<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1997
REGISTRATION NO. 333-12259
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BROOKDALE LIVING COMMUNITIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
8361 36-4103821
DELAWARE (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
JURISDICTION OF
INCORPORATION OR ---------------
ORGANIZATION)
77 WEST WACKER DRIVE, SUITE 3900
CHICAGO, ILLINOIS 60601
(312) 456-0239
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
---------------
MARK J. SCHULTE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BROOKDALE LIVING COMMUNITIES, INC.
77 WEST WACKER DRIVE, SUITE 3900
CHICAGO, ILLINOIS 60601
(312) 456-0239
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WAYNE D. BOBERG, ESQ. J. VAUGHAN CURTIS, ESQ.
KIMBERLY A. KNIGHT, ESQ.
BRIAN T. BLACK, ESQ.
WINSTON & STRAWN ALSTON & BIRD
35 WEST WACKER DRIVE 1201 WEST PEACHTREE STREET
CHICAGO, ILLINOIS 60601 ATLANTA, GEORGIA 30309
(312) 558-5600 (404) 881-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 4, 1997
PROSPECTUS
, 1997
5,000,000 SHARES
LOGO
COMMON STOCK
All of the 5,000,000 shares of common stock, $0.01 par value per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by Brookdale
Living Communities, Inc. ("Brookdale" or the "Company"). Upon completion of the
Offering, The Prime Group, Inc. and its affiliates (collectively, "PGI") and
management of the Company will own 33.3% of the Common Stock (30.3% if the
Underwriters' over-allotment option is exercised in full). See "Risk Factors--
Significant Influence by Existing Stockholders and Management."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $14.00 and $16.00 per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "BLCI."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
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<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................. $ $ $
Total(3).................. $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(2) Before deducting expenses payable by the Company, estimated at $3,500,000.
(3) The Company has granted to the Underwriters an option, exercisable within
30 days hereof, to purchase up to an aggregate of 750,000 additional shares
of Common Stock at the price to the public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$ , $ and $ , respectively. The Underwriters
have agreed to reserve up to 100,000 shares for sale to certain individuals
at the Price to the Public less Underwriting Discounts and Commissions. To
the extent such reserved shares are sold to such individuals, total
Underwriting Discounts and Commissions will be reduced to the extent of
such discounts. See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain prior conditions including the right of the Underwriters to
reject orders in whole or in part. It is expected that delivery of such shares
will be made in Washington, D.C., on or about , 1997.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
<PAGE>
[PHOTOS]
[The inside front cover page will include a fold out page with color
photographs and captions on each side of such fold out page. The inside front
cover page itself will also contain color photographs and captions. The
photographs will consist of an outside view of each of the facilities expected
to be owned or leased by the Company together with a corresponding caption
identifying such facility by name and the city of its location, as well as an
artist's depiction of the Company's prototype facility with a caption
identifying it as such. In addition, each side of the fold out page and the
inside front cover page will contain several photographs of residents in
various settings, in each case without captions.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Except as otherwise indicated, the
information contained in this Prospectus assumes (i) the consummation at the
completion of the Offering of the transactions described herein resulting in
the formation of the Company, including, but not limited to, the contribution
to the Company of the capital stock of BLC Property, Inc., certain interests in
the Heritage and the Devonshire facilities and the operations relating to the
senior and assisted living division of The Prime Group, Inc. and its affiliates
(collectively, "PGI"), the acquisition of the Acquired Facilities (as defined
herein) and the Company has entered the management contracts for its two
managed facilities (collectively, the "Formation") and (ii) the Underwriters'
over-allotment option is not exercised. Unless the context requires otherwise,
all references to the "Company" or "Brookdale" in this Prospectus mean the
Company, its predecessors and those entities owned or controlled by the Company
as though the Formation had occurred. See "Risk Factors--Lack of Arm's Length
Negotiations" and "--Uncertainty of Proposed Acquisition," "The Company and the
Formation" and "Certain Transactions."
Brookdale Living Communities, Inc. ("Brookdale" or the "Company") provides
senior and assisted living services to the elderly through its facilities
located in urban and suburban areas of major metropolitan markets. The Company
operates nine senior and assisted living facilities containing a total of 1,968
units which, as of December 31, 1996, were approximately 99% occupied. The
Company owns four of such facilities, leases three facilities under a long-term
net operating lease and manages two other facilities pursuant to management
contracts. In addition, the Company has entered an agreement to acquire a
facility containing 200 units, the closing of which acquisition is expected to
occur within 60 days following the completion of the Offering. With facilities
that contain an average of 220 units, the Company believes it is able to
achieve economies of scale within its facilities and provide senior and
assisted living services in a cost-effective manner. The Company plans to
acquire or lease approximately three to five facilities per year containing an
aggregate of approximately 600 to 1,000 units, and to commence development of
at least two new facilities per year containing approximately 200 units each.
The Company has entered agreements to acquire development sites located in Glen
Ellyn, Illinois, Southfield, Michigan and Austin, Texas, the closings of which
are expected to occur within 12 months following the completion of the
Offering. The Company had pro forma revenues and a net loss for the year ended
December 31, 1996 of approximately $41.5 million and $602,000, respectively.
The Company estimates that approximately 99.9% of the Company's pro forma
revenues are derived from private pay sources.
Brookdale's facilities are designed for middle to upper income residents who
desire an upscale residential environment providing the highest level of
quality, care and value. Brookdale's objective is to allow its residents to age
in place by providing them with a continuum of senior and assisted living
services. By providing residents a range of service options as their needs
change, the Company seeks to achieve a greater continuity of care, thereby
enabling seniors to maintain their residency for a longer time period. The
ability to allow residents to age in place is beneficial to Brookdale's
residents as well as their families who are burdened with care option decisions
for their elderly relatives. In addition to studio, one-bedroom and two-bedroom
units, the Company provides all residents with basic services, such as meal
service, 24-hour emergency response, housekeeping, concierge services,
transportation and recreational activities. For residents who require
additional supplemental care services, the Company provides assistance with
certain activities of daily living. The average age of Brookdale's residents is
approximately 82 years old, and many of these residents require some level of
assistance with activities of daily living. Supplemental care services are
provided either by the Company or by outside services or agencies. The Company
intends to bring "in-house" as many of these services as practicable and has
established a program providing various levels and combinations of these
services called "Personally Yours"SM.
The Company's operating philosophy is to provide the highest quality of
personalized care for its residents in order to enhance their physical and
mental well-being. A key element of this philosophy is to establish
affiliations between Brookdale's facilities and local hospitals. Each of the
Hallmark facility in Chicago, Illinois,
3
<PAGE>
the Heritage facility in Des Plaines, Illinois and the Devonshire facility in
Lisle, Illinois (collectively, the "Original Facilities"), have affiliations
with local hospitals. In addition, the Company is currently pursuing hospital
affiliations for the Gables at Brighton, Springs of East Mesa, Hawthorn Lakes
and Edina Park Plaza facilities and intends to arrange such affiliations for
facilities that it acquires, develops or leases in the future. Hospital
affiliations provide for on-site physician and nursing services, and facilitate
the provision of health care services and wellness programs to the Company's
residents.
The Company believes that the senior and assisted living industry is emerging
as a preferred alternative to meet the growing demand for a cost-effective
residential setting in which to care for the elderly who cannot or choose not
to live independently due to physical or cognitive frailties and who may
require assistance with some of the activities of daily living or the
availability of nursing or other medical care. In general, senior and assisted
living consists of a combination of housing and the availability of 24-hour a
day personal support services and assistance with certain activities of daily
living. The Company believes that factors contributing to the growth of the
senior and assisted living industry include: (i) the aging of the U.S.
population; (ii) consumer preference for greater independence in a residential
setting as compared to institutional settings, such as skilled nursing
facilities; (iii) its cost effectiveness compared to skilled nursing care and
home health care; and (iv) the decreasing ability of relatives to provide care
for the elderly in the home. The senior and assisted living industry remains
highly fragmented, with only 5% of the industry's units operated by the 20
largest companies in the industry, which provides substantial opportunities for
industry consolidation.
The Company's business and growth strategy is based on the following key
elements: (i) acquiring and leasing senior and assisted living facilities in
major metropolitan markets; (ii) leveraging its development expertise to
construct its prototype facility in major metropolitan markets; (iii)
utilization, when available, of long-term, tax-exempt bonds to finance the
acquisition and renovation of existing facilities and the development of new
facilities; (iv) providing access to a full continuum of senior and assisted
living services to residents of its facilities; (v) utilizing sophisticated
marketing programs to maintain high occupancy rates; and (vi) utilizing its
operational expertise to enhance the profitability of its existing and future
facilities.
Brookdale Living Communities, Inc. was incorporated in Delaware in September
1996 to continue and expand the business and operations of the senior and
assisted living division of PGI. Since 1981, PGI has been engaged in the
ownership, development, acquisition and operation of over 20 million square
feet of income producing properties and, since 1985, has been active in the
development, construction, marketing and operation of senior and assisted
living facilities for the elderly. The Company's principal executive offices
are located at 77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601, and
its telephone number is (312) 456-0239.
THE OFFERING
Common Stock offered by the Company..
5,000,000 shares
Common Stock to be outstanding after
the Offering......................... 7,500,000 shares (1)
Use of Proceeds......................
To pay the cash portion of the purchase
price for the Acquired Facilities and
the Park Place facility, to pay certain
amounts to or on behalf of PGI and to
various third parties in connection with
the Formation, to finance a portion of
future acquisitions and developments and
for working capital and other general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol........ BLCI
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(1) Does not include 695,000 shares of Common Stock subject to options expected
to be granted at the initial public offering price. See "Management--Stock
Incentive Plan."
4
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
PRO FORMA
AS ADJUSTED
1994 1995 1996 1996(1)
(IN THOUSANDS, EXCEPT PER SHARE DATA
AND OPERATING DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (2)(3):
Revenue:
Resident fees........................ $ 15,205 $ 21,935 $23,437 $ 41,183
Management services income .......... -- -- -- 280
-------- -------- ------- --------
Total revenue...................... 15,205 21,935 23,437 41,463
Facilities operating expenses........ (11,270) (13,253) (12,806) (22,459)
Lease expenses (4)................... -- -- -- (8,705)
General and administrative expenses
(5)................................. -- -- -- (2,837)
Depreciation and amortization........ (3,286) (3,721) (2,946) (3,835)
-------- -------- ------- --------
Operating income..................... 649 4,961 7,685 3,627
Interest and financing fees expense,
net................................. (4,053) (6,385) (5,320) (5,168)
-------- -------- ------- --------
Income (loss) before minority
interest and extraordinary item..... (3,404) (1,424) 2,365 (1,541)
(Income) loss allocated to minority
interest............................ 1,178 802 (756) --
-------- -------- ------- --------
Income (loss) before extraordinary
item................................ (2,226) (622) 1,609 (1,541)
Extraordinary item (gain on
extinguishment of debt)............. -- 3,274 -- --
-------- -------- ------- --------
Net income (loss).................... $ (2,226) $ 2,652 $ 1,609 $ (1,541)
======== ======== ======= ========
UNAUDITED PRO FORMA DATA:
Income (loss) before income taxes and
extraordinary item.................. $ (2,226) $ (622) $ 1,609 $ (1,541)
Pro forma benefit (provision) for
income taxes (6).................... 890 249 (643) 939
-------- -------- ------- --------
Income (loss) before extraordinary
item................................ (1,336) (373) 966 (602)
Extraordinary item (gain on
extinguishment of debt), net of
income taxes of $1,310 (6).......... -- 1,964 -- --
-------- -------- ------- --------
Pro forma net income (loss).......... $ (1,336) $ 1,591 $ 966 $ (602)
======== ======== ======= ========
Pro forma net income per share (7)... $ 0.39 $ (0.08)
======= ========
Pro forma shares of common stock
outstanding (7)..................... 2,500 7,500
======= ========
SELECTED OPERATING AND OTHER DATA:
Total units operated (8)............. 918 918 918 2,166
Occupancy rate (8)................... 95.6% 98.1% 99.2% 98.6%
Average monthly revenue per unit (9). $ 1,732 $ 2,015 $ 2,144 $ 1,928
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-------------------------------
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (3):
Cash........................................... $ 4,044 $ 13,741
Cash-restricted (10)........................... 1,089 3,363
Letter of credit deposit (10).................. -- 11,000
Total assets................................... 56,731 157,740
Total long-term debt........................... 65,000 93,430
Stockholders' and partners' equity (deficit)... (25,428) 39,279
</TABLE>
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(1) The Company has entered a definitive purchase agreement to acquire the Park
Place facility located in Spokane, Washington for approximately $14.4
million. Although the Company expects to consummate the acquisition of the
Park Place facility within 60 days following the completion of the
Offering, there can be no assurance that the conditions to closing such
acquisition will be satisfied in a timely manner, if at all. If such
facility is not acquired by the Company, pro forma as adjusted total
revenue, operating income and net loss would be approximately $39.3
million, $3.4 million and $732,000, respectively, for the year ended
December 31, 1996. See "Risk Factors--Uncertainty of Proposed Acquisition."
(2) The historical financial and operating data for each of the three years
ended December 31, 1994, 1995 and 1996 represent combined historical
financial data for the senior and assisted living division of PGI,
including among other things, a combination of the businesses of the
Original Facilities. See "The Company and the Formation."
(3) The pro forma statements of operations data for the year ended December 31,
1996 give effect to (a) the Formation; (b) the acquisition of the Park
Place facility; (c) the initial capitalization of the Company; and (d) the
Offering. The pro forma balance sheet as of December 31, 1996 gives effect
to these transactions as if they occurred on such date. See Unaudited Pro
Forma Combined Condensed Financial Statements of the Company.
(4) Pro forma lease expenses for the year ended December 31, 1996 are recorded
net of $806,000 relating to the amortization of a deferred gain on the sale
and leaseback of the Hallmark facility which occurred on December 27, 1996.
See Note (c) to Notes to the Pro Forma Combined Condensed Statement of
Operations and Note 7 to Combined Financial Statements of the Original
Facilities.
(5) Historically, the Original Facilities have incurred property management
fees in lieu of general and administrative expenses. However, upon the
completion of the Offering, the Company will no longer incur property
management fees and report general and administrative expenses as a
separate item. See Pro Forma Combined Condensed Statements of Operations of
the Company.
(6) Includes a pro forma income tax adjustment for federal and state income
taxes to reflect the Original Facilities as C Corporations. See Note (g) of
Notes to Pro Forma Combined Condensed Statement of Operations of the
Company and Note 1 of Notes to Combined Financial Statements of the
Original Facilities.
(7) Historical amounts reflect the issuance of 2,500,000 shares of Common Stock
in connection with the Formation. Pro forma as adjusted amounts reflect the
issuance of 5,000,000 shares of Common Stock in connection with the
Offering and 2,500,000 shares of Common Stock in connection with the
Formation.
(8) Total units operated represents the total units operated as of the end of
the period for the Original Facilities (the Hallmark facility was not
acquired by PGI until June 1994 and was sold to a third party and leased
back to BLC Property, Inc. on December 27, 1996). Occupancy rate is
calculated by dividing total occupied units by total units operated as of
the end of the period for the Original Facilities. Pro forma amounts
include the Original Facilities, the Acquired Facilities, the Park Place
facility, the Leased Facilities and the managed facilities. PGI owned and
operated the 206-unit Island on Lake Travis facility, which is not included
in the Original Facilities, during each of the years ended December 31,
1994, 1995 and 1996.
(9) Average monthly revenue per unit represents the average of the total
monthly resident fees divided by occupied units at the end of the period
averaged over the respective period presented and for the period of time in
operation during the period for the Original Facilities. Pro forma amounts
include the Original Facilities, the Acquired Facilities, the Park Place
facility and the Leased Facilities.
(10) Cash-restricted represents amounts segregated for use in the payment of
real estate taxes and other operating activity in accordance with
governmental and debt agreement requirements. Letter of credit deposit
represents cash collateral for the proposed credit enhancement of $65.0
million of tax-exempt bonds that are secured by the Heritage and the
Devonshire facilities. The Company intends to earn interest income on both
cash-restricted and letter of credit deposit amounts. See Note 2 to both
the Combined Financial Statements of the Original Facilities and
Activelife Facilities and Notes (a), (b) and (f) to the Unaudited Pro
Forma Combined Condensed Balance Sheet of the Company.
5
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the factors set forth below,
as well as the other information contained in this Prospectus, in evaluating
an investment in the Common Stock offered hereby.
RECENT ORGANIZATION; RECENT NET LOSSES
The Company was organized in September 1996 to own, operate, acquire and
develop senior and assisted living facilities. The Original Facilities,
including the Hallmark facility, and the operations relating thereto were
formerly owned and operated by PGI. BLC Property, Inc. ("BLC") was recently
organized by PGI to facilitate the December 1996 sale and leaseback of PGI's
Hallmark facility. Pursuant to such sale and leaseback transaction, Health and
Retirement Properties Trust ("HRPT"), a publicly-traded health care real
estate investment trust, purchased the Hallmark facility from PGI and leased
such facility to BLC pursuant to a net operating lease. Concurrently with such
transaction, HRPT acquired the Springs of East Mesa and the Gables at Brighton
facilities from a third party and net leased such facilities to BLC, and BLC
in turn subleased each of the Hallmark, Springs of East Mesa and Gables at
Brighton facilities (collectively, the "Leased Facilities") to separate,
wholly owned subsidiaries of BLC. Upon completion of the Offering, PGI will
contribute to the Company all of the capital stock of BLC, its interests in
the Heritage and the Devonshire facilities, together with the operations
relating to its senior and assisted living division, and the Company will
acquire from third parties the Edina Park Plaza and the Hawthorn Lakes
facilities (collectively, the "Acquired Facilities"). The Original Facilities
had income before minority interest and extraordinary item of approximately
$2.4 million in 1996, compared to losses before minority interest of
approximately $1.4 million and $3.4 million in 1995 and 1994, respectively. On
a pro forma basis, after giving effect to the Formation and the acquisition of
the Park Place facility, the Company would have had a net loss in 1996 of
approximately $602,000 (after pro forma income taxes). There can be no
assurance that the Company's operations will be profitable in the future. The
inability to achieve profitability at a newly acquired, developed or leased
facility on a timely basis could have a material adverse effect on the
Company's business, financial condition and results of operations and the
market price of the Common Stock. See "--Uncertainty of Proposed Acquisition,"
"The Company and the Formation," "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
LACK OF ARM'S LENGTH NEGOTIATIONS
The terms of the transactions between the Company and PGI that comprise a
portion of the Formation, including, without limitation, PGI's contribution to
the Company of the capital stock of BLC, its interests in the Heritage and the
Devonshire facilities and the operations relating to its senior and assisted
living division, were not determined by arm's length negotiations. No
independent third-party appraisals of the capital stock of BLC, such interests
in the Heritage and the Devonshire facilities or the operations relating to
PGI's senior and assisted living division were obtained on behalf of the
Company. Accordingly, there can be no assurance that the terms of these
arrangements, including, but not limited to, the number of shares of Common
Stock and cash received by PGI in exchange for the capital stock of BLC, PGI's
interests in the Heritage and the Devonshire facilities and the operations
relating to PGI's senior and assisted living division are as favorable to the
Company as those the Company would have obtained from unaffiliated third
parties. See "The Company and the Formation" and "Certain Transactions."
UNCERTAINTY OF PROPOSED ACQUISITION
The Company has entered a definitive purchase agreement to acquire the Park
Place facility for approximately $14.4 million. The closing of such
acquisition is subject to certain customary conditions, including conditions
regarding the status of the title to the real property, the results of
environmental investigations and the transfer or issuance of applicable
licenses and permits. If Brookdale is unable to acquire such facility, its pro
forma as adjusted total revenue, operating income and net loss for the year
ended December 31, 1996 would be
6
<PAGE>
approximately $39.3 million, $3.4 million and $732,000, respectively. Although
the Company expects the proposed acquisition of the Park Place facility to be
consummated within 60 days following the completion of the Offering, there can
be no assurance that the conditions to closing such acquisition will be
satisfied in a timely manner, if at all. Any delay or failure to consummate
the purchase of the Park Place facility could have an adverse effect on the
Company's operating results. Upon the completion of this acquisition, the Park
Place facility's units will represent approximately 9% of the total units
operated by the Company. See "The Company and the Formation" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
DIFFICULTIES OF INTEGRATION; FUTURE ACQUISITION RISKS
There can be no assurance that the Company will successfully integrate the
operations of the newly acquired or leased facilities with the operations of
the Original Facilities. If the Company is unsuccessful in operating the newly
acquired or leased facilities and integrating them into the Original
Facilities, the Company's business, financial condition and results of
operations could be materially and adversely affected. In addition, the
Company currently plans to acquire or lease three to five additional
facilities per year that are or can be repositioned as senior and assisted
living facilities. While the Company is actively pursuing acquisition
opportunities, except for the agreements for the purchase of the Acquired
Facilities and the Park Place facility, it has not entered into any agreements
for any material acquisitions. There can be no assurance that the Company's
acquisitions will be completed at the rate currently expected, if at all. The
success of the Company's acquisitions will be determined by numerous factors,
including the Company's ability to identify suitable acquisition
opportunities, competition for such acquisitions, the purchase price, the
financial performance of the facilities after acquisition and the ability of
the Company to integrate effectively the operations of acquired facilities.
Any failure by the Company to achieve its acquisition plans or to integrate or
operate acquired facilities effectively may have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Business and Growth Strategy."
DEVELOPMENT AND CONSTRUCTION RISKS
In addition to acquisitions, the Company currently plans to commence
development of at least two new senior and assisted living facilities per year
containing approximately 200 units each in urban and suburban areas in major
metropolitan markets. The Company's ability to achieve its development plans
will depend upon a variety of factors, many of which are beyond the Company's
control. Further, due to the time required for site selection, governmental
approvals, construction and rental, it is expected that a facility will not
achieve a 90% occupancy rate (a stabilized rate) for at least 32 months, if at
all, after a final determination is made by the Company to proceed with any
particular development. The successful development of additional facilities
will involve a number of risks, including the possibility that the Company may
be unable to locate suitable sites at acceptable prices or may be unable to
obtain, or may experience delays in obtaining, necessary zoning, land use,
building, occupancy, licensing and other required governmental permits and
authorizations. The Company may also incur construction costs that exceed
original estimates, may not complete construction projects on schedule and may
experience competition in the search for suitable development sites. There can
be no assurance that the Company will not suffer delays in its development
program, which could slow the Company's growth. The Company relies and will
continue to rely on third party general contractors to construct its new
facilities. There can be no assurance that the Company will not experience
difficulties in working with general contractors and subcontractors, which
could result in increased construction costs and delays. Further, facility
development is subject to a number of contingencies over which the Company
will have little control and that may adversely affect project cost and
completion time, including shortages of, or the inability to obtain, labor or
materials, the inability of the general contractor or subcontractors to
perform under their contracts, strikes, adverse weather conditions and changes
in applicable laws or regulations or in the method of applying such laws and
regulations. Accordingly, if the Company is unable to achieve its development
plans, its business, financial condition and results of operations could be
materially and adversely affected. See "Business--Business and Growth
Strategy."
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NEED FOR ADDITIONAL FINANCING
To achieve its acquisition and development plans and growth objectives, the
Company will need to obtain significant additional financial resources. The
Company estimates the cost to acquire and develop the new facilities targeted
for acquisition or development over the next two years is approximately $200.0
million in the aggregate, which substantially exceeds the net proceeds of the
Offering. Accordingly, the Company's future growth will depend on its ability
to obtain significant additional financing on acceptable terms. The Company
has no existing commitments for financing. The Company will from time to time
seek debt financing through a variety of sources, which may include tax-exempt
bonds, conventional mortgage financing and bank financing, leases with third
parties or other similar financing methods. If such debt financing is
unavailable or is not available on terms favorable to the Company, the Company
may obtain financing through additional equity offerings, the completion of
which may result in a dilution to the Company's stockholders. There can be no
assurance that future financing, whether debt or equity, will be available as
needed or on terms acceptable to the Company. A lack of funds may require the
Company to delay or eliminate all or some of its development projects and
acquisition plans and could therefore have a material adverse effect on the
Company's growth plans and on its business, financial condition and results of
operations. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
ADVERSE CONSEQUENCES OF INDEBTEDNESS AND LEASE OBLIGATIONS; FLOATING RATE DEBT
The Company was subject to mortgage and other indebtedness in an aggregate
principal amount of approximately $93.4 million at December 31, 1996 on a pro
forma basis. The Company, through its wholly owned subsidiary BLC, is
presently a party to a long-term master lease covering the Leased Facilities.
This master lease requires minimum annual lease payments aggregating
approximately $8.3 million in 1997 and $8.8 million in 1998 and provides for
increases in minimum annual lease payments in 1999 and 2000 and additional
rent payments based on a percentage of any increases in the revenues generated
by the Leased Facilities beginning in 1999. The Company intends to finance its
senior and assisted living facilities through tax-exempt bond financing,
conventional mortgage financing and bank financing, leases with third parties
or other similar financing methods. The amount of indebtedness and lease
payments is expected to increase substantially as the Company pursues its
growth strategy. As a result, an increasing amount of the Company's cash flow
will be devoted to debt service and related lease payments, and the Company
will continue to be subject to risks normally associated with significant
financing leverage. At December 31, 1996, approximately $65.0 million ($93.4
million pro forma after giving effect to the Formation) in principal amount of
the Company's indebtedness bore interest at floating rates. In addition,
indebtedness the Company may incur in the future, including long-term, tax-
exempt bond financing, if available, may bear interest at floating rates and
in such event increases in prevailing interest rates could increase
significantly the Company's interest payment obligations. There can be no
assurance that the Company will generate sufficient cash flow from operations
to cover required interest, principal and lease payments. Any payment or other
default could cause the lender to foreclose upon the facilities securing such
indebtedness or, in the case of a lease, could result in the termination of
the lease, with a consequent loss of income and asset value to the Company. In
addition, it is anticipated that the terms of the Company's credit facilities
or letters of credit will restrict the payment of dividends by the Company or
distributions by its wholly owned partnerships or subsidiaries to the Company
if certain financial ratios are not met. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and Notes to Pro Forma Combined Condensed Statements of
Operations of the Company.
The Heritage, Devonshire, Hawthorn Lakes and Edina Park Plaza facilities
have been financed with tax-exempt bonds. In order to maintain the tax-exempt
treatment of the interest paid on these bonds, the facilities must comply with
certain federal income tax requirements, principally pertaining to the maximum
income level of a specified portion ("Qualified Residents") of the facilities'
residents. Failure to satisfy these requirements would constitute an event of
default under such bonds, thereby accelerating their maturity. In certain
cases, the Company's ability to increase prices to Qualified Residents at the
facilities with such bond financing (in response to higher operating costs or
other factors) could be limited if it affects the ability of the Company to
attract and retain such Qualified Residents.
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DIFFICULTIES OF MANAGING RAPID GROWTH
The Company expects that the number of facilities it owns and operates will
increase substantially as the Company pursues its development and acquisition
strategy. This planned growth will place significant demands on the Company's
management resources. In order to manage its growth effectively, the Company
must continue to expand its operational, financial and management information
systems and continue to attract, train, motivate, manage and retain key
employees. If the Company is unable to manage its growth effectively, its
business, financial condition and results of operations could be materially
and adversely affected. See "Business--Business and Growth Strategy" and
"Management."
DEPENDENCE ON SENIOR MANAGEMENT AND SKILLED PERSONNEL
The Company depends significantly on the continued services of Mark J.
Schulte, its President and Chief Executive Officer. The loss of his services
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company also depends on its ability
to continue to attract and retain management personnel who will be responsible
for the day-to-day operations of its senior and assisted living facilities. If
the Company is unable to hire qualified management personnel to operate its
facilities, the Company's business, financial condition and results of
operations could be materially and adversely affected. See "Management."
BENEFITS TO AFFILIATES
PGI will realize substantial benefits from the Offering. In particular, upon
completion of the Offering, PGI will acquire 2,071,334 shares of Common Stock
with a market value of approximately $31.1 million (assuming no exercise of
the Underwriters' over-allotment option and an initial public offering price
of $15.00 per share, the midpoint of the filing range) in connection with its
contribution to the Company of all of the capital stock of BLC, its interests
in the Heritage and the Devonshire facilities and the operations relating to
its senior and assisted living division. Also, the Company will pay PGI
approximately $7.2 million to reimburse PGI for earnest monies previously paid
by PGI in connection with the acquisition of the Acquired Facilities, the Park
Place facility, a third party's interests in the Heritage and the Devonshire
facilities and the proposed acquisitions of the development sites located in
Glen Ellyn, Illinois, Southfield, Michigan and Austin, Texas and for certain
costs and expenses previously paid by PGI relating to the issuance and
distribution of Common Stock pursuant to the Offering. Further, PGI will
covenant that the partnerships owning the Heritage and the Devonshire
facilities will have no less than $800,000 in the aggregate in unrestricted
cash upon the completion of the Offering; however, any unrestricted cash in
excess of $800,000 then held by such partnerships will be distributed to PGI.
In addition, in accordance with the terms and conditions of the master lease
between HRPT and BLC governing the Leased Facilities, upon the closing of the
Offering and PGI's contribution of all of BLC's capital stock to the Company,
certain affiliates of PGI, including The Prime Group, Inc., will be released
by HRPT from such affiliates' guaranties of BLC's obligations under the master
lease. At the Formation, in accordance with a formation agreement, by and
among the Company, Mark J. Schulte and PGI (the "Formation Agreement"), Mr.
Schulte will transfer to the Company all of his interests in PGI's senior and
assisted living division in exchange for 328,666 shares of Common Stock from
the Company. See "--Lack of Arm's Length Negotiations," "The Company and the
Formation" and "Use of Proceeds."
SIGNIFICANT INFLUENCE BY EXISTING STOCKHOLDERS AND MANAGEMENT
PGI will beneficially own approximately 27.6% of the outstanding Common
Stock after completion of the Offering (25.1% if the Underwriters' over-
allotment option is exercised in full). Executive officers and directors of
the Company as a group will beneficially own approximately 33.3% of the
outstanding Common Stock after the Offering (30.3% if the Underwriters' over-
allotment option is exercised in full). As a result, PGI and the Company's
executive officers and directors will have significant influence over all
matters requiring approval by the Company's stockholders, including business
combinations and the election of directors. See "Principal Stockholders."
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COMPETITION
The long-term care industry is highly competitive, and the Company believes
that the senior and assisted living segment, in particular, will become even
more competitive in the future. The Company will be competing with numerous
other companies providing similar services such as home health care agencies,
other senior and assisted living providers, retirement communities and
convalescent centers. In general, regulatory and other barriers to entry in
the senior and assisted living industry are not substantial. In pursuing its
business and growth strategy, the Company expects to face competition in its
efforts to develop, acquire and lease facilities. Some of the Company's
present and potential competitors are significantly larger and have, or may
obtain, greater financial resources than the resources available to the
Company. Consequently, there can be no assurance that the Company will not
encounter increased competition that could limit its ability to attract
residents or expand its business or otherwise have a material adverse effect
on its business, financial condition and results of operations. Moreover, if
the development of new senior and assisted living facilities outpaces demand
for those facilities in certain markets, such markets may become saturated.
Such an oversupply of facilities could cause the Company to experience
decreased occupancy rates, depressed margins and lower operating results. See
"Business--Competition."
GOVERNMENTAL REGULATION
The Company's senior and assisted living facilities are subject to federal,
state and local regulation and licensing by state and local health and social
service agencies and other regulatory authorities, which requirements vary
from state to state. Senior and assisted living facilities in some states are
subject to periodic survey or inspection by governmental authorities. In
Illinois, where the Original Facilities are located, and perhaps in certain
other states in which the Company may operate in the future, the Company may
be unable to provide certain higher levels of assisted living services without
obtaining the appropriate licenses, if applicable. In addition, some states
have adopted certificate of need or similar laws applicable to assisted living
and nursing facilities which generally require that the appropriate state
agency approve certain acquisitions or capital expenditures and determine that
a need exists for certain new bed additions or new services. Many states have
placed a moratorium on granting certificates of need or otherwise stated their
intent not to grant approval for such expenditures. To the extent certificates
of need or other similar approvals are required for expansion of Company
operations, such expansion could be adversely affected by the failure or
inability to obtain the necessary approvals or possible delays in obtaining
such approvals.
Although the Company currently does not participate in the Medicare or
Medicaid programs, the hospitals with which it has affiliations do participate
in those programs, and the Company intends to participate in the Medicare
program at the skilled nursing facility to be constructed at the Devonshire
facility. Also, all of the Company's residents are eligible for Medicare
benefits. Therefore, certain aspects of the Company's business are and will be
subject to federal and state laws and regulations which govern financial and
other arrangements between and among health care providers, suppliers and
vendors. These laws prohibit certain direct and indirect payments and fee-
splitting arrangements designed to induce or encourage the referral of
patients to, or the recommendation of, a particular provider or other entity
or person for medical products and services. These laws include, but are not
limited to, the federal "anti-kickback law" which prohibits, among other
things, the offer, payment, solicitation or receipt of any form of
remuneration in return for the referral of Medicare and Medicaid patients. The
Office of the Inspector General of the Department of Health and Human
Services, the Department of Justice and other federal agencies interpret these
statutes liberally and enforce them aggressively. Members of Congress have
proposed legislation that would significantly expand the federal government's
involvement in curtailing fraud and abuse and increase the monetary penalties
for violation of these provisions. Violation of these laws can result in,
among other things, loss of licensure, civil and criminal penalties for
individuals and entities and exclusion of health care providers or suppliers
from participation in the Medicare and/or Medicaid programs.
In addition, although the Company is not a Medicare or Medicaid provider or
supplier, it is subject to these laws because (i) the state laws typically
apply regardless of whether Medicare or Medicaid payments are at issue, (ii)
the Company plans to build and operate a skilled nursing facility at its
Devonshire facility and may establish
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licensed home health agencies which are intended to participate in Medicare
and (iii) as required under some state licensure laws, and for the convenience
of its residents, some of the Company's senior and assisted living facilities
maintain contracts with hospitals, who in turn maintain contracts with certain
health care providers and practitioners, including pharmacies, home health
agencies and hospices, through which the health care providers make their
health care items or services (some of which may be covered by Medicare or
Medicaid) available to facility residents. There can be no assurance that such
laws will be interpreted in a manner consistent with the practices of the
Company.
The success of the Company will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses as the regulatory environment for senior and assisted living
facilities evolves. There can be no assurance that federal, state or local
laws or regulatory procedures which might adversely affect the Company will
not be imposed or expanded. Any failure by the Company to comply with
applicable regulatory requirements could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Governmental Regulation."
ENVIRONMENTAL RISKS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
held liable for the cost of removal or remediation of certain hazardous or
toxic substances that could be located on, in or under such property. Such
laws and regulations often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of the hazardous or
toxic substances. In addition, the Company's skilled nursing facility to be
built at the Devonshire facility will be subject to laws relating to the
disposal of biohazardous waste. The costs of any required remediation or
removal of these substances could be substantial, and the liability of an
owner or operator as to any affected property is generally not limited under
such laws and regulations and could exceed the property's value and the
aggregate assets of the owner or operator. In connection with the ownership or
operation of its facilities, the Company could be liable for these remediation
costs or fines. As a result, the presence, with or without the Company's
knowledge, of hazardous or toxic substances at any property held or operated
by the Company, or acquired or operated by the Company in the future, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
LIABILITY AND INSURANCE
The services provided by the Company subject it to significant liability
risks. In recent years, the senior and assisted living industry has
experienced an increase in the number of lawsuits alleging negligence and
other legal theories, many of which involve significant legal costs and
substantial claims. The Company intends to secure, by completion of the
Offering, insurance policies in amounts and with such coverage as it deems
appropriate for its operations. There can be no assurance, however, that the
Company will be able to continue to obtain sufficient liability insurance
coverage in the future or that such coverage will be available on acceptable
terms. A successful claim in excess of the Company's coverage or not covered
by the Company's insurance could have a material adverse effect on the
Company's business, financial condition and results of operations. Claims
against the Company, regardless of their merit or outcome, may involve
significant legal costs and require management to devote considerable time
which would otherwise be utilized in the operation of the Company. See
"Business--Insurance."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 7,500,000 shares of
Common Stock outstanding (8,250,000 shares if the Underwriters' over-allotment
option is exercised in full). Of these shares, the 5,000,000 shares sold in
the Offering (or a maximum of 5,750,000 if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction or
limitation under the Securities Act of 1933, as amended (the "Securities
Act"), except for any shares purchased by "affiliates" of the Company, as such
term is defined in Rule 144 promulgated under the Securities Act. The
remaining 2,500,000 shares are "restricted securities" within the meaning of
Rule 144 and are held by PGI and management of the Company. The Company, its
directors and executive officers, certain of its key employees and PGI have
agreed with the Underwriters, subject
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to certain exceptions, not to sell or otherwise dispose of any shares of
Common Stock, any options to purchase Common Stock or any securities
convertible into or exchangeable for shares of Common Stock for a period of
one year after the date of this Prospectus (the "lock-up period") without the
prior written consent of Friedman, Billings, Ramsey & Co., Inc. ("FBR"). After
expiration of the lock-up period, PGI will be entitled to certain demand and
incidental registration rights with respect to its shares. If PGI, by
exercising its demand registration rights, causes a large number of shares to
be registered and sold in the public market, such sales could have an adverse
effect on the market price for the Common Stock. Further, promptly following
completion of the Offering, the Company intends to register 830,000 shares of
Common Stock which will be reserved for issuance pursuant to the Company's
stock option programs. Upon completion of the Offering, options to purchase
such 695,000 shares will be granted at the initial public offering price to
executive officers, certain key employees and non-employee directors of the
Company. Such options will vest and become exercisable with regard to 675,000
shares, subject to certain conditions being met, at the rate of 25% per year
commencing on the first anniversary of their date of grant and, with regard to
20,000 shares, at the rate of 33.3% per year commencing on the first
anniversary of their date of grant. All restricted shares of Common Stock will
be eligible for sale to certain qualified institutional buyers in accordance
with Rule 144A under the Securities Act. Sales of substantial amounts of
shares of Common Stock in the public market after the Offering or the
perception that such sales could occur could adversely affect the market price
of the Common Stock and the Company's ability to raise equity. See
"Management--Stock Incentive Plan," "Description of Capital Stock--
Registration Rights Agreement," "Shares Eligible for Future Sale" and
"Underwriting."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or be
sustained after the Offering. The initial public offering price of the Common
Stock will be determined by negotiations between the Company and the
representative of the Underwriters and may bear no relationship to the price
at which the Common Stock will trade after completion of the Offering. For
factors that will be considered in determining the initial public offering
price, see "Underwriting." After completion of the Offering, the market price
of the Common Stock could be subject to significant fluctuations in response
to various factors and events, including the liquidity of the market for the
shares of Common Stock, variations in the Company's operating results, changes
in earnings estimates by securities analysts, publicity regarding the industry
or the Company and the adoption of new statutes or regulations (or changes in
the interpretation of existing statutes or regulations) affecting the health
care industry in general or the senior and assisted living industry in
particular. In addition, the stock market in recent years has experienced
broad price and volume fluctuations that often have been unrelated to the
operating performance of particular companies. These market fluctuations may
adversely affect the market price of the shares of Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation and Amended and Restated
By-laws, as well as Delaware corporate law, contain certain provisions that
could have the effect of making it more difficult for a third party to
acquire, or discouraging a third party from attempting to acquire, control of
the Company. These provisions could limit the price that certain investors
might be willing to pay in the future for shares of Common Stock. Certain of
these provisions allow the Company to issue, without stockholder approval,
preferred stock having rights senior to those of the Common Stock. Other
provisions impose various procedural and other requirements, including advance
notice and super-majority voting provisions, that could make it more difficult
for stockholders to effect certain corporate actions. In addition, the
Company's Board of Directors is divided into three classes, each of which
serves for a staggered three-year term, which may make it more difficult for a
third party to gain control of the Board of Directors. As a Delaware
corporation, the Company is subject to Section 203 of the Delaware General
Corporation Law, as amended (the "DGCL"), which, in general, prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined therein) for three years following the date such
person became an interested stockholder unless certain conditions are
satisfied. Pursuant to a Board
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resolution adopted at the time of formation of the Company, the Section 203
limits do not apply to any "business combination" between the Company and PGI.
See "Description of Capital Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION
The existing stockholders of the Company acquired their shares of Common
Stock at an average cost substantially below the assumed initial public
offering price set forth on the cover page of this Prospectus. Therefore,
purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in net tangible book value per share of approximately
$7.61. See "Dilution."
THE COMPANY AND THE FORMATION
The Company was incorporated in Delaware on September 4, 1996 and is wholly
owned by an affiliate of The Prime Group, Inc. At the completion of the
Offering, the shares owned by such affiliate will be repurchased by the
Company in accordance with a subscription agreement between the Company and
such affiliate at a nominal price. BLC, a wholly owned subsidiary of PGI, was
incorporated in Delaware on December 12, 1996 to facilitate the December 1996
sale and leaseback of PGI's Hallmark facility. Pursuant to such sale and
leaseback transaction, HRPT purchased the Hallmark facility from PGI and
leased such facility to BLC pursuant to a net operating lease. Concurrently
with such transaction, HRPT acquired the Springs of East Mesa and the Gables
at Brighton facilities from a third party and net leased such facilities to
BLC, and BLC in turn subleased each of the Leased Facilities to separate,
wholly owned subsidiaries of BLC.
Pursuant to the Formation Agreement, in connection with the completion of
the Offering, PGI will contribute to the Company all of the capital stock of
BLC, its interests in the Heritage and the Devonshire facilities and the
operations relating to its senior and assisted living division (including all
of the capital stock of a wholly owned subsidiary of PGI that holds certain
rights relating to the proposed skilled nursing facility on the campus of the
Devonshire facility) in exchange for 2,071,334 shares of Common Stock and the
assumption by the Company of certain indebtedness in the aggregate amount of
$65.0 million. Further, PGI will covenant that the partnerships owning the
Heritage and the Devonshire facilities will have no less than $800,000 in the
aggregate in unrestricted cash upon the completion of the Offering; however,
any unrestricted cash in excess of $800,000 then held by such partnerships
will be distributed to PGI. In addition, in accordance with the terms and
conditions of the master lease between HRPT and BLC governing the Leased
Facilities, upon the closing of the Offering and PGI's contribution of all of
BLC's capital stock to the Company, certain affiliates of PGI, including The
Prime Group, Inc., will be released by HRPT from such affiliates' guaranties
of BLC's obligations under the master lease. In addition, the Company will pay
PGI approximately $7.2 million to reimburse PGI for earnest monies previously
paid by PGI in connection with the acquisition of the Acquired Facilities, the
Park Place facility, a third party's interests in the Heritage and the
Devonshire facilities and the proposed acquisitions of the development sites
located in Glen Ellyn, Illinois, Southfield, Michigan and Austin, Texas and
for certain costs and expenses previously paid by PGI relating to the issuance
and distribution of Common Stock pursuant to the Offering. At the Formation,
in accordance with the Formation Agreement, Mark J. Schulte, President and
Chief Executive Officer of the Company, will transfer all of his interests in
PGI's senior and assisted living division to the Company in exchange for
328,666 shares of Common Stock. The Company, at the completion of the
Offering, will also enter (i) a management agreement with PGI to manage the
Island on Lake Travis facility and (ii) a management agreement (and an option
to purchase) regarding the Kenwood facility with a third party unaffiliated
with PGI that owns the Kenwood facility. See "Risk Factors--Benefits to
Affiliates," "Use of Proceeds," "Business--Facilities" and "Certain
Transactions."
The Company currently has credit enhancement securing the $65.0 million of
tax-exempt bonds relating to the Heritage and the Devonshire facilities which
it must replace on or before the date of the acquisition of these facilities.
Bank One, Illinois, NA has issued a commitment, and the Company expects to
obtain an extension of an expired commitment previously obtained from LaSalle
National Bank, in each case pursuant to which letters of credit with a
maturity of three years from the date of issuance of such letters of credit
would be provided as
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replacement credit enhancement for such tax-exempt bonds. On or prior to the
completion of the Offering, the Company will have executed definitive
agreements with such banks to issue the letters of credit. In addition to the
mortgages on the Heritage and the Devonshire facilities, it is anticipated
that estimated cash collateral of approximately $11.0 million from the net
proceeds of the Offering will be pledged as additional collateral and the
letters of credit will be guaranteed to the extent of 30% by the Company. The
Company intends to purchase two-year interest rate protection agreements with
respect to such tax-exempt indebtedness upon the completion of the Offering,
which, if so purchased, will have the effect of mitigating the effect of
inflation and higher interest rates on such indebtedness during the terms of
such contracts. There can be no assurance that the Company will be able to
purchase such interest rate protection contracts on terms favorable to the
Company, if at all.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 5,000,000 shares of
Common Stock offered hereby are estimated to be approximately $66.3 million
(at an assumed initial public offering price of $15.00 per share, the midpoint
of the filing range) or approximately $76.7 million if the Underwriters' over-
allotment option is exercised in full, after deducting the estimated
underwriting discounts and commissions and offering expenses (including
approximately $1.3 million to be paid to PGI to reimburse PGI for such
expenses previously paid by PGI) payable by the Company. Simultaneously with
the completion of the Offering, the Company intends to use approximately $35.8
million of the net proceeds to fund the cash portion of the purchase price for
the Acquired Facilities and the Park Place facility (including the payment to
PGI of approximately $300,000 to reimburse PGI for earnest monies previously
paid by PGI in connection with the acquisition of the Acquired Facilities and
the Park Place facility), and approximately $5.6 million of the net proceeds
to reimburse PGI for earnest monies previously paid by PGI in connection with
the acquisition of a third party's interests in the Heritage and the
Devonshire facilities and the proposed acquisitions of the development sites
located in Glen Ellyn, Illinois, Southfield, Michigan and Austin, Texas. In
addition, the Company intends to use approximately $1.6 million of the net
proceeds to fund a statutory escrow deposit with respect to the Hallmark
facility pursuant to Illinois law and in accordance with BLC's lease agreement
with HRPT. The Company also intends to use approximately $11.0 million of the
net proceeds as cash collateral for the proposed credit enhancement on $65.0
million of tax-exempt bonds that are secured by the Heritage and the
Devonshire facilities and approximately $400,000 in payment of a commitment
fee to the financial institutions providing such credit enhancement. In
addition, the Company intends to use approximately $300,000 to purchase
interest rate protection contracts on the $65.0 million of tax-exempt bonds
relating to the Heritage and the Devonshire facilities. The foregoing uses of
proceeds represent the direct and indirect payment to PGI and its affiliates
of an aggregate of approximately $7.2 million, or approximately 10.9%, of the
net proceeds of the Offering (9.4% if the Underwriters' over-allotment is
exercised in full). The balance of the net proceeds, approximately $11.6
million (or approximately $22.0 million if the Underwriters' over-allotment
option is exercised in full), will be used to finance a portion of the future
acquisitions and developments of senior and assisted living facilities and for
working capital and general corporate purposes. Pending such uses described
above, the Company intends to invest the net proceeds in short-term, interest-
bearing securities or certificates of deposit. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Business--Business and Growth Strategy" and "Certain
Transactions."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and currently plans to retain future earnings, if any, to finance the
growth of the Company's business rather than to pay cash dividends. Payments
of any cash dividends in the future will depend on the financial condition,
results of operations and capital requirements of the Company as well as other
factors deemed to be relevant by the Board of Directors. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
14
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1996 (i) the
capitalization of the Original Facilities and (ii) the pro forma
capitalization of the Company, as adjusted to give effect to the Formation and
the receipt and application of the net proceeds of the Offering (assuming an
initial public offering price of $15.00, the midpoint of the filing range, and
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by the Company) as discussed in "Use of Proceeds."
The table should be read in conjunction with the Unaudited Pro Forma Combined
Condensed Financial Statements of the Company and the Combined Financial
Statements of the Original Facilities, and the related notes to each thereto,
contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
---------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Unrestricted cash........................................ $ 4,044 $ 13,741
======== ========
Total long-term debt(1).................................. $ 65,000 $ 93,430
Stockholders' and partners' equity (deficit):
Preferred Stock, $0.01 par value, 20,000,000 shares
authorized; none issued or outstanding.................. -- --
Common Stock, $0.01 par value, 75,000,000 shares
authorized; 7,500,000 shares issued and outstanding, pro
forma as adjusted(2).................................... -- 75
Additional paid-in capital............................... -- 39,204
Accumulated deficit...................................... (25,428) --
-------- --------
Total stockholders' and partners' equity (deficit)..... (25,428) 39,279
-------- --------
Total capitalization................................. $ 39,572 $132,709
======== ========
</TABLE>
- ---------------------
(1) See Note (i) of Notes to Unaudited Pro Forma Combined Condensed Balance
Sheet of the Company, Note 4 of Notes to Combined Financial Statements of
the Original Facilities and Note 3 of Notes to the Combined Financial
Statements of the Activelife Facilities (the Springs of East Mesa, Edina
Park Plaza and Hawthorn Lakes facilities) for information regarding the
Company's long-term indebtedness.
(2) Does not include 695,000 shares of Common Stock subject to options
expected to be granted at the initial public offering price. See
"Management--Stock Incentive Plan."
15
<PAGE>
DILUTION
The Company's net deficit in tangible book value as of December 31, 1996
prior to the Offering was approximately $14.6 million, or $5.85 per share. Net
deficit in tangible book value per share as of December 31, 1996 is equal to
the Original Facilities' total tangible assets less their total tangible
liabilities, divided by the 2,500,000 shares of Common Stock to be received by
PGI and management of the Company related to the Formation. After giving
effect to the sale of the 5,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $15.00 per
share, the midpoint of the filing range, the pro forma net tangible book value
of the Common Stock at December 31, 1996 would have been approximately $55.4
million, or $7.39 per share. This represents an immediate increase in pro
forma net tangible book value of $13.24 per share to existing stockholders and
immediate dilution of $7.61 per share to purchasers of Common Stock in the
Offering. The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $15.00
Net deficit in tangible book value prior to the Offering....... $(5.85)
Increase attributable to new investors......................... 13.24
------
Pro forma net tangible book value after the Offering............. 7.39
------
Dilution per share to new investors.............................. $ 7.61
======
</TABLE>
The following table summarizes the differences between PGI and management
and the new investors with respect to the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid (based upon an assumed initial public offering price of $15.00
per share, the midpoint of the filing range):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
New investors............. 5,000,000 66.7% $75,000,000 151.2% $15.00
PGI and management(1)(2).. 2,500,000 33.3 (25,400,000) (51.2) (10.16)
--------- ----- ----------- -----
Total................. 7,500,000 100.0% $49,600,000 100.0% $ 6.61
========= ===== =========== =====
</TABLE>
- ---------------------
(1) Does not include 695,000 shares of Common Stock subject to options
expected to be granted at the initial public offering price. See
"Management--Stock Incentive Plan."
(2) Total consideration provided by PGI and management for the shares of
Common Stock includes the Original Facilities partners' deficit at
December 31, 1996 of $25.4 million.
16
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected financial and operating data for the
Original Facilities and selected pro forma data for the Company. The selected
financial data as of December 31, 1995 and 1996, and for the years ended
December 31, 1994, 1995 and 1996, have been derived from the audited combined
financial statements of the Original Facilities included elsewhere in this
Prospectus. The selected financial data as of December 31, 1992, 1993 and 1994
and for the years ended December 31, 1992 and 1993 have been derived from the
combined financial statements of the Original Facilities not included in this
Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------- ---
1992 1993 1994 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING
DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resident fees.................. $ 5,044 $ 6,637 $ 15,205 $ 21,935 $23,437
Facilities operating expenses... (3,910) (5,279) (11,270) (13,253) (12,806)
General and administrative
expenses (1)................... -- -- -- -- --
Depreciation and amortization... (1,281) (1,626) (3,286) (3,721) (2,946)
------- ------- -------- -------- -------
Operating income (loss)......... (147) (268) 649 4,961 7,685
Interest and financing fees
expense........................ (1,742) (1,791) (4,053) (6,385) (5,320)
------- ------- -------- -------- -------
Income (loss) before minority
interest and extraordinary
item........................... (1,889) (2,059) (3,404) (1,424) 2,365
(Income) loss allocated to
minority interest.............. 1,415 1,266 1,178 802 (756)
------- ------- -------- -------- -------
Income (loss) before
extraordinary item............. (474) (793) (2,226) (622) 1,609
Extraordinary item (gain on
extinguishment of debt)........ -- -- -- 3,274 --
------- ------- -------- -------- -------
Net income (loss)............... $ (474) $ (793) $ (2,226) $ 2,652 $ 1,609
======= ======= ======== ======== =======
UNAUDITED PRO FORMA DATA:
Income (loss) before income
taxes and extraordinary item... $ (474) $ (793) $ (2,226) $ (622) $ 1,609
Pro forma benefit (provision)
for income taxes (2)........... 190 317 890 249 (643)
------- ------- -------- -------- -------
Income (loss) before
extraordinary item............. (284) (476) (1,336) (373) 966
Extraordinary item (gain on
extinguishment of debt), net of
income taxes of $1,310 (2)..... -- -- -- 1,964 --
------- ------- -------- -------- -------
Pro forma net income (loss)..... $ (284) $ (476) $ (1,336) $ 1,591 $ 966
======= ======= ======== ======== =======
Pro forma net income per share
(3)............................ $ 0.39
=======
Pro forma shares of common stock
outstanding (3)................ 2,500
=======
SELECTED OPERATING AND OTHER
DATA:
Total units operated (4)........ 323 577 918 918 918
Occupancy rate (4).............. 95.4% 79.9% 95.6% 98.1% 99.2%
Average monthly revenue per unit
(5)............................ $ 1,365 $ 1,454 $ 1,732 $ 2,015 $ 2,144
BALANCE SHEET DATA:
Total assets.................... $70,255 $65,149 $102,579 $100,325 $56,731
Total long-term debt............ 70,848 71,510 101,242 99,627 65,000
Partners' capital (deficit)..... (1,987) (2,780) 1,852 3,597 (25,428)
</TABLE>
- ---------------------
(1) Historically, general and administrative expenses have not been incurred
with regard to the Original Facilities; however, upon the completion of
the Offering, the Company will incur and report general and administrative
expenses as a separate item. See Pro Forma Combined Condensed Statements
of Operations of the Company.
(2) Includes a pro forma income tax adjustment for federal and state income
taxes to reflect the Original Facilities as C Corporations. See Note 1 of
Notes to Combined Financial Statements of the Original Facilities.
17
<PAGE>
(3) Reflects the issuance of 2,500,000 shares of Common Stock in connection
with the Formation.
(4) Total units operated represent the total units operated as of the end of
the period for the Original Facilities (the Hallmark facility, with 341
units, was not acquired by PGI until June 1994 and was sold to HRPT and
leased back to BLC on December 27, 1996). Occupancy rate is calculated by
dividing total occupied units by total units operated as of the end of the
period for the Original Facilities.
(5) Average monthly revenue per unit represents the average of total monthly
resident fees divided by occupied units at the end of the period averaged
over the respective period presented and for the period of time in
operation during the period for the Original Facilities.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Financial Data" and the Combined Financial Statements of the Original
Facilities and Notes thereto, each appearing elsewhere in this Prospectus.
Such historical information includes the operations, assets and liabilities of
the business and facilities relating to the Original Facilities (a portion of
which, consisting of the Heritage and the Devonshire facilities and the
operations relating to the Original Facilities, will be contributed to the
Company as part of the Formation, the balance of which, consisting of the
Hallmark facility, was acquired by HRPT and in turn leased to the Company),
and forms the basis for "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Except for "Overview," the discussion of
historical results set forth below does not include financial information
relating to the Acquired Facilities (consisting of the Hawthorn Lakes and the
Edina Park Plaza facilities), the Park Place facility, two of the Leased
Facilities (consisting of the Springs of East Mesa and the Gables at Brighton
facilities) or the managed facilities. See "Risk Factors--Uncertainty of
Proposed Acquisition" and "The Company and the Formation." Historical results
as set forth herein are not necessarily indicative of future results from
operations.
OVERVIEW
The Company operates nine senior and assisted living facilities containing a
total of 1,968 units. Four of such facilities are owned by the Company, three
facilities are leased by the Company from HRPT and two facilities are managed
by Brookdale pursuant to management contracts. The Company's senior and
assisted living facilities offer residents a supportive, "home-like" setting
and assistance with certain activities of daily living. By providing residents
a range of service options as their needs change, the Company seeks to achieve
greater continuity of care, enabling seniors to age in place and thereby
maintain their residency for a longer time period. The ability to allow
residents to age in place is beneficial to Brookdale's residents as well as
their families who are burdened with care option decisions for their elderly
relatives.
Upon the completion of the Offering, PGI will contribute to the Company all
of the capital stock of BLC, its interests in the Heritage and the Devonshire
facilities and the operations relating to its senior and assisted living
division (including all of the capital stock of a wholly owned subsidiary of
PGI that holds certain rights relating to the proposed skilled nursing
facility on the campus of the Devonshire facility) in exchange for 2,071,334
shares of Common Stock and the assumption by the Company of certain
indebtedness in the aggregate amount of $65.0 million. Further, PGI will
covenant that the partnerships owning the Heritage and the Devonshire
facilities will have no less than $800,000 in the aggregate in unrestricted
cash upon the completion of the Offering; however, any unrestricted cash in
excess of $800,000 then held by such partnerships will be distributed to PGI.
In addition, in accordance with the terms and conditions of the master lease
between HRPT and BLC governing the Leased Facilities, upon the closing of the
Offering and PGI's contribution of all of BLC's capital stock to the Company,
certain affiliates of PGI, including The Prime Group, Inc., will be released
by HRPT from such affiliates' guaranties of BLC's obligations under the master
lease. In addition, the Company will pay PGI approximately $7.2 million to
reimburse PGI for earnest monies previously paid by PGI in connection with the
acquisition of the Acquired Facilities, the Park Place facility, a third
party's interests in the Heritage and the Devonshire facilities and the
proposed acquisitions of the development sites located in Glen Ellyn,
Illinois, Southfield, Michigan and Austin, Texas and for certain costs and
expenses previously paid by PGI relating to the issuance and distribution of
Common Stock pursuant to the Offering. At the Formation, in accordance with
the Formation Agreement, Mark J. Schulte, President and Chief Executive
Officer of the Company, will transfer all of his interests in PGI's senior and
assisted living division to the Company in exchange for 328,666 shares of
Common Stock. Further, at the completion of the Offering, the Company will
enter (i) a management contract with PGI to manage the Island on Lake Travis
facility and (ii) a management agreement (and an option to purchase) regarding
the Kenwood facility with a third party unaffiliated with PGI that owns the
Kenwood facility. See "Risk Factors--Benefits to Affiliates," "The Company and
the Formation," "Use of Proceeds," "Business--Facilities" and "Certain
Transactions."
The Company currently plans to acquire or lease approximately three to five
facilities per year containing an aggregate of approximately 600 to 1,000
units, and to commence development of at least two new facilities per year
containing approximately 200 units each in major urban and suburban areas of
major metropolitan
19
<PAGE>
markets. The Company anticipates that it will use a combination of net
proceeds from the Offering, additional equity financing and debt financing,
lease transactions and cash generated from operations to fund this development
activity. In order to achieve its growth plans, the Company will be required
to obtain a substantial amount of additional financing. To the extent
available, the Company intends to use long-term, tax-exempt bonds to finance
the acquisition and renovation of existing facilities and the development of
new facilities. The Company has no existing commitments for financing. There
can be no assurance that future financing or lease transactions will be
available as needed or on terms acceptable to the Company. A lack of funds may
require the Company to delay all or some of its acquisition plans and
development projects. See "Risk Factors--Difficulties of Integration; Future
Acquisition Risks," "--Development and Construction Risks," "--Need for
Additional Financing" and "--Liquidity and Capital Resources."
The Company derives its revenues from resident fees and management fees. On
a pro forma basis after giving effect to the Formation, most of the Company's
operating revenue has come from resident fees, which comprised 99.2% of total
operating revenues for the years ended December 31, 1995 and 1996. Resident
fees typically are paid monthly by residents, their families or other
responsible parties. The Company estimates that approximately 99.9% of the
Company's pro forma revenue has been derived from private pay sources.
Management services income, which on a pro forma basis after giving effect to
the Formation, accounted for 0.7% of the Company's revenues for the years
ended December 31, 1995 and 1996, consists of management fees which typically
range from 3.0% to 5.0% of a managed facility's total gross revenues. Resident
fees and management fees are recognized as revenues when services are
provided. After the Offering, the Company will not receive management fees
with regard to its owned and leased facilities; however, it will receive fees
under the management contracts for the Island on Lake Travis and the Kenwood
facilities.
The Company classifies its operating expenses into the following categories:
(i) facility operating expenses, which include lease payments, labor, food,
marketing and other direct facility expenses and real estate taxes; (ii)
general and administrative expenses, which primarily include corporate
headquarters and other overhead costs; and (iii) depreciation and
amortization. On a pro forma basis after giving effect to the Formation,
annual lease expenses will be recorded net of $806,000 per year related to the
amortization of a deferred gain on the sale and leaseback of the Hallmark
facility.
RESULTS OF OPERATIONS
The following table sets forth certain data from the respective combined
statements of operations of the Original Facilities:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1994 1995 1996
<S> <C> <C> <C>
Resident fees......................................... 100.0% 100.0% 100.0%
Facility operating expenses........................... (74.1) (60.4) (54.6)
General and administrative expenses (1)............... -- -- --
Depreciation and amortization......................... (21.6) (17.0) (12.6)
------ ------ ------
Income from operations................................ 4.3 22.6 32.8
Interest and financing fees expense................... (26.7) (29.1) (22.7)
------ ------ ------
Income (loss) before minority interest and
extraordinary item................................... (22.4) (6.5) 10.1
(Income) loss allocated to minority interest.......... 7.7 3.7 (3.2)
------ ------ ------
Income (loss) before extraordinary item............... (14.7) (2.8) 6.9
Extraordinary item.................................... -- 14.9 --
------ ------ ------
Net income (loss)..................................... (14.7)% 12.1% 6.9%
====== ====== ======
Selected Operating and Other Data:
Total units operated (2).............................. 918 918 918
Occupancy rate (2).................................... 95.6% 98.1% 99.2%
Average monthly revenue per unit (3).................. $1,732 $2,015 $2,144
</TABLE>
20
<PAGE>
- ---------------------
(1) Historically, general and administrative expenses have not been incurred
with regard to the Original Facilities; however, upon the completion of
the Offering, the Company will incur and report general and administrative
expenses as a separate item. See Pro Forma Combined Condensed Statements
of Operations of the Company.
(2) Total units operated represents total units operated as of the end of the
period for the Original Facilities (the Hallmark facility, with 341 units,
was not acquired by PGI until June 1994 and was sold to HRPT and leased
back to BLC on December 27, 1996). Occupancy rate is calculated by
dividing total occupied units by total units operated as of the end of the
period for the Original Facilities.
(3) Average monthly revenue per unit represents the average of the total
monthly resident fees divided by occupied units at the end of the period
averaged over the respective period presented and for the period of time
in operation during the period for the Original Facilities.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Revenue. Resident fees revenue increased approximately $1.5 million, or
6.8%, to $23.4 million for the year ended December 31, 1996 primarily due to a
6.4% increase in average monthly revenue per unit and a 1.1% increase in
occupancy percentage from the year ended December 31, 1995 to the year ended
December 31, 1996. The occupancy rate for the Original Facilities during the
year ended December 31, 1996 was 99.2% as compared to 98.1% during the year
ended December 31, 1995. The average monthly revenue per unit increased by
$129 per unit to $2,144 per unit for the year ended December 31, 1996 as
compared to $2,015 per occupied unit for the year ended December 31, 1995.
Operating Expenses. Facility operating expenses decreased approximately
$447,000, or 3.4%, to $12.8 million for the year ended December 31, 1996
primarily due to more efficient operations at the Original Facilities and
economies of scale created by the increase in occupancy and revenue. This was
evidenced by the decrease in these expenses as a percentage of revenue to
54.6% for the year ended December 31, 1996 compared to 60.4% for the year
ended December 31, 1995. In addition, property management fees (such
management fees, which were paid to PGI, will not be payable after the
Formation) decreased approximately $513,000, or 35.6%, due primarily to a
reduction of the Hallmark facility's management fees, effective January 1,
1996, from 5.0% of net operating income to 3.0%.
Depreciation and amortization expense decreased approximately $775,000, or
20.8%, to $2.9 million for the year ended December 31, 1996 primarily due to
amortization of deferred marketing fees of approximately $591,000 in 1995
related to the Devonshire and the Heritage facilities that became fully
amortized in 1995 and certain furniture and equipment of the Devonshire
facility that was fully depreciated in 1995, representing a depreciation
expense of approximately $215,000 in 1995, and was partially offset by an
increase in depreciable assets at each of the Original Facilities.
Interest and financing fees expense decreased approximately $1.1 million, or
16.7%, to $5.3 million for the year ended December 31, 1996 primarily due to
the refinancing of the Hallmark facility's mortgage payable at the end of
1995. This refinancing resulted in savings of approximately $594,000 as the
new note bears a fixed rate of interest of 7.265% per annum whereas the old
note accrued interest at a rate of LIBOR plus 2.5% per annum. For the year
ended December 31, 1995, the interest rate on the old note ranged from 8.75%
to 9.0%. In addition, the Devonshire and the Heritage facilities experienced
lower interest rates on their variable rate bonds during the year ended
December 31, 1996 than during the year ended December 31, 1995, which resulted
in additional savings of approximately $292,000. Interest rates on these bonds
(exclusive of credit enhancement and other fees) averaged approximately 3.4%
for the year ended December 31, 1996 as compared to an average rate of
approximately 3.9% for the year ended December 31, 1995. These decreases in
interest expense were slightly offset by increased financing fees associated
with the Devonshire and the Heritage facilities' bonds for the year ended
December 31, 1996.
Income (Loss) Before Minority Interest and Net Income (Loss). Income before
minority interest increased approximately $3.8 million and net income
decreased by approximately $1.1 million to approximately $2.4 million and $1.6
million, respectively, for the year ended December 31, 1996 compared to a loss
before minority interest and net income of $1.4 million and $2.7 million,
respectively, for the year ended December 31, 1995
21
<PAGE>
primarily due to an increase in operating revenue and a decrease in operating
expenses, offset as described above by the extraordinary gain on
extinguishment of debt of $3.3 million on the Hallmark facility in the year
ended December 31, 1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Revenue. Resident fees revenue increased approximately $6.7 million, or
44.3%, to $21.9 million for the year ended December 31, 1995. Of this
increase, $4.9 million related to a full year of operations at the Hallmark
facility during the year ended December 31, 1995 versus only seven months
during the year ended December 31, 1994, while the remainder of this increase
was primarily due to increases in average monthly revenue per unit and
occupancy rates at the Original Facilities for the year ended December 31,
1994 as compared to the year ended December 31, 1995. Occupancy rates for the
Original Facilities during the year ended December 31, 1995 increased 2.5% to
98.1% from 95.6% during the year ended December 31, 1994. The average monthly
revenue per unit increased by $283 per unit, to $2,015 per occupied unit, for
the year ended December 31, 1995 as compared to $1,732 per unit for the year
ended December 31, 1994.
Operating Expenses. Facility operating expenses increased approximately $2.0
million, or 17.6%, to $13.3 million for the year ended December 31, 1995
primarily due to an increase of $1.9 million in facility operating expenses at
the Hallmark facility due to a full year of operations versus only seven
months during the year ended December 31, 1994. Real estate taxes increased
approximately $120,000, or 13.4%, to $1.0 million for the year ended December
31, 1995 again due to a full year of taxes being expensed for the Hallmark
facility. Real estate taxes at both the Devonshire and the Heritage facilities
were consistent from year to year. Property management fees (such management
fees, which were paid to PGI, will not be payable after the Formation)
increased approximately $327,000, or 44.0%, to $1.1 million for the year ended
December 31, 1995 primarily due to a full year of fees assessed at the
Hallmark facility and increased revenues at the Devonshire and the Heritage
facilities. However, the Original Facilities were run more efficiently and
economies of scale created by the increase in occupancy and revenue are
evidenced by the reduction of these expenses as a percentage of revenue
decreasing to 60.4% for the year ended December 31, 1995 from 74.1% for the
year ended December 31, 1994.
Depreciation and amortization expense increased approximately $435,000, or
13.2%, to $3.7 million for the year ended December 31, 1995. Of this increase,
approximately $511,000 related to a full year of depreciation at the Hallmark
facility and $121,000 related to an increase of depreciable assets at the
Original Facilities. These increases were partially offset by a decrease of
$197,000 in the amortization of deferred marketing costs at the Heritage
facility that became fully amortized in mid-1995.
Interest and financing fees expense increased 57.5%, or $2.3 million, to
$6.4 million for the year ended December 31, 1995. Of this increase,
approximately $1.7 million was due to 12 months of interest expense at the
Hallmark facility during the year ended December 31, 1995 versus only seven
months during the year ended December 31, 1994. In addition, approximately
$612,000 of additional interest expense related to the variable-rate bonds
that encumber both the Devonshire and the Heritage facilities was recognized
in the year ended December 31, 1995 due to increased interest rates. Interest
rates on the bonds (exclusive of credit enhancement and other fees) averaged
3.9% during the year ended December 31, 1995 versus 2.9% during the year ended
December 31, 1994. The Devonshire and the Heritage facilities also realized an
increase in financing fees during the year ended December 31, 1995 as a
standard fee of 1.35% of the outstanding bond balance was imposed, which
created a $135,000 increase in financing fees from the prior year. The above
mentioned increases were partially offset by a $117,000 reduction to interest
expense related to a note payable to an affiliate that was paid off during the
year ended December 31, 1994.
In December 1995, the owner of the Hallmark facility repaid its original
mortgage note from the proceeds of a new note at a discount of approximately
$3.3 million, which was recognized as an extraordinary gain on the
extinguishment of debt.
Income (Loss) Before Minority Interest and Net Income (Loss). Loss before
minority interest decreased approximately $2.0 million to approximately $1.4
million and net income increased approximately $4.9 million to $2.7 million
for the year ended December 31, 1995 compared to a loss before minority
interest and net loss of $3.4 million and $2.2 million, respectively, for the
year ended December 31, 1994 primarily due to an extraordinary gain on the
extinguishment of the mortgage on the Hallmark facility and increased revenues
at the Original Facilities, both described above. Partially offsetting the
extraordinary gain and increase in operating revenue was an increase in
operating expenses, as described above.
22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations totaled approximately $5.3 million, $620,000
and $2.2 million for each of the three years ended December 31, 1996, 1995 and
1994, respectively. The variance in cash flows from operations during the
foregoing periods resulted primarily from the effects of increases in various
liabilities during the year ended December 31, 1994 due to the acquisition of
the Hallmark facility and improved operating results of the Original
Facilities during the year ended December 31, 1996. Cash totaled approximately
$4.0 million, $5.1 million and $4.1 million at December 31, 1996, 1995 and
1994, respectively.
Net cash provided by (used in) investing activities totaled approximately
$58.1 million, $689,000 and $(36.9) million for the years ended December 31,
1996, 1995 and 1994, respectively. Brookdale's investing activities included
proceeds from the sale of the Hallmark facility of $58.5 million during the
year ended December 31, 1996, capital expenditures of $42.1 million related to
the acquisition of the Hallmark facility during the year ended December 31,
1994 and improvements to existing operations totaling approximately $359,000,
$239,000 and $1.1 million for the years ended December 31, 1996, 1995 and
1994, respectively.
Management believes that its capital expenditure program is adequate to
improve and equip its existing facilities, and expects to finance such
expenditures primarily through cash flows from operations. Excluding the
acquisition and development of new facilities, management believes that
capital expenditures related to the construction of the 82-bed skilled nursing
facility adjacent to the Devonshire facility will approximate $5.0 million and
the expansion of the Hawthorn Lakes facility will approximate $5.0 million.
The funds necessary for such capital expenditures will be derived from
additional debt financing.
Net cash provided by (used in) financing activities was approximately
$(64.4) million, ($349,000) and $38.3 million for the years ended December 31,
1996, 1995 and 1994, respectively. The activity primarily relates to the
repayment of the mortgage note payable on the Hallmark facility of $34.6
million, distributions to partners of $26.2 million and advances of $4.5
million made to the general partner during the year ended December 31, 1996,
the payment of the principal portion of debt and distributions to partners and
additional financing and partner contributions to fund the acquisition of the
Hallmark facility during the year ended December 31, 1994.
Brookdale plans to retain future earnings, if any, to finance the growth of
its business rather than to pay cash dividends. Payments of any cash dividends
in the future will depend on the financial condition, results of operations
and capital requirements of the Company as well as other factors deemed
relevant by the Board of Directors.
The Company currently plans to acquire or lease approximately three to five
facilities per year containing an aggregate of approximately 600 to 1,000
units, and to commence development of at least two new facilities per year
containing approximately 200 units each in urban and suburban areas of major
metropolitan markets. The Company anticipates that new developments will
require eight to 10 months for pre-construction development, 12 to 14 months
for construction and approximately 12 months after opening to achieve
stabilized occupancy. The development costs for the 175-unit prototype are
estimated to be approximately $20.0 million, or approximately $115,000 per
unit. The Company anticipates that it will use a combination of net proceeds
from the Offering, additional equity financing and debt financing, lease
transactions and cash generated from operations to fund its acquisition and
development activity. The Company currently estimates that the net proceeds
from the Offering, together with anticipated financing, will be sufficient to
fund its acquisition and development plans for approximately 24 months
following completion of the Offering. Therefore, in order to achieve its
growth plans, the Company will be required to obtain a substantial amount of
additional financing. The Company presently has no commitment, arrangement or
understanding regarding financing to fund the debt portion of the Company's
acquisition and development plans. There can be no assurance that the Company
will be able to obtain financing for its acquisition and development programs.
See "Risk Factors--Need for Additional Financing."
The Company has $65.0 million of long-term indebtedness as of December 31,
1996 ($93.4 million pro forma after giving effect to the Formation) in tax-
exempt bonds with floating rates. See Unaudited Pro Forma
23
<PAGE>
Combined Condensed Financial Statements of the Company contained elsewhere in
this Prospectus. The interest rates (exclusive of credit enhancement and other
fees) on such debt averaged 3.4%, 3.9% and 2.9% during the years ended December
31, 1996, 1995 and 1994, respectively. Such tax-exempt bonds contain covenants
requiring the facilities to maintain a minimum number of units for income
qualified residents. The Company may enter into similar bond financing in the
future. See "Risk Factors--Adverse Consequences of Indebtedness and Lease
Obligations; Floating Rate Debt."
Following the Offering, the Company will be dependent on third-party
financing for its acquisition and development program. The Company has no
arrangements for financing but the documentation for any such financing
obtained in the future is expected to contain terms and conditions and
representations and warranties that are customary for such loans and is
expected to contain financial covenants and other restrictions that (i) require
the Company to meet certain financial tests and maintain certain escrows of
funds, (ii) limit, among other things, the ability of the Company to borrow
additional funds, dispose of assets and engage in mergers or other business
combinations and (iii) restrict the ability of the Company to operate competing
facilities within certain distances from mortgaged facilities. See "Risk
Factors--Adverse Consequences of Indebtedness and Lease Obligations; Floating
Rate Debt." There can be no assurance that financing for the Company's
acquisition and development program will be available to the Company on
acceptable terms or at all. Moreover, to the extent the Company acquires or
leases facilities that do not generate positive cash flow (after financing or
lease costs, as applicable), the Company may be required to seek additional
capital for working capital and liquidity purposes. See "Risk Factors--Need for
Additional Financing."
IMPACT OF INFLATION
Resident fees from senior and assisted living facilities owned or leased by
the Company and management fees from facilities operated by the Company are its
primary sources of revenue. These revenues are affected by monthly fee rates
and facility occupancy rates. The rates charged for the delivery of senior and
assisted living services are highly dependent upon local market conditions and
the competitive environment in which the facilities operate. Substantially all
of the Company's resident agreements are for terms of approximately one year
and allow, at the time of renewal, for adjustments in the monthly fees payable
thereunder, and thus may enable the Company to seek increases in monthly fees
due to inflation or other factors. Any such increase would be subject to market
and competitive conditions and could result in a decrease in occupancy at the
Company's facilities. The Company believes, however, that the short-term nature
of its resident agreements generally serves to reduce the risk to the Company
of the adverse effect of inflation. In addition, employee compensation expense
is a principal cost element of facility operations. There can be no assurance
that resident fees will increase or that costs will not increase due to
inflation or other causes. In addition, approximately $65.0 million ($93.4
million pro forma after giving effect to the Formation) in principal amount of
the Company's indebtedness bears interest at floating rates and future
indebtedness may bear floating rate interest. Inflation, and its impact on
floating interest rates, could materially affect the amount of interest
payments due on such indebtedness. The Company intends to purchase two-year
interest rate protection agreements with respect to $65.0 million of such
indebtedness upon the completion of the Offering, which, if so purchased, will
have the effect of mitigating the effect of inflation and higher interest rates
on such indebtedness during the terms of such contracts. There can be no
assurance that the Company will be able to purchase such interest rate
protection contracts on terms favorable to the Company, if at all. See "Risk
Factors--Competition" and "--Adverse Consequences of Indebtedness and Lease
Obligations; Floating Rate Debt."
24
<PAGE>
BUSINESS
OVERVIEW
Brookdale provides senior and assisted living services to the elderly
through its facilities located in urban and suburban areas of major
metropolitan markets. The Company operates nine senior and assisted living
facilities containing a total of 1,968 units which, as of December 31, 1996,
were approximately 99% occupied. The Company owns four of such facilities,
leases three facilities under a long-term net operating lease and manages two
other facilities pursuant to management contracts. In addition, the Company
has entered an agreement to acquire the 200-unit Park Place facility, the
closing of which acquisition is expected to occur within 60 days following the
completion of the Offering. With facilities that contain an average of 220
units, the Company believes it is able to achieve economies of scale within
its facilities and provide senior and assisted living services in a more cost-
effective manner. The Company plans to acquire or lease approximately three to
five facilities per year containing an aggregate of approximately 600 to 1,000
units, and to commence development of at least two new facilities per year
containing approximately 200 units each. The Company has entered agreements to
acquire development sites located in Glen Ellyn, Illinois, Southfield,
Michigan and Austin, Texas, the closings of which are expected to occur within
12 months following the completion of the Offering. Brookdale had pro forma
revenues and a net loss for the year ended December 31, 1996 of approximately
$41.5 million and $602,000, respectively. The Company estimates that
approximately 99.9% of the Company's pro forma revenues are derived from
private pay sources. See "Risk Factors--Uncertainty of Proposed Acquisition,"
"--Difficulties of Integration; Future Acquisition Risks," "--Development and
Construction Risks" and "--Need for Additional Financing" and "Certain
Transactions."
Brookdale's facilities are designed for middle to upper income residents who
desire an upscale residential environment providing the highest level of
quality, care and value. The Company's objective is to allow its residents to
age in place by providing them with a continuum of senior and assisted living
services. By providing residents a range of service options as their needs
change, Brookdale seeks to achieve a greater continuity of care, thereby
enabling seniors to maintain their residency for a longer time period. The
ability to allow residents to age in place is beneficial to Brookdale's
residents as well as their families who are burdened with care option
decisions for their elderly relatives. In addition to studio, one-bedroom and
two-bedroom units, the Company provides all residents with basic services,
such as meal service, 24-hour emergency response, housekeeping, concierge
services, transportation and recreational activities. For residents who
require additional supplemental care services, the Company provides assistance
with certain activities of daily living. The average age of Brookdale's
residents is approximately 82 years old, and many of these residents require
some level of assistance with their activities of daily living. Supplemental
care services are provided either by the Company or by outside services or
agencies. The Company intends to bring "in-house" as many of these services as
practicable and has established a program providing various levels and
combinations of these services called "Personally Yours"SM.
THE SENIOR AND ASSISTED LIVING INDUSTRY
The senior and assisted living industry is a rapidly growing component of
the non-acute health care system for the elderly. The senior living industry
serves the needs of the elderly who benefit from living in a supportive
environment and may require or prefer occasional assistance with the
activities of daily living, and who no longer desire, or cannot maintain, an
independent lifestyle. It is estimated that 35% of the people over age 85
require assistance with at least one activity of daily living, such as
bathing, eating, personal hygiene, grooming and dressing. The senior and
assisted living industry remains highly fragmented, with only 5% of the
industry's units operated by the 20 largest companies in the industry, which
provides opportunities for industry consolidation.
The rapid growth of the senior and assisted living industry is supported by
several significant trends, including the following:
FAVORABLE DEMOGRAPHICS. The primary consumers of senior and assisted living
services are persons over age 65. This group represents one of the fastest
growing segments of the U.S. population. According to U.S. Bureau of the
Census data, the number of people in the U.S. age 65 and older increased by
more than 27% from 1981 to 1994, growing from 26.2 million to 33.2 million.
The segment of the population over 85 years of age, which comprises the
largest percentage of residents at senior care facilities, is projected to
increase by more than
25
<PAGE>
40% between the years 1990 and 2000. Brookdale believes that these trends,
depicted in the graph below, will contribute to continued strong demand for
senior and assisted living services.
PROJECTED PERCENTAGE CHANGE IN THE ELDERLY POPULATION OF THE U.S.
LOGO
CONSUMER PREFERENCE. The Company believes that senior and assisted living
facilities provide prospective residents and their families with an attractive
alternative to skilled nursing facilities, particularly with respect to
prospective residents who do not require the level of care or institutional
setting of skilled nursing facilities. Senior and assisted living facilities,
which are generally furnished by residents, allow residents to age in place
and preserve their independence in a more residential setting. The Company
believes these factors result in a higher quality of life than that
experienced in the more institutional or clinical settings, such as skilled
nursing facilities.
COST-EFFECTIVE ALTERNATIVE. The annual per resident cost for senior and
assisted living care is significantly less than the annual per resident cost
for skilled nursing care. The Company believes that the cost of senior and
assisted living care (which includes housing and meal preparation) compares
favorably with home health care when the costs associated with housing and
meal preparation are added to the costs of home health care. Pricing pressure
is also forcing skilled nursing facilities to shift their focus toward
providing more intense levels of care enabling them to charge higher fees,
thus adding to the shortage of facilities where less intensive care is
available. The rapid growth of the elderly population coupled with continuing
constraints on the supply and availability of long term care beds is leading
to a continued shortage of long term care beds for the elderly, as the table
below illustrates.
DECLINE IN NURSING BEDS PER THOUSAND
FOR INDIVIDUALS 85 YEARS OR OLDER
LOGO
CHANGING FAMILY DYNAMICS. As a result of the growing number of two-income
families, many children are not able to care for elderly parents in their own
homes. Two-income families are, however, better able to provide financial
support for elderly parents. In addition, other factors, such as the growth in
the divorce rate and single-parent households, as well as the increasing
geographic dispersion of families, have contributed to the growing inability
of children to care for aging parents in the home.
26
<PAGE>
BUSINESS AND GROWTH STRATEGY
The Company's business and growth strategy is based on the following key
elements:
ACQUIRE AND LEASE EXISTING SENIOR AND ASSISTED LIVING FACILITIES. The
Company believes that significant opportunities exist to take advantage of the
fragmented senior and assisted living industry by selectively acquiring or
leasing existing facilities. The Company's acquisition strategy will focus
primarily on facilities that are designed or can be repositioned by the
Company, by improving or enhancing available services and amenities, for
middle to upper-income private pay residents. Acquisitions will primarily
consist of large facilities, similar to the Company's current facilities that
contain an average of 220 units, located in urban and suburban areas of major
metropolitan markets. See "--Acquisitions and Development" and "Risk Factors--
Uncertainty of Proposed Acquisition" and "--Difficulties of Integration;
Future Acquisition Risks."
DEVELOP THE BROOKDALE PROTOTYPE FACILITY IN TARGETED MARKETS. The Company
intends to leverage its development expertise and construct its prototype
facility in selected sites located in urban and suburban areas of major
metropolitan markets. The Company's prototype facility, which is flexible and
can be adapted to the specific requirements of individual markets and site
requirements, contains 175 units, but can be constructed to accommodate
between 150 and 225 units. The prototype offers a mix of studio, one-bedroom
and two-bedroom units and common areas providing premium amenities. The
Company intends to begin development of at least two facilities in each of the
next five years, and anticipates that each development will require
approximately 20 to 24 months from pre-development to completion of
construction. See "--Acquisitions and Development" and "Risk Factors--
Development and Construction Risks."
FOCUS ON OPPORTUNITIES FOR LOWER COST OF CAPITAL. The Company intends to
utilize long-term, tax-exempt bond financing, when available, to finance the
acquisition and renovation of existing senior and assisted facilities and the
development of new facilities. The cost benefit of tax-exempt bond financing,
which can be a low cost source of funds in certain circumstances, is partially
offset in certain cases by the potential limit on the Company's ability to
increase prices to Qualified Residents at facilities subject to such bond
financing to the extent such increases affect the ability of the Company to
attract and retain such Qualified Residents. See "Risk Factors--Adverse
Consequences of Indebtedness and Lease Obligations; Floating Rate Debt."
PROVIDE ACCESS TO A FULL CONTINUUM OF SENIOR AND ASSISTED LIVING SERVICES.
The Company's strategy is to provide access to a full continuum of senior and
assisted living services that allows its residents' to age in place. These
services are provided either by the Company or by outside services or
agencies. It is the Company's strategy to increase the availability of
additional services and to capture the incremental revenue generated by
providing these services through Company employees. In addition, one of
Brookdale's goals is to establish hospital affiliations for each of its
facilities. Hospital affiliations provide for on-site physician and nursing
services and facilitate the provision of health care services and wellness
programs to the Company's residents. In order to offer residents a complete
range of care options, the Company is presently developing an 82-bed skilled
nursing facility on the campus of the Devonshire facility. The Company may
pursue the development of additional skilled nursing facilities at its other
facilities in selected markets. See "Risk Factors--Development and
Construction Risks," "Use of Proceeds" and "--Company Operations--Hospital
Affiliations."
UTILIZE SOPHISTICATED MARKETING PROGRAMS TO MAINTAIN HIGH OCCUPANCY RATES.
The Company utilizes sophisticated marketing programs to achieve high
occupancy rates, which as of December 31, 1996 were approximately 99% for the
Original Facilities. The Company believes that its programs will improve the
occupancy rates of facilities that the Company acquires or leases in the
future. The Company's marketing programs are designed to create community
awareness of the Company, its facilities and its services, and to cultivate
relationships with referral sources such as health care providers, physicians,
clergy, area agencies for the elderly, home health agencies and social
workers. In addition, hospital affiliations have been successfully implemented
by the Company at the Original Facilities, which provide referrals of
prospective residents. The Company believes that the success of its marketing
programs is demonstrated not only by its high occupancy rates, but also by the
Company's ability to maintain waiting lists at its facilities for prospective
residents who pay a deposit in order to be included on such lists. See "--
Company Operations--Marketing and Sales."
27
<PAGE>
UTILIZE OPERATIONAL EXPERTISE TO ENHANCE PROFITABILITY. The Company has
developed and successfully implemented sophisticated management and
operational procedures at its Original Facilities resulting in strong
operating margins and occupancy rates at these facilities. These procedures
include securing national vendor contracts where feasible to ensure consistent
low pricing, implementing sophisticated budgeting and financial controls at
each facility and establishing standardized training and operations
procedures. The Company believes that the systematic implementation of its
management and operations policies will enable the Company to enhance the
financial performance of its existing and future facilities and continue to
improve the profitability of its stabilized facilities. See "Risk Factors--
Difficulties of Integration; Future Acquisition Risks" and "--Development and
Construction Risks."
EXPAND FACILITIES WHERE ECONOMICALLY ADVANTAGEOUS. The Company has found
that certain senior and assisted living facilities with stabilized occupancies
benefit from additions and expansions offering increased capacity, as well as
additional levels of service for higher acuity residents. Furthermore, the
expansion of existing facilities allows the Company to enhance its economies
of scale by increasing the revenue base at a facility while leveraging such
facility's existing infrastructure such as the laundry equipment and the
kitchen. In addition to the planned 82-bed skilled nursing facility on the
campus of the Devonshire facility, the Company is currently planning to expand
its Hawthorn Lakes facility in Vernon Hills, Illinois with an additional 57
units. See "Risk Factors--Development and Construction Risks."
FACILITIES
The following table sets forth certain information regarding the Company's
facilities:
<TABLE>
<CAPTION>
OCCUPANCY
YEAR RATE(2) OWNERSHIP
FACILITY(1) LOCATION UNITS OPENED 1994 1995 1996 STATUS(3)
<S> <C> <C> <C> <C> <C> <C> <C>
The Hallmark(4)(5)...... Chicago, IL 341 1990 91% 99% 100% Leased
The Devonshire(4)....... Lisle, IL 323 1990 99% 98% 98% Owned
The Heritage(4)......... Des Plaines, IL 254 1993 99% 100% 100% Owned
The Island on Lake
Travis(6).............. Lago Vista, TX 206 1988 94% 95% 98% Managed
Hawthorn Lakes(7)....... Vernon Hills, IL 202 1987 -- -- 100% Owned
Edina Park Plaza(7)..... Edina, MN 201 1987 -- -- 99% Owned
The Springs of East
Mesa(5)................ Mesa, AZ 185 1986 -- -- 100% Leased
The Kenwood(8).......... Minneapolis, MN 153 1987 -- -- 100% Managed
The Gables at
Brighton(5)............ Brighton, NY 103 1988 -- -- 100% Leased
-----
Total Units......... 1,968(9)
</TABLE>
- ---------------------
(1) The Company has entered a definitive purchase agreement to acquire the
Park Place facility, a 200-unit facility located in Spokane, Washington
for approximately $14.4 million, the closing of which acquisition is
expected to occur within 60 days following the completion of the Offering.
See "Risk Factors--Uncertainty of Proposed Acquisition."
(2) The occupancy rate, which is calculated by dividing the number of occupied
units by the number of available units, was determined as of December 31,
1994 for the 1994 occupancy rate indicated, as of December 31, 1995 for
the 1995 occupancy rate indicated and as of December 31, 1996 for the 1996
occupancy rate indicated. If the occupancy rate is not indicated, such
occupancy rate was not available because the Company did not operate the
facility during such year.
(3) All facilities indicated as "Owned" are 100% owned by Brookdale.
(4) This facility is one of the Original Facilities.
(5) This facility is one of the Leased Facilities, which facilities are net
leased from HRPT to BLC pursuant to a long-term master lease. The master
lease has an initial term that expires on December 31, 2019, and BLC has
the right to extend the term of the master lease for two consecutive 25-
year renewal periods. The master lease requires minimum annual lease
payments aggregating approximately $8.3 million in 1997 and $8.8 million
in 1998 and provides for increases in minimum annual lease payments in
1999 and 2000 and additional rent payments based on a percentage of any
increases in the revenues generated by the Leased Facilities beginning in
1999. See Note 4 of Notes to Consolidated Financial Statements of BLC
Property, Inc. and Subsidiaries.
(6) This facility is owned by PGI and will be managed by the Company pursuant
to a management agreement which is expected to have an initial term of two
years, cancellable by the Company at any time upon 60 days' prior written
notice (and by PGI only for cause as set forth in the agreement during its
initial term), and a management fee of 5.0% of gross revenues and
reimbursement of expenses. See "Certain Transactions."
(7) This facility is one of the Acquired Facilities.
(8) The management agreement for this facility is expected to have a 10-year
term, cancellable upon six months' notice after the 29th month of its
term, and a management fee of 3.0% of gross revenues, an incentive fee
providing the Company with a share of certain levels of any future growth
in this facility's net operating income and reimbursement of expenses. In
addition, the management agreement is expected to provide the Company with
an option to purchase this facility.
(9) Total units exclude the planned 82-bed skilled nursing facility at the
Devonshire facility and the planned 57-unit expansion at the Hawthorn
Lakes facility.
28
<PAGE>
SERVICES
The Company's senior and assisted living facilities offer residents personal
support services and assistance with certain activities of daily living in a
supportive, home-like setting. Residents of the Company's facilities are
typically unable or choose not to live independently, but do not require the
24-hour nursing care provided in skilled nursing facilities. The Company's
service options are designed to meet residents' changing needs and to achieve
a continuity of care, enabling seniors to age in place and thereby maintain
their residency for a longer time period.
BASIC CARE PROGRAM
The basic care package, which is received by all residents, includes meal
service, housekeeping services within the resident's unit, social and
recreational activities, scheduled transportation to medical centers and
shopping, security, emergency call response, access to on-site medical
services and medical education and wellness programs.
SUPPLEMENTAL CARE SERVICES
In addition to the basic care services, the Company offers custom tailored
supplemental care services for residents who desire or need such services.
Optional supplemental care services include check-in services and shopping,
escort and companion services. Residents with cognitive or physical frailties
and higher level service needs are either accommodated with supplemental
services in their own units or, in certain facilities, are cared for in a more
structured and supervised environment on a separate wing or floor of the
facility with a dedicated staff and with separate dining rooms and activity
areas.
At present, many residents receive supplemental services from outside third
parties. The Company has also established a program providing various levels
and combinations of supplemental care services called "Personally Yours"SM.
This personal service program provides certain non-licensed services, such as
companion services, assistance with dressing and bathing, medication
reminders, check-in services, shopping and escort services. The Company plans
to expand its supplemental service offerings, where permitted, in order to
capture incremental revenue and enable its residents to remain in its
facilities longer. In addition, where practicable, the Company intends to
obtain licensure to provide licensed home health services to residents.
Certain services, such as physician care, infusion therapy, physical and
speech therapy and other home health care services, are provided to many of
Brookdale's residents who need these services by third parties. The Company
assists residents in locating qualified providers for such health care
services.
COMPANY OPERATIONS
OVERVIEW
The Company continually reviews opportunities to expand the amount of
services it provides to its residents. To date, the Company has been able to
increase its monthly service fees on an annual basis and has experienced
increasing facility operating margins at the Original Facilities through a
combination of the implementation of efficient operating procedures and the
economies of scale associated with its larger than average facilities. The
Company's operating procedures include securing national vendor contracts
where appropriate to obtain consistent low pricing, implementing sophisticated
budgeting and financial controls at each facility and establishing
standardized training and operations procedures. The Company believes that
successful senior and assisted living operators must combine health care,
hospitality and real estate operations expertise.
Brookdale has implemented intensive standards, policies and procedures
systems, including detailed staff manuals, which the Company believes have
contributed to Brookdale's high facility operating margins. The Company has
centralized accounting, finance and other operating functions at its corporate
headquarters so that, consistent with its operating philosophy, facility-based
personnel focus on resident care. Headquarters staff in
29
<PAGE>
Chicago, Illinois are responsible for: the establishment of Company-wide
policies and procedures relating to, among other things, resident care,
facility design and facility operations; billings and collections; accounts
payable; finance and accounting; development of employee training materials
and programs; marketing activities; the hiring and training of management and
other facility-based personnel; compliance with applicable local and state
regulatory requirements; and implementation of the Company's acquisition,
development and leasing plans.
FACILITY STAFFING AND TRAINING
Each facility has an Executive Director responsible for the day-to-day
operations of the facility, including quality of care, social services and
financial performance. Each Executive Director receives specialized training
from the Company. In addition, a portion of each Executive Director's
compensation is directly tied to the operating performance of the facility and
to the maintenance of high occupancy levels. The Company believes that the
quality and size of its facilities, coupled with its competitive compensation
philosophy, have enabled it to attract high-quality, professional
administrators. Each Executive Director is supported by a Resident Services
Director who is directly responsible for day-to-day care of the residents and
a Marketing Director who oversees marketing and community outreach programs.
Other key positions at each facility include the Food Service Director, the
Activities Director, the Housekeeping Director, the Engineering Director and
the Business Manager. See "Risk Factors--Dependence on Senior Management and
Skilled Personnel."
The Company believes that quality of care and operating efficiency can be
maximized by direct resident and staff contact. Employees involved in resident
care, including the administrative staff, are trained in the support and care
needs of the residents and emergency response techniques. The Company has
adopted formal training and evaluation procedures to help ensure quality care
for its residents. The Company has extensive policy and procedure manuals for
each department and holds ongoing training sessions for management and staff
at each site. See "Risk Factors--Difficulties of Managing Rapid Growth."
QUALITY ASSURANCE
The Company maintains quality assurance programs at each of its facilities
through its corporate headquarters staff. The Company's quality assurance
program is designed to achieve a high degree of resident and family member
satisfaction with the care and services provided by the Company. The Company's
quality control measures include, among other things, facility inspections
conducted by corporate staff on at least a monthly basis. These inspections
cover: the appearance of the exterior and grounds; the appearance and
cleanliness of the interior; the professionalism and friendliness of staff;
resident care plans; the quality of activities and the dining program;
observance of residents in their daily living activities; and compliance with
government regulations.
The Company's quality control measures also include the survey of residents
and family members on a regular basis to monitor the quality of services
provided to residents. The survey process begins with a visitor's survey sent
one week following a potential resident's visit to a facility to ascertain his
or her opinions and initial impressions. Detailed annual written surveys and
exit surveys are used to appraise and monitor the level of satisfaction of
residents and their families with facility operations and services.
In order to foster a sense of community as well as to respond to residents'
desires, at each facility the Company has initiated the establishment of a
resident council, an advisory committee elected by the residents, that meets
monthly with the Executive Director of the facility. Separate resident
committees also exist for food service, activities, marketing and hospitality.
These committees promote resident involvement and satisfaction and enable
facility management to be more responsive to the residents' needs and desires.
MARKETING AND SALES
The Company's marketing strategy is intended to create awareness of the
Company and its services among potential residents and their family members
and referral sources, such as hospital discharge planners, physicians, clergy,
area agencies for the elderly, skilled nursing facilities, home health
agencies and social workers.
30
<PAGE>
Brookdale's marketing staff develops overall strategies for promoting the
Company and monitors the success of the Company's marketing efforts. Each
facility has a Director of Marketing who oversees the facility's marketing and
outreach programs and supervises the on-site marketing staff and move-in
coordinators. Besides direct contacts with prospective referral sources, the
Company also relies on print advertising, yellow pages advertising, direct
mail, signage and special events, such as grand openings for new facilities,
health fairs and community receptions. In addition, resident referral programs
have been established and are promoted at each facility. See "Risk Factors--
Competition."
HOSPITAL AFFILIATIONS
Another key element in the Company's strategy is to establish affiliations
between Brookdale's facilities and hospitals. The Hallmark and the Heritage
facilities are affiliated with Saint Joseph Health Centers and Hospital and
Holy Family Hospital, respectively, pursuant to agreements with the respective
hospitals. Both agreements grant the hospitals the right to lease space from
the Company at the respective facilities and provide that the hospitals will
maintain centers in the facilities to make services available to facility
residents. Each hospital pays rent for its leased space, and the Company
compensates the hospitals for making the services they render available at the
facilities. The annual amounts paid by the hospitals pursuant to the rental
arrangements at the Hallmark and the Heritage facilities are approximately
equal to the annual amounts paid by such facilities to such respective
hospitals pursuant to the applicable compensation arrangements. The agreement
regarding the Heritage facility terminates in 1998 and the agreement regarding
the Hallmark facility terminates in 1999, but will be automatically extended
unless either the hospital or the Company gives notice of termination.
Although not subject to a written agreement, the Devonshire facility has an
affiliation with Good Samaritan Hospital on terms similar to the agreements
regarding the Hallmark and the Heritage facilities. The Company is currently
pursuing hospital affiliations for the Gables at Brighton, the Springs of East
Mesa, the Hawthorn Lakes and the Edina Park Plaza facilities and has not
assumed and will not be assuming any existing health care or hospital
affiliation agreements at such facilities. In addition, the Company intends to
arrange such affiliations for facilities that it acquires, develops or leases
in the future. Hospital affiliations provide for on-site physician and nursing
services and facilitate the provision of health care services and wellness
programs to the Company's residents and provide the Company with a referral
source.
ACQUISITIONS AND DEVELOPMENT
The Company evaluates markets for acquisition and development opportunities
based on demographics and market studies. The Company's acquisition and
development strategy will focus on the urban and suburban areas of major
metropolitan markets.
ACQUISITIONS
The Company currently expects to acquire three to five facilities per year
containing an aggregate of approximately 600 to 1,000 units. The Company may
acquire facilities as a means of entry to new markets and may also seek to
acquire facilities within its existing markets to gain further market share
and leverage its existing market awareness. Acquisitions are expected to
primarily consist of large facilities that are similar to the Company's
current facilities, which average approximately 220 units per facility. In
reviewing acquisition opportunities, the Company considers, among other
things, underlying demographics, facility location within its neighborhood or
community, the current reputation of the facility in the marketplace and the
ability of the Company to improve or enhance a facility's available services
and amenities. Further, the Company evaluates the opportunity to improve or
enhance services and operating results through the implementation of the
Company's standard operating procedures. See "Risk Factors--Difficulties of
Integration; Future Acquisition Risks" and "--Need for Additional Financing."
PGI acquired the Hallmark, a 341-unit facility in Chicago, Illinois in June
1994. Simultaneously with the completion of the Offering, the Company will
acquire Hawthorn Lakes, a 202-unit facility in Vernon Hills,
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<PAGE>
Illinois and Edina Park Plaza, a 201-unit facility in Edina, Minnesota. In
addition, the Company will enter into a management contract to operate the
Kenwood, a 150-unit facility in Minneapolis, Minnesota, which also provides
Brookdale with an option to acquire such facility. Also, the Company has
entered a definitive purchase agreement to acquire the Park Place facility, a
200-unit facility in Spokane, Washington, the closing of which acquisition is
expected to occur within 60 days following the completion of the Offering. See
"Risk Factors--Uncertainty of Proposed Acquisition" and "--Difficulties of
Integration; Future Acquisition Risks."
DEVELOPMENT
The Company currently intends to commence the development of at least two
facilities per year. The Company's flexible prototype facility contains 175
units, but can be constructed to accommodate between 150 to 225 units. The
size of a particular facility will depend on site size, zoning and underlying
market characteristics. The Company's 175-unit prototype contains
approximately 165,000 square feet in a four-story building and contains a mix
of studio, one-bedroom and two-bedroom units. In addition to the living units,
the Company's prototype contains common areas for residents, including a
living room, library, billiards room, multi-purpose room, arts and crafts
room, exercise room, convenience store, beauty/barber shop, mail room, dining
room and private dining room. The Company anticipates that new developments
will require eight to 10 months for pre-construction development, 12 to 14
months for construction and approximately 12 months after opening to achieve
stabilized occupancy. The development costs for the 175-unit prototype are
estimated to be approximately $20 million, or approximately $115,000 per unit.
The Company evaluates markets in which to develop its prototype based on a
number of factors, including demographic profiles of both potential residents
and their adult children, existing competitors and lack of new entrants,
estimated market demand and zoning prospects. Site selection is based on
established criteria relating to land cost and conditions, visibility,
accessibility, immediate adjacencies, community perception and zoning
prospects. Full market feasibility studies, which include evaluations of all
potential competitors, extensive interviews with key community sources and
health care providers and demographic studies, are conducted for each site.
The Company is presented with potential sites by independent brokers,
developers, health care organizations and financial institutions and through
internal site identification. If a site meets the Company's general market
criteria, then the Company will order a preliminary market study by an
independent third party. If the market study indicates that the site meets its
selection criteria, the Company will then conduct a more in-depth analysis of
the market to ensure there is a demonstrated need for senior and assisted
living services and that the site is appropriate in terms of location, size
and zoning. If the market and site meet all of the Company's selection
criteria, the property will be purchased for development. See "Risk Factors--
Development and Construction Risks" and "--Need for Additional Financing."
The Company has entered definitive purchase agreements to acquire
development sites located in Glen Ellyn, Illinois, Southfield, Michigan and
Austin, Texas for approximately $7.2 million in the aggregate. The closings of
the Company's purchase of the development sites is subject to certain
customary conditions, including zoning and other governmental approvals.
Although the Company expects the acquisitions of the development sites to be
consummated within 12 months following the completion of the Offering, there
can be no assurance that the conditions to closing such acquisitions will be
satisfied in a timely manner, if at all. See "Risk Factors--Development and
Construction Risks."
COMPETITION
The senior and assisted living industry is highly competitive and the
Company expects that it will become more competitive in the future. The
Company will continue to face competition from numerous local, regional and
national providers of senior and assisted living services. The Company will
compete with such facilities primarily on the bases of cost, quality of care
and the array of services provided. The Company will also compete
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<PAGE>
with companies providing home based health care based on those factors as well
as the reputation, geographic location and physical appearance of facilities
and family preferences. Some of the Company's competitors operate on a not-
for-profit basis or as charitable organizations or have, or may obtain,
greater financial resources than those of the Company.
Moreover, in the implementation of the Company's business and growth
strategy, the Company expects to face competition for the acquisition and
development of senior and assisted living facilities. Consequently, there can
be no assurance that the Company will not encounter increased competition in
the future which could limit its ability to attract residents or expand its
business and could have a material adverse effect on the Company's financial
condition, results of operations and prospects. See "Risk Factors--
Competition."
GOVERNMENTAL REGULATION
Senior and assisted living facilities are subject to varying degrees of
federal, state and local regulation and licensing by local and state health
and social service agencies and other regulatory authorities. While
regulations and licensing requirements often vary significantly from state to
state, they typically address, among other things: personnel education,
training and records; facility services; physical plant specifications;
furnishing of resident units; food and housekeeping services; emergency
evacuation plans; and resident rights and responsibilities. In most states,
senior and assisted living facilities also are subject to state or local
building codes, fire codes and food service licensure or certification
requirements. Assisted living facilities may be subject to periodic survey or
inspection by governmental authorities. In Illinois, where the Original
Facilities are located, and perhaps in certain other states in which the
Company may operate in the future, the Company may be unable to provide
certain higher levels of assisted living services without obtaining the
appropriate licenses, if applicable. The Company's success will depend in part
on its ability to satisfy such regulations and requirements and to acquire and
maintain required licenses. The Company's operations could also be adversely
affected by, among other things, regulatory developments such as revisions in
licensing and certification standards.
Some states have adopted certificate of need or similar laws applicable to
assisted living and nursing facilities which generally require that the
appropriate state agency approve certain acquisitions or capital expenditures
and determine that a need exists for certain new bed additions or new
services. Many states have placed a moratorium on granting certificates of
need or otherwise stated their intent not to grant approval for such
expenditures. To the extent certificates of need or other similar approvals
are required for expansion of Company operations, such expansion could be
adversely affected by the failure or inability to obtain the necessary
approvals or possible delays in obtaining such approvals.
Although the Company currently does not participate in the Medicare or
Medicaid programs, the hospitals with which it has affiliations do participate
in those programs, and the Company intends to participate in the Medicare
program at the skilled nursing facility to be constructed at the Devonshire
facility. Also, all of the Company's residents are eligible for Medicare
benefits. Therefore, certain aspects of the Company's business are and will be
subject to federal and state laws and regulations which govern financial and
other arrangements between and among health care providers, suppliers and
vendors. These laws prohibit certain direct and indirect payments and fee-
splitting arrangements designed to induce or encourage the referral of
patients to, or the recommendation of, a particular provider or other entity
or person for medical products and services. These laws include, but are not
limited to, the federal "anti-kickback law" which prohibits, among other
things, the offer, payment, solicitation or receipt of any form of
remuneration in return for the referral of Medicare and Medicaid patients. The
Office of the Inspector General of the Department of Health and Human
Services, the Department of Justice and other federal agencies interpret these
statutes liberally and enforce them aggressively. Members of Congress have
proposed legislation that would significantly expand the federal government's
involvement in curtailing fraud and abuse and increase the monetary penalties
for violation of these provisions. Violation of these laws can result in,
among other things, loss of licensure, civil and criminal penalties for
individuals and entities and exclusion of health care providers or suppliers
from participation in the Medicare and/or Medicaid programs.
33
<PAGE>
In addition, although the Company is not a Medicare or Medicaid provider or
supplier, it is subject to these laws because (i) the state laws typically
apply regardless of whether Medicare or Medicaid payments are at issue, (ii)
the Company plans to build and operate a skilled nursing facility at its
Devonshire facility and may establish licensed home health agencies which are
intended to participate in Medicare and (iii) as required under some state
licensure laws, and for the convenience of its residents, some of the
Company's senior and assisted living facilities maintain contracts with
hospitals, who in turn maintain contracts with certain health care providers
and practitioners, including pharmacies, home health agencies and hospices,
through which the health care providers make their health care items or
services (some of which may be covered by Medicare or Medicaid) available to
facility residents. There can be no assurance that such laws will be
interpreted in a manner consistent with the practices of the Company.
Under the Americans with Disabilities Act of 1990, all places of public
accommodation are required to meet certain federal requirements related to
access and use by disabled persons. A number of additional federal, state and
local laws exist which also may require modifications to existing and planned
properties to create access to the properties by disabled persons. While the
Company believes that its facilities are substantially in compliance with
present requirements or are exempt therefrom, if required changes involve a
greater expenditure than anticipated or must be made on a more accelerated
basis than anticipated, additional costs would be incurred by the Company.
Further legislation may impose additional burdens or restrictions with respect
to access by disabled persons, the costs of compliance with which could be
substantial.
The Company and its activities are subject to zoning and other state and
local government regulations. Zoning variances or use permits are often
required for construction. Severely restrictive regulations could impair the
ability of the Company to open additional facilities at desired locations or
could result in costly delays, which could adversely affect the Company's
business and growth strategy and results of operations. See "Risk Factors--
Development and Construction Risks" and "--Governmental Regulation."
THE COMPANY AND THE FORMATION
The Company was incorporated in Delaware on September 4, 1996 and is wholly
owned by an affiliate of The Prime Group, Inc. At the completion of the
Offering, the shares owned by such affiliate will be repurchased by the
Company in accordance with a subscription agreement between the Company and
such affiliate at a nominal price. BLC, a wholly owned subsidiary of PGI, was
incorporated in Delaware on December 12, 1996 to facilitate the December 1996
sale and leaseback of PGI's Hallmark facility. Pursuant to such sale and
leaseback transaction, HRPT purchased the Hallmark facility from PGI and
leased such facility to BLC pursuant to a net operating lease. Concurrently
with such transaction, HRPT acquired the Springs of East Mesa and the Gables
at Brighton facilities from a third party and net leased such facilities to
BLC, and BLC in turn subleased each of the Leased Facilities to separate,
wholly owned subsidiaries of BLC.
Pursuant to the Formation Agreement, in connection with the completion of
the Offering, PGI will contribute to the Company all of the capital stock of
BLC, its interests in the Heritage and the Devonshire facilities and the
operations relating to its senior and assisted living division (including all
of the capital stock of a wholly owned subsidiary of PGI that holds certain
rights relating to the proposed skilled nursing facility on the campus of the
Devonshire facility) in exchange for 2,071,334 shares of Common Stock and the
assumption by the Company of certain indebtedness in the aggregate amount of
$65.0 million. Further, PGI will covenant that the partnerships owning the
Heritage and the Devonshire facilities will have no less than $800,000 in the
aggregate in unrestricted cash upon the completion of the Offering; however,
any unrestricted cash in excess of $800,000 then held by such partnerships
will be distributed to PGI. In addition, in accordance with the terms and
conditions of the master lease between HRPT and BLC governing the Leased
Facilities, upon the closing of the Offering and PGI's contribution of all of
BLC's capital stock to the Company, certain affiliates of PGI, including The
Prime Group, Inc., will be released by HRPT from such affiliates' guaranties
of BLC's obligations under the master lease. In addition, the Company will pay
PGI approximately $7.2 million to reimburse PGI for earnest monies previously
paid by PGI in connection with the acquisition of the Acquired Facilities, the
Park Place
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<PAGE>
facility, a third party's interests in the Heritage and the Devonshire
facilities and the proposed acquisitions of the development sites located in
Glen Ellyn, Illinois, Southfield, Michigan and Austin, Texas and for certain
costs and expenses previously paid by PGI relating to the issuance and
distribution of Common Stock pursuant to the Offering. At the Formation, in
accordance with the Formation Agreement, Mark J. Schulte, President and Chief
Executive Officer of the Company, will transfer all of his interests in the
senior and assisted living division to the Company in exchange for 328,666
shares of Common Stock. The Company, at the completion of the Offering, will
also enter (i) a management agreement with PGI to manage the Island on Lake
Travis facility and (ii) a management agreement (and an option to purchase)
regarding the Kenwood facility with a third party unaffiliated with PGI that
owns the Kenwood facility. See "Risk Factors--Benefits to Affiliates," "Use of
Proceeds," "--Facilities" and "Certain Transactions."
The Company currently has credit enhancement securing the $65.0 million of
tax-exempt bonds relating to the Heritage and the Devonshire facilities which
it must replace on or before the date of the acquisition of these facilities.
Bank One, Illinois, NA has issued a commitment, and the Company expects to
obtain an extension of an expired commitment previously obtained from LaSalle
National Bank, in each case pursuant to which letters of credit with a
maturity of three years from the date of issuance of such letters of credit
would be provided as replacement credit enhancement for such tax-exempt bonds.
On or prior to the completion of the Offering, the Company will have executed
definitive agreements with such banks to issue the letters of credit. In
addition to the mortgages on the Heritage and the Devonshire facilities, it is
anticipated that estimated cash collateral of approximately $11.0 million from
the net proceeds of the Offering will be pledged as additional collateral and
the letters of credit will be guaranteed to the extent of 30% by the Company.
The Company intends to purchase two-year interest rate protection agreements
with respect to such tax-exempt indebtedness upon the completion of the
Offering, which, if so purchased, will have the effect of mitigating the
effect of inflation and higher interest rates on such indebtedness during the
terms of such contracts. There can be no assurance that the Company will be
able to purchase such interest rate protection contracts on terms favorable to
the Company, if at all.
EMPLOYEES
The Company has approximately 713 employees, of which 20 are employed at the
Company's headquarters. The Company believes employee relations are good.
INSURANCE
The provision of personal and health care services entails an inherent risk
of liability. Compared to more institutional long-term care facilities, senior
and assisted living residences offer residents a greater degree of
independence in their daily lives. This increased level of independence,
however, may subject the resident and the Company to certain risks that would
be reduced in more institutionalized settings. The Company currently maintains
liability insurance intended to cover such claims which it believes is
adequate based on the nature of the risks, its historical experience and
industry standards. See "Risk Factors--Liability and Insurance."
EXECUTIVE OFFICES
The Company's executive office is located in Chicago, Illinois, where the
Company leases approximately 4,500 square feet under an agreement with an
affiliate of PGI. See "Certain Transactions."
LEGAL PROCEEDINGS
The Company is involved in various lawsuits and claims arising in the normal
course of business. In the opinion of management of the Company, although the
outcomes of these suits and claims are uncertain, in the aggregate they should
not have a material adverse effect on the Company's business, financial
condition and results of operations.
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<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information concerning each of the
Company's directors, executive officers and key employees:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
<S> <C> <C>
Michael W. Reschke...... 41 Chairman of the Board, Director
Mark J. Schulte......... 43 President and Chief Executive Officer, Director
Darryl W. Copeland,
Jr.(1)................. 37 Executive Vice President designee, Director designee
Craig G. Walczyk........ 37 Vice President--Chief Financial Officer and Secretary
Matthew F. Whitlock..... 32 Vice President--Acquisitions
Mark J. Iuppenlatz...... 37 Vice President--Development
Stephan T. Beck......... 41 Vice President--Operations
Sheryl A. Wolf.......... 34 Controller
Margaret B. Shontz...... 37 Vice President--Human Resources
Wayne D. Boberg(2)...... 44 Director designee
Bruce L. Gewertz(2)..... 47 Director designee
Darryl W. Hartley-
Leonard(2)............. 51 Director designee
Daniel J. Hennessy(2)... 39 Director designee
</TABLE>
- ---------------------
(1) Prior to or upon the effectiveness of the Registration Statement that
contains this Prospectus, the Company intends to nominate and elect Mr.
Copeland to serve as an Executive Vice President and a director of the
Company.
(2) Prior to or upon the effectiveness of the Registration Statement that
contains this Prospectus, the Company intends to nominate and elect this
person (who is unaffiliated with the Company and PGI) to serve as a
director of the Company, who will be referred to herein as an "Independent
Director."
Michael W. Reschke is Chairman of the Board of Directors of the Company. Mr.
Reschke founded PGI in 1981 and, since that time, has served as PGI's
Chairman, Chief Executive Officer and President. For the last 15 years, Mr.
Reschke has directed and managed the development, finance, construction,
leasing, marketing, acquisition, renovation and property management activities
of PGI. Mr. Reschke is also a member of the Board of Directors of Ambassador
Apartments, Inc., a publicly traded real estate investment trust involved in
multi-family residential projects and the successor in interest to the former
multi-family division of PGI. Mr. Reschke is also Chairman of the Board of
Prime Retail, Inc., a publicly traded real estate investment trust involved in
factory outlet centers and the successor in interest to the former retail
division of PGI. Mr. Reschke is licensed to practice law in the State of
Illinois and is a certified public accountant. Mr. Reschke is a member of the
Chairman's Roundtable and the Executive Committee of the National Realty
Committee, as well as a full member of the Urban Land Institute. Mr. Reschke
also serves on the Board of Visitors of the University of Illinois Law School.
Mark J. Schulte is President and Chief Executive Officer of the Company and
is also a director of the Company. From January 1991 to immediately prior to
the Offering, Mr. Schulte was employed by PGI in its Senior Housing Division,
most recently serving as Executive Vice President, with primary responsibility
for overseeing all aspects of PGI's Senior Housing Division. Prior to joining
PGI, Mr. Schulte had 13 years of experience in the development and operation
of multi-family housing, senior housing, senior and assisted living and health
care facilities. Mr. Schulte is licensed to practice law in the State of New
York. Mr. Schulte serves on the Executive Committee of the American Seniors
Housing Association.
Darryl W. Copeland, Jr. has agreed to serve as an Executive Vice President
and a director, and will be appointed as an Executive Vice President and a
director, prior to or upon the effectiveness of the Registration Statement
that contains this Prospectus. From August 1989 to February 1997, Mr. Copeland
was employed by Donaldson, Lufkin & Jenrette Securities Corporation as an
investment banker, most recently serving as Senior Vice President in the
Health Care and Leveraged Finance groups.
Craig G. Walczyk is Vice President--Chief Financial Officer and Secretary of
the Company. From November 1992 to immediately prior to the Offering, Mr.
Walczyk was employed by PGI as Vice President,
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<PAGE>
Director of Corporate Accounting. Prior to joining PGI, Mr. Walczyk was
employed by the accounting firm of Ernst & Young LLP from September 1982 to
October 1992. Mr. Walczyk is a certified public accountant and a member of the
American Institute of Certified Public Accountants and the Illinois CPA
Society.
Matthew F. Whitlock is Vice President--Acquisitions of the Company. From
August 1996 to immediately prior to the Offering, Mr. Whitlock was employed by
PGI in its Senior Housing Division as Director of Acquisitions. Prior to
joining PGI, Mr. Whitlock was employed by the Forum Group, previously one of
the largest operators of senior and assisted living facilities, as an
acquisition specialist from August 1995 to July 1996. Mr. Whitlock was a
principal with Concordia Group, a senior and assisted living consulting firm,
from June 1991 to July 1995.
Mark J. Iuppenlatz is Vice President--Development of the Company. From
September 1996 to immediately prior to the Offering, Mr. Iuppenlatz was
employed by PGI in its Senior Housing Division as Director of Development.
Prior to joining PGI's Senior Housing Division, Mr. Iuppenlatz was employed by
Schlotzsky's, Inc., a publicly traded restaurant company, as Vice President--
Real Estate from January 1995 to August 1996. Mr. Iuppenlatz was employed by
PGI as Director of Marketing and Leasing from October 1991 to 1994 and as
Director of Leasing from January 1989 to September 1991.
Stephan T. Beck is Vice President--Operations of the Company. From January
1993 to immediately prior to the Offering, Mr. Beck was employed by PGI, most
recently serving as Corporate Director of Operations of its Senior Housing
Division. Prior to joining PGI, Mr. Beck was employed by Classic Residence by
Hyatt as Executive Director of the Hallmark facility, which was then managed
by Classic Residence by Hyatt, from August 1990 to December 1992.
Sheryl A. Wolf is Controller of the Company. From September 1991 to
immediately prior to the Offering, Ms. Wolf was employed by PGI, most recently
serving as Corporate Director of Finance of its Senior Housing Division.
Margaret B. Shontz is Vice President--Human Resources of the Company. From
February 1989 to immediately prior to the Offering, Ms. Shontz was employed by
PGI, most recently serving as Director of Human Resources of its Senior
Housing Division.
Wayne D. Boberg has agreed to serve as a director, and will be appointed as
a director, prior to or upon the effectiveness of the Registration Statement
that contains this Prospectus. Mr. Boberg is licensed to practice law in the
State of Illinois and has been a partner of the law firm of Winston & Strawn
since 1985, specializing in the representation of corporate clients in
connection with debt and equity financings and acquisitions. Mr. Boberg serves
on the Board of Visitors of the Indiana University School of Law.
Dr. Bruce L. Gewertz has agreed to serve as a director, and will be
appointed as a director, prior to or upon the effectiveness of the
Registration Statement that contains this Prospectus. Dr. Gewertz has served
as The Dallas B. Phemister Professor and Chairman, Department of Surgery since
1992 and served as the first Faculty Dean of Medical Education from 1989 to
1992 at the University of Chicago Pritzker School of Medicine. Dr. Gewertz is
Editor of the Journal of Surgical Research and serves on the Editorial Board
of Annals of Vascular Surgery.
Darryl W. Hartley-Leonard has agreed to serve as a director, and will be
appointed as a director, prior to or upon the effectiveness of the
Registration Statement that contains this Prospectus. Mr. Hartley-Leonard is a
founding partner of H-LK Partners, a hotel development and management
partnership, Chairman of the Board and Chief Executive Officer of DART Inc., a
privately-held technology company, and a founding partner, Chairman of the
Board and Chief Executive Officer of Cobabaco, a cigar distributor. Mr.
Hartley-Leonard retired as Chairman of the Board of Hyatt Hotels Corporation
in 1996 after a 32-year career with Hyatt and its diversified affiliates. Mr.
Hartley-Leonard also serves on the Board of Directors of Royal Caribbean
Cruise Line, the United States Committee for UNICEF and Evanston Hospital.
Daniel J. Hennessy has agreed to serve as a director, and will be appointed
as a director, prior to or upon the effectiveness of the Registration
Statement that contains this Prospectus. Mr. Hennessy co-founded Code,
Hennessy & Simmons, Inc., a Chicago based private equity investment firm, in
August 1988 and, since that time, has served as a principal. Mr. Hennessy is
also Chairman of the Board of National Picture and Frame Co., a publicly
traded manufacturer of picture frames, mirrors and framed art products.
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<PAGE>
The Board of Directors will be divided into three classes, each class
consisting of approximately one-third of the total number of directors. Class
I directors, consisting of Mr. Reschke and Dr. Gewertz, will hold office until
the 1998 annual meeting of stockholders; Class II directors, consisting of
Messrs. Hartley-Leonard and Copeland, will hold office until the 1999 annual
meeting of stockholders; and Class III directors, consisting of Messrs.
Schulte, Boberg and Hennessy, will hold office until the 2000 annual meeting
of stockholders.
No family relationship exists among any of the directors or executive
officers of the Company. No arrangement or understanding exists between any
director or executive officer or any other person pursuant to which any
director or executive officer was selected as a director or executive officer
of the Company. Executive officers of the Company are elected or appointed by
the Board of Directors and hold office until their successors are elected, or
until the earliest of their death, resignation or removal.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The members of the Audit Committee will consist of certain
of the Independent Directors. The Audit Committee, among other things, makes
recommendations concerning the engagement of independent auditors, reviews the
results and scope of the annual audit and other services provided by the
Company's independent auditors and reviews the adequacy of the Company's
internal accounting controls.
Compensation Committee. The members of the Compensation Committee will
consist of certain of the Independent Directors. The Compensation Committee
makes recommendations to the full Board of Directors concerning salary and
bonus compensation and benefits for executive officers of the Company. In
addition, the Compensation Committee has the power and authority to implement
and administer the Company's Stock Incentive Plan.
COMPENSATION OF DIRECTORS; INDEMNIFICATION AGREEMENTS
The Company intends to pay its directors who are not employees of the
Company a fee for their services as directors. They will receive annual
compensation of $12,000 plus a fee of $1,000 for attendance at each meeting of
the Board of Directors and $500 for attendance at each committee meeting. The
members of the Board will receive reimbursement of all travel and lodging
expenses related to their attendance at both board and committee meetings. The
Company anticipates that it will grant to each non-employee director certain
options to purchase Common Stock. See "--Stock Incentive Plan."
The Company intends to enter indemnification agreements with each of the
Company's directors. The indemnification agreements will require, among other
things, that the Company indemnify such directors to the fullest extent
permitted by law, and advance to the directors all related expenses, subject
to reimbursement if it is subsequently determined that indemnification is not
permitted. The Company also must indemnify and advance all expenses incurred
by directors seeking to enforce their rights under the indemnification
agreements, and cover directors under the Company's directors' and officers'
liability insurance.
EXECUTIVE COMPENSATION
The Company was organized in September 1996, did not conduct any operations
and, accordingly, did not pay any cash compensation to its executive officers
for the year ended December 31, 1996. The following table sets forth the
annual base salary expected to be paid to the Company's Chairman of the Board,
Chief Executive Officer and each of the other five most highly compensated
executive officers during the year ending December 31, 1997. In addition, the
Company's executive officers will be eligible to receive cash bonuses and
additional stock options at the discretion of the Compensation Committee of
the Board of Directors.
<TABLE>
<CAPTION>
NAME PRINCIPAL POSITION(S) 1997 BASE SALARY
<S> <C> <C>
Michael W.
Reschke Chairman of the Board $100,000
Mark J.
Schulte President and Chief Executive Officer 275,000
Darryl W.
Copeland,
Jr. Executive Vice President 250,000
Craig G.
Walczyk Vice President--Chief Financial Officer and Secretary 125,000
Matthew F.
Whitlock Vice President--Acquisitions 95,000(1)
Mark J.
Iuppenlatz Vice President--Development 135,000(1)
Stephan T.
Beck Vice President--Operations 100,000
</TABLE>
38
<PAGE>
- ---------------------
(1) In addition to a base salary, these individuals are expected to receive a
substantial portion of their total compensation from an incentive bonus
program that for Mr. Whitlock is based on facilities acquired and for Mr.
Iuppenlatz is based on facilities developed.
STOCK INCENTIVE PLAN
The Company has established a Stock Incentive Plan (the "Stock Incentive
Plan") for the purpose of attracting and retaining directors, executive
officers and other key employees. Each option granted pursuant to the Stock
Incentive Plan shall be designated at the time of grant as either an
"incentive stock option" or as a "non-qualified stock option."
The Stock Incentive Plan provides for the grants of options ("Options") to
purchase a specified number of shares of Common Stock. Under the Stock
Incentive Plan, 830,000 shares of Common Stock will be available for grants.
Participants in the Stock Incentive Plan, who may be directors, officers or
employees of the Company or its subsidiaries or Company-owned partnerships,
will be selected by the Compensation Committee. See "--Compensation of
Directors; Indemnification Agreements."
The Stock Incentive Plan authorizes the Compensation Committee to grant
incentive stock options at an exercise price to be determined by it, provided
that such price cannot be less than 100% of the fair market value of the
Common Stock on the date on which the Option is granted. If an incentive stock
option is to be granted to an employee who owns over 10% of the total combined
voting power of all classes of the Company's stock, then the exercise price
may not be less than 110% of the fair market value of the Common Stock covered
by such option on the day it is granted. The exercise price of non-qualified
stock options may be any price determined by the Compensation Committee.
Upon completion of the Offering, the Company will grant 675,000 Options (the
"Initial Grants") to the following key officers and employees of the Company:
Michael W. Reschke (75,000); Mark J. Schulte (175,000); Darryl W. Copeland,
Jr. (275,000); Craig G. Walczyk (25,000); Matthew F. Whitlock (25,000); Mark
J. Iuppenlatz (25,000); Stephan T. Beck (25,000); Sheryl A. Wolf (25,000); and
Margaret B. Shontz (25,000).
The Initial Grants will vest, subject to certain conditions being met, at
the rate of 25% per year over the next four years commencing on the first
anniversary of their date of grant and will have a term of 10 years. The
exercise price of the Options issued pursuant to the Initial Grants will be
the initial public offering price of the Common Stock. The exercise price for
any Option is generally payable in cash or, in certain circumstances, by the
surrender, at the fair market value on the date on which the Option is
exercised, of shares of Common Stock.
Any unvested Options held by an optionee will automatically be forfeited if
the optionee leaves employment for any reason. Upon a "change in control" (as
defined in the Stock Incentive Plan), all unvested Options will vest. The
rights of any participants to exercise an Option may not be transferred in any
way other than by will or laws of descent and distribution or pursuant to a
qualified domestic relations order.
The Company also anticipates that it will grant an aggregate of 20,000
Options to its non-employee directors that will vest at the rate of 33.3% per
year over the next three years commencing on the first anniversary of their
date of grant and will have a term of 10 years. The exercise price of these
Options will be the initial public offering price of the Common Stock. The
exercise price for any of these Options will generally be payable in cash or,
in certain circumstances, by the surrender, at the fair market value on the
date on which the Option is exercised, of shares of Common Stock.
The Compensation Committee may grant options under the Stock Incentive Plan
in substitution for outstanding options with higher exercise prices. In
addition, in the event of certain extraordinary events, the Compensation
Committee may make adjustments in the aggregate number and kind of shares
reserved for issuance, the number and kind of shares covered by outstanding
awards and the exercise prices specified therein as may be determined to be
appropriate.
39
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Reschke,
Schulte, Copeland, Whitlock and Iuppenlatz. These agreements provide that the
executive officers shall devote substantially all of their business time to
the operation of the Company, except for Mr. Michael W. Reschke who shall only
be required to devote such time as he deems necessary to fulfill his duties
and obligations to the Company as Chairman of the Board. The agreements with
Messrs. Reschke, Schulte, Copeland, Whitlock and Iuppenlatz establish the
initial base salaries set forth in the executive compensation table and
provide for an initial three year term (except in the case of the agreement
with Mr. Copeland, which provides for an initial four year term) which is
automatically extended for an additional year after expiration of the initial
term and any extension period unless the Company provides the executive
officer with at least 30 days' prior written notice that such term shall not
be extended. The agreement with Mr. Schulte also provides for an annual bonus
of up to 150% of the base salary. The agreement with Mr. Copeland provides for
an annual bonus of up to 100% of the base salary, a signing bonus of $150,000
and an initial stock grant, subject to a two-year vesting period, of 100,000
shares of Common Stock. The agreements with Messrs. Whitlock and Iuppenlatz
also provide for annual bonuses based on certain performance criteria. If any
of such agreements are terminated by the Company "without cause" (as such term
is defined in the agreements), the executive so terminated will be entitled to
a lump sum payment. With respect to Messrs. Whitlock and Iuppenlatz, such lump
sum payment will be an amount equal to six months base salary. With regard to
Messrs. Reschke and Schulte, such executives will receive a lump sum payment
equal to the greater of 50% of their base salary for the remainder of the term
of their agreements or an amount equal to their base salary for one year. Upon
any such termination of Mr. Copeland's agreement, Mr. Copeland will receive a
lump sum payment equal to the base salary for one year plus a pro rata portion
of the annual bonus. Messrs. Reschke, Schulte and Copeland may terminate their
respective agreements and be entitled to approximately two times their annual
compensation in the event of a "change in control" of the Company and a
material diminution of their respective duties and responsibilities or
compensation. In the event any of Messrs. Schulte, Copeland, Whitlock and
Iuppenlatz voluntarily terminates his employment with the Company, the
executive will be subject to a non-compete agreement with a term of two years.
Mr. Reschke is bound by the non-compete agreement between PGI and the Company.
See "Certain Transactions."
40
<PAGE>
CERTAIN TRANSACTIONS
The following agreements will be entered in connection with the Formation
and the Offering:
Formation Agreement. At the Formation and pursuant to the Formation
Agreement, PGI will transfer to the Company all of the capital stock of BLC,
its interests in the Heritage and the Devonshire facilities and the operations
relating to its senior and assisted living division. In return for such
contribution, the Company will exchange 2,071,334 shares of its Common Stock
and will assume certain indebtedness in the aggregate amount of $65.0 million.
In addition, the Company will pay PGI approximately $7.2 million to reimburse
PGI for earnest monies previously paid by PGI in connection with the
acquisition of the Acquired Facilities, the Park Place facility, a third
party's interests in the Heritage and the Devonshire facilities and the
proposed acquisitions of the development sites located in Glen Ellyn,
Illinois, Southfield, Michigan and Austin, Texas and for certain costs and
expenses previously paid by PGI relating to the issuance and distribution of
Common Stock pursuant to the Offering. In accordance with the Formation
Agreement, Mark J. Schulte will transfer all of his interests in PGI's senior
and assisted living division to the Company in exchange for 328,666 shares of
Common Stock from the Company. Except as expressly set forth in the Formation
Agreement with regard to title, liens, claims and certain other items and
PGI's representations that the Original Facilities have been operated in the
ordinary course since December 31, 1996, no party is making any representation
or warranty as to the assets, businesses or liabilities transferred or assumed
as part of the Formation, as to any consents or approvals required in
connection therewith, as to the value thereof or as to freedom from
counterclaim with respect to any claim of any party. Except as expressly set
forth in the Formation Agreement, all assets are being transferred on an "as
is, where is" basis. In the Formation Agreement, PGI will covenant that the
partnerships owning the Heritage and the Devonshire facilities will have no
less than $800,000 in the aggregate in unrestricted cash upon the completion
of the Offering; however, any amounts in excess of $800,000 then held by such
partnerships will be distributed to PGI. See "Risk Factors--Lack of Arm's
Length Negotiations" and "--Benefits to Affiliates" and "The Company and the
Formation."
The Company will indemnify PGI and its affiliates against certain losses,
claims, damages or liabilities including those arising out of: (i) any
inaccurate representation or breach of warranty by the Company under the
Formation Agreement; and (ii) any indebtedness, lease, contract or other
obligation assumed by the Company pursuant to the Formation Agreement. The
Company will also indemnify PGI, as a controlling person, against any loss,
claim, damage or liability arising out of the Offering, except for losses,
claims, damages or liabilities arising from the inaccuracy of information
supplied in writing by PGI for inclusion in this Prospectus. PGI will
similarly indemnify the Company and its subsidiaries with respect to any
inaccurate representation or breach of warranty by PGI under the Formation
Agreement.
Registration Rights Agreement. The Company will grant demand and incidental
registration rights to PGI for the registration of shares of Common Stock
owned by PGI under the Securities Act. See "Description of Capital Stock--
Registration Rights Agreement."
Voting Agreement. PGI will enter a Voting Agreement pursuant to which it
will agree to vote all of its shares of Common Stock at any meeting at which
directors are elected in favor of the election of independent directors so
that after such election, if such persons are elected, there will be at least
four independent directors. The Voting Agreement will continue in effect until
the earlier of three years from the date of the Offering and the date PGI
first owns less than 10% of the outstanding Common Stock.
Non-Compete Agreements. The Company, PGI and Mr. Reschke will enter a Non-
Compete Agreement that will prevent PGI and Mr. Reschke from developing,
acquiring, owning or operating senior and assisting living facilities and
semi-acute care facilities in the United States for a period expiring on the
earlier of (i) four years from the date of the Offering and (ii) one year from
the date of a merger of the Company or the sale of all or substantially all of
the stock or assets of the Company; however, PGI will be permitted to maintain
its ownership interest in the Island on Lake Travis facility. In addition, to
the extent PGI or Mr. Reschke were to acquire a group of properties that
included facilities similar to those operated by the Company, then the Company
would
41
<PAGE>
have the right and opportunity to purchase such similar facilities at a price
equal to their fair market value. PGI and Mr. Reschke will be allowed to
provide debt or lease financing for properties that are similar to the
facilities owned or managed by the Company. See "Risk Factors--Lack of Arm's
Length Negotiations."
Management Agreement. The Company and PGI will enter a management agreement
for a term of two years with respect to the Island on Lake Travis facility.
The Company will be paid a monthly fee of 5.0% of the gross revenues of such
facility for each month and reimbursement of expenses. The management
agreement may be terminated by PGI only for cause as set forth in the
management agreement during its initial term and upon 60 days' prior written
notice at any time after the expiration of the initial term. The Company may
terminate the management agreement at any time upon 60 days' advance notice.
Space Sharing Agreement. The Company and PGI will enter a space sharing
agreement for office space located at 77 West Wacker Drive in Chicago,
Illinois to be used as headquarters for the Company. The space sharing
agreement will have an initial term of four months and thereafter may be
extended in increments of two- month terms for up to 12 additional months, at
a base rental rate of approximately $8,800 per month plus a pro rata share of
real estate taxes and operating expenses.
Wayne D. Boberg, a director designee of the Company, is a partner of the law
firm of Winston & Strawn, which has provided, and continues to provide, legal
services to the Company.
In the future, transactions between the Company and its officers, directors,
principal stockholders and their affiliates will require the approval of a
majority of the disinterested members of the Board of Directors.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of March 4, 1997, and as adjusted
to reflect the sale of the shares offered hereby and to give effect to the
issuance of the shares in connection with the Formation, by (i) each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock; (ii) each director of the Company; (iii) each executive officer of the
Company; and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OWNERSHIP
SHARES -----------------
BENEFICIALLY BEFORE AFTER
NAME OWNED (1) OFFERING OFFERING
<S> <C> <C> <C>
The Prime Group, Inc.(2)......................... 2,071,334 -- 27.6%
Michael W. Reschke(3)............................ 2,071,334 100.0% 27.6
Mark J. Schulte.................................. 328,666 -- 4.4
Darryl W. Copeland, Jr.(4)....................... 100,000 -- 1.3
Wayne D. Boberg(5)............................... -- -- --
Bruce L. Gewertz(5).............................. -- -- --
Darryl W. Hartley-Leonard(5)..................... -- -- --
Daniel J. Hennessy(5)............................ -- -- --
Craig G. Walczyk ................................ -- -- --
Matthew F. Whitlock ............................. -- -- --
Mark J. Iuppenlatz .............................. -- -- --
Stephan T. Beck ................................. -- -- --
Executive officers and directors
as a group (11 persons)......................... 2,500,000 100.0% 33.3%
</TABLE>
- ---------------------
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, a person has beneficial ownership of any securities as to which
such person, directly or indirectly, through any contract, arrangement,
undertaking, relationship or otherwise has or shares voting power and/or
investment power and as to which such person has the right to acquire such
voting and/or investment power within 60 days. Percentage of beneficial
ownership as to any person as of a particular date is calculated by
dividing the number of shares beneficially owned by such person by the sum
of the number of shares outstanding as of such date and the number of
shares as to which such person has the right to acquire voting and/or
investment power within 60 days.
(2) Includes shares of Common Stock held by affiliates of The Prime Group,
Inc. The address of The Prime Group, Inc. is 77 West Wacker Drive,
Chicago, Illinois 60601.
(3) Includes 2,071,334 shares of Common Stock held by The Prime Group, Inc.
and certain of its affiliates. Mr. Reschke is the Chairman, Chief
Executive Officer and President of The Prime Group, Inc.
(4) The Company intends to nominate and elect, prior to or upon the
effectiveness of the Registration Statement that contains this Prospectus,
Mr. Copeland to serve as an Executive Vice President and a director of the
Company.
(5) The Company intends to nominate and elect, prior to or upon the
effectiveness of the Registration Statement that contains this Prospectus,
this person to serve as a director of the Company.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that the authorized capital stock of the Company consists of
75,000,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), and 20,000,000 shares of Preferred Stock, par value $0.01 per share
(the "Preferred Stock"). Upon completion of the Offering, 7,500,000 shares of
Common Stock will be issued and outstanding (8,250,000 shares if the
Underwriters' over-allotment option is exercised in full), and no shares of
Preferred Stock will be issued or outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share on all
matters submitted to a vote of stockholders. The Certificate does not provide
for cumulative voting, and, accordingly, the holders of a majority of the
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. The Certificate provides that
whenever there is paid, or declared and set aside for payment, to the holders
of the outstanding shares of any class of stock having preference over the
Common Stock as to the payment of dividends, the full amount of dividends and
of sinking fund or retirement fund or other retirement payments, if any, to
which such holders are entitled, then dividends may be paid on the Common
Stock out of any assets legally available therefor, but only when and as
declared by the Board of Directors. The Certificate also provides that in the
event of any liquidation, dissolution or winding up of the Company, after
there is paid to or set aside for the holders of any class of stock having
preference over the Common Stock the full amount to which such holders are
entitled and after payment or provision for payment of all debts and
liabilities of the Company, the holders of the Common Stock shall be entitled
to receive the remaining assets of the Company available for distribution, in
cash or in kind. The holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The rights, preferences and privileges of
holders of Common Stock will be subject to the rights of the holders of any
shares of any series of Preferred Stock that the Company may issue in the
future.
PREFERRED STOCK
The Certificate provides that the Board of Directors of the Company is
authorized to issue Preferred Stock in series and to fix and state the voting
powers, and such designations, preferences and relative participating,
optional or other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. Such action may be taken
by the Board without stockholder approval. Under the Certificate, each share
of each series of Preferred Stock is to have the same relative rights as, and
be identical in all respects with, all other shares of the same series. While
providing flexibility in connection with possible financings, acquisitions and
other corporate purposes, the issuance of Preferred Stock, among other things,
could adversely affect the voting power of the holders of Common Stock and,
under certain circumstances, be used as a means of discouraging, delaying or
preventing a change in control of the Company. There will be no shares of
Preferred Stock outstanding upon completion of the Offering, and the Company
has no present plan to issue shares of its Preferred Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Limitations of Director Liability. Section 102(b)(7) of the Delaware General
Corporation Law, as amended (the "DGCL"), authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. Although Section 102(b)(7) does not change directors' duty of care, it
enables corporations to limit available relief to equitable remedies such as
injunction or rescission. The Certificate limits the liability of directors to
the Company or its stockholders to the full extent permitted by Section
102(b)(7). Specifically, directors of the Company are not personally liable
for monetary damages to the Company or its stockholders for breach of the
director's fiduciary duty as a director, except for liability: (i) for any
breach of the director's duty of loyalty to the Company or its stockholders;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing
44
<PAGE>
violation of law; (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the DGCL; or (iv) for
any transaction from which the director derived an improper personal benefit.
Indemnification. To the maximum extent permitted by law, the Company's
Amended and Restated By-laws (the "By-laws") provide for mandatory
indemnification of directors and officers of the Company against any expense,
liability and loss to which they may become subject, or which they may incur
as a result of being or having been a director or officer of the Company. In
addition, the Company must advance or reimburse directors and officers for
expenses incurred by them in connection with indemnifiable claims.
The Company also maintains directors' and officers' liability insurance.
CERTAIN ANTI-TAKEOVER PROVISIONS
Upon completion of the Offering, the Certificate and the By-laws will
contain, among other things, certain provisions described below that may
reduce the likelihood of a change in the Board of Directors or voting control
of the Company without the consent of the Board of Directors. These provisions
could have the effect of discouraging, delaying or preventing tender offers or
takeover attempts that some or a majority of the stockholders might consider
to be in the stockholders' best interest, including offers or attempts that
might result in payment of a premium over the market price for the Common
Stock.
Classification of Board of Directors. The Certificate and the By-laws of the
Company divide the Board of Directors into three classes, designated Class I,
Class II and Class III, respectively, each class to be as nearly equal in
number as possible. The terms of Class I, Class II and Class III directors
will expire at the 1998, 1999 and 2000 annual meetings of stockholders,
respectively, and in all cases directors elected will serve until their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors will be elected to succeed those in the class whose
terms then expire, each elected director to serve for a term expiring at the
third succeeding annual meeting of stockholders after such director's
election, and until the director's successor is elected and qualified. Thus,
only one class of the directors stand for re-election each year, requiring at
least two stockholders' meetings at which directors are elected to replace a
majority of the Board.
Filling of Board Vacancies; Removal. Any vacancy occurring in the Board of
Directors, including any vacancy created by an increase in the number of
directors, shall be filled for the unexpired term by the concurring vote of a
majority of the directors then in office, whether or not a quorum, and any
director so chosen shall hold office for the remainder of the full term of the
class in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
Directors may only be removed with cause by the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock then
entitled to vote at an election of directors.
Stockholder Action by Unanimous Written Consent. Any action required or
permitted to be taken by the stockholders must be effected at a duly called
annual or special meeting of such holders and may not be effected by any
consent in writing by such holders, unless such consent is unanimous.
Call of Special Meetings. Special meetings of stockholders may be called at
any time but only by the Board of Directors, the Chairman of the Board, the
Chief Executive Officer, the President or stockholders possessing at least 25%
of the voting power of the issued and outstanding voting stock entitled to
vote generally in the election of directors.
By-laws Amendments. The stockholders may amend the By-laws by the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of stock of the Company entitled to vote thereon. Directors may also
amend the By-laws by a two-thirds vote of the directors then in office.
Certificate Amendments. Except as set forth in the Certificate or as
otherwise specifically required by law, no amendment of any provision of the
Certificate shall be made unless such amendment has been first proposed
45
<PAGE>
by the Board of Directors upon the affirmative vote of at least two-thirds of
the directors then in office and thereafter approved by the affirmative vote
of the holders of at least a majority of the outstanding shares of stock of
the Company entitled to vote thereon; provided, however, if such amendment is
to the provisions described above or the provisions in the Certificate
relating to the decrease in the authorized number of shares of Preferred
Stock, Board authority to issue Preferred Stock, the removal or decreasing of
the limitation on directors' liability or the amendment of the By-laws or
stockholder meeting matters, such amendment must be approved by the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of stock entitled to vote thereon.
Stockholder Nominations and Proposals. With certain exceptions, the By-laws
require that stockholders intending to present nominations for directors or
other business for consideration at a meeting of stockholders notify the
Company's Secretary by the later of 60 days before the date of the meeting and
15 days after the date notice of the meeting is mailed or public notice of the
meeting is given.
Certain Statutory Provisions. Section 203 of the DGCL provides, in general,
that a stockholder acquiring more than 15% of the outstanding voting shares of
a corporation subject to the statute (an "Interested Stockholder"), but less
than 85% of such shares, may not engage in certain "Business Combinations"
with the corporation for a period of three years subsequent to the date on
which the stockholder became an Interested Stockholder unless (i) before such
person became an Interested Stockholder, the corporation's board of directors
approved either the Business Combination or the transaction in which the
stockholder became an Interested Stockholder or (ii) the Business Combination
is approved by the corporation's board of directors and authorized by a vote
of at least two-thirds of the outstanding voting stock of the corporation not
owned by the Interested Stockholder.
Section 203 defines the term "Business Combination" to encompass a wide
variety of transactions with or caused by an Interested Stockholder in which
the Interested Stockholder receives or could receive a benefit on other than a
pro rata basis with other stockholders, including mergers, certain asset
sales, certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation which increase the proportionate interest of
the Interested Stockholder or a transaction in which the Interested
Stockholder receives certain other benefits.
Pursuant to a Board resolution adopted at the time of formation of the
Company, the Section 203 limits do not apply to any "Business Combination"
between the Company and PGI.
REGISTRATION RIGHTS AGREEMENT
The Company has granted demand and incidental registration rights to PGI for
the registration of shares of Common Stock owned by PGI under the Securities
Act. Three demand registrations are permitted during the first five years
following the initial public offering of the Common Stock and one registration
per year each year thereafter until PGI owns less than 10% of the outstanding
Common Stock. The Company will pay the fees and expenses of the demand
registrations and the incidental registrations, while PGI will pay all
underwriting discounts and commissions. These registration rights are subject
to certain conditions and limitations, including the right of underwriters to
limit the number of shares owned by PGI included in such registration.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is LaSalle National
Trust, N.A.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock,
and no prediction can be made as to the effect, if any, that market sales of
shares or the availability of such shares for sale will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock and the
ability of the Company to raise capital through a sale of its securities.
Upon completion of the Offering, the Company will have 7,500,000 shares of
Common Stock outstanding, (8,250,000 shares if the Underwriters' over-
allotment option is exercised in full). Of those shares, the 5,000,000 shares
sold in the Offering (5,750,000 shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradeable without restriction
(except as to affiliates of the Company) or further registration under the
Securities Act. The remaining 2,500,000 shares of Common Stock outstanding
will be restricted securities ("Restricted Securities") within the meaning of
Rule 144 under the Securities Act.
In general, under Rule 144 under the Securities Act as currently in effect
(and subject to the recent amendments to Rule 144 described below), a person
(or persons whose shares are aggregated) who has beneficially owned Restricted
Securities for at least two years, and including the holding period of any
prior owner unless such prior owner is an affiliate, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume of the Common Stock on the Nasdaq National Market during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Any person (or
persons whose shares are aggregated) who is not deemed to have been an
affiliate of the Company at any time during the three months preceding a sale,
and who has beneficially owned shares for at least three years (including any
period of ownership of preceding non-affiliated holders), would be entitled to
sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements. An "affiliate" is a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or under common
control with, such issuer. The Commission has adopted certain amendments to
Rule 144 and Rule 144(k) under the Securities Act that, when effective, will
reduce the requisite holding periods to one year and two years, respectively.
The amendment will become effective on April 21, 1997 and will have the effect
of accelerating the time at which Restricted Securities will be available for
resale under Rule 144 and Rule 144(k).
Rule 144A under the Securities Act as currently in effect generally permits
unlimited resales of certain restricted securities of any issuer provided that
the purchaser is a qualified institution that owns and invests on a
discretionary basis at least $100 million in securities (and, in the case of a
bank or savings and loan association, has a net worth of at least $25 million)
or is a registered broker-dealer that owns and invests on a discretionary
basis at least $10 million in securities. Rule 144A allows PGI to sell its
shares of Common Stock to such institutions and registered broker-dealers
without regard to any volume or other restrictions. There can be no assurance
that the availability of such resale exemption will not have an adverse effect
on the trading price of the Common Stock.
The Company, its directors and executive officers, certain of its key
employees and PGI have agreed not to offer to sell, sell, distribute, grant
any option to purchase, or otherwise dispose of, directly or indirectly, any
shares of Common Stock or securities convertible into, or exercisable or
exchangeable for, shares of Common Stock owned by them prior to the expiration
of one year from the date of this Prospectus, except (i) with the prior
written consent of FBR, (ii) in the case of the Company, the grant of options
to purchase shares of Common Stock under the Company's Stock Incentive Plan
and (iii) for the sale of shares in the Offering. PGI may sell all 2,071,334
of its shares of Common Stock subject to the volume and other limitations of
Rule 144 after the expiration of the Rule 144 holding period.
PGI has the right to include its shares in any future registration of
securities effected by the Company under the Securities Act, subject to the
right of any underwriter in such offering requiring PGI to reduce the number
of
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<PAGE>
shares PGI otherwise has the right to have included in such registration. If
the Company is required to register shares held by PGI pursuant to the
exercise of its registration rights, such sales may have an adverse effect on
the Company's stock price and its ability to raise needed capital. See "Risk
Factors--Shares Eligible for Future Sale," "Principal Stockholders" and
"Description of Capital Stock--Registration Rights Agreement."
The Company intends to file a registration statement under the Securities
Act registering the shares of Common Stock reserved for issuance upon the
exercise of options granted under the Stock Incentive Plan. See "Management--
Stock Incentive Plan." This registration statement is expected to be filed
soon after the date of this Prospectus and will become effective automatically
upon filing. Accordingly, shares registered under such registration statement
will be available for sale in the open market, unless such shares are subject
to vesting restrictions with the Company and except to the extent that the
holders of such options are subject to the one year lock-up agreements
described above.
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<PAGE>
UNDERWRITING
Subject to the terms and certain conditions contained in the Underwriting
Agreement, the underwriters named below (the "Underwriters"), for whom
Friedman, Billings, Ramsey & Co., Inc. ("FBR") is acting as representative,
have severally agreed to purchase from the Company an aggregate of 5,000,000
shares of Common Stock. The number of shares of Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Friedman, Billings, Ramsey & Co., Inc...........................
---------
Total....................................................... 5,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay
for all the shares of Common Stock offered hereby (other than the shares of
the Common Stock covered by the over-allotment option described below) if any
are taken.
Prior to the Offering, there has been no established trading market for the
shares of Common Stock. The initial price to the public for the shares of
Common Stock offered hereby has been determined by negotiation between the
Company and FBR. The factors considered in determining the initial price to
the public include the history of and the prospects for the industry in which
the Company competes, the past and present operations of the Company, the
historical results of operations of the Company, the prospects for future
earnings of the Company, the recent market prices of securities of generally
comparable companies and the general condition of the securities markets at
the time of the Offering.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain liabilities, including
liabilities under the Securities Act.
The Underwriters have advised the Company that they propose to offer the
shares of Common Stock to the public initially at the price to the public set
forth on the cover page of this Prospectus and to certain dealers (who may
include the Underwriters) at such price less a concession not to exceed $
per share. The Underwriters may allow, and such dealers may reallow, discounts
not in excess of $ per share to any other Underwriter and certain other
dealers.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
750,000 additional shares of Common Stock at the initial public offering price
less underwriting discounts and commissions, solely to cover over-allotments.
To the extent that the Underwriters exercise such option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite such Underwriter's name in the preceding table bears
to the total number of shares offered.
The Underwriters do not intend to confirm sales of shares of Common Stock to
any accounts over which they exercise discretionary authority.
Subject to certain exceptions, the Company, its directors and executive
officers, certain of its key employees and PGI have agreed not to offer, sell,
contract to sell, or otherwise dispose of any shares of Common Stock or any
securities convertible or exchangeable into any shares of Common Stock prior
to the expiration of one year from the date of this Prospectus, without the
prior written consent of FBR. See "Shares Eligible for Future Sale."
49
<PAGE>
At the request of the Company, up to 100,000 shares of Common Stock offered
hereby have been reserved for sale to certain individuals, including directors
and employees of the Company and PGI and members of their families. The price
of such shares to such persons will be the initial public offering price set
forth on the cover page hereof less underwriting discounts and commissions.
The number of shares available to the general public will be reduced to the
extent those persons purchase reserved shares. Any shares not so purchased
will be offered hereby at the public offering price set forth on the cover of
this Prospectus.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Winston & Strawn, Chicago, Illinois. Alston & Bird,
Atlanta, Georgia, is acting as counsel for the Underwriters in connection with
certain legal matters relating to the sale of Common Stock offered hereby.
Wayne D. Boberg, a partner of Winston & Strawn, is a director designee of the
Company.
EXPERTS
The balance sheet of Brookdale Living Communities, Inc. as of December 31,
1996, the combined financial statements of the Original Facilities as of
December 31, 1995 and 1996, and for each of the three years in the period
ended December 31, 1996, the combined financial statements of the Activelife
Facilities as of December 31, 1995 and 1996, and for each of the three years
in the period ended December 31, 1996, the financial statements of the Gables
at Brighton Associates as of December 31, 1995, and for each of the two years
in the period ended December 31, 1996, the combined financial statements of
the Park Place Facilities as of December 31, 1995 and 1996, and for each of
the two years in the period ended December 31, 1996, and the consolidated
financial statements of BLC Property, Inc. as of December 31, 1996, and for
the period from December 12, 1996 (inception) to December 31, 1996, appearing
in this Prospectus and Registration Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. As used herein, the term "Registration Statement" means
the initial Registration Statement and any and all amendments thereto. This
Prospectus omits certain information contained in the Registration Statement
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto. Statements herein concerning the contents of any contract or other
document are not necessarily complete and in each instance reference is made
to such contract or other document filed with the Commission as an exhibit to
the Registration Statement, each such statement being qualified by and subject
to such reference in all respects.
As a result of the Offering, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith will file reports and other information with the
Commission. Reports, registration statements, proxy statements and other
information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the Commission's Regional Offices, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, New York, New York
10048. Copies of such materials can be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. In addition, registration statements and certain other
documents filed with the Commission through its Electronic
50
<PAGE>
Data Gathering, Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
The Company intends to furnish holders of the Common Stock with annual
reports containing among other information, audited financial statements
certified by an independent public accounting firm and quarterly reports
containing unaudited condensed financial information for the first three
quarters of each fiscal year. The Company also intends to furnish such other
reports as it may determine or as may be required by law.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BROOKDALE LIVING COMMUNITIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Pro Forma Combined Condensed Balance Sheet as of December 31, 1996...... F-4
Pro Forma Combined Condensed Statement of Operations for the year ended
December 31, 1996...................................................... F-5
Notes to Pro Forma Combined Condensed Balance Sheet..................... F-6
Notes to Pro Forma Combined Condensed Statement of Operations for the
year ended December 31, 1996........................................... F-10
AUDITED BALANCE SHEET
Report of Independent Auditors.......................................... F-13
Balance Sheet as of December 31, 1996................................... F-14
Notes to Balance Sheet.................................................. F-15
ORIGINAL FACILITIES (THE DEVONSHIRE, THE HERITAGE AND THE HALLMARK
FACILITIES)
Report of Independent Auditors.......................................... F-16
Combined Balance Sheets as of December 31, 1995 and 1996................ F-17
Combined Statements of Operations for the years ended December 31, 1994,
1995 and 1996.......................................................... F-18
Combined Statements of Changes in Partners' Capital (Deficit) for the
years ended December 31, 1994, 1995 and 1996........................... F-19
Combined Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996.......................................................... F-20
Notes to Combined Financial Statements.................................. F-21
ACTIVELIFE FACILITIES (SPRINGS OF EAST MESA, EDINA PARK PLAZA AND HAWTHORN
LAKES FACILITIES)
Report of Independent Auditors.......................................... F-27
Combined Balance Sheets as of December 31, 1995 and 1996................ F-28
Combined Statements of Operations for the years ended December 31, 1994,
1995 and 1996.......................................................... F-29
Combined Statements of Changes in Partners' Deficit for the years ended
December 31, 1994, 1995 and 1996....................................... F-30
Combined Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996.......................................................... F-31
Notes to Combined Financial Statements.................................. F-32
GABLES AT BRIGHTON ASSOCIATES
Report of Independent Auditors.......................................... F-35
Balance Sheet as of December 31, 1995................................... F-36
Statements of Income for the years ended December 31, 1995 and 1996..... F-37
Statements of Changes in Partners' Capital for the years ended December
31, 1995 and 1996...................................................... F-38
Statements of Cash Flows for the years ended December 31, 1995 and 1996. F-39
Notes to Financial Statements........................................... F-40
PARK PLACE FACILITIES (PARK PLACE PHASE I AND PARK PLACE PHASE II)
Report of Independent Auditors.......................................... F-41
Combined Balance Sheets as of December 31, 1995 and 1996................ F-42
Combined Statements of Operations for the years ended December 31, 1995
and 1996............................................................... F-43
Combined Statements of Changes in Partners' Capital/Owners' Equity for
the years ended December 31, 1995 and 1996............................. F-44
Combined Statements of Cash Flows for the years ended December 31, 1995
and 1996............................................................... F-45
Notes to Combined Financial Statements.................................. F-46
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BLC PROPERTY, INC. AND SUBSIDIARIES
Report of Independent Auditors.......................................... F-49
Consolidated Balance Sheet as of December 31, 1996...................... F-50
Consolidated Statement of Operations for the period from December 12,
1996 (inception) to December 31, 1996.................................. F-51
Consolidated Statement of Stockholder's Equity for the period from
December 12, 1996
(inception) to December 31, 1996....................................... F-52
Consolidated Statement of Cash Flows for the period from December 12,
1996 (inception) to December 31, 1996.................................. F-53
Notes to Consolidated Financial Statements.............................. F-54
</TABLE>
F-2
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited Pro Forma Combined Condensed Balance Sheet of the Company is
presented as if, at December 31, 1996, the Company had sold 5 million shares
of its common stock at a sale price of $15 per share, issued 2.5 million
shares of its common stock to PGI and management, acquired owned or leased
interests in the Original Facilities, the Activelife Facilities, the Gables at
Brighton facility the Park Place Facilities and BLC Property, Inc. as
described under "Use of Proceeds". The unaudited Pro Forma Combined Condensed
Statement of Operations for the year ended December 31, 1996 is presented as
if the above transactions occurred as of January 1, 1996. The unaudited Pro
Forma Combined Condensed financial statements of the Company should be read in
conjunction with all of the financial statements contained elsewhere in the
Prospectus. In management's opinion, all adjustments necessary to reflect the
effects of the Formation and Offering have been made.
The unaudited Pro Forma Combined Condensed Balance Sheet and Statement of
Operations of the Company are not necessarily indicative of what the actual
financial position or results of operations would have been assuming the
Formation and Offering had occurred at the dates indicated above, nor do they
purport to represent the future financial position or results of operations of
the Company.
F-3
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
<TABLE>
<CAPTION>
BLC
ORIGINAL ACTIVELIFE PARK PLACE PROPERTY, PRO FORMA PRO FORMA
COMPANY FACILITIES FACILITIES FACILITIES INC. SUBTOTAL ADJUSTMENTS AS ADJUSTED
------- ---------- ---------- ---------- --------- -------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash.................... $ 1 $ 4,044 $10,502 $ 270 $ 186 $ 15,003 (a) $(1,262) $ 13,741
Cash-restricted......... -- 1,089 758 51 -- 1,898 (b) 1,465 3,363
Accounts receivable..... -- 143 103 -- 22 268 (c) (103) 165
Prepaid rent and other.. -- 491 -- -- 760 1,251 (d) (491) 760
------ ------- ------- ------- ------ -------- ------- --------
Total current assets.... 1 5,767 11,363 321 968 18,420 (391) 18,029
Real estate, net........ -- 49,224 22,496 9,388 -- 81,108 (e) 44,925 126,033
Letter of credit
deposit................ -- -- -- -- -- -- (f) 11,000 11,000
Deferred costs, net..... -- 1,483 692 134 232 2,541 (g) (126) 2,415
Other................... 2,580 257 175 198 6 3,216 (h) (2,953) 263
------ ------- ------- ------- ------ -------- ------- --------
Total assets............ $2,581 $56,731 $34,726 $10,041 $1,206 $105,285 $52,455 $157,740
====== ======= ======= ======= ====== ======== ======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
AND PARTNERS' EQUITY (DEFICIT)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current liabilities:
Debt, current........... $ -- $ -- $ 263 $ 4,883 $ -- $ 5,146 (i) $(4,883) $ 263
Deferred gain on sale of
property, current...... -- 806 -- -- -- 806 -- 806
Prepaid rent............ -- -- -- -- 616 616 (d) (491) 125
Accrued interest
payable................ -- 182 195 -- -- 377 -- 377
Accrued real estate
taxes.................. -- 996 669 -- 35 1,700 -- 1,700
Accounts payable........ -- 316 340 189 127 972 (j) (529) 443
Tenant security
deposits............... -- 2,307 752 37 307 3,403 -- 3,403
Due to affiliates and
other.................. 2,580 1,073 2,095 -- 120 5,868 (k) (5,419) 449
------ ------- ------- ------- ------ -------- ------- --------
Total current
liabilities............ 2,580 5,680 4,314 5,109 1,205 18,888 (11,322) 7,566
Debt, long-term......... -- 65,000 30,780 3,286 -- 99,066 (i) (5,899) 93,167
Deferred gain on sale of
property, long-term.... -- 17,728 -- -- -- 17,728 -- 17,728
------ ------- ------- ------- ------ -------- ------- --------
Total liabilities....... 2,580 88,408 35,094 8,395 1,205 135,682 (17,221) 118,461
Commitments (p)......... -- -- -- -- -- -- -- --
Minority interest....... -- (6,249) -- -- -- (6,249)(l) 6,249 --
Stockholders' and
partners' equity
(deficit):
Preferred stock, $0.01
par value, 20,000
shares authorized, no
shares issued or
outstanding............ -- -- -- -- -- -- -- --
Common stock, $0.01 par
value, 75,000 shares
authorized, 7,500
shares issued and
outstanding............ -- -- -- -- -- -- (m) 75 75
Additional paid-in
capital................ 1 -- -- -- 1 2 (n) 39,202 39,204
Partners' equity
(deficit).............. -- (25,428) (368) 1,646 -- (24,150)(o) 24,150 --
------ ------- ------- ------- ------ -------- ------- --------
Total stockholders' and
partners' equity
(deficit).............. 1 (25,428) (368) 1,646 1 (24,148) 63,427 39,279
------ ------- ------- ------- ------ -------- ------- --------
Total liabilities and
stockholders' and
partners' equity
(deficit).............. $2,581 $56,731 $34,726 $10,041 $1,206 $105,285 $52,455 $157,740
====== ======= ======= ======= ====== ======== ======= ========
</TABLE>
See accompanying notes to the Pro Forma Combined Condensed Balance Sheet.
F-4
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
BLC
ORIGINAL ACTIVELIFE GABLES AT PARK PLACE PROPERTY, PRO FORMA PRO FORMA
FACILITIES FACILITIES BRIGHTON FACILITIES INC. SUBTOTAL ADJUSTMENTS AS ADJUSTED(J)
---------- ---------- --------- ---------- --------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Resident fees........... $23,437 $12,718 $2,743 $2,201 $ 84 $41,183 $ -- $41,183
Management services
income................. -- -- -- -- -- -- (a) 280 280
------- ------- ------ ------ ---- ------- ------- -------
Total revenue........... 23,437 12,718 2,743 2,201 84 41,183 280 41,463
Facility operating
expenses............... (12,806) (8,486) (1,829) (1,692) (54) (24,867)(b) 2,408 (22,459)
Lease expenses.......... -- -- -- -- (31) (31)(c) (8,674) (8,705)
General and
administrative
expenses............... -- -- -- -- -- -- (d) (2,837) (2,837)
Depreciation and
amortization........... (2,946) (1,026) (295) (487) -- (4,754)(e) 919 (3,835)
------- ------- ------ ------ ---- ------- ------- -------
Income (loss) from
operations............. 7,685 3,206 619 22 (1) 11,531 (7,904) 3,627
Interest and financing
fees expense........... (5,320) (2,986) -- (478) -- (8,784)(f) 3,616 (5,168)
------- ------- ------ ------ ---- ------- ------- -------
Income (loss) before
income taxes (h)....... 2,365 220 619 (456) (1) 2,747 (4,288) (1,541)
Pro forma (provision)
benefit for income
taxes.................. (946) -- -- -- 1 (945)(g) 1,884 939
------- ------- ------ ------ ---- ------- ------- -------
Pro forma net income
(loss)................. $ 1,419 $ 220 $ 619 $ (456) $-- $ 1,802 $(2,404) $ (602)
======= ======= ====== ====== ==== ======= ======= =======
Pro forma net income
(loss) per share....... $ 0.57 $ (0.08)
======= =======
Pro forma common shares
outstanding (i)........ 2,500 7,500
======= =======
</TABLE>
See accompanying notes to the Pro Forma Combined Condensed Statement of
Operations.
F-5
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
BASIS OF PRESENTATION
The pro forma combined condensed financial statements of the Company include
the historical financial statements of the Original Facilities, the Activelife
Facilities, the Gables at Brighton facility (balance sheet is not included due
to there being no operations remaining at December 31, 1996), the Park Place
Facilities [Park Place Phase II is an 83 unit facility that commenced
operations in 1996 (special care facility in February 1996 and assisted living
facility in May 1996)] and BLC Property, Inc. (BLC), each of which consists of
the following properties:
<TABLE>
<CAPTION>
ORIGINAL
FACILITIES ACTIVELIFE FACILITIES GABLES AT BRIGHTON FACILITY PARK PLACE FACILITIES
---------- --------------------- --------------------------- ---------------------
<S> <C> <C> <C>
The Devonshire (1) Springs of East Mesa (3) Gables at Brighton (3) Park Place Phase I (4)
The Heritage (1) Edina Park Plaza (2) Park Place Phase II (4)
The Hallmark (3) Hawthorn Lakes (2)
</TABLE>
- ---------------------
(1) These properties will be contributed to the Company by PGI and management.
(2) These properties will be purchased by the Company from proceeds of the
Offering.
(3) These properties are leased by BLC from Health and Retirement Properties
Trust (HRPT).
(4) These properties will be acquired within 60 days of the closing of the
Offering with proceeds received from the Offering.
Collectively (2) properties are referred to as the Acquired Facilities and
(3) properties are referred to as the Leased Facilities.
The Company will purchase the real estate and certain other assets, and
receive credits at closings for assuming certain debt, accrued real estate
taxes and tenant security deposits related to the Acquired Facilities and the
Park Place Facilities. The Company is not purchasing any other assets or
assuming any other liabilities of the Acquired Facilities or the Park Place
Facilities.
The following pro forma adjustments reflect the Offering, the Formation and
the above activity:
<TABLE>
<C> <S> <C>
(a) Cash:
Gross proceeds from Offering................................... $75,000
Estimated cost of the Offering ($3,500) and underwriters
discount ($5,250)............................................. (8,750)
Payments to be made to PGI from the proceeds of the Offering
for consideration to be paid to Third Party for its ownership
interests in the Original Facilities ($5,430). Adjustment
required to cash to reflect PGI's net contribution of $800 of
unrestricted cash of the Devonshire and the Heritage as part
of its contribution ($2,289). (Subsequent to December 31, 1996
PGI made $150 in escrow deposits on certain development sites
on behalf of the Company. The Company intends to reimburse PGI
from the proceeds of the Offering.)........................... (7,719)
Payment made for the acquisition of the Edina Park Plaza,
Hawthorne Lakes, Park Place Facilities (See Note e)........... (35,763)
Elimination of historical unrestricted cash accounts of the
Activelife Facilities ($10,502) and Park Place Facilities
($270) not being acquired by the Company...................... (10,772)
Cash to be used for an interest bearing letter of credit
deposit on the Devonshire and the Heritage.................... (11,000)
Payment made for the Hallmark facility Life Care Escrow (See
Note b)....................................................... (1,558)
Payment of fees for new acquisition line of credit ($400) and
interest rate protection contracts ($300)..................... (700)
-------
$(1,262)
=======
(b) Cash-restricted:
Additional cash requirement on the Hallmark facility's Life
Care Escrow................................................... $ 1,558
Elimination of historical cash-restricted accounts of the
Activelife Facilities ($42) and Park Place Facilities ($51)
not being acquired by the Company............................. (93)
-------
$ 1,465
=======
</TABLE>
F-6
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET--(CONTINUED)
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<C> <S> <C>
(c) Accounts receivable:
Elimination of historical accounts receivable accounts of the
Activelife Facilities ($103) not being acquired by the
Company...................................................... $ (103)
========
(d) Prepaid rent:
Elimination of prepaid rent on the Hallmark (asset and
liability between the Original Facilities and BLC Property,
Inc.)........................................................ $ (491)
========
(e) Real estate, net:
The Company will purchase the Acquired Facilities and the Park
Place Facilities for the purchase prices indicated below and
will assume certain liabilities as follows:
</TABLE>
<TABLE>
<CAPTION>
EDINA
PARK HAWTHORN PARK PLACE
PLAZA LAKES FACILITIES
------- -------- ----------
<S> <C> <C> <C> <C>
Purchase price............................ $23,980 $26,800 $14,350
Plus: other assets being acquired
Cash--restricted......................... 357 359 --
Less: liabilities being assumed...........
Mortgage note payable.................... 15,106 13,324 --
Accrued interest......................... 100 95 --
Accrued real estate taxes................ 326 343 --
Tenant security deposits................. 300 452 37
------- ------- -------
Cash payments made for acquisitions (see
Note a).................................. $ 8,505 $12,945 $14,313
======= ======= =======
The Company is acquiring the real estate assets and assuming liabilities
of the above entities which, in management's opinion, are stated at their
estimated fair market values. The adjustments to reflect the purchases
are reflected below.
</TABLE>
<TABLE>
<C> <S> <C>
Adjustments to the historical cost bases of the Edina Park
Plaza facility ($11,137), Hawthorne Lakes facility ($17,147),
Park Place Phase Facilities ($4,962) to reflect an allocation
of purchase prices to the fair value of the acquired real
estate........................................................ $33,246
Increase in basis resulting from the elimination ($6,249--See
Note l) and purchase for cash ($5,430) of the Third Party
owner's interest in The Original Facilities................... 11,679
-------
$44,925
=======
(f) Letter of credit deposit:
Cash to be used in an interest bearing letter of credit deposit
on the Devonshire and the Heritage............................ $11,000
=======
(g) Deferred costs, net:
Payment of fees for new acquisition line of credit ($400 for a
3 year term) and interest rate protection contracts ($300 for
a 2 year term)................................................ $ 700
Elimination of historical cost deferred costs accounts of the
Activelife Facilities ($692) and the Park Place Facilities
($134) not being acquired by the Company...................... (826)
-------
$ (126)
=======
</TABLE>
F-7
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET--(CONTINUED)
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<C> <S> <C>
(h) Other assets:
Reclassification of deferred offering costs, incurred by an
affiliate, to paid-in capital................................. $(2,580)
Elimination of historical other asset accounts of the
Activelife Facilities ($175) and the Park Place Facilities
($198) not being acquired by the Company...................... (373)
-------
$(2,953)
=======
(i) Debt, current:
Elimination of historical current portion debt accounts of the
Park Place Facilities ($4,883) not being assumed by the
Company....................................................... $(4,883)
=======
Debt, long-term:
Elimination of historical long-term debt accounts of the
Activelife Facilities ($2,613) and Park Place Facilities
($3,286) not being assumed by the Company..................... $(5,899)
=======
</TABLE>
After giving effect to the formation, the Company will have principal
payments relating to mortgage notes and bonds payable as of December 31, 1996
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1997............................ $ 263
1998............................ 286
1999............................ 310
2000(1)......................... 65,336
2001............................ 365
Thereafter...................... 26,870
-------
$93,430
=======
</TABLE>
- ---------------------
(1) The proposed letter of credit agreement extends the credit enhancement on
$65,000 of tax-exempt bonds that are secured by the Devonshire and the
Heritage until the year 2000.
<TABLE>
<C> <S> <C>
(j) Accounts payable:
Elimination of historical accounts payable accounts of the
Activelife Facilities ($340) and the Park Place Facilities
($189) not being assumed by the Company....................... $ (529)
=======
(k) Due to affiliates and Other:
Repayment of deferred offering costs of the Company ($2,580)
and reclassification of amounts from due to affiliates for
costs associated with BLC's organization and lease agreement
with HRPT incurred by PGI to equity ($744) (The Company
intends to reimburse PGI $1,585 for cash payments made for
deferred offerings costs and escrow deposits for the Acquired
Facilities and the Park Place Facilities)..................... $(3,324)
Elimination of historical due to affiliates and other
liabilities accounts of the Activelife Facilities, not being
assumed by the Company........................................ (2,095)
-------
$(5,419)
=======
(l) Minority interest:
Elimination of Third Party's minority interest balance in the
Original Facilities........................................... $ 6,249
=======
</TABLE>
F-8
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET--(CONTINUED)
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<C> <S> <C>
(m) Common stock:
Issuance of 5,000 shares of common stock, $.01 par value,
pursuant to the initial public offering...................... $ 50
Issuance of 2,500 shares of common stock, $.01 par value, to
PGI in consideration for its contribution of its interests in
the Original Facilities and BLC.............................. 25
--------
$ 75
========
(n) Additional paid-in capital:
Issuance of 5,000 shares of common stock, $.01 par value,
pursuant to the initial public offering at an assumed
offering price of $15 per share.............................. $ 74,950
Issuance of 2,500 shares of common stock, $.01 par value, to
PGI and management in consideration for its contribution of
its interests in the Original Facilities and BLC............. (25)
Estimated costs of the Offering ($3,500) and underwriters
discount ($5,250)............................................ (8,750)
Adjustment to reflect PGI's net contribution of $800 of
unrestricted cash of the Devonshire and the Heritage ($2,289)
net of the reclassification of amounts due to affiliates for
costs associated with BLC's organization and lease agreements
with HRPT incurred by PGI ($744)............................. (1,545)
Reclassification of historical partners' equity (deficit)..... (24,150)
Elimination of carry over historical cost basis of the net
assets and liabilities of the Activelife Facilities
(Deficit--$368) and the Park Place Facilities (Equity--
$1,646)...................................................... (1,278)
--------
$ 39,202
========
(o) Partners' equity (deficit):
Reclassification of historical partners' equity (deficit)..... $ 24,150
========
(p) Commitments:
Upon the completion of the Formation and the Offering the
Company will (i) provide a stock incentive plan for
directors, executive officers and other key employees (See
"Business--Stock Incentive Plan"), (ii) enter into a space
sharing agreement with PGI (See "Certain Transactions--Space
Sharing Agreement") and (iii) continue a 401(k) plan
initiated by PGI for the Original Facilities (See "Employee
Benefit Plan" in footnote 6 to the combined financial
statements of the Original Facilities).
</TABLE>
F-9
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
<C> <S> <C> <C>
(a) Management services income:
Management services income for management services performed
by the Company for The Island on Lake Travis and the Kenwood.. $ 280
=======
(b) Facility operating expenses:
Reclassification of lease expense incurred by the Original
Facilities included in facility operating expenses in the
combined historical financial statements...................... $ 75
Elimination of historical management fees paid by the Original
Facilities ($930), the Activelife Facilities ($785), the
Gables at Brighton facility ($115) and the Park Place
Facilities ($131) and administrative fees paid by the
Original Facilities ($372) which will not be incurred by the
Company....................................................... 2,333
-------
$ 2,408
=======
(c) Lease expenses:
Reclassification of lease expense incurred by the Original
Facilities included in facility operating expenses in the
combined historical financial statements (See Note 7 to the
Original Facilities combined financial statements)............ $ (75)
Adjustment to relect a full year lease payments related to the
Leased Facilities (See Note 4 to the consolidated financial
statements of BLC Property, Inc.)............................. (8,599)
-------
$(8,674)
=======
Total annual lease expenses ($9,511) less
amortization of deferred gain on sale of the
Hallmark ($806).................................... $ (8,705)
Less: lease expense recognized in 1996:
BLC Property, Inc................................... 31
Original Facilities................................. 75
---------
Adjustment required................................. $ (8,599)
=========
(d) General and administrative expenses:
Estimated increase in salaries and related benefits associated
with former employees of PGI who will become the senior
officers and managers of the Company and additional
administrative and financial reporting expenses which would
have been incurred by the Company had it been operating as a
public company during the year:
Salaries and wages............................................. $(1,812)
Directors' and officers' insurance and fees.................... (160)
Legal and accounting........................................... (210)
Other.......................................................... (655)
-------
$(2,837)
=======
The Company anticipates hiring new employees and incur other
administrative costs based upon its future expansion plans.
The Company estimates these costs to be $1,916 on an annual
basis. These costs have not been reflected in the pro forma
adjustments.
</TABLE>
F-10
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS--
(CONTINUED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
<C> <S> <C>
(e) Depreciation and amortization:
Adjustments to historical depreciation expense associated with
(*):
Decrease in depreciation expense associated with the change in
depreciable lives of the Devonshire and the Heritage
facilities.................................................... $ 213
Additional depreciation associated with the increase in basis
resulting from the purchase of the Third Party owners'
interest in the Original Facilities........................... (339)
Adjustment to depreciation expense associated with the increase
in the basis from the purchase and the increase in depreciable
lives
Edina Park Plaza and Hawthorne Lakes facilities................ (652)
Park Place Facilities.......................................... 63
Elimination of historical depreciation and amortization expense
of the Leased Facilities (the Hallmark facility $1,239, the
Springs of East Mesa facility $383, and the Gables at Brighton
facility $295)................................................ 1,917
Additional amortization expense associated with the fees paid
for the new acquisition line of credit ($400 over 3 years) and
interest rate protection contracts ($300 over 2 years)........ (283)
-------
$ 919
=======
*The Company has determined that the estimated useful lives of buildings to
be 45 years and furniture and equipment to be 5 years, as compared to 40
years and 3-12 years, respectively used by the Original Facilities. This
change was made to better reflect the estimated periods during which such
assets will remain in service. For financial statement reporting purposes,
the above will be recorded prospectively as a change in estimate for the
Original Facilities over their remaining lives. Depreciation expense
included in the "Pro Forma As Adjusted" column was based upon the Company's
new estimated useful lives.
(f) Interest expense:
Elimination of interest expense incurred related to the debt of
the Leased Facilities (the Hallmark facility $2,505, and the
Springs of East Mesa facility $439), the Acquired Facilities
($194) and the Park Place Facilities ($478)................... $ 3,616
=======
</TABLE>
F-11
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS--
(CONTINUED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<C> <S> <C> <C>
(g) (Provision) benefit for income taxes:
The Original Facilities and the entities that operated
the Activelife Facilities, the Gables at Brighton
facility and Park Place Facilities prior to the
acquisition were not taxable entities. The
realization of the deferred gain on the sale of the
Hallmark as a reduction of lease expenses (see Note
c) is considered a permanent difference between book
income (loss) and tax income (loss) and is not
taxable. The difference has the following impact on
the Company's benefit for income tax at a 40% rate
(includes, federal and state statutory income tax
rates). This adjustment provides pro forma benefit
for income taxes at a 40% effective income tax rate.. $ 1,884
============
Benefit on loss before permanent difference........... $616
Benefit related to permanent difference............... 323
----
Pro forma benefit for income taxes.................... $939
====
(h) Income (loss) before income taxes:
The income (loss) before income taxes presented in the
historical statements of operations of the Original
Facilities is before minority interest; the
Activelife Facilities is before gain on sale of
property and; the Gables at Brighton facility is
before gain on sale of property and represents income
(loss) from continuing operations. The minority
interest is not included due to the interest being
acquired in conjunction with the Formation and
Offering and the gains on sale of properties are not
included due to the non-recurring nature of the
transactions.
(i) Pro forma net loss per share is based upon the number
of common shares issued consisting of the 2,500
shares issued to PGI and management in exchange for
their interest in the Original Facilities plus the
issuance of all 5,000 shares in the initial offering
Original Facilities................................... 2,500 shares
============
The Company........................................... 7,500 shares
============
(j) The Company has entered a definitive purchase
agreement to acquire the Park Place Facilities
located in Spokane, Washington for approximately
$14.4 million. Although the Company expects to
consummate the acquisition of the Park Place facility
within 30 to 60 days from the closing of the
Offering, there can be no assurance that the
conditions to closing such acquisition will be
satisfied in a timely manner, if at all. If such
facility is not acquired by the Company, pro forma as
adjusted total revenue, operating income and net loss
would be $39,262, $3,411 and $732, respectively, for
the year ended December 31, 1996. See "Risk Factors--
Uncertainty of Proposed Acquisition."
</TABLE>
F-12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Brookdale Living Communities, Inc.
We have audited the accompanying balance sheet of Brookdale Living
Communities, Inc., a Delaware corporation, as of December 31, 1996. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Brookdale Living Communities,
Inc. as of December 31, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1997
F-13
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash................................................................ $ 1,000
Deferred offering costs............................................. 2,580,000
----------
Total assets........................................................ $2,581,000
==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'S EQUITY
<S> <C>
Due to affiliate.................................................... $2,580,000
----------
Total liabilities................................................... 2,580,000
Stockholder's equity:
Common Stock, $.01 par value, 100 shares authorized, issued and
outstanding........................................................ 1
Additional paid-in capital.......................................... 999
----------
Total stockholder's equity.......................................... 1,000
----------
Total liabilities and stockholder's equity.......................... $2,581,000
==========
</TABLE>
See notes to balance sheet.
F-14
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1996
1. ORGANIZATION
Brookdale Living Communities, Inc. (the "Company") was incorporated in
Delaware under the Delaware General Corporation Law on September 4, 1996. The
Company was formed in order to consolidate and expand the Original Facilities
and BLC Property, Inc. owned by The Prime Group, Inc. and its affiliates
("PGI"). In connection with a proposed public offering (the "Offering") more
fully described elsewhere in this Registration Statement and Prospectus, the
Company will sell shares of its common stock to the public and PGI will
contribute its interests in The Original Facilities and BLC Property, Inc. in
exchange for 2.5 million shares of common stock of the Company.
2. DEFERRED COSTS
As of December 31, 1996, PGI has incurred approximately $2,580,000 of legal,
accounting and related costs on behalf of the Company in connection with the
Offering which have been presented as deferred offering costs on the balance
sheet. These costs, in addition to offering costs incurred after December 31,
1996 through the date the Offering, will be deducted from the gross proceeds
of the Offering.
3. USE OF ESTIMATES
The preparation of the balance sheet in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the balance sheet and accompanying notes.
Actual results could differ from those estimates.
F-15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of
Brookdale Living Communities, Inc.
We have audited the accompanying combined balance sheets of the Original
Facilities as of December 31, 1995 and 1996 and the related combined
statements of operations, changes in partners' capital (deficit) and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Original Facilities'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Original
Facilities at December 31, 1995 and 1996, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1997
F-16
<PAGE>
ORIGINAL FACILITIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash................................................. $ 5,086,428 $ 4,044,601
Cash--restricted..................................... 1,732,854 1,088,797
Accounts receivable.................................. 160,580 142,789
Prepaid rent-affiliate............................... -- 490,834
Due from affiliates.................................. 93,500 101,327
------------ -----------
Total current assets................................. 7,073,362 5,868,348
Real estate, at cost:
Land................................................. 8,336,937 3,684,794
Buildings and improvements........................... 88,382,978 52,418,455
Furniture and equipment.............................. 3,794,756 2,280,147
------------ -----------
100,514,671 58,383,396
Accumulated depreciation............................. (9,476,602) (9,158,919)
------------ -----------
91,038,069 49,224,477
Deferred costs, net.................................. 1,982,270 1,481,955
Other................................................ 231,521 156,568
------------ -----------
Total assets......................................... $100,325,222 $56,731,348
============ ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Mortgage note payable................................ $ 334,165 $ --
Deferred gain on sale of property.................... -- 805,835
Accrued interest payable............................. 204,063 182,153
Accrued real estate taxes............................ 992,570 995,544
Accounts payable..................................... 199,602 316,097
Tenant security deposits............................. 2,259,846 2,307,302
Due to affiliates.................................... 272,578 694,063
Other................................................ 177,614 379,157
------------ -----------
Total current liabilities............................ 4,440,438 5,680,151
Mortgage note payable................................ 34,292,835 --
Bonds payable........................................ 65,000,000 65,000,000
Deferred gain on sale of property.................... -- 17,728,380
------------ -----------
Total liabilities.................................... 103,733,273 88,408,531
Minority interest.................................... (7,005,255) (6,249,661)
Partners' capital (deficit).......................... 3,597,204 (25,427,522)
------------ -----------
Total liabilities and partners' capital (deficit).... $100,325,222 $56,731,348
============ ===========
</TABLE>
See notes to combined financial statements.
F-17
<PAGE>
ORIGINAL FACILITIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
<S> <C> <C> <C>
REVENUE
Resident fees........................... $15,204,692 $21,934,680 $23,437,114
EXPENSES
Facility operating...................... 8,848,494 10,804,692 10,842,704
Real estate taxes....................... 886,533 1,005,620 1,032,733
Depreciation and amortization........... 3,285,812 3,720,612 2,945,562
Interest................................ 3,310,052 5,507,289 4,739,947
Financing fees.......................... 743,002 877,500 581,441
Property management and other fees--
affiliate.............................. 1,535,224 1,443,195 929,831
----------- ----------- -----------
Total expenses.......................... 18,609,117 23,358,908 21,072,218
----------- ----------- -----------
Income (loss) before minority interest
and extraordinary item................. (3,404,425) (1,424,228) 2,364,896
(Income) loss allocated to minority
interest............................... 1,178,257 802,687 (755,594)
----------- ----------- -----------
Income (loss) before extraordinary item. (2,226,168) (621,541) 1,609,302
Extraordinary item--gain on
extinguishment of debt................. -- 3,274,207 --
----------- ----------- -----------
Net income (loss)....................... $(2,226,168) $ 2,652,666 $ 1,609,302
=========== =========== ===========
UNAUDITED PRO FORMA DATA:
Income (loss) before income taxes and
extraordinary item..................... $(2,226,168) $ (621,541) $ 1,609,302
Pro forma benefit (provision) for income
taxes.................................. 890,467 248,616 (643,721)
----------- ----------- -----------
Income (loss) before extraordinary item. (1,335,701) (372,925) 965,581
Extraordinary item, net of income taxes
of $1,309,683.......................... -- 1,964,524 --
----------- ----------- -----------
Pro forma net income (loss)............. $(1,335,701) $ 1,591,599 $ 965,581
=========== =========== ===========
Pro forma net income per share.......... $ 0.39
===========
Pro forma common shares outstanding..... 2,500,000
===========
</TABLE>
See notes to combined financial statements.
F-18
<PAGE>
ORIGINAL FACILITIES
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
THE
DEVONSHIRE THE HERITAGE THE HALLMARK
------------ ------------ ------------------------ TOTAL TOTAL
GENERAL GENERAL GENERAL LIMITED GENERAL LIMITED
PARTNER PARTNER PARTNER PARTNER PARTNERS PARTNER TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Partners' deficit at
January 1, 1994........ $ (2,219,635) $ (560,395) $ -- $ -- $(2,780,030) $ -- $ (2,780,030)
Contributions......... 556,863 600,000 10 5,700,990 1,156,873 5,700,990 6,857,863
Net loss.............. (109,105) (850,942) (12,661) (1,253,460) (972,708) (1,253,460) (2,226,168)
------------ ------------ ---------- ------------ ----------- ------------- -------------
Partners' capital
(deficit) at December
31, 1994............... (1,771,877) (811,337) (12,651) 4,447,530 (2,595,865) 4,447,530 1,851,665
Contributions......... 54,875 -- -- -- 54,875 -- 54,875
Distributions......... -- -- -- (962,002) -- (962,002) (962,002)
Net income (loss)..... (159,044) (325,557) 31,373 3,105,894 (453,228) 3,105,894 2,652,666
------------ ------------ ---------- ------------ ----------- ------------- -------------
Partners' capital
(deficit) at December
31, 1995............... (1,876,046) (1,136,894) 18,722 6,591,422 (2,994,218) 6,591,422 3,597,204
Contributions......... 49,859 -- -- -- 49,859 -- 49,859
Distributions......... -- -- (261,523) (25,890,737) (261,523) (25,890,737) (26,152,260)
Advances made to
general partners..... (1,600,527) (2,931,100) -- -- (4,531,627) -- (4,531,627)
Net income............ 139,890 335,925 11,335 1,122,152 487,150 1,122,152 1,609,302
------------ ------------ ---------- ------------ ----------- ------------- -------------
Partners' deficit at
December 31, 1996...... $ (3,286,824) $ (3,732,069) $ (231,466) $(18,177,163) $(7,250,359) $ (18,177,163) $ (25,427,522)
============ ============ ========== ============ =========== ============= =============
</TABLE>
See notes to combined financial statements.
F-19
<PAGE>
ORIGINAL FACILITIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)..................... $(2,226,168) $ 2,652,666 $ 1,609,302
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization........ 3,285,812 3,720,612 2,945,562
Minority interest.................... (1,178,257) (802,687) 755,594
Extraordinary item................... -- (3,274,207) --
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable........................ (103,585) (39,628) 17,791
(Increase) in prepaid rent-
affiliate......................... -- -- (490,834)
(Increase) decrease in other
assets............................ (99,646) 12,252 74,953
Increase (decrease) in accrued
interest payable.................. 714,707 (680,108) (21,910)
Increase (decrease) in accrued real
estate taxes...................... 600,016 (134,930) 2,974
Increase (decrease) in accounts
payable........................... 74,473 (46,029) 116,495
Increase in tenant security
deposits.......................... 1,026,802 111,614 47,456
Decrease in arbitrage rebate
payable........................... (73,678) (806,418) --
Increase (decrease) in other
liabilities....................... 187,963 (93,219) 201,543
----------- ----------- ------------
Net cash provided by operating
activities........................... 2,208,439 619,918 5,258,926
INVESTING ACTIVITIES
Proceeds from sale of property....... -- -- 58,474,380
Additions to real estate............. (43,224,823) (238,633) (359,249)
Decrease in construction costs
payable............................. (606,781) -- --
Reimbursement of building
improvements from tenants........... -- 139,559 --
Decrease (increase) in due from
affiliate........................... 41,800 (68,016) (7,827)
Decrease in cash -- restricted....... 6,938,354 856,017 --
----------- ----------- ------------
Net cash (used in) provided by
investing activities................. (36,851,450) 688,927 58,107,304
FINANCING ACTIVITIES
Repayment of mortgage note payable... -- (32,967,418) (34,627,000)
Repayment of bonds payable........... (4,000,000) -- --
Repayment of note payable --
affiliate........................... (2,510,081) -- --
Proceeds from mortgage note payable.. 36,241,625 34,627,000 --
(Increase) decrease in cash --
restricted.......................... (527,778) (542,013) 644,057
Increase in deferred financing
costs............................... (110,126) (626,662) --
Increase in deferred leasing costs... -- -- (212,571)
Increase in due to affiliate......... 126,609 66,899 421,485
Advances to general partner.......... -- -- (4,531,627)
Contributions from partners.......... 6,857,863 54,875 49,859
Contributions from minority
interest............................ 2,194,993 -- --
Distributions to partners............ -- (962,002) (26,152,260)
----------- ----------- ------------
Net cash provided by (used in)
financing activities................. 38,273,105 (349,321) (64,408,057)
----------- ----------- ------------
Net increase (decrease) in cash....... 3,630,094 959,524 (1,041,827)
Cash at beginning of year............. 496,810 4,126,904 5,086,428
----------- ----------- ------------
Cash at end of year................... $ 4,126,904 $ 5,086,428 $ 4,044,601
=========== =========== ============
</TABLE>
See notes to combined financial statements.
F-20
<PAGE>
ORIGINAL FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Original Facilities represent a combination of three partnerships
described below ("Partnerships") that own, operate, and manage assisted living
facilities ("Properties") in the greater Chicagoland area. The Properties are
under common management and ownership of The Prime Group, Inc. and its
affiliates ("PGI") as either the managing general partner (responsible for the
operations of the Properties) or 100% owner. Two of the Properties have a
third party owner ("Third Party"), whose ownership interests have been
reflected as a minority interest in the combined financial statements.
Pursuant to the formation transactions more fully described elsewhere in this
Registration Statement and Prospectus, the Original Facilities will be
operated (owned or leased) by a newly formed corporation, Brookdale Living
Communities, Inc. (the "Company"), whose shares are being registered pursuant
to this Registration Statement.
The Partnerships and Properties owned and operated by the Original
Facilities are as follows:
<TABLE>
<CAPTION>
PARTNERSHIP PROPERTY
<S> <C>
The Ponds of Pembroke Limited Partnership The Devonshire
River Oaks Partners The Heritage
Hallmark Partners, L.P. The Hallmark
</TABLE>
Included in the combined financial statements are the operations of The
Devonshire (Partnership ownership-PGI: 25% managing general partner interest,
Third Party: 50% general partner interest and 25% limited partner interest)
and The Heritage (Partnership ownership-PGI: 50% managing general partner
interest and Third Party: 50% general partner interest) and the operations of
the Hallmark from June 1, 1994 (The Hallmark facility was purchased by
Hallmark Partners, L.P., a newly formed partnership 100% owned by PGI, on June
1, 1994 for $41.6 million. On an unaudited pro-forma basis for the year ended
December 31, 1994 combined revenue would have increased by approximately $2.6
million and combined net loss would have increased by approximately $1.0
million in the combined statements of operations had the Hallmark been owned
by PGI since January 1, 1994).
On December 27, 1996 The Hallmark was sold by Hallmark Partners, L.P. (HP)
to Health and Retirement Properties Trust (HRPT) which then leased The
Hallmark to BLC Property, Inc. (BLC), an affiliate of PGI, which subleased the
property back to HP (see Note 7), in a sale-leaseback transaction. HP received
net proceeds from the sale of $58.5 million, resulting in a gain of $18.5
million net of a prepayment fee of $2.8 million and the writeoff of deferred
financing fees of $579,601. The above gain is deferred and is being amortized
using the straight-line method over the life of the sublease.
All significant intercompany accounts and transactions have been eliminated
in combination.
RESIDENT FEE REVENUE
Resident fee revenue is recorded when services are rendered and consist of
fees for basic housing, support services and fees associated with additional
services such as personalized health and assisted living care.
REAL ESTATE
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of," under which the Partnerships would be required to
recognize impairment losses for the Properties when indicators of impairment
are present and the Properties' expected undiscounted cash flows are not
sufficient to recover the Properties' carrying value. The Partnerships adopted
Statement No. 121 effective January 1, 1995 with no impact on the accompanying
combined financial statements.
Expenditures for ordinary maintenance and repairs are expensed to operations
as incurred. Significant renovations and improvements which improve and/or
extend the useful life of the asset are capitalized and depreciated over their
estimated useful life. Interest and other direct costs incurred during
construction periods are capitalized as a component of the building cost.
F-21
<PAGE>
ORIGINAL FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation is calculated using the straight-line method over the estimated
useful lives of assets, which are as follows:
<TABLE>
<S> <C>
Buildings..................... 40 years
Building improvements and
furniture fixtures........... 3-12 years
</TABLE>
DEFERRED COSTS
Deferred financing costs are amortized using the straight-line method over
the term of the mortgage notes and bonds. Deferred lease costs are amortized
using the straight-line method over the term of the sublease. Deferred
marketing costs, consisting primarily of the costs of the marketing
facilities, were amortized using the straight-line method over the estimated
lease up period of 22 months through June 1995 when they were fully amortized.
INCOME TAXES
The Partnerships pay no income taxes and the income or loss from the
Partnerships is includable on the respective federal income tax returns of the
partners.
The Partnerships net basis of real estate assets as reported in the
financial statements at December 31, 1996 exceeds the basis used for federal
income tax purposes by approximately $2.2 million due to the use of
accelerated depreciation methods for federal income tax purposes.
USE OF ESTIMATES
The preparation of the combined financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
PRO FORMA PRESENTATION (UNAUDITED)
The pro forma net income per share for the year ended December 31, 1996 was
determined based upon 2.5 million shares of common stock issued by the Company
to PGI in exchange for its ownership in the Original Facilities.
The pro forma (provision) benefit for income taxes for the Original
Facilities is based on the historical combined financial data of the Original
Facilities as if the entities comprising the Original Facilities had operated
as taxable corporations for all periods presented and is recorded at the
federal and state statutory rates in effect during the period (40%).
2. CASH--RESTRICTED
The Heritage and The Hallmark have Life Care Escrow deposits required under
the Illinois Life Care Facility Act Section 7(b) which will be funded from
time to time in accordance with a schedule provided by the Illinois Department
of Public Health. The amount on deposit at December 31, 1995 and 1996 was
$652,503 and $1,088,797, respectively.
In accordance with the mortgage note payable described in Note 5, The
Hallmark was required to maintain escrow deposits for real estate taxes,
repairs, and other operating activities. The total of all escrow accounts at
December 31, 1995 was $1,080,351.
F-22
<PAGE>
ORIGINAL FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Pursuant to Internal Revenue Code Section 148(f), The Heritage was required
to rebate to the United States government any interest earnings in excess of
the interest cost of the Bond proceeds not yet used for Project costs. During
1995, the Partnership paid $806,418 from unused restricted Bond proceeds to the
United States government as a final settlement of its arbitrage rebate payable.
No amounts were paid in 1994 or 1996.
3. DEFERRED COSTS
Deferred costs consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
<S> <C> <C>
Financing costs.................................. $2,656,553 $2,056,966
Lease costs...................................... -- 212,571
---------- ----------
2,656,553 2,269,537
Less: Accumulated amortization................... (674,283) (787,582)
---------- ----------
$1,982,270 $1,481,955
========== ==========
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
<S> <C> <C>
MORTGAGE NOTES PAYABLE
Mortgage note payable, financial institution, interest
at 7.265% per annum with monthly principal and
interest assuming a 30 year amortization period,
through maturity in January 2006. (A) (B)............. $34,627,000 $ --
BONDS PAYABLE
Variable rate tax-exempt bonds issued by state and
local governmental authorities. (C)................... $65,000,000 $65,000,000
</TABLE>
- ---------------------
(A) The mortgage note payable was collateralized by The Hallmark's real estate.
(B) On December 27, 1996, The Hallmark was sold and a portion of the proceeds
were used to repay the mortgage note payable. In addition, The Hallmark was
required to pay a prepayment fee of $2,722,679 which has been included as a
reduction in calculating the gain on sale of property. The Hallmark repaid
a previous note payable on December 18, 1995 from proceeds of the above
mentioned mortgage note payable which resulted in an extraordinary gain of
$3,274,207 in 1995.
(C) Permanent financing for the development for The Devonshire and The Heritage
has been provided by $65,000,000 (The Devonshire--$33,000,000; The
Heritage--$32,000,000) of tax-exempt Qualified Residential Rental Bonds
(the "Bonds"). The Bonds mature on December 15, 2019 and December 15, 2025.
Under the terms of the bond loan agreement, The Devonshire and The Heritage
are to make interest-only payments monthly, calculated using a floating
rate determined by the Remarketing Agent of the Bonds. The rates ranged
from 1.65% to 5.50% during 1994, 2.55% to 5.20% during 1995 and 2.30% to
4.40% during 1996. The rates at December 31, 1995 were 5.05% and 5.20%, and
December 31, 1996 were 4.00% and 4.10%.
The maximum annual interest rate on the Bonds is 15%. Under certain
conditions, the interest rate on the Bonds may be converted to a fixed rate
at the request of the respective Partnership.
F-23
<PAGE>
ORIGINAL FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The Bonds are collateralized by irrevocable letters of credit issued by
various banks in the aggregate amount of $66,714,699 (the "Letters of
Credit") that expire December, 1997 and December, 1998. A Letter of Credit
fee of .5% per annum of the stated amount of the Letters of Credit is due
quarterly in advance. The Letters of Credit with the various banks are
collateralized by separate Standby Purchase Agreements entered into with
the Third Party to reimburse the banks for any funds drawn on the Letters
of Credit. The Letters of Credit and Standby Purchase Agreements are
collateralized by mortgages on The Devonshire and The Heritage. The due
dates of the bonds would be accelerated upon the expiration of the Letters
of Credit and Standby Purchase Agreements unless they are extended or
replaced. However, The Devonshire and The Heritage have entered into
separate Standby Bond Purchase and Indemnity Agreements (the "Agreements")
with the Third Party pursuant to which the Third Party agrees to provide
standby credit enhancement to issuers of replacement Letters of Credit or,
if replacement Letters of Credit are not obtained, to buy the bonds. The
Agreements expire on March 22, 1998. If the Third Party buys the bonds
pursuant to the Agreements, The Devonshire and The Heritage would be
required to buy the bonds from the Third Party on March 22, 1998. PGI has
provided the Third Party with certain collateral totaling $2,220,000 to
secure the obligations of The Devonshire under the Agreements with the
Third Party. The Partnerships incurred financing fees of $743,002, $877,500
and $581,441 during the years ended December 31, 1994, 1995 and 1996
respectively.
Each bondholder may tender bonds on any business day and receive a price
equal to the principal amount thereof, plus accrued interest through the
tender date. Upon tender, the Remarketing Agent shall immediately remarket
the Bonds on a best-efforts basis. In the event the Remarketing Agent fails
to remarket any bonds, the partnerships are obligated to purchase those
bonds, for which they may draw on the Letters of Credit.
Included in interest expense for the year ended December 31, 1994 is
$117,318 of interest expense related to a $2,510,081 note payable to an
affiliate that was repaid in 1994. The note payable bore interest at 10% per
annum.
Interest expense is stated net of interest income of $155,608, $118,642 and
$113,696 for the years ended December 31, 1994, 1995 and 1996, respectively.
Total interest paid on the mortgage note payable and bonds payable was
$2,633,635, $6,306,039 and $4,761,857 for the years ended December 31, 1994,
1995, and 1996, respectively.
5. TAX INCREMENTAL FINANCING
The Heritage is located in a redevelopment area designated by a local
municipality as a tax incremental financing district ("TIF"). Under the terms
of the redevelopment agreement, The Heritage is eligible to receive up to
$1,136,889 for all eligible development costs, as defined through a Tax
Incremental Financing Bond ("Bond"). The Bond matures on December 1, 2007 and
bears interest at 10%, with principal and interest payable annually on each
December 1. The Bond is subject to optional redemption in whole, or in part,
at any time, at a redemption price equal to the principal outstanding at the
date redeemed. The Bond is subject to mandatory redemption, in part, by the
application of annual sinking fund installments by the municipality on each
December 1 thereafter, at a redemption price equal to the principal
outstanding at the date redeemed. The Bond is payable solely from real estate
tax incremental revenues and certain sales tax receipts generated in the TIF.
Payments are to be made to the extent of available TIF revenues. The
insufficiency of TIF revenues generated in the redevelopment area for any
given year shall not be considered a default in payment, but all past due
amounts shall be a continuing obligation payable from future TIF revenues. Any
unpaid amounts including interest, at maturity, will be forgiven. As the
collectibility of the bond principal and interest is dependent upon sufficient
revenues being generated in the redevelopment area, revenue is recognized by
The Heritage when principal and
F-24
<PAGE>
ORIGINAL FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
interest are received. For the years ended December 31, 1994, 1995, and 1996,
The Heritage received principal and interest payments totaling $144,389,
$144,089 and $610,804, respectively.
6. EMPLOYEE BENEFIT PLAN
In August 1994, PGI established 401(k) plans for all employees that meet
minimum employment criteria. The plans provide that the participants may defer
up to 15% of their eligible compensation on a pre-tax basis subject to certain
maximum amounts. The Partnerships will contribute an additional 25% of the
employee's contribution to the plan, up to $500 per employee per annum.
Employees are always 100% vested in their own contributions and vested in
Partnerships contributions over five years. The Partnership made contributions
in the amount of $33,456, $16,480 and $29,782 for the years ended December 31,
1994, 1995 and 1996 respectively. Such amounts are included in facility
operating expense in the combined statements of operations.
7. RELATED PARTY TRANSACTIONS
In connection with the organization of the Partnerships and the development
and financing of the Properties, PGI and an affiliate are entitled to payments
and fees for various services provided. Such amounts incurred for the years
ended December 31, 1994, 1995, and 1996 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
<S> <C> <C> <C>
Property management fee (a)....................... $743,977 $1,071,195 $929,831
Administration fee (b)............................ 291,247 372,000 372,000
Incentive leasing fee (c)......................... 500,000 -- --
</TABLE>
- ---------------------
(a) PGI is entitled to a property management fee equal to 5% of total
operating income (3% for The Hallmark effective January 1, 1996).
(b) PGI is entitled to an annual administration fee of $186,000 for providing
administrative services to The Devonshire and The Heritage. The fee is
included in property management and other fees-affiliate expense in the
combined statements of operations.
(c) PGI was entitled to an incentive leasing fee from The Hallmark based upon
achieving certain leasing levels, as defined. The fee is included in
property management and other fees-affiliate expense in the combined
statements of operation.
Amounts due to affiliates are for amounts due for advances made by
affiliates. Amounts due from affiliates are for advances made by the
Partnerships to affiliates. Amounts due from and due to affiliates are non-
interest bearing and payable upon demand.
Average balances of amounts due from and due to affiliates for the years
ended December 31, 1994, 1995 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995 1996
<S> <C> <C> <C>
Due from affiliates.................................. $ 46,300 $ 59,500 $ 97,400
Due to affiliates.................................... 142,400 239,100 483,300
</TABLE>
In 1996, The Devonshire and The Heritage made advances to PGI in the amount
of $4,531,627 which PGI used as an escrow deposit to acquire The Third Party's
interest in the two partnerships pursuant to the formation transactions more
fully described elsewhere in this Registration Statement and Prospectus. The
advances are non-interest bearing and have been reflected as an increase in
partners' deficit in the combined financial statements.
F-25
<PAGE>
ORIGINAL FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In conjunction with the sale of the Hallmark (see Note 1) BLC leased The
Hallmark from the third party and then subleased (Sublease Agreement) the
property to Hallmark Partners, L.P. The Sublease Agreement has an initial term
of 23 years with options to extend the term for two consecutive 25-year terms,
and requires monthly lease payments ranging from $490,834 to $568,334 over the
life of the sublease. Future minimum annual rental expense to be recorded over
the life of the Sublease Agreement is $5,933,301 (Gross expense of $6,739,136
less amortization of deferred gain on sale of property of $805,835). During
1996, the Partnerships recorded $74,875 of rental expense (included in
facility operating expense in the combined statements of operations) related
to the Sublease Agreement.
8. FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash, cash-restricted and variable rate and fixed rate mortgage notes
payable are reflected in the accompanying combined balance sheets at amounts
considered by management to reasonably approximate fair value. Management
estimates the fair value of its long-term fixed rate notes payable generally
using discounted cash flow analysis based upon the Original Facilities'
current borrowing rate for debt with similar maturities.
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of
Brookdale Living Communities, Inc.
We have audited the accompanying combined balance sheets of the Activelife
Facilities as of December 31, 1995 and 1996 and the related combined
statements of operations, changes in partners' deficit and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Activelife Facilities' management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Activelife
Facilities at December 31, 1995 and 1996, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1997
F-27
<PAGE>
ACTIVELIFE FACILITIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 2,055,227 $10,502,184
Cash--restricted.................................... 792,223 758,423
Accounts receivable................................. 82,208 103,054
----------- -----------
Total current assets................................ 2,929,658 11,363,661
Real estate, at cost:
Land................................................ 1,731,721 1,359,721
Buildings and improvements.......................... 33,169,840 27,082,944
Furniture and equipment............................. 1,190,196 1,044,651
----------- -----------
36,091,757 29,487,316
Accumulated depreciation............................ (6,773,607) (6,991,344)
----------- -----------
29,318,150 22,495,972
Deferred financing fees, net of accumulated
amortization of $488,898 and $316,671at December
31, 1995 and 1996, respectively.................... 908,863 691,663
Other............................................... 185,457 174,843
----------- -----------
Total assets........................................ $33,342,128 $34,726,139
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Mortgage notes payable.............................. $ 323,283 $ 263,328
Accrued interest payable............................ 234,307 195,364
Accrued real estate taxes........................... 655,859 668,974
Accounts payable and accrued expenses............... 439,333 340,047
Tenant security deposits............................ 780,676 751,664
Due to affiliates................................... 1,852,587 2,092,241
Other............................................... 39,074 2,462
----------- -----------
Total current liabilities........................... 4,325,119 4,314,080
Mortgage notes payable.............................. 36,022,624 30,779,811
----------- -----------
Total liabilities................................... 40,347,743 35,093,891
Partners' deficit................................... (7,005,615) (367,752)
----------- -----------
Total liabilities and partners' deficit............. $33,342,128 $34,726,139
=========== ===========
</TABLE>
See notes to combined financial statements.
F-28
<PAGE>
ACTIVELIFE FACILITIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
<S> <C> <C> <C>
REVENUE
Resident fees............................. $11,495,016 $12,336,745 $12,717,784
EXPENSES
Facility operating........................ 6,505,485 6,867,193 6,937,729
Real estate taxes......................... 654,188 689,255 763,318
Depreciation and amortization............. 994,336 1,010,252 1,026,170
Interest.................................. 2,994,039 2,995,823 2,986,414
Property management fee--affiliate........ 701,054 755,130 784,620
----------- ----------- -----------
Total expenses............................ 11,849,102 12,317,653 12,498,251
----------- ----------- -----------
Income (loss) before gain on sale of
property and extraordinary item.......... (354,086) 19,092 219,533
Gain on sale of property.................. -- -- 7,416,330
----------- ----------- -----------
Income (loss) before extraordinary item... (354,086) 19,092 7,635,863
Extraordinary item--loss on extinguishment
of debt.................................. (304,407) -- --
----------- ----------- -----------
Net income (loss)......................... $ (658,493) $ 19,092 $ 7,635,863
=========== =========== ===========
</TABLE>
See notes to combined financial statements.
F-29
<PAGE>
ACTIVELIFE FACILITIES
COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
SPRINGS OF EAST
MESA EDINA PARK PLAZA HAWTHORN LAKES
-------------------- ---------------------- ---------------------
TOTAL TOTAL
GENERAL LIMITED GENERAL LIMITED GENERAL LIMITED GENERAL LIMITED
PARTNERS PARTNERS PARTNERS PARTNERS PARTNERS PARTNERS PARTNERS PARTNERS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Partners' capital
(deficit) at
January 1, 1994.. $ 873 $1,198,912 $ (91,186) $(4,934,450) $(69,314) $(1,461,561) $(159,627) $(5,197,099) $(5,356,726)
Contributions... -- 500,000 -- -- -- -- -- 500,000 500,000
Distributions... (16,414) (543,297) -- -- (2,064) (204,416) (18,478) (747,713) (766,191)
Net income
(loss)......... (412) (40,771) (6,270) (620,688) 96 9,552 (6,586) (651,907) (658,493)
-------- ---------- --------- ----------- -------- ----------- --------- ----------- -----------
Partners' capital
(deficit) at
December 31,
1994............. (15,953) 1,114,844 (97,456) (5,555,138) (71,282) (1,656,425) (184,691) (6,096,719) (6,281,410)
Distributions... (56,572) (312,000) -- -- (3,748) (370,977) (60,320) (682,977) (743,297)
Net income
(loss)......... 2,997 296,724 (4,974) (492,340) 2,164 214,521 187 18,905 19,092
-------- ---------- --------- ----------- -------- ----------- --------- ----------- -----------
Partners' capital
(deficit) at
December 31,
1995............. (69,528) 1,099,568 (102,430) (6,047,478) (72,866) (1,812,881) (244,824) (6,760,791) (7,005,615)
Distributions... (38,400) (269,600) -- -- (6,900) (683,100) (45,300) (952,700) (998,000)
Net income
(loss)......... 76,730 7,596,299 (4,428) (438,415) 4,057 401,620 76,359 7,559,504 7,635,863
-------- ---------- --------- ----------- -------- ----------- --------- ----------- -----------
Partners' capital
(deficit) at
December 31,
1996............. $(31,198) $8,426,267 $(106,858) $(6,485,893) $(75,709) $(2,094,361) $(213,765) $ (153,987) $ (367,752)
======== ========== ========= =========== ======== =========== ========= =========== ===========
</TABLE>
See notes to combined financial statements.
F-30
<PAGE>
ACTIVELIFE FACILITIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................ $ (658,493) $ 19,092 $ 7,635,863
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization.......... 994,336 1,010,252 1,026,170
Interest expense added to mortgage note
payable
principal............................. 151,524 172,774 193,803
Gain on sale of property............... -- -- (7,416,330)
Extraordinary item..................... 304,407 -- --
Changes in operating assets and
liabilities:
(Increase) decrease in cash-
restricted.......................... (64,613) (7,157) 33,800
(Increase) decrease in accounts
receivable.......................... (73,962) 41,197 (20,846)
(Increase) decrease in other assets.. (7,177) 31,203 10,614
Increase (decrease) in accrued
interest payable.................... 794 (2,036) (38,943)
Increase in accrued real estate
taxes............................... 2,459 19,066 13,115
Decrease in accounts payable and
accrued expenses.................... (117,733) (43,729) (99,286)
Increase (decrease) in tenant
security deposits................... 32,423 (16,280) (29,012)
Increase in due to affiliate......... 124,320 275,595 239,654
Decrease in other liabilities........ (36,317) (22,896) (36,612)
---------- ---------- -----------
Net cash provided by operating
activities.............................. 651,968 1,477,081 1,511,990
INVESTING ACTIVITIES
Proceeds from sale of property........... -- -- 13,778,137
Additions to real estate................. (176,055) (169,379) (348,599)
---------- ---------- -----------
Net Cash provided by (used in) investing
activities.............................. (176,055) (169,379) 13,429,538
FINANCING ACTIVITIES
Repayment of mortgage notes payable...... (5,514,747) (297,956) (5,666,571)
Mortgage note payable prepayment fee..... (200,000) -- --
Proceeds from mortgage note payable...... 5,670,000 170,000 170,000
Increase in deferred financing costs..... (203,332) -- --
Contributions from partners.............. 500,000 -- --
Distributions to partners................ (766,191) (743,297) (998,000)
---------- ---------- -----------
Net cash used in financing activities.... (514,270) (871,253) (6,494,571)
---------- ---------- -----------
Net (decrease) increase in cash.......... (38,357) 436,449 8,446,957
Cash and cash equivalents at beginning of
year.................................... 1,657,135 1,618,778 2,055,227
---------- ---------- -----------
Cash and cash equivalents at end of year. $1,618,778 $2,055,227 $10,502,184
========== ========== ===========
</TABLE>
See notes to combined financial statements.
F-31
<PAGE>
ACTIVELIFE FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Activelife Facilities ("Activelife") represents a combination of three
partnerships described below ("Partnerships") that own, operate, and manage
assisted living facilities ("Properties"). The Properties are under the common
management of Activelife Management Corporation ("AMC"). Certain principals of
AMC also have ownership interests in the Partnerships. Pursuant to the
formation transactions more fully described elsewhere in this Registration
Statement and Prospectus, the Activelife Facilities will be operated (owned or
leased) by a newly formed corporation Brookdale Living Communities, Inc. (the
"Company"), whose shares are being registered pursuant to this Registration
Statement.
The Partnerships and Properties owned and operated by AMC are as follows:
<TABLE>
<CAPTION>
PARTNERSHIP PROPERTY LOCATION
<S> <C> <C>
East Mesa Senior Living Limited Part-
nership Springs of East Mesa Mesa, Arizona
Edina Park Place Associates Limited
Partnership Edina Park Plaza Edina, Minnesota
Hawthorn Lakes Associates Limited Part-
nership Hawthorn Lakes Vernon Hills, Illinois
</TABLE>
The Partnerships maintain their books and records on the basis of accounting
used for federal income tax purposes. The differences between federal income
tax basis and generally accepted accounting principles affecting the
Partnerships relate to differences in the basis of real estate assets and the
use of accelerated depreciation methods with shorter depreciable lives used
for federal income tax basis, resulting in the net book value of real estate
assets at December 31, 1996 being approximately $15.1 million lower for
federal income tax basis.
On December 27, 1996 the Springs of East Mesa was sold by East Mesa Senior
Living Limited Partnership to a third party for net proceeds of $13.8 million,
resulting in a gain of $7.4 million net of the writeoff of deferred financing
fees of $170,650. A portion of the proceeds were used to repay the mortgage
note payable on the Springs of East Mesa.
All significant intercompany accounts and transactions have been eliminated
in combination.
RESIDENT FEES REVENUE
Resident fees revenue is recorded when services are rendered and consist of
fees for basic housing, support services and fees associated with additional
services such as personalized health and assisted living care.
REAL ESTATE
At December 31, 1995, the Properties were carried at cost which was not in
excess of net realizable value as determined by management. In March 1995, the
Financial Accounting Standards Board issued Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of,"
under which the Partnerships would be required to recognize impairment losses
for the Properties when indicators of impairment are present and the
Properties' expected undiscounted cash flows are not sufficient to recover the
Properties' carrying value. The Partnerships adopted Statement No. 121
effective January 1, 1996 with no impact on the accompanying combined
financial statements.
Expenditures for ordinary maintenance and repairs are expensed to operations
as incurred. Significant renovations and improvements which improve and/or
extend the useful life of the asset are capitalized and depreciated over their
estimated useful life.
Depreciation is calculated using the straight-line method over the estimated
useful lives of assets, which are as follows:
<TABLE>
<S> <C>
Buildings...................................................... 40 years
Building improvements and furniture and equipment.............. 5-10 years
</TABLE>
F-32
<PAGE>
ACTIVELIFE FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
CASH AND CASH EQUIVALENTS
The Partnerships consider all cash accounts and money market funds and
certificates of deposit with an original maturity of three months or less when
purchased to be cash and cash equivalents.
DEFERRED FINANCING FEES
Deferred financing fees are amortized using the straight-line method over
the term of the mortgage notes payable.
INCOME TAXES
The Partnerships pay no income taxes and the income or loss from the
Partnerships is includable on the respective federal income tax returns of the
partners.
USE OF ESTIMATES
The preparation of the combined financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. CASH--RESTRICTED
In accordance with mortgage note payable agreements described in Note 3, the
Partnerships are required to maintain escrow deposits for real estate taxes,
repairs, and other operating activities.
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
<S> <C> <C>
MORTGAGE NOTES PAYABLE
Fixed rate mortgage notes payable issued by local
municipalities (A) (B)................................ $28,672,794 $28,430,113
Mortgage note payable, financial institution, interest
at 8.25% per annum with monthly principal and interest
assuming a 25 year amortization period, with a lump-
sum payment at maturity in March 2004. (A) (C)........ 5,423,890 --
Interest reduction loan provided by Housing and
Redevelopment Authority of Edina, Minnesota (HRA) (A)
(D)................................................... 2,249,223 2,613,026
----------- -----------
$36,345,907 $31,043,139
=========== ===========
</TABLE>
- ---------------------
(A) Mortgage notes payable are collateralized by the Partnerships' real estate
assets.
(B) The notes bear interest at 8% ($15,264,543 and $15,105,842 at December 31,
1995 and 1996, respectively) and 8.525% ($13,408,251 and $13,324,270 at
December 31, 1995 and 1996, respectively, with monthly principal and
interest payments through maturity in 2027.
(C) On December 27, 1996 the mortgage note was repaid from proceeds from the
sale of the Springs of East Mesa. In February 1994, the mortgage note
payable was refinanced resulting in an extraordinary loss on
extinguishment of debt of $304,407.
(D) The Elderly Housing Interest Reduction Agreement (arising out of tax
increment financing) between the HRA and the Partnership provides that the
HRA will make loans upon request of the Partnership in monthly
installments to the Partnership totaling $170,000 each year for a period
of 20 years, commencing in 1987, for the payment of interest on the
mortgage note payable issued by HRA. The loan bears interest at the
greater of 12-1/2% simple interest per annum or the statutory minimum, as
defined, and shall be payable
F-33
<PAGE>
ACTIVELIFE FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
with interest at maturity. Included in the balance is accrued interest of
$789,112 and $982,915 at December 31, 1995 and 1996, respectively. Advances
plus all unpaid interest are payable in one installment due 20 years after
the anniversary date of the last payment request on the loan.
The aggregate amount of all principal payments for the mortgage notes payable
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C>
1997......................... $ 263,328
1998......................... 285,904
1999......................... 309,959
2000......................... 336,211
2001......................... 364,696
Thereafter................... 29,483,041
-----------
$31,043,139
===========
</TABLE>
Total interest paid on the mortgage notes payable was $2,841,721,
$2,825,085, and $2,831,554 for the years ended December 31, 1994, 1995, and
1996, respectively.
4. RELATED PARTY TRANSACTIONS
In connection with the organization of the Partnerships and the development
and financing of the Properties, AMC is entitled to payments and fees for
various services provided. Such amounts incurred for the years ended December
31, 1994, 1995, and 1996 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1994 1995 1996
<S> <C> <C> <C>
Property management fees (a).................. $701,054 $755,130 $784,620
Development fees (b).......................... 175,405 224,142 135,249
Sales commissions(c).......................... -- -- 727,500
</TABLE>
- --------------------
(a) AMC is entitled to the following management fees:
.Base fees range from 3% to 4% of gross revenue or the greater of 5% of
monthly gross revenue or $5000.
. Incentive fees range from 1% to 3% of gross revenue and 29% of cash flow
from operations, as defined. The payment of incentive fees is subject to
available cash and distributions to partners equal to certain levels of
return on capital, as defined.
(b) AMC and affiliated entities are entitled to fees for services rendered in
connection with the identification, financings, computer usage and leasing
of the Properties.
(c) As part of the sale of the Springs of East Mesa on December 27, 1996, the
general partner of the East Mesa Senior Living Limited Partnership
received a sales commission equal to 5% of sales price which was included
in calculating the gain on sale of property. The payment of the sales
commission was consented to by the limited partners of this partnership.
Amounts due to affiliates are for amounts due for the above fees and
advances made by affiliates and are non-interest bearing and payable upon
demand from available cash.
5. FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, cash-restricted and fixed rate mortgage notes
payable are reflected in the accompanying combined balance sheets at amounts
considered by management to reasonably approximate fair value. Management
estimates the fair value of its long-term fixed rate notes payable generally
using discounted cash flow analysis based upon AMC's current borrowing rate
for debt with similar maturities.
F-34
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Brookdale Living Communities, Inc.
We have audited the accompanying balance sheet of the Gables at Brighton
Associates (the "Partnership") as of December 31, 1995 and the related
statements of income, changes in partners' capital and cash flows for each of
the two years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Gables at Brighton
Associates at December 31, 1995, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1997
F-35
<PAGE>
GABLES AT BRIGHTON ASSOCIATES
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
<S> <C> <C>
ASSETS
Current assets:
Cash.......................................................... $ 562,453
Other......................................................... 99,692
-----------
Total current assets.......................................... 662,145
Real estate, at cost:
Land.......................................................... 702,666
Building and improvements..................................... 6,873,764
Furniture and equipment....................................... 399,591
-----------
7,976,021
Accumulated depreciation...................................... (2,188,848)
-----------
5,787,173
-----------
Total assets.................................................. $ 6,449,318
===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses......................... $ 44,840
Tenant security deposits...................................... 226,254
Due to affiliate.............................................. 8,165
Other......................................................... 123,518
-----------
Total current liabilities..................................... 402,777
Partners' capital............................................. 6,046,541
-----------
Total liabilities and partners' capital....................... $ 6,449,318
===========
</TABLE>
See notes to financial statements.
F-36
<PAGE>
GABLES AT BRIGHTON ASSOCIATES
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1995 1996
<S> <C> <C>
REVENUE
Resident fees............................................ $2,638,072 $2,742,751
EXPENSES
Facility operating....................................... 1,485,766 1,490,914
Real estate taxes........................................ 227,562 223,291
Depreciation............................................. 292,334 295,025
Property management fee--affiliate....................... 107,975 115,003
---------- ----------
Total expenses........................................... 2,113,637 2,124,233
---------- ----------
Income before gain on sale of property................... 524,435 618,518
Gain on sale of property................................. -- 4,856,981
---------- ----------
Net income............................................... $ 524,435 $5,475,499
========== ==========
</TABLE>
See notes to financial statements.
F-37
<PAGE>
GABLES AT BRIGHTON ASSOCIATES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<S> <C>
Partners' capital at January 1, 1995 .............................. $ 6,247,080
Distributions.................................................... (724,974)
Net income....................................................... 524,435
-----------
Partners' capital at December 31, 1995 ............................ 6,046,541
Distributions.................................................... (11,522,040)
Net income....................................................... 5,475,499
-----------
Partners' capital at December 31, 1996............................. $ --
===========
</TABLE>
See notes to financial statements.
F-38
<PAGE>
GABLES AT BRIGHTON ASSOCIATES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1995 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................ $ 524,435 $ 5,475,499
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 292,334 295,025
Gain on sale of property............................ -- (4,856,981)
Changes in operating assets and liabilities:
Decrease in other assets.......................... 486 99,692
Decrease in accounts payable and accrued expenses. (9,979) (44,840)
Increase in tenant security deposits.............. 12,175 (226,254)
Decrease in due to affiliate...................... (1,748) (8,165)
Increase (decrease) in other liabilities.......... 83,111 (123,518)
--------- -----------
Net cash provided by operating activities............. 900,814 610,458
INVESTING ACTIVITIES
Proceeds from sale of property........................ -- 10,418,887
Additions to real estate.............................. (54,059) (69,758)
--------- -----------
Net cash (used in) provided by investing activities... (54,059) 10,349,129
--------- -----------
FINANCING ACTIVITIES
Distributions to partners............................. (724,974) (11,522,040)
--------- -----------
Cash used in financing activities..................... (724,974) (11,522,040)
--------- -----------
Net increase (decrease) in cash....................... 121,781 (562,453)
Cash at beginning of year............................. 440,672 562,453
--------- -----------
Cash at end of year................................... $ 562,453 $ --
========= ===========
</TABLE>
See notes to financial statements.
F-39
<PAGE>
GABLES AT BRIGHTON ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Gables at Brighton Associates (the "Partnership") is a general partnership
that owned, operated, and managed an assisted living facility known as The
Gables at Brighton ("Property") located in Rochester, New York. On December
27, 1996 the Property was sold by the Partnership to a third party for net
proceeds of $10.4 million, resulting in a gain of $4.9 million. As of December
31, 1996 the proceeds from the sale have been distributed to the partners and
the Partnership has no assets or liabilities at that date.
RESIDENT FEE REVENUE
Resident fee revenue was recorded when services were rendered and consisted
of fees for basic housing, support services and fees associated with
additional services such as personalized health and assisted living care.
REAL ESTATE
Expenditures for ordinary maintenance and repairs were expensed to
operations as incurred. Significant renovations and improvements which improve
and/or extend the useful life of the asset were capitalized and depreciated
over their estimated useful life. Interest incurred during construction
periods was capitalized as a component of the building cost.
Depreciation was calculated using the straight-line method over the
estimated useful lives of assets, which were as follows:
<TABLE>
<S> <C>
Building and improvements.. 20-27.5 years
Furniture and equipment.... 5-7 years
</TABLE>
INCOME TAXES
The Partnership pays no income taxes and the income or loss from the
Partnership is includable on the respective federal income tax returns of the
partners.
USE OF ESTIMATES
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. RELATED PARTY TRANSACTIONS
In connection with the operation of the Property, an affiliate of one of the
partners was entitled to management fees equal to 2.5% of resident fees and 5%
of cash flows, as defined. Amounts due to affiliate are for amounts due for
the above fees and are non-interest bearing and payable upon demand.
F-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of
Brookdale Living Communities, Inc.
We have audited the accompanying combined balance sheets of the Park Place
Facilities as of December 31, 1995 and 1996 and the related combined
statements of operations, changes in partners' capital/owners' equity and cash
flows for each of the two years in the period ended December 31, 1996. These
financial statements are the responsibility of the Park Place Facilities'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Park Place
Facilities at December 31, 1995 and 1996, and the combined results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1997
F-41
<PAGE>
PARK PLACE FACILITIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 536,798 $ 269,913
Cash--restricted...................................... 46,976 50,594
---------- -----------
Total current assets.................................. 583,774 320,507
Real estate, at cost:
Land.................................................. 285,168 285,168
Buildings and improvements............................ 4,944,247 9,271,066
Furniture and equipment............................... 500,058 1,176,323
Construction-in-progress.............................. 2,784,825 --
---------- -----------
8,514,298 10,732,557
Accumulated depreciation.............................. (871,146) (1,344,130)
---------- -----------
7,643,152 9,388,427
Deferred financing fees, net of accumulated
amortization of $13,548 at
December 31, 1996.................................... -- 134,250
Other................................................. 4,017 197,885
---------- -----------
Total assets.......................................... $8,230,943 $10,041,069
========== ===========
LIABILITIES AND PARTNERS' CAPITAL/OWNERS' EQUITY
Current liabilities:
Mortgage notes payable................................ $ 242,904 $ 4,883,439
Accounts payable and accrued expenses................. 59,465 188,614
Tenant security deposits.............................. 21,600 36,500
---------- -----------
Total current liabilities............................. 323,969 5,108,553
Mortgage notes payable................................ 5,489,411 3,286,888
---------- -----------
Total liabilities..................................... 5,813,380 8,395,441
Partners' capital/owners' equity...................... 2,417,563 1,645,628
---------- -----------
Total liabilities and partners' capital/owners'
equity............................................... $8,230,943 $10,041,069
========== ===========
</TABLE>
See notes to combined financial statements.
F-42
<PAGE>
PARK PLACE FACILITIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1996
<S> <C> <C>
REVENUE
Resident fees.......................................... $1,130,722 $2,200,534
EXPENSES
Facility operating..................................... 593,593 1,494,178
Real estate taxes...................................... 61,675 67,628
Depreciation and amortization.......................... 239,405 486,532
Interest............................................... 193,303 477,520
Property management fee--affiliate..................... 55,688 131,047
---------- ----------
Total expenses......................................... 1,143,664 2,656,905
---------- ----------
Net loss............................................... $ (12,942) $ (456,371)
========== ==========
</TABLE>
See notes to combined financial statements.
F-43
<PAGE>
PARK PLACE FACILITIES
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL/OWNERS' EQUITY
<TABLE>
<CAPTION>
PARK PLACE
GENERAL PARTNERSHIP PARK PLACE II, LLC TOTAL
------------------- ------------------ ----------
<S> <C> <C> <C>
Partners'
capital/owners'equity at
January 1, 1995............ $805,505 $ -- $ 805,505
Contributions............. -- 1,650,000 1,650,000
Distributions............. (25,000) -- (25,000)
Net income (loss)......... (23,506) 10,564 (12,942)
-------- ---------- ----------
Partners'
capital/owners'equity at
December 31, 1995.......... 756,999 1,660,564 2,417,563
Distributions............. (25,000) (290,564) (315,564)
Net income (loss)......... 95,958 (552,329) (456,371)
-------- ---------- ----------
Partners'
capital/owners'equity at
December 31, 1996.......... $827,957 $ 817,671 $1,645,628
======== ========== ==========
</TABLE>
See notes to combined financial statements.
F-44
<PAGE>
PARK PLACE FACILITIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................ $ (12,942) $ (456,371)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 239,405 486,532
Changes in operating assets and liabilities:
Increase in cash-restricted..................... (19,528) (3,618)
Increase in other assets........................ (1,640) (193,868)
Increase in accounts payable and accrued
expenses....................................... 49,107 129,149
Increase in tenant security deposits............ 600 14,900
----------- -----------
Net cash provided by (used in) operating activities. 255,002 (23,276)
INVESTING ACTIVITIES
Additions to real estate............................ (2,839,186) (2,218,259)
----------- -----------
Cash used in investing activities................... (2,839,186) (2,218,259)
FINANCING ACTIVITIES
Repayment of mortgage notes payable................. (381,091) (242,904)
Proceeds from mortgage note payable................. 1,771,648 2,680,916
Increase in deferred financing costs................ -- (147,798)
Contributions from partners......................... 1,650,000 --
Distributions to partners........................... (25,000) (315,564)
----------- -----------
Net cash provided by financing activities........... 3,015,557 1,974,650
----------- -----------
Net increase (decrease) in cash..................... 431,373 (266,885)
Cash and cash equivalents at beginning of year...... 105,425 536,798
----------- -----------
Cash and cash equivalents at end of year............ $ 536,798 $ 269,913
=========== ===========
</TABLE>
See notes to combined financial statements.
F-45
<PAGE>
PARK PLACE FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Park Place Facilities ("Park Place") represents a combination of a
general partnership and a limited liability corporation described below
("Ownership Entities") that own, operate, and manage assisted living
facilities ("Properties"). The Properties are under the common management of
Senior Living Management Services ("SLM"). A principal of SLM also has
ownership interests in the Ownership Entities. Pursuant to the formation
transactions more fully described elsewhere in this Registration Statement and
Prospectus, the Park Place Facilities will be owned and operated by a newly
formed corporation Brookdale Living Communities, Inc. (the "Company"), whose
shares are being registered pursuant to this Registration Statement.
The Ownership Entities and Properties owned and operated by SLM are as
follows:
<TABLE>
<CAPTION>
PARTNERSHIP PROPERTY LOCATION
<S> <C> <C>
Park Place General Partnership Park Place Phase I Spokane, Washington
Park Place II, LLC Park Place Phase II Spokane, Washington
</TABLE>
The combined financial statements include the operations of Park Place Phase
I from January 1, 1995 and Park Place Phase II from February 1996 (facility
commenced operations--special care facility in February 1996 and assisted
living facility in May 1996). All significant intercompany accounts and
transactions have been eliminated in combination.
RESIDENT FEES REVENUE
Resident fees revenue is recorded when services are rendered and consist of
fees for basic housing, support services and fees associated with additional
services such as personalized health and assisted living care.
REAL ESTATE
At December 31, 1995, the Properties were carried at cost which was not in
excess of net realizable value as determined by management. In March 1995, the
Financial Accounting Standards Board issued Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of,"
under which the Partnerships would be required to recognize impairment losses
for the Properties when indicators of impairment are present and the
Properties' expected undiscounted cash flows are not sufficient to recover the
Properties' carrying value. The Partnerships adopted Statement No. 121
effective January 1, 1996 with no impact on the accompanying combined
financial statements.
Expenditures for ordinary maintenance and repairs are expensed to operations
as incurred. Significant renovations and improvements which improve and/or
extend the useful life of the asset are capitalized and depreciated over their
estimated useful life. Interest and other direct costs incurred during
construction periods are capitalized as a component of building cost.
Depreciation is calculated using straight-line and accelerated methods over
the estimated useful lives of assets, which are as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 27.5-39 years
Furniture and equipment..................................... 5-7 years
</TABLE>
CASH AND CASH EQUIVALENTS
The Ownership Entities consider all cash accounts and money market funds and
certificates of deposit with an original maturity of three months or less when
purchased to be cash and cash equivalents.
F-46
<PAGE>
PARK PLACE FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DEFERRED FINANCING FEES
Deferred financing fees are amortized using the straight-line method over
the term of the mortgage notes payable.
INCOME TAXES
The Ownership Entities pay no income taxes and the income or loss from the
Ownership Entities is includable on the respective federal income tax returns
of the partners/members.
USE OF ESTIMATES
The preparation of the combined financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. CASH--RESTRICTED
In accordance with mortgage note payable agreements described in Note 3, the
Ownership Entities are required to maintain escrow deposits for real estate
taxes, repairs, and other operating activities.
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
<S> <C> <C>
MORTGAGE NOTES PAYABLE
Fixed rate mortgage notes payable, financial
institution, interest at 3.25% with monthly principal
and interest payments through maturity in 2012. (A)... $3,513,852 $3,365,758
Mortgage note payable, financial institution, interest
at prime plus 1% per annum payable monthly, with a
lump-sum payment at maturity in May, 1997. (A)........ 1,771,648 4,452,564
Notes payable various individuals, are unsecured and
bear interest at prime plus 1% per annum with monthly
principal and interest payments through maturities in
1997 through 1999..................................... 446,815 352,005
---------- ----------
$5,732,315 $8,170,327
========== ==========
</TABLE>
- ---------------------
(A) Mortgage notes payable are collateralized by the Ownership Entities real
estate assets.
The aggregate amount of all principal payments for the mortgage notes payable
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C>
1997.......................... $4,883,439
1998.......................... 204,409
1999.......................... 248,425
2000.......................... 184,203
2001.......................... 190,280
Thereafter.................... 2,459,571
----------
$8,170,327
==========
</TABLE>
Total interest incurred and paid on the mortgage notes and other notes
payable was $193,303 and $510,813 for the years ended December 31, 1995, and
1996, respectively, of which $33,293 was capitalized in 1996.
F-47
<PAGE>
PARK PLACE FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. RELATED PARTY TRANSACTIONS
In connection with the organization of the Ownership Entities and the
development and financing of the Properties, SLM and certain ownership members
are entitled to payments and fees for various services provided. Such amounts
incurred for the years ended December 31, 1995, and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1995 1996
<S> <C> <C>
Property management fees (a)..................... $ 55,688 $ 131,047
Development fees(b).............................. 550,000 --
</TABLE>
- ---------------------
(a) SLM is entitled to the following management fees:
.Base fees range from the greater of 5% of monthly gross revenue or $5,000
up to 95% occupancy.
. Incentive fees are 12% of incremental gross revenue, as defined at
occupancy over 95%.
(b) Certain ownership members of the Park Place II, LLC received development
fees of $550,000 related to the development and financing of Park Place
Phase II. These fees were capitalized as a component of real estate costs.
5. FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, cash-restricted, fixed and variable rate mortgage
notes payable and other variable rate notes payable are reflected in the
accompanying combined balance sheets at amounts considered by management to
reasonably approximate fair value. Management estimates the fair value of its
long-term fixed rate notes payable generally using discounted cash flow
analysis based upon SLM's current borrowing rate for debt with similar
maturities.
F-48
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Brookdale Living Communities, Inc.
We have audited the accompanying consolidated balance sheet of BLC Property,
Inc. and subsidiaries, a Delaware corporation, as of December 31, 1996 and the
related consolidated statements of operations, stockholder's equity and cash
flows for the period from December 12, 1996 (inception) to December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit of the financial statements
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BLC Property,
Inc. and subsidiaries at December 31, 1996, and the consolidated results of
their operations and their cash flows for the period from December 12, 1996
(inception) to December 31, 1996 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1997
F-49
<PAGE>
BLC PROPERTY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash............................................................... $ 185,742
Accounts receivable................................................ 21,696
Prepaid rent and other............................................. 760,185
----------
Total current assets............................................... 967,623
Deferred costs..................................................... 231,722
Other.............................................................. 6,317
----------
Total assets....................................................... $1,205,662
==========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C>
Current liabilities:
Prepaid sublease rent-affiliate.................................... $ 490,834
Prepaid tenant rent................................................ 124,889
Accrued real estate taxes.......................................... 34,958
Accounts payable and accrued expenses.............................. 126,994
Tenant security deposits........................................... 306,531
Due to affiliate................................................... 117,258
Other.............................................................. 3,879
----------
Total current liabilities.......................................... 1,205,343
Stockholder's equity:
Common Stock, $.01 par value, 100 shares authorized, issued and
outstanding....................................................... 1
Additional paid-in capital......................................... 999
Retained deficit................................................... (681)
----------
Total stockholder's equity......................................... 319
----------
Total liabilities and stockholder's equity......................... $1,205,662
==========
</TABLE>
See notes to consolidated financial statements.
F-50
<PAGE>
BLC PROPERTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM DECEMBER 12, 1996 (INCEPTION)
TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
REVENUE
<S> <C>
Resident fees......................................................... $83,962
EXPENSES
Facility operating.................................................... 50,459
Real estate taxes..................................................... 3,843
Rent.................................................................. 30,795
-------
Total expenses........................................................ 85,097
-------
Loss before income taxes.............................................. (1,135)
Income tax benefit.................................................... 454
-------
Net loss.............................................................. $ (681)
=======
</TABLE>
See notes to consolidated financial statements.
F-51
<PAGE>
BLC PROPERTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
PERIOD FROM DECEMBER 12, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL PAID-IN
CAPITAL
COMMON STOCK ----------------------
------------- PAID-IN NOTE RETAINED
SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS TOTAL
------ ------ ---------- ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common
stock.................. 100 $1 $ 999 $ -- $ -- $1,000
Additional contribution. -- -- 8,543,911 (8,543,911) -- --
Net loss for the period. -- -- -- -- (681) (681)
--- --- ---------- ----------- ----- ------
Balance at December 31,
1996................... 100 $1 $8,544,910 $(8,543,911) $(681) $ 319
=== === ========== =========== ===== ======
</TABLE>
See Notes to consolidated financial statements.
F-52
<PAGE>
BLC PROPERTY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM DECEMBER 12, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss........................................................... $ (681)
Adjustments to reconcile net loss to net cash provided by operating
activities
Increases in operating assets and liabilities:
Accounts receivable............................................ (21,696)
Prepaid rent and other......................................... (760,185)
Deferred costs................................................. (231,722)
Other assets................................................... (6,317)
Prepaid sublease rent-affiliate................................ 490,834
Prepaid tenant rent............................................ 124,889
Accrued real estate taxes...................................... 34,958
Accounts payable and accrued expenses.......................... 126,994
Tenant security deposits....................................... 306,531
Other current liabilities...................................... 3,879
---------
Net cash provided by operating activities.......................... 67,484
FINANCING ACTIVITIES
Proceeds from issuance of common stock........................... 1,000
Increase due to affiliate........................................ 117,258
---------
Cash provided by financing activities.............................. 118,258
---------
Net increase in cash and cash at end of period..................... $ 185,742
=========
</TABLE>
See notes to consolidated financial statements.
F-53
<PAGE>
BLC PROPERTY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION
BLC Property, Inc. (the "Company") was incorporated in Delaware under the
Delaware General Corporation Law on December 12, 1996. The Company was formed
in order to consolidate and expand the senior and assisted living facilities
owned and operated by The Prime Group, Inc. and its affiliates ("PGI").
Pursuant to the formation transactions more fully described elsewhere in this
Registration Statement and Prospectus, the Company will be operated by a newly
formed corporation, Brookdale Living Communities, Inc. ("Brookdale"), whose
shares are being registered pursuant to this Registration Statement.
The Company formed the following wholly owned subsidiaries (collectively--
the Operating Subsidiaries):
Brookdale Living Communities of Illinois, Inc.
Brookdale Living Communities of Arizona, Inc.
Brookdale Living Communities of New York, Inc.
The Company began leasing the following properties (Leased Facilities) on
December 27, 1996 (see Note 4):
<TABLE>
<CAPTION>
PROPERTY PREVIOUS OWNER
-------- --------------
<S> <C>
The Hallmark.................. Hallmark Partners, L.P.
(Original Facilities)
Springs of East Mesa.......... East Mesa Senior Living Limited Partnership
(Activelife Facilities)
The Gables at Brighton........ Gables at Brighton Associates
</TABLE>
The Company has subleased The Hallmark to Hallmark Partners, L.P. (see Note
4). The previous owners and related financial statements are more fully
described elsewhere in this Registration Statement and Prospectus.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements includes the operations of the Company
and the Operating Subsidiaries for the period from December 12, 1996
(inception) to December 31, 1996. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Resident Fee Revenue
Resident fee revenue is recorded when services are rendered and consist of
fees for basic housing, support services and fees associated with additional
services such as personalized health and assisted living care.
Deferred Costs
Deferred leasing costs are amortized using the straight-line method over the
term of the related leases. Deferred organization costs are amortized using
the straight-line method over five years.
Income Taxes
The Company and its wholly owned subsidiaries file federal and certain state
income tax returns on a consolidated basis.
F-54
<PAGE>
BLC PROPERTY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
USE OF ESTIMATES
The preparation of the consolidated financial statements in accordance with
generally accepted accounting principals requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. DEFERRED COST
Deferred costs consist of the following:
<TABLE>
<S> <C>
Deferred leasing......................... $187,243
Deferred organization.................... 44,479
--------
$231,722
========
</TABLE>
No amortization expense was recorded in 1996.
4. LEASES
BLC entered into a lease agreement (Lease Agreement) with Health and
Retirement Properties Trust (HRPT), to lease the Leased Facilities. The Lease
Agreement has an initial term of 23 years with options to extend the term for
two consecutive 25 year terms and requires monthly payments ranging from
$692,709 to $802,084. The Lease Agreement also requires additional rent
beginning in 1999 related to increases in revenue, as defined, generated by
the Leased Facilities. Future minimum annual rental expense to be recorded
over the term of the Lease Agreement is $9,510,877. Included in prepaid rent
and other at December 31, 1996 is $692,709 of prepaid rent related to these
leases. Included in other liabilities at December 31, 1996 is $13,309 for the
effect of straight-lining of rental payments in 1996, net of $9,430 for the
effect of straight-lining sublease rental payments in 1996 described below.
The Lease Agreement provides for various operating covenants including that
the Company maintain a tangible net worth equal to one year's minimum rent.
The Lease Agreement provides that any demand notes receivable from the
Company's stockholder can be included in calculating tangible net worth (see
Note 5).
The Company has subleased The Hallmark to Hallmark Partners, L.P., an
affiliate of PGI, under comparable lease terms with monthly lease payments
ranging from $490,834 to $568,334 over the life of the lease. Future minimum
annual sublease rental income to be recorded over the life of the sublease
agreement is $6,739,136. Included in prepaid sublease rent-affiliate at
December 31, 1996 is $490,834 of prepaid rent from this sublease.
Rent expense in the consolidated statement of operations is recorded net of
sublease income of $74,875 received from the above sublease.
5. NOTE RECEIVABLE--STOCKHOLDER
As described in Note 4 the Company is required to maintain a minimum net
worth equal to one year of minimum rental payments. The Company's stockholder
has provided a capital contribution evidenced by a note. The note bears
interest at prime, per annum, and is due on demand. The balance of the note
receivable will be adjusted as necessary for the Company to maintain the
minimum net worth requirement of the Lease Agreement.
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-55
<PAGE>
BLC PROPERTY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. RELATED PARTY TRANSACTIONS
Amounts due to affiliates are advances made by affiliates that bear interest
at prime rate and are due on the earlier of the closing of Brookdale's initial
public offering or January 1, 1998. Payments of amounts due to affiliates are
subordinated to payments required under the Lease Agreement.
8. EMPLOYEE BENEFIT PLAN
The Company established 401(k) plans for all employees that meet minimum
employment criteria. The plans provide that the participants may defer up to
15% of their eligible compensation on a pre-tax basis subject to certain
maximum amounts. The Company will contribute an additional 25% of the
employee's contribution to the plan, up to $500 per employee per annum.
Employees are always 100% vested in their own contributions and vested in
Company contributions over five years. The Company made no contributions for
the period ended December 31, 1996.
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash and the variable rate note receivable-stockholder are reflected in the
accompanying consolidated balance sheet at amounts considered by management to
reasonably approximate fair value.
F-56
<PAGE>
[PHOTOS]
[The inside back cover page will contain color photographs and captions. The
photographs will consist of an outside view of each of the facilities expected
to be managed by the Company together with a corresponding caption identifying
such facility by name and the city of its location. In addition, the inside
back cover page will contain several photographs of residents in various
settings, in each case without captions.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SO-
LICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR SO-
LICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED
HEREBY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
The Company and the Formation............................................. 13
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Dilution.................................................................. 16
Selected Financial Data................................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 19
Business.................................................................. 25
Management................................................................ 36
Certain Transactions...................................................... 41
Principal Stockholders.................................................... 43
Description of Capital Stock.............................................. 44
Shares Eligible for Future Sale........................................... 47
Underwriting.............................................................. 49
Legal Matters............................................................. 50
Experts................................................................... 50
Additional Information.................................................... 50
Index to Financial Statements............................................. F-1
</TABLE>
------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,000,000 SHARES
LOGO
COMMON STOCK
----------------
PROSPECTUS
----------------
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various costs and expenses in connection
with the issuance and distribution of the securities being registered hereby,
other than underwriting discounts and commissions. The Company will bear all
of such expenses. All amounts are estimated except for the Securities and
Exchange Commission ("SEC") registration fee, the National Association of
Securities Dealers, Inc. ("NASD") filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<S> <C>
SEC registration fee......................................... $ 42,134
NASD filing fee.............................................. 12,719
Nasdaq National Market listing fee........................... *
Blue sky fees and expenses (including attorneys' fees and
expenses)................................................... 30,000
Accounting fees and expenses................................. *
Legal fees and expenses...................................... *
Printing and engraving expenses.............................. *
Transfer agent and registrar's fees.......................... *
-----------
Total.................................................... $3,500,000
===========
</TABLE>
- ---------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of Delaware
("Section 145"), a corporation may indemnify its directors, officers,
employees and agents and its former directors, officers, employees and agents
and those who serve, at the corporation's request, in such capacities with
another enterprise, against expenses (including attorneys' fees), as well as
judgments, fines and settlements in non-derivative lawsuits, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding in which they or any of them were or are made parties or are
threatened to be made parties by reason of their serving or having served in
such capacity. Section 145 provides, however, that such person must have acted
in good faith and in a manner he or she reasonably believed to be in (or not
opposed to) the best interests of the corporation, and, in the case of a
criminal action, such person must have had no reasonable cause to believe his
or her conduct was unlawful. In addition, Section 145 does not permit
indemnification in an action or suit by or in the right of the corporation,
where such person has been adjudged liable to the corporation, unless, and
only to the extent that, a court determines that such person fairly and
reasonably is entitled to indemnity for expenses the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
The Company's Amended and Restated By-laws (the "By-laws") provide for
mandatory indemnification of directors and officers generally to the same
extent authorized by Section 145. Under the By-laws, the Company shall advance
expenses incurred by an officer or director in defending any such action if
the director or officer undertakes to repay such amount if it is determined
that he or she is not entitled to indemnification.
The Company maintains directors' and officers' liability insurance.
The Company also intends to enter into indemnification agreements with each
of the Company's directors and certain of its officers. The indemnification
agreements will require, among other things, that the Company indemnify such
directors and officers to the fullest extent permitted by law, and advance to
such directors and officers all related expenses, subject to reimbursement if
it is subsequently determined that indemnification is not permitted. The
Company also must indemnify and advance all expenses incurred by such
directors and officers seeking to enforce their rights under the
indemnification agreements and cover such directors and officers under the
Company's directors' and officers' liability insurance.
II-1
<PAGE>
The Company's Restated Certificate of Incorporation provides that the
Company's directors will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors, except (a) for any breach of the directors' duty of loyalty
to the Company or its stockholders, (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(c) under Section 174 of the General Corporation Law of the State of Delaware,
which makes directors liable for unlawful payments of dividends or unlawful
stock repurchases or redemptions, or (d) for transactions from which directors
derive improper personal benefit.
The Underwriting Agreement provides for indemnification by the Underwriters
of the directors, officers and controlling persons of the Company against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"), under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth certain information as to all securities sold by
the Company within the last three years that were not registered under the
Securities Act. As to all such transactions, an exemption is claimed under
Section 4(2) of the Securities Act.
On September 4, 1996, the Company issued 100 shares of Common Stock to
Michael W. Reschke for $10.00 per share, or an aggregate purchase price of
$1,000. This Common Stock was purchased solely for investment purposes to
facilitate the organization of the Company. Upon completion of the Offering,
all of the shares so acquired by Mr. Reschke will be redeemed by the Company
for an aggregate redemption price of $1,000.
Simultaneously with the completion of the Offering, the Company also will
issue 2,071,334 shares of Common Stock to PGI in exchange for all of the
capital stock of BLC, its interests in the Heritage and the Devonshire
facilities and the operations relating to its senior and assisted living
division and 328,666 shares of Common Stock to Mark J. Schulte in exchange for
his interests in PGI's senior and assisted living division.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Form of Restated Certificate of Incorporation of the Company
3.2* Form of Amended and Restated By-laws of the Company
4.1* Form of certificate representing Common Stock of the Company
5.1* Opinion of Winston & Strawn regarding legality of shares being reg-
istered
10.1* Form of Formation Agreement by and among the Company, PGI and Mark
J. Schulte
10.2* Form of Space Sharing Agreement by and between the Company and PGI
10.3* Form of Registration Rights Agreement by and between the Company and
PGI
10.4* Form of Voting Agreement by and between the Company and PGI
10.5* Form of Non-Compete Agreement by and among the Company, PGI and
Michael W. Reschke
10.6+ Subscription Agreement dated September 4, 1996 by and between the
Company and Michael W. Reschke
10.7* Form of Employment Agreement by and between the Company and Michael
W. Reschke
10.8* Form of Employment Agreement by and between the Company and Mark J.
Schulte
10.9* Form of Employment Agreement by and between the Company and Darryl
W. Copeland, Jr.
10.10* Form of Employment Agreement by and between the Company and Matthew
F. Whitlock
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
EXHIBIT DESCRIPTION
NUMBER -----------
-------
10.11* Form of Employment Agreement by and between the Company and Mark J.
Iuppenlatz
10.12* Form of Management Agreement by and between Brookdale Living Commu-
nities of Texas, Inc. and The Island on Lake Travis, Ltd.
10.13* Form of Management Agreement by and between Brookdale Living Commu-
nities of Minnesota, Inc. and Kenwood Associates Limited Partnership
10.14* Form of Stock Incentive Plan
10.15* Form of Indemnification Agreement
10.16* Form of Amended and Restated Agreement of Limited Partnership of
Hallmark Partners, L.P.
10.17* Form of Amended and Restated Partnership Agreement of River Oaks
Partners
10.18* Form of Amended and Restated Agreement of Limited Partnership of The
Ponds of Pembroke Limited Partnership
10.19+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and Gables at Brighton Associates
10.20+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and Edina Park Plaza Associates Limited Partnership
10.21+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and East Mesa Senior Living Limited Partnership
10.22+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and Hawthorn Lakes Associates
10.23+ Letter Agreement dated September 17, 1996 by and among PGI, KILICO
Realty Corporation and Kemper Investors Life Insurance Company
10.24 First Amendment dated December 20, 1996 to Letter Agreement dated
September 17, 1996 by and among PGI, KILICO Realty Corporation and
Kemper Investors Life Insurance Company
10.25 Purchase and Sale Agreement dated as of February 20, 1997 by and be-
tween the Company and Park Place General Partnership
10.26 Purchase and Sale Agreement dated as of February 20, 1997 by and be-
tween the Company and Park Place II, L.L.C.
10.27 Master Lease Agreement dated as of December 27, 1996 by and between
HRPT, as landlord, and BLC, as tenant
10.28 Sublease Agreement dated as of December 27, 1996 by and between BLC,
as sublandlord, and Brookdale Living Communities of Arizona, Inc.,
as subtenant
10.29 Sublease Agreement dated as of December 27, 1996 by and between BLC,
as sublandlord, and Brookdale Living Communities of Illinois, Inc.,
as subtenant
10.30 Sub-Sublease Agreement dated as of December 27, 1996 by and between
Brookdale Living Communities of Illinois, Inc., as sub-sublandlord,
and Hallmark Partners L.P., as sub-subtenant
10.31 Sublease Agreement dated as of December 27, 1996 by and between BLC,
as sublandlord, and Brookdale Living Communities of New York, Inc.,
as subtenant
10.32 Real Estate Purchase Agreement dated as of February 24, 1997 by and
between PGI and Firstar DuPage Bank Trust No. 3612 dated December 4,
1989, Firstar DuPage Bank Trust No. 3625 dated February 22, 1990,
West Suburban Bank Trust No. 1975 dated December 13, 1978 and the
direct and indirect beneficiaries thereof
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.33 Real Estate Purchase Agreement dated as of February 14, 1997 by and
between PGI and AC Properties, L.L.C.
10.34 Contract for Sale dated February 21, 1997 by and between PGI and VG
Office Partnership '95, Ltd.
10.35 First Amendment dated as of February 21, 1997 to Contract for Sale
dated February 14, 1997 by and between PGI and VG Office Partnership
'95, Ltd.
21.1* Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2* Consent of Winston & Strawn (to be included in opinion filed as Ex-
hibit 5.1)
23.3.1 Consent of Darryl W. Copeland, Jr.
23.3.2 Consent of Wayne D. Boberg
23.3.3 Consent of Bruce L. Gewertz
23.3.4+ Consent of Darryl W. Hartley-Leonard
23.3.5+ Consent of Daniel J. Hennessy
24.1+ Powers of attorney (included on signature page included in Part II
of the initial filing)
27.1 Financial Data Schedule
</TABLE>
- ---------------------
* To be filed by amendment.
+ Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES.
Financial Statement Schedules have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Company hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO,
STATE OF ILLINOIS, ON THE 4TH DAY OF MARCH, 1997.
Brookdale Living Communities, Inc.
/s/ Mark J. Schulte
By___________________________________
Mark J. Schulte
President and Chief Executive
Officer
----------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON MARCH 4, 1997 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Michael W. Reschke* Chairman of the Board, Director
___________________________________________
Michael W. Reschke
/s/ Mark J. Schulte President and Chief Executive Officer
___________________________________________ (principal executive officer), Director
Mark J. Schulte
Craig G. Walczyk* Vice President--Chief Financial Officer and
___________________________________________ Secretary (principal financial officer)
Craig G. Walczyk
Sheryl A. Wolf* Controller (principal accounting officer)
___________________________________________
Sheryl A. Wolf
</TABLE>
/s/ Mark J. Schulte
*By__________________________________
Mark J. Schulte, Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
1.1* Form of Underwriting Agreement.............................
3.1* Form of Restated Certificate of Incorporation of the Compa-
ny.........................................................
3.2* Form of Amended and Restated By-laws of the Company........
4.1* Form of certificate representing Common Stock of the Compa-
ny.........................................................
5.1* Opinion of Winston & Strawn regarding legality of shares
being registered...........................................
10.1* Form of Formation Agreement by and among the Company, PGI
and Mark J. Schulte........................................
10.2* Form of Space Sharing Agreement by and between the Company
and PGI....................................................
10.3* Form of Registration Rights Agreement by and between the
Company and PGI............................................
10.4* Form of Voting Agreement by and between the Company and
PGI........................................................
10.5* Form of Non-Compete Agreement by and among the Company, PGI
and Michael W. Reschke.....................................
10.6+ Subscription Agreement dated September 4, 1996 by and be-
tween the Company and Michael W. Reschke...................
10.7* Form of Employment Agreement by and between the Company and
Michael W. Reschke.........................................
10.8* Form of Employment Agreement by and between the Company and
Mark J. Schulte............................................
10.9* Form of Employment Agreement by and between the Company and
Darryl W. Copeland, Jr.....................................
10.10* Form of Employment Agreement by and between the Company and
Matthew F. Whitlock........................................
10.11* Form of Employment Agreement by and between the Company and
Mark J. Iuppenlatz.........................................
10.12* Form of Management Agreement by and between Brookdale Liv-
ing Communities of Texas, Inc. and The Island on Lake Trav-
is, Ltd....................................................
10.13* Form of Management Agreement by and between Brookdale Liv-
ing Communities of Minnesota, Inc. and Kenwood Associates
Limited Partnership........................................
10.14* Form of Stock Incentive Plan...............................
10.15* Form of Indemnification Agreement..........................
10.16* Form of Amended and Restated Agreement of Limited Partner-
ship of Hallmark Partners, L.P.............................
10.17* Form of Amended and Restated Partnership Agreement of River
Oaks Partners..............................................
10.18* Form of Amended and Restated Agreement of Limited Partner-
ship of The Ponds of Pembroke Limited Partnership..........
10.19+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and Gables at Brighton Associates..
10.20+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and Edina Park Plaza Associates
Limited Partnership........................................
10.21+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and East Mesa Senior Living Limited
Partnership................................................
10.22+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and Hawthorn Lakes Associates......
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
10.23+ Letter Agreement dated September 17, 1996 by and among PGI,
KILICO Realty Corporation and Kemper Investors Life Insur-
ance Company ..............................................
10.24 First Amendment dated December 20, 1996 to Letter Agreement
dated September 17, 1996 by and among PGI, KILICO Realty
Corporation and Kemper Investors Life Insurance Company....
10.25 Purchase and Sale Agreement dated as of February 20, 1997
by and between the Company and Park Place General Partner-
ship.......................................................
10.26 Purchase and Sale Agreement dated as of February 20, 1997
by and between the Company and Park Place II, L.L.C........
10.27 Master Lease Agreement dated as of December 27, 1996 by and
between HRPT, as landlord, and BLC, as tenant..............
10.28 Sublease Agreement dated as of December 27, 1996 by and be-
tween BLC, as sublandlord, and Brookdale Living Communities
of Arizona, Inc., as subtenant.............................
10.29 Sublease Agreement dated as of December 27, 1996 by and be-
tween BLC, as sublandlord, and Brookdale Living Communities
of Illinois, Inc., as subtenant............................
10.30 Sub-Sublease Agreement dated as of December 27, 1996 by and
between Brookdale Living Communities of Illinois, Inc., as
sub-sublandlord, and Hallmark Partners L.P., as sub-subten-
ant........................................................
10.31 Sublease Agreement dated as of December 27, 1996 by and be-
tween BLC, as sublandlord, and Brookdale Living Communities
of New York, Inc., as subtenant............................
10.32 Real Estate Purchase Agreement dated as of February 24,
1997 by and between PGI and Firstar DuPage Bank Trust No.
3612 dated December 4, 1989, Firstar DuPage Bank Trust No.
3625 dated February 22, 1990, West Suburban Bank Trust No.
1975 dated December 13, 1978 and the direct and indirect
beneficiaries thereof......................................
10.33 Real Estate Purchase Agreement dated as of February 14,
1997 by and between PGI and AC Properties, L.L.C...........
10.34 Contract for Sale dated February 21, 1997 by and between
PGI and VG Office Partnership '95, Ltd.....................
10.35 First Amendment dated as of February 21, 1997 to Contract
for Sale dated February 14, 1997 by and between PGI and VG
Office Partnership '95, Ltd................................
21.1* Subsidiaries of the Company................................
23.1 Consent of Ernst & Young LLP...............................
23.2* Consent of Winston & Strawn (to be included in opinion
filed as Exhibit 5.1)......................................
23.3.1 Consent of Darryl W. Copeland, Jr..........................
23.3.2 Consent of Wayne D. Boberg.................................
23.3.3 Consent of Bruce L. Gewertz................................
23.3.4+ Consent of Darryl W. Hartley-Leonard.......................
23.3.5+ Consent of Daniel J. Hennessy..............................
24.1+ Powers of attorney (included on signature page included in
Part II of the initial filing).............................
27.1 Financial Data Schedule....................................
</TABLE>
- ---------------------
*To be filed by amendment.
+Previously filed.
II-7
<PAGE>
EXHIBIT 10.24
December 20, 1996
KILICO Realty Corporation and
Kemper Investors Life Insurance Company
c/o ZKS Real Estate Partners LLC
225 W. Washington Street
Suite 1450
Chicago, Illinois 60606
Attention: Robert J. Korslin
Re: First Amendment to September 17, 1996
Senior Housing Portfolio Letter Agreement
-----------------------------------------
Dear Bob:
Reference is hereby made to that certain letter agreement (the "Original
Agreement"), dated September 17, 1996, between The Prime Group, Inc., on the one
hand, and KILICO Realty Corporation and Kemper Investors Life Insurance Company,
on the other hand. This letter (this "First Amendment") amends the Original
Agreement. All capitalized terms used in this First Amendment which are not
specifically defined in this First Amendment, but which are defined in the
Original Agreement, shall have the meanings given to such terms in the Original
Agreement.
The Original Agreement provides for the purchase by Prime from Kemper, and
the sale by Kemper to Prime, of the Kemper Senior Housing Interests in
accordance with the terms and subject to the conditions set forth in the
Original Agreement. The parties hereto hereby agree to amend the Original
Agreement as follow:
1. The parties hereto hereby agree and acknowledge that, as of the date
hereof, Earnest Money in the aggregate amount of Four Million Five Hundred
Thirty-One Thousand Five Hundred Ninety-Five and no/100 Dollars ($4,531,595.00)
has been deposited with Kemper in accordance with Paragraph 3 of the Original
Agreement (the "Original Deposit"). The parties hereto hereby agree that, from
and after the date of this Amendment, except as
<PAGE>
KILICO Realty Corporation and
Kemper Investors Life Insurance Company
2
December 20, 1996
provided in paragraph 9(b) of the Original Agreement, as amended by this First
Amendment: Kemper shall be the sole owner of the Original Deposit free and clear
of any claim or interest of Prime; the Original Deposit shall not be considered
or treated as Earnest Money for any purpose under the Original Agreement; and
the Original Deposit shall not be refundable to Prime for any reason; provided,
however, that, at the Closing, the Original Deposit shall be credited against
the Purchase Price. Notwithstanding the foregoing, the provisions of paragraph
3 of the Original Agreement shall remain in force and obligate Prime to deposit
with Kemper as Earnest Money under the Original Agreement, commencing on January
2, 1997 and continuing on the first business day of each succeeding month until
Closing, the Net Cash Flow generated by Ponds L.P. and ROP during the preceding
month.
2. Paragraph 4 of the Original Agreement is hereby amended by adding
the following at the end thereof:
"Notwithstanding the foregoing, at the option of Prime (the
"Extension Option"), which Extension Option must be exercised,
if at all, by Prime by the delivery of written notice to Kemper
of such exercise on or before December 20, 1996, the December
30, 1996 date set forth in the immediately preceding sentence
shall be changed to April 11, 1997 (provided that the Closing
Date may not be any date between March 15, 1997 and March 31,
1997, inclusive). In the event Prime exercises the Extension
Option, (a) the Purchase Price shall be increased to an amount
equal to the sum of Five Million One Hundred Fifty-Eight and
no/100 Dollars ($5,158,000.00) plus (i) Two Thousand and no/100
Dollars ($2,000.00) per day for each day after December 30, 1996
to and including the earlier of January 31, 1997 or the Closing
Date, plus (ii) if the Closing Date has not occurred on or
before January 31, 1997, Three Thousand and no/100 Dollars
($3,000.00) per day from February 1, 1997 to and including the
earlier of February 28, 1997 or the Closing Date, plus (iii) if
the Closing Date has not occurred on or before February 28,
1997, Four Thousand and no/100 Dollars ($4,000.00) per day from
March 1, 1997 to and including the earliest of (x) March 31,
1997, (y) the Closing Date (other than between March 15, 1997
and March 31, 1997, inclusive), or (z) the IPO Closing Date if
the IPO Closing Date occurs between March 15, 1997 and March 31,
1997, inclusive, in which event the Closing hereunder shall not
occur on the IPO Closing Date, but the parties shall deposit in
escrow on the IPO Closing Date such documents as may be
reasonably required to assure consummation of the Closing in
accordance with the provisions of this Agreement, and (b) the
written notice described in the first sentence of this paragraph
4 must be given, if at all, no later than March 31, 1997.
Notwithstanding the provisions of the preceding sentence, in the
event Prime has exercised the Extension Option and the Closing
occurs
<PAGE>
KILICO Realty Corporation and
Kemper Investors Life Insurance Company
3
December 20, 1996
on or before December 31, 1996, the Purchase Price shall be Four
Million Nine Hundred Eight Thousand and no/100 Dollars
($4,908,000.00). For purposes hereof, the "IPO Closing Date" shall
mean the date of consummation of the initial public offering of the
entity that is contemplated to acquire the Kemper Senior Housing
Interests or to operate the Devonshire and the Heritage, which entity
is now known as Brookdale Living Communities, Inc."
3. Kemper hereby reaffirms and reiterates, as of the date of this
Amendment, all of the representations and warranties made by Kemper in paragraph
6 of the Original Agreement. Prime hereby reaffirms and reiterates, as of the
date of this Amendment, all of the representations and warranties made by Prime
in paragraph 7 of the Original Agreement.
4. Paragraph 9(b) of the Original Agreement is hereby amended by adding
the following after the words "specific performance" in the last line thereof:
"; provided, however, for purposes of this paragraph 9(b), the Earnest
Money shall only include (i) a portion of the Original Deposit in the
amount of Two Million Six Hundred Sixty-Five Thousand Nine Hundred
Twenty-Two and no/100 Dollars ($2,665,922.00), and (ii) that portion
of the Earnest Money deposited with Kemper from and after January 2,
1997 that is attributable to Prime's respective percentage interests
in distributions of Ponds L.P. and ROP based on current ownership
interests."
5. Expect as amended or modified by this First Amendment, the terms and
provisions of the Original Agreement shall remain and continue in full force and
effect. All references to the Agreement shall refer to the Original Agreement as
amended by this First Amendment. All references to the Sale Agreement in that
certain letter, dated September 17, 1996, delivered by ROP and Ponds L.P. to
Realty and KILICO in accordance with Paragraph 10 of the Original Agreement,
which letter was confirmed by Realty and KILICO and consented to by PGI, shall
mean the Original Agreement as amended by this First Amendment.
6. This First Amendment may be executed in one or more counterparts, each
of which, when executed and delivered, shall be deemed to be an original and all
of which counterparts, taken together, shall constitute one and the same
document with the same force and effect as if the signatures of all of the
parties were on a single counterpart.
[signature page follows]
<PAGE>
KILICO Realty Corporation and
Kemper Investors Life Insurance Company
4
December 20, 1996
If the foregoing corresponds to Kemper's understanding of the terms of the
agreement between Kemper and Prime to amend the Original Agreement, please so
signify by having a duly authorized officer or duly authorized officers of
Kemper execute the enclosed copy of this letter and returning the executed copy
of this letter to the undersigned.
Sincerely,
THE PRIME GROUP, INC.
By:
-------------------------------
Its:
------------------------------
ACCEPTED AND AGREED TO:
- ----------------------
KILICO REALTY CORPORATION
By: /s/ Robert J. Korslin
-----------------------
Name: Robert J. Korslin
Its: Authorized Signatory
Date: December 20, 1996
KEMPER INVESTORS LIFE INSURANCE COMPANY
By: /s/ Robert J. Korslin
-----------------------
Name: Robert J. Korslin
Its: Authorized Signatory
Date: December 20, 1996
By: /s/ Timothy R. Verrilli
-----------------------
Name: Timothy R. Verrilli
Its: Authorized Signatory
Date: December 20, 1996
<PAGE>
EXHIBIT 10.25
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered into
as of this 20th day of February, 1997, by and between PARK PLACE GENERAL
PARTNERSHIP, a Washington general partnership (hereinafter "Seller") and
BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation (hereinafter
"Buyer").
R E C I T A L S
WHEREAS, Seller owns real property, consisting of approximately 7.55 acres,
situated in the State of Washington, County of Spokane, 511 S. Park Road,
Spokane, Washington 99212, upon which an one hundred and seventeen (117) unit
independent living retirement facility and the personal property used in
conjunction therewith is located, which real property, improvements thereon and
personal property are operated by Seller under the name Park Place Independent
Living Retirement Facility;
WHEREAS, Park Place II, L.L.C., a Washington limited liability company,
("Park Place II") owns real property, consisting of approximately 4.59 acres,
adjacent to Seller's property, and located at 601 S. Park Road, Spokane,
Washington 99212, upon which an eighty-three (83) unit assisted living
retirement facility and other improvements thereon is located, and which is
operated by Park Place II under the name Park Place II Assisted Living and
Special Care Facility, which Park Place II and Buyer have entered into a
Purchase and Sale Agreement executed on even date herewith;
WHEREAS, Park Place II Assisted Living and Special Care Facility and Park
Place Independent Living Retirement Facility, together, are operated by Seller
and Park Place under the name Park Place Retirement Community;
WHEREAS, Seller has agreed to sell to Buyer all of Seller's right, title
and interest in the real property and all improvements constructed or situated
thereon, together with all of Seller's tangible and intangible personal property
used in the operation of the Seller's business conducted upon the real property
(including, but not limited to, all trademarks, permits and licenses), and Buyer
has agreed to purchase same from Seller subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
promises specified in this Agreement, and for other good and valuable
consideration, Buyer and Seller agree as follows:
ARTICLE 1.
PURCHASE AND SALE
1.01 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, convey and transfer to Buyer, and Buyer agrees
to purchase from Seller, at Closing, all of Seller's right, title and interests
in and to the following assets owned by
<PAGE>
Seller and used in connection with the ownership or operation of the Park Place
Independent Living Retirement Facility.
(A) All of the land situated in the State of Washington, County of
Spokane, 511 S. Park Road, Spokane, Washington 99212, legally described on
attached Exhibit "1.01(A)," consisting of approximately 7.55 acres,
together with any and all improvements located on such land, and all of the
rights, privileges, easements and appurtenances belonging or appertaining
to such land and improvements, including any right, title and interest in
and to streets, alleys and rights-of-way adjacent to such land (such land
and improvements and all such rights, privileges, easements and
appurtenances are collectively referred to herein as the "Real Property").
(B) All tangible or intangible personal property or interest therein
now or hereafter owned or held by Seller in connection with the Real
Property (or any portion thereof) or in connection with the ownership,
operation, management or use thereof, except for personal property
specifically excluded pursuant to the terms of this Agreement, including,
but not limited to: (1) any trade style or trade names used in connection
with the Real Property, including but not limited to the names Park Place
Independent Living Retirement Facility and Park Place Retirement Community;
(2) any and all contract rights and other agreements or leases affecting
the Real Property; (3) all plans and specifications or other construction
drawings of any type in Seller's possession or control prepared in
connection with the construction of any improvements or proposed
improvements; (4) all current assignable contracts, guaranties and
warranties (including guaranties and warranties pertaining to the
acquisition of the Real Property, or any parcel thereof by Seller),
licenses and other permits, approvals, authorizations, certificates,
permissions, no action letters and similar assurances issues by any private
person or persons or by any governmental or quasi-governmental authority or
authorities relating to the Real Property, or any portion thereof, or the
ownership, operation, management or use thereof; (5) all site plans,
surveys, soil and substrata studies, water studies, environmental studies,
architectural renderings, engineering plans, and other plans, diagrams, or
studies of any kind relating to the Real Property, or any portion thereof;
and (6) all furniture, inventory, books and records, equipment, machinery,
tools, appliances, kitchen equipment, dishes and utensils and any and all
other tangible or intangible property on the Real Property, or used in
connection with the ownership and operation of the Real Property and/or the
operation of Seller's business on the Real Property (all of the foregoing
are hereinafter collectively called the "Personal Property."
The assets and property interests of Seller described in Section 1.01(A) and
1.01(B) being sold pursuant hereto shall collectively be referred to as the
"Assets."
1.02 Excluded Assets. The parties hereto agree and acknowledge that
Seller is not transferring the following Assets to Buyer: (1) the existing
checking account with Wells Fargo Bank, Account No. 4159 659929, for revenues,
deposits and expenses paid, any petty cash or utility deposits or interest on
utility deposits or reserves, relating to the Assets being
-2-
<PAGE>
sold pursuant hereto or the operation by Seller of the Park Place II Assisted
Living and Special Care Facility prior to the Closing Date, (2) the money market
account existing with Wells Fargo Bank, Account No. 6428 305379 for security
deposits, and (3) a HUD loan Reserve Account existing with Wells Fargo Bank,
Account No. 6428 305387.
1.03 Contingency. The purchase and sale of the Assets referred to herein
shall be conditioned upon the simultaneous closing of the purchase and sale of
the Assets owned by Park Place II (hereinafter "Park Place II Assets") referred
to in that certain Purchase and Sale Agreement between Park Place II and Buyer
dated as of the date hereof (hereinafter the "PPII Agreement"). A "Seller
Default" by Park Place II under the PPII Agreement shall automatically be a
Seller Default by Seller under this Agreement. A "Buyer Default" by Buyer under
the PPII Agreement shall automatically be a Buyer Default under this Agreement.
In the event that Buyer terminates the PPII Agreement in accordance with its
terms, this Agreement shall automatically terminate and the Earnest Money (as
defined below) shall be returned to Buyer, except in the event such termination
was the result of a Buyer Default. In the event Park Place II terminates the
PPII Agreement in accordance with its terms, this Agreement shall automatically
terminate and Buyer shall have no rights or remedies against Seller except in
the event such termination was a result of a Seller Default.
ARTICLE 2.
PURCHASE PRICE
2.01 Purchase Price. Subject to the remaining terms and conditions of
this Agreement, Seller agrees to sell and Buyer agrees to purchase the Assets
for a total purchase price (the "Purchase Price") of Six Million, Five Hundred
Thousand Dollars ($6,500,000.00), subject to adjustments and prorations in
accordance with this Agreement. Seller and Buyer shall agree on an allocation
of the Purchase Price among the Real Property and the Personal Property on or
before Closing.
2.02 Earnest Money. Buyer has deposited in an escrow account with First
American Title, Spokane, Washington, which will provide title insurance for the
project ("Title Company"), the sum of Twenty-Two Thousand, Six Hundred, Forty-
Eight and 08/100 Dollars ($22,648.08) in cash as initial earnest money (the
"Initial Earnest Money"). Simultaneously with the execution of this Agreement
by Buyer, Buyer shall deposit an additional Ninety Thousand, Five Hundred,
Ninety-Two and 33/100 Dollars ($90,592.33) in cash as additional earnest money
(the "Additional Earnest Money") which shall be applied to the purchase price of
the Assets herein upon Closing. The Initial Earnest Money and the Additional
Earnest Money, together with all accrued interest thereon, is referred to herein
as the "Earnest Money." The Initial Earnest Money along with the Additional
Earnest Money shall be invested by the title company in a money market fund or
in such other investment instrument or account designated by Buyer. Upon
successful completion of the Feasibility Period as provided in Section 2.03
herein without Buyer terminating this Agreement, the Initial Earnest Money and
the Additional Earnest Money shall be nonrefundable and payable to Seller in the
event Buyer fails to complete the purchase of
-3-
<PAGE>
the Assets in accordance with the terms and conditions of this Agreement because
of a Buyer Default. The Initial Earnest Money and the Additional Earnest Money
shall be held by the Company and applied to the purchase price at Closing.
2.03 Feasibility Period. The feasibility period ("Feasibility Period"),
during which the Buyer shall conduct its due diligence with respect to the
Assets to be acquired by it under this Agreement, shall run from the date of
this Agreement through the periods specified in Exhibit "2.03" hereto. Seller
and Buyer acknowledge that the length of the Feasibility Period differs with
respect to each outstanding issue or item (an "Item") detailed in Exhibit
"2.03."
During the Feasibility Period, Buyer shall have the right to physically
inspect the condition of the Assets, to review the books and records maintained
for the Assets, to conduct various tests with respect to the Real Property at
the sole cost of Buyer, including, but not limited to, soil tests and
environmental and hazardous and toxic waste tests and to otherwise determine the
feasibility (economic or otherwise) of the acquisition, ownership and
development of the Assets. At any time during the Feasibility Period with
respect to any Item in question specified in Exhibit "2.03" for the period of
time specified in Exhibit "2.03", Buyer, in Buyer's sole and absolute
discretion, may, upon written notice to Seller, terminate this Agreement if
Buyer is not satisfied with the results of its due diligence investigations
and/or the materials delivered to Buyer relating to such Item, in which event,
the Earnest Money shall be returned to Buyer and all of the rights, duties and
obligations of the parties hereto shall immediately terminate, and this
Agreement shall be null, void and of no further force or effect. Regardless of
whether or not Buyer terminates this Agreement during the Feasibility Period,
Buyer shall provide Seller with copies of any reports, tests, inspections and
surveys with respect to the Real Property, including but not limited to, soil
tests and environmental and hazardous toxic waste tests, and any other tests and
reports and inspections which Buyer may have conducted during the Feasibility
Period, subject to the limitations contained in Section 15.07 below. Seller
shall reasonably cooperate with Buyer and Buyer's agents, employees and
representatives in connection with Buyer's inspections, tests, surveys and
studies of the Assets. Buyer shall complete all of Buyer's due diligence
relating to each Item, prior to the expiration of the Feasibility Period
relating to each such Item. Upon the expiration of the specific time period for
the specific Items set forth in Exhibit "2.03" without Buyer terminating this
Agreement, Buyer may no longer terminate this Agreement because of Buyer's
dissatisfaction relating to the specific Item in question.
In Exhibit "2.03", Buyer has set forth specific Items and the time needed
to review and approve each Item, which Exhibit "2.03" shall serve to extend the
Feasibility Period for the specific Items set forth therein for the time periods
set forth therein. If Buyer, in Buyer's sole and absolute discretion, is not
satisfied with the resolution of the specific Items set forth in Exhibit "2.03,"
within the time period set forth in Exhibit "2.03," Buyer shall then have the
right, in Buyer's sole and absolute discretion, to terminate this Agreement at
any time on or prior to the expiration date of the specific time period for the
outstanding Item, and Buyer shall be refunded the Earnest Money. Buyer shall
not otherwise terminate the Agreement with respect to any Item, except for its
dissatisfaction, in its sole and absolute discretion, with a specific Item
during the specific time period set forth in Exhibit "2.03."
-4-
<PAGE>
Once the specific time period has expired for a specific Item, Buyer may not
terminate this Agreement and request a refund of the Earnest Money because of
Buyer's dissatisfaction with such Item. In the event of a Buyer Default (as
defined in Section 17.02 below) of any terms of this Agreement, the Earnest
Money shall be non-refundable to Buyer and payable to Seller as described in
Section 17.02 below.
2.04 Manner of Payment of Purchase Price. The Purchase Price shall be
paid by Buyer to Seller in cash at Closing either by wire transfer funds or by
cashier's or certified check.
2.05 Liability Assumption. In addition to the payment of the Purchase
Price, at the date of Closing, Buyer shall assume and agree to pay and/or
perform in a timely manner and discharge as they come due, subsequent to Closing
the following liabilities and obligations of Seller:
(A) the obligations of Seller accruing after the date of Closing under
the Leases described in Exhibit "2.05(A)" hereto (the "Leases"); and
(B) the obligations of Seller accruing after the date of Closing under
the Contracts described in Exhibit "2.05(B)" hereto (the "Contracts").
Buyer shall not assume Contracts described in Exhibit "2.05(C)" hereto
which shall be terminated by Seller prior to Closing (the "Nonassigned
Contracts"). At Closing, Seller shall indemnify and hold harmless Buyer for
obligations under the (i) foregoing Leases and Contracts that accrued prior to
Closing and (ii) the foregoing Nonassigned Contracts that accrue prior to and/or
after Closing. At Closing, Buyer shall indemnify and hold harmless Seller for
obligations under the Leases and Contracts that accrue subsequent to Closing.
ARTICLE 3.
PRORATIONS AND BROKERAGE FEE
3.01 Buyer and Seller agree to prorate the following items, in cash or
other immediately available funds, on a daily basis, as of the Closing Date:
(A) all real property taxes relating to the Assets (in the event the
actual amount of all real property taxes are not known at Closing, such
taxes shall be prorated on the basis 1997 budgeted assumptions submitted in
the 1997 budget prepared by S.L. Start and Associates, and included in
correspondence dated January 21, 1997 from Dee McGonigle on behalf of
Seller to Buyer (the "1997 Budget") and shall be reprorated after Closing
when the final amounts are known, and any such reproration payment shall be
due within ten (10) days after written demand from the party owed such
amount;
-5-
<PAGE>
(B) All personal property taxes relating to the Personal Property
became a lien one (1) year prior to when the personal property tax is
normally payable, and Seller shall pay for the personal property taxes for
1996 normally payable in the year 1997 and personal property taxes normally
payable in year 1998 for calendar year 1997 will be prorated between the
parties;
(C) all costs and expenses of pre-paid services and inventory which
accrue to Buyer's benefit after Closing and amounts owed for services and
inventory which benefitted Seller prior to Closing and are to be paid by
Buyer after Closing;
(D) rents and other sums due under the Leases set forth in Exhibit
"2.05(A)" hereto;
(E) obligations due under Contracts set forth in Exhibit "2.05(B)"
hereto;
(F) advance payments by residents or tenants for future services not
yet rendered as of the Closing;
(G) payments for licenses with Department of Health, including
Boarding Home fee and food service fee to the extent any such payments
accrue to Buyer's benefit after Closing, it being understood that Buyer is
not taking an assignment of such permits and any such proration shall only
benefit Seller to the extent Buyer pays less for such new licenses than
Buyer would have otherwise paid.
3.02 Brokerage Fee. Seller and Buyer have agreed to a "referral fee" due
and payable to Gulf/Atlantic Valuation Services. Each party shall be
responsible for the payment of their own portion of said fee agreement outside
of Closing. Each fee agreement with Gulf/Atlantic Valuation Services is
negotiated through separate agreement. Each party shall be responsible for any
other brokerage fees or commissions which such party incurs as a result of this
transaction.
3.03 Security Deposits. At Closing, Seller shall either pay to Buyer, or
Buyer shall be entitled to a credit against the Purchase Price equal to, all
security deposits and other amounts paid by residents or tenants which are
refundable to such residents or tenants (the "Security Deposits"). The Security
Deposits shall not include accrued interest on the Security Deposits earned by
Seller to the extent such interest does not have to be paid to any tenants or
residents.
ARTICLE 4.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
4.01. Seller's Covenants. Between the date of the execution of this
Agreement and the date of the Closing, Seller shall:
-6-
<PAGE>
(A) keep and perform all of the obligations to be performed by the
Seller under each and every agreement, permit, license and approval
relating to or affecting the Assets, including without limitation the
Leases listed in Exhibit "2.05(A)" attached hereto, the Contracts listed in
Exhibit "2.05(B)" attached hereto and the Nonassigned Contracts listed in
Exhibit "2.05(c)" attached hereto;
(B) not enter into, execute, extend, renew, terminate or modify any
lease, easement, license or any other agreement relating to or affecting
the Assets without, in each case, Buyer's prior written consent and
approval, other than residency agreements on Seller's standard form without
material modifications, and at rates equal to or greater than Seller's
current scheduled rates as depicted on Exhibit "4.01(B)" attached hereto.
Copies of such residency agreements shall be delivered by Seller to Buyer
within five (5) days after being signed (but in no event later than
Closing);
(C) effectuate, at Seller's own expense, all necessary maintenance,
repair, and replacements required to maintain the Assets in good condition
and repair;
(D) not convey or remove from the Assets or any portion thereof any of
the Personal Property located on the Assets; and
(E) cooperate with Buyer in obtaining all permits, licenses and
approvals described in this Agreement, and take all actions reasonably
requested by Buyer in connection therewith.
(F) not mortgage, hypothecate or further encumber the Assets or any
portion thereof or permit any liens on the Assets or any portion thereof to
arise by operation of law, except that Seller may mortgage (the "Seller
Deed of Trust") the Real Property to a current partner in Seller in
connection with the acquisitions of such partnership interests in Seller
provided that the aggregate amount of all sums secured by all liens,
mortgages and other encumbrances on the Assets does not exceed ninety
percent (90%) of the Purchase Price.
(G) remedy, at Seller's own expense, all violations of laws,
ordinances, orders or other requirements relating to the ownership,
construction, development and operation of the Assets which have been or
may be imposed by any governmental authority having jurisdiction over, or
affecting, all or any part of the Assets prior to the date of the Closing;
provided, however, that if such remedy would cost in excess of Fifty
Thousand Dollars ($50,000.00), Seller shall notify Buyer that Seller elects
not to pay such amounts in excess of FiftyThousand Dollars ($50,000.00),
and Buyer shall have ten (10) days after such notification to elect to
either (i) terminate this Agreement, in which case the Earnest Money shall
be returned to Purchaser or (ii) pay such amounts in excess of Fifty
Thousand Dollars ($50,000.00), and in the event Buyer does not make a
timely election, Buyer shall be deemed to have selected item (i) above.
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4.02 Representations and Warranties.
(A) In order to induce Buyer to enter into this Agreement, Seller
represents and warrants to Buyer that on the date hereof and on the date of
the Closing:
(1) Seller has all the necessary and requisite authority to enter
into this Agreement and to consummate the transactions contemplated
hereby, and the persons executing this Agreement and all other
documents required to consummate the transactions contemplated hereby
on behalf of Seller are duly authorized to execute this Agreement and
such other documents on behalf of Seller.
(2) Seller is a general partnership duly formed and validly
existing under the laws of the state of Washington;
(3) Seller is a "United States person," as defined by Internal
Revenue Code Section 1445 and Section 7701.
(4) The execution of this Agreement by Seller does not, and the
performance by Seller of the transactions contemplated by this
Agreement will not, violate or constitute a breach of its partnership
agreement and any amendments thereto, or any partners' resolution of
Seller or any contract, permit, license, order or decree to which
Seller is a party or by which Seller or its assets are bound.
(5) Seller has good, marketable and indefeasible fee simple title
to the Real Property, subject only to the matters disclosed in the
preliminary title report referred to in Section 8.01 of this Agreement
and the Seller Deed of Trust (and any related note) to be recorded
prior to Closing, and Seller will deliver to Buyer at Closing, a
statutory warranty deed, conveying good, marketable and insurable
title to the Real Property free and clear of all liens, pledges, and
encumbrances, except for the "Permitted Exceptions" described in
Exhibit "6.02" attached hereto.
(6) No party, person or entity is in possession of the Assets or
any portion thereof, and, no party, person or entity has any interest
in the Assets, or any portion thereof, except for (i) lessees under
the Leases referred to in Exhibit "2.05.A", (ii) Seller, (iii) the
matters disclosed in the Title Commitment and (iv) the Seller Deed of
Trust (and any related note) to be recorded prior to Closing.
(7) To the best of Seller's knowledge, the Assets and the
operation thereof are not in violation of any applicable federal or
state law, or any ordinance, order or regulation of any governmental
or quasi-governmental
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agency having jurisdiction over the Assets. No proceedings of any
type (including condemnation or similar proceedings) have been
instituted or to the knowledge of the Seller are pending or
contemplated against the Real Property or any part thereof or the
Assets or any portion thereof.
(8) To the best of Seller's knowledge, there are no unrecorded
liens or encumbrances (including, but not limited to, liens relating
to environmental matters) against the Assets or any portion thereof.
(9) Seller has not been notified of, nor billed for, any special
assessments of any nature with respect to the Real Property or any
portion thereof, nor has the Seller received any written notice of,
nor has the Seller knowledge of, any such special assessment being
contemplated.
(10) To the best of Seller's knowledge, true, correct and
complete copies of the Leases, the Contracts and the Nonassigned
Contracts listed in Exhibits "2.05(A)", "2.05(B)" and "2.05(C)",
together with all amendments thereto and modifications thereof, have
been delivered to Buyer or will be delivered to Buyer within the time
period provided in this Agreement, and all subsequent amendments or
modifications to any such contract or lease shall be promptly
delivered to Buyer.
(11) There are no outstanding contracts or commitments made by
Seller for any work or materials in connection with the Assets which
have not been, or will not be, on or before the date of the Closing,
fully paid for on a timely basis and except for the Leases and
Contracts to be assigned to Buyer pursuant to this Agreement, there
are no leases, contracts, commitments or agreements which will bind
Buyer or the Assets from and after Closing.
(12) No person or entity has any right or option to acquire all
or any portion of the Assets, other than Buyer pursuant to this
Agreement.
(13) To the best of Seller's knowledge, there currently exist no
events of default by Seller, or events which with passage of time or
notice or both would constitute events of default by Seller, under the
terms and provisions of any leases or any other contracts or
agreements, with respect to the Assets to which Seller is a party, or
to Seller's best knowledge, by any other party thereto.
(14) Seller has no employees employed in connection with the
operation of the Assets, other than the employees listed on Exhibit
"11.02(C)" of this Agreement.
(15) Seller holds, and at all times through the Closing will
hold, good, valid and marketable title to the Personal Property, free
and clear of any liens, encumbrances or adverse claims, except the
liens set forth in Exhibit
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"4.02(A)(15)" attached hereto, and Seller has and at all time through
the Closing will have, the right and authority to convey or assign to
Buyer all of the Personal Property.
(16) To the best of Seller's knowledge, there are no violations
by Seller, or to the best of Seller's knowledge, by any other person
or entity, of any restrictive covenants or other matters affecting the
Real Property.
(17) Seller has not been notified of any litigation or
governmental proceeding (including, without limitation, any eminent
domain proceeding) affecting the assets or any portion thereof, and to
Seller's best knowledge, no such litigation or proceeding is pending,
threatened, contemplated or exists.
(18) All the books and records maintained for the Assets by
Seller or Seller's agents, employees or representatives are located at
Seller's office at W. 25 Nora, Spokane, Washington 99210.
(19) Seller does not now owe and will not owe any taxes or any
penalties or interest thereon pursuant to any governmental law,
statute or regulation for which Buyer is or will be obligated to or
liable for a withholding of funds from the Purchase Price pursuant to
any so called "bulk sales" law or other applicable law, state or
regulation.
(20) Except as set forth in the the Underground Storage Tank
Permanent Closure/Change-In-Service Checklist prepared by Industrial
Tank dated April 10, 1992, (a) Seller has not generated, treated,
stored or disposed of Hazardous Materials (as defined below) in, under
or upon the Real Property (above or below ground), or any portion
thereof, or used any Hazardous Materials in or on the Assets, or any
portion thereof, in violation of any Environmental Laws; (b) to the
best of Seller's knowledge, no prior owner and no prior or current
occupant generated, treated, stored or disposed of such Hazardous
Materials in, under or upon the Real Property, or used any Hazardous
Materials in or on the Assets, or any portion thereof, in violation of
any Environmental Laws; (c) to the best of Seller's knowledge, no
Hazardous Materials are present in, under or upon the Real Property,
or any portion thereof; (d) to the best of Seller's knowledge, the
Assets and the use and operation of the Assets are not in violation of
any Environmental Laws (as defined below); (e) to the best of Seller's
knowledge, no portion of the Real Property has ever been used as a
sanitary landfill or dump; (f) to the best of Seller's knowledge, no
underground storage tank or tanks are located on or under the Real
Property; and (g) to the best of Seller's knowledge, no Hazardous
Materials or underground storage tanks are present in, under or upon
any parcel of property adjacent to the Real Property.
(21) To the best of Seller's knowledge, no portion of the Real
Property is a wetland designated by the United States Army Corp of
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Engineers or other federal, state or local body or agency having
jurisdiction over the Assets, or any portion thereof.
(22) To the best of Seller's knowledge and except as otherwise
disclosed in writing to Buyer on or before February 21, 1997, there
are no user or other fees being assessed relating to the aquifer
protection area.
(23) To the best of Seller's knowledge, no portion of the Assets
contains any building materials containing asbestos or manufactured
from asbestos.
(24) The Real Property is adequately served by all necessary
utilities including, without limitations, storm water systems,
sanitary sewer, water, electricity, telephone, gas, cable, television
and other utility services necessary to operate the Park Place
Independent Living Retirement Facility. No assessments are currently
due in said utilities.
(25) Seller has not used the services of any broker or finder in
connection with the transactions contemplated hereby, except for the
referral fee to Gulf/Atlantic Valuation referred to in Section 3.02.
If any such fees or commissions are claimed or payable as a result of
Seller's claimed action or inaction, such shall be Seller's sole
responsibility. Seller shall indemnify, defend, and hold Buyer
harmless from and against any and all losses, damages, costs and
claims suffered or incurred by Buyer as a result or by reason of any
claim by any person or entity having dealt with Seller for any
brokerage commission or finder's or referral fee except as provided
herein.
(B) In the event at any time prior to Closing Seller learns or has
reason to believe that any of the aforesaid representations and warranties
is no longer true or valid, Seller shall immediately notify Buyer in
writing and therein specify the factors rendering, or likely to render,
such representations or warranties untrue or invalid. All representations
and warranties of Seller contained in this Section 4.02, or elsewhere in
this Agreement, shall be deemed remade as of the date of Closing.
4.03 Environmental Indemnity. Seller hereby agrees to indemnify, defend
and hold the Buyer harmless from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims incurred or suffered by or
asserted against Buyer arising from or related to Seller's breach of any
Environmental Law on or with respect to the operation of Seller's business on
the Real Property, or any of the warranties and representations stated in
Paragraphs, 4.02(A)(20) and 4.02 (A)(23) hereof. For purposes of this
Agreement, "Hazardous Material" means and includes any waste material or other
substance defined as hazardous in 42 U.S.C. Sec. 9601(14), or any related or
applicable federal, state or local statute, law, regulation or ordinance,
pollutants or contaminants (as defined in 42 U.S.C. (S) 9601(33), petroleum
(including crude oil or any fraction thereof), any form of natural or synthetic
gas, sludge (as defined in 42 U.S.C. (S) 6903(26A), radioactive substances,
hazardous waste (as defined in 42 U.S.C. (S) 6903(27)) and any other hazardous
wastes, hazardous
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substances, contaminants or pollutants as defined or described in any of the
Environmental Laws. As used in this Agreement, "Environmental Laws" means all
federal, state and local environmental laws, and any rule or regulation
promulgated thereunder, and any order, standard, interim regulation, moratorium,
policy or guideline of or pertaining to any federal, state or local government,
department or agency including but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Maine Protection, Research, and Sanctuaries Act, the
National Environmental Policy Act, the Noise Control Act, the Safe Drinking
Water Act, the Resource Conservation and Recovery Act ("RCRA"), as amended, the
Hazardous Material Transportation Act, the Refuse Act, the Uranium Mill Tailings
Radiation Control Act and the Atomic Energy Act and regulations of the Nuclear
Regulatory Agency, and all state and local environmental laws and regulations.
The indemnification hereunder shall include and benefit Buyer , all subsidiaries
and affiliates of Buyer and any nominee or assignee of Buyer taking title to the
Assets at Closing.
ARTICLE 5.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
5.01 Buyer's Covenants. Buyer shall apply, within five (5) Business Days
after the date this Agreement is fully executed and a copy has been delivered to
both parties, for all permits, licenses and approvals necessary to operate Park
Place Retirement Community.
5.02 Buyer's Representations and Warranties.
(A) In order to induce Seller to enter this Agreement, Buyer represents,
warrants and covenants to Seller that on the date hereof and on the date of
Closing:
(1) Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware, has received all
necessary approval and authority to own its property and to carry on its
business as is now owned and operated by it. Buyer has the requisite corporate
authority to carry on business in the State of Washington.
(2) Authority. The Board of Directors of Buyer has duly approved the
agreements contemplated herein in accordance with Buyer's Articles of
Incorporation and Bylaws. The execution, delivery and performance hereof by
Buyer has been duly authorized by all necessary corporate actions of Buyer and
its Board of Directors.
(3) Operating Permits and Licenses. Buyer will use good faith efforts to
obtain prior to Closing all licenses and permits necessary to own and operate
the Assets and carry on the acquired business of the Park Place Retirement
Community. Buyer shall timely make
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(within five (5) Business Days after the date this Agreement is fully executed
and a copy has been delivered to both parties) and diligently proceed in good
faith to complete all applications necessary to operate Park Place Retirement
Community, including without limitations the transfer of the Department of
Health Boarding Home License from Seller to Buyer. Provided Buyer has timely
made such application and diligently pursued such permit or license, a failure
of the State of Washington or any applicable agency of the State of Washington
to issue and/or transfer all such licenses and permits shall not be a Purchaser
Default under this Agreement.
(4) Payment of Liabilities Assumed. Buyer shall pay and discharge all the
liabilities and obligations of Seller assumed by Buyer hereunder to include,
without limitation, the Leases and Contracts listed in Exhibits "2.05(A)" and
"2.05(B)," when and as the same shall become due and payable or dischargeable.
(5) Payment of Washington Sales and Use Tax. Buyer covenants and agrees
to pay any and all Washington state sales and use taxes, arising by virtue of
the sale of the Assets by Seller to Buyer.
(6) Inspection. Buyer has inspected all tangible property of the acquired
business and, except as otherwise provided in this Agreement, such tangible
property is in a condition, as of the date of such inspection by Buyer,
acceptable to Buyer.
(7) Broker Fees. Buyer has not used the services of any broker or finder
in connection with the transactions contemplated hereby, except for the referral
fee to Gulf/Atlantic Valuation referred to in Section 3.02. If any such fees or
commissions are claimed or payable as a result of Buyer's claimed action or
inaction, such shall be Buyer's sole responsibility. Buyer shall indemnify,
defend, and hold Seller harmless from and against any and all losses, damages,
costs and claims suffered or incurred by Seller as a result or by reason of any
claim by any person or entity having dealt with Buyer for any brokerage
commission or finder's or referral fee except as provided herein.
(8) No Litigation. To the best of Buyer's knowledge there are no suits,
claims or actions, whether legal, administrative, arbitration or other
proceeding, or governmental investigations pending, or to Buyer's knowledge
threatened, as of February 18, 1997, which if determined adversely to Buyer
would in Buyer's estimation result in a judgment against Buyer in excess of
$100,000.00.
(9) Solvency. As of the date of this Agreement Buyer's assets at a fair
valuation exceed the amount of all of Buyer's debts at a fair valuation, and
Buyer is able to pay all of its debts (including trade debts and contingent
liabilities) as they become due, and that no transaction contemplated hereby
shall constitute preferential or fraudulent transfers within the meaning of 11
U.S.C. (S)(S) 547 or 548 and under (S)(S) 19.40 and 23.72 of the Revised Code of
Washington.
(10) Accuracy of Representations and Warranties. Buyer's representations
and warranties set forth in this Agreement are true, accurate and correct.
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B. In the event at any time prior to Closing, Buyer learns or has reason
to believe that any of the aforesaid representations and warranties is no longer
true or valid, Buyer shall immediately notify Seller in writing, and therein
specify the factors rendering or likely to render such representations or
warranties untrue or invalid. All representations and warranties of Buyer
contained in this Section 5.02 or elsewhere in this Agreement shall be deemed
remade as of the date of Closing.
ARTICLE 6.
TITLE AND SURVEY MATTERS
6.01 Uniform Commercial Code Search. Seller shall order a Uniform
Commercial Code security interest search under the name of Seller, as debtor.
Such searches shall be done both at the office of the local place for filing and
at the central place of filing in the state of Washington. Seller shall provide
Buyer with the results of all such searches at least ten (10) days prior to the
original expiration date of the Feasibility Period.
6.02 Issuance of Title Policy. At the Closing Seller shall cause the
Title Company to issue to Buyer an Owner's Policy of Title Insurance (the "Title
Policy") with extended coverage and with the following endorsements (i) 3.01
Zoning Endorsement with parking and sign coverage, (ii) access endorsement,
(iii) contiguity endorsement insuring that the Real Property is contiguous with
the "Real Property" under the PPII Agreement and (iii) such other endorsements
as Buyer may reasonably request, and Seller reasonably approves, on or before
the expiration of the Feasibility Period as it relates to the Survey and title
exception documents (the "Title Review Period"), at Seller's cost and expense in
the full amount of the Purchase Price insuring good, marketable and insurable
fee simple title in Buyer of the Real Property, subject only to the Permitted
Exceptions described on Exhibit "6.02" attached hereto. In the event that Buyer
requests any additional title endorsements during the Title Review Period which
Seller refuses to include in the Title Policy, Buyer shall have the right within
seven (7) days of any such rejection in writing by Seller to either withdraw its
request for such endorsements, agree to pay for such endorsements itself, or
terminate this Agreement, in which case the Earnest Money shall be returned to
Buyer.
6.03 Commitment, Searches and Survey. Not later than ten (10) days prior
to the expiration of the Feasibility Period, Seller, at Seller's sole cost and
expense, shall deliver or cause to be delivered to Buyer, in form and substance
reasonably satisfactory to Buyer, six (6) copies of an ALTA-ACSM Class A "as-
built" survey ("Survey") (including field notes) with respect to the Real
Property, dated and certified as of a date subsequent to the date of this
Agreement, prepared by a Public Surveyor registered by the state of Washington,
setting forth the legal description of the Real Property, showing the location
of any improvements, and showing the size and location of all easements,
encroachments and encumbrances listed on the title commitment (identifying each
by volume and page reference or recording number if applicable), reciting the
exact area of the Real Property in acres and square feet, reciting the exact
area of each easement, encroachment and encumbrance, showing no portion of the
Real Property situated in an area designated by the U.S. Secretary
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of Housing and Urban Development (or by any other governmental or quasi-
governmental agency or authority having jurisdiction over the Real Property) as
a flood plain, special flood hazard area or general hazard area, showing all
visible utility lines upon the Real Property, and indicating such other
information reasonably requested by Buyer in writing prior to the expiration of
the Feasibility Period. The Survey shall meet the accuracy requirements of an
ALTA-ACSM Class A survey, and contain a certificate specifically addressed to
Buyer, the Title Company and any other party or parties designated by Buyer
reading as follows:
"The undersigned does hereby certify that (i) this survey was this day
made upon the ground of the property reflected hereon, for the benefit of
and reliance by Seller, Buyer, the Title Company and all other parties
listed above; (ii) the description contained hereon is correct; (iii) the
property and each parcel thereof has access to and from a dedicated roadway
as shown hereon; (iv) except as shown hereon, there are no discrepancies,
conflicts, shortages in area, encroachments, improvements, overlapping of
improvements, setback lines, easements, or roadways; (v) the total acreage
and the gross square footage and the square footage net of any portion of
the property lying within public roadways shown hereon are correct; (vi)
none of the property lies within the 100-year flood plain or any special
flood hazard area or general hazard area as designated by any governmental
agency; and (vii) this survey satisfies the accuracy requirements of an
ALTA-ACSM Class A "as-built" survey."
The Survey must be satisfactory to the Title Company so as to permit it to
issue extended coverage on the Title Policy at Closing.
ARTICLE 7.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
7.01 Accounts Receivable. Buyer agrees that the accounts receivable owned
by Seller as of the Closing Date for rent and services rendered prior to Closing
are not being transferred or sold hereunder, and that from the Closing Date
forward Seller will be entitled to receive payment of the same. Buyer shall
remit to Seller within ten (10) days following the end of each month, following
the Closing, all payments received by Buyer, for the prior month, on the
accounts receivable owned by Seller. Buyer will prepare a schedule of Seller's
accounts receivable showing all payments received thereon within ten (10) days
after the last day of each month, which schedule shall be subject to approval by
Seller, which approval shall not be unreasonably withheld or delayed. Seller
acknowledges and agrees that Buyer is not quaranteeing, collection of, nor will
Buyer be obligated to expend any sums to collect, any accounts receivable owed
to Seller. In the event any amounts are received from tenants or residents
which are not sufficient to bring such tenant's or resident's accounts current,
such amounts shall first be applied against the accounts receivable payable to
Seller.
7.02 Accounts Payable. Seller agrees to timely pay and satisfy in full
all amounts due for products, goods, supplies, inventory and services received
or performed at the Park
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Place Independent Living Retirement Facility prior to the Closing Date. Buyer
agrees to timely pay and satisfy in full all amounts (i) accruing after the
Closing under the Contracts being assumed by Buyer and (ii) due for products,
goods, supplies, inventory and services received or performed in the ordinary
course of business after the Closing Date at the Park Place Independent Living
Retirement Facility pursuant to a schedule to be prepared by Seller and approved
by Buyer in Buyer's reasonable discretion prior to Closing (it being agreed to
by the parties that such schedule may include general estimates of the amounts
in question which do not have to be specified to the exact dollar). Such
schedule shall be revised and reconciled by the parties after the Closing from
time to time to reflect the actual amounts owed.
ARTICLE 8.
DELIVERY OF DOCUMENTS PRIOR TO CLOSING
8.01 Seller's Deliveries. Seller has delivered prior to the execution of
this Agreement the following:
(A) the results of the Uniform Commercial Code search and tax searches
on Seller, as debtor, in the state of Washington and County of Spokane;
(B) the preliminary title report;
(C) copies of all contracts, agreements, instruments or
arrangements described in Exhibits "2.05(A)", "2.05(B)" and "2.05(C)";
(D) a preliminary schedule of Seller's accounts receivable;
(E) a list of all of Seller's present employees of Park Place
Retirement Community and their titles, job descriptions, rates of pay,
bonuses earned, length of employment and vacation and sick pay earned and
accrued;
(F) copies of financial statements on the operation of the Park Place
Independent Living Retirement Facility for the immediately preceding two
(2) fiscal years;
(G) a copy of each survey, environmental report and appraisal, in the
possession of Seller and which relate to the Assets or the Park Place
Independent Living Retirement Facility; and
(H) a schedule setting forth the name of each resident or tenant and
the applicable rental charged, and copies of all current Leases.
8.02 Buyer's Deliveries. Within five (5) days from the date hereof Buyer
shall deliver to Seller:
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(A) the Certificate of Secretary or Assistant Secretary of Buyer, with
attached resolutions authorizing the transaction, and authorizing one or
more of the officers of Buyer to execute and deliver the Agreement; and
(B) the Buyer's most recent Financial Statements for 1995 and 1996.
ARTICLE 9.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, at or before the Closing, of all conditions set out in this
Article 9. In the event all of the conditions contained in this Article 9 are
not satisfied by Closing other than because of a Buyer Default, Buyer may
terminate this Agreement and the Earnest Money shall be returned to Buyer.
Buyer may waive, in writing, any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by Buyer of any of its other rights or remedies under
Section 17.01 of this Agreement, if Seller shall be in default of any of its
representations, warranties or covenants under this Agreement or any term or
provision of this Agreement, unless such waiver is a waiver of such default.
9.01 Representations, Warranties and Covenants True at Closing. The
covenants, representations and warranties of Seller to Buyer contained in this
Agreement shall be true and correct on the date of this Agreement and at the
date of Closing with the same force and effect as if such covenants,
representations and warranties were made at such time.
9.02 Authorization. All actions required to be taken by Seller to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by Seller.
9.02 Compliance with Agreement. Seller shall have performed and complied
in all material respects with Seller's obligations under this Agreement which
are to be performed or complied with by Seller prior to or at the Closing.
9.03 Actions, Suits, and Proceedings. No actions, suits or proceedings
before any court, or any government body or authority pertaining to the Assets,
the operation of the Park Place Independent Living and Retirement Facility, the
transaction contemplated by this Agreement or to its consummation thereof shall
have been instituted or threatened on or before the Closing Date.
9.04 Authority and Approvals. Buyer shall have obtained all licenses,
permits, certificates, approvals and other authorizations from the appropriate
governmental agencies that are necessary to operate the Park Place Retirement
Community as a retirement apartment facility, including but not limited to the
DSHS Medicaid Contract. In the event State of Washington and/or other
applicable authorities does not issue by the time of Closing all such licenses
and permits which are necessary to own and operate the assets and
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carry out the business of Park Place Retirement Community, and Buyer has timely
made all such applications and diligently pursued obtaining such licenses and
permits, Buyer may terminate this Agreement, the Earnest Money shall be returned
to Buyer, and this Agreement shall be null and void.
9.05 Uniform Commercial Code Lien Searches. The Buyer shall have
received, at least five (5) days prior to Closing, certified copies of Uniform
Commercial Code lien searches and tax and judgment lien searches, all dated no
earlier than ten (10) days prior to Closing. In the event such lien searches
reveal the existence of security interests or liens held by anyone in the
subject Assets of this Agreement, such security interests or liens shall be
terminated at or prior to Closing and Buyer shall be furnished with evidence of
termination of the security interests.
9.06 Simultaneous Closing. The purchase and sale of the Park Place II
Assets referred to in that certain Purchase and Sale Agreement between Park
Place II and Buyer dated as of the date hereof shall close simultaneously with
the Closing of the purchase and sale of the Assets hereto.
ARTICLE 10.
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
The obligations of Seller under this Agreement are subject to the
satisfaction, at or before the Closing, of all of the conditions set out in this
Article 10. In the event all of the conditions contained in this Article 10 are
not satisfied by Closing other than because of a Seller Default, Seller may
terminate this Agreement. Seller may waive any or all of the conditions in
whole or in part without prior notice; provided, however, that no such waiver of
a conditions shall constitute a waiver by Seller of any of its other rights or
remediesunder Section 17.02 of this Agreement, if Buyer shall be in default of
any of its representations, warranties or covenants or any other provision of
this Agreement, unless such waiver is a waiver of such default.
10.01 Representations, Warranties and Covenants True at Closing. The
covenants, representations and warranties of the Buyer to the Seller contained
in this Agreement shall be true and correct at the date of Closing with the same
force and effect as if such covenants, representations and warranties were made
at such time.
10.02 Authorization. All actions required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by Buyer.
10.03 Compliance with Agreement. Buyer shall have performed and complied
in all material respects with all obligations under this Agreement which are to
be performed or complied with prior to or at the Closing.
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10.04 Actions, Suits and Proceedings Against Buyer. No action, suit or
proceeding against Buyer, before any court or any government body or authority,
pertaining to the transaction contemplated by this Agreement and to its
consummation, shall have been instituted or threatened on or before the Closing
Date against Buyer which has the effect of materially adversely affecting
Buyer's ability to perform its obligations under this Agreement.
10.05 Simultaneous Closing. The purchase and sale of the Park Place
Assets referred to in that certain Purchase and Sale Agreement between Park
Place General Partnership and Buyer dated as of the date hereof shall close
simultaneously with the Closing of the purchase and sale of the Assets hereto.
10.06 Authority and Approvals. Buyer shall have obtained all licenses,
permits, certificates, approvals and other authorizations from the appropriate
governmental agencies that are necessary to operate the Park Place Retirement
Community as a retirement apartment facility, including but not limited to the
DSHS Medicaid Contract.
ARTICLE 11.
CLOSING AND POST CLOSING
11.01 Closing. Subject to the satisfaction of all conditions precedent to
Closing, Provided that (i) all conditions to Buyer's obligation to Close under
this Agreement have been satisfied or waived in writing by Buyer and (ii) all
conditions to Seller's obligation to Close under this Agreement have been
satisfied or waived in writing by Buyer, the Closing shall be held on or before
February 28, 1997 ("Closing Date"), unless another date is mutually agreed to by
Seller and Buyer. Buyer shall have the right to extend The Closing Date upon
written notice to Seller at any time prior to February 28, 1997 for a period of
thirty-one (31) days. Such extension shall not affect the condition or
designation of the Earnest Money. In no event shall the Closing Date extend
beyond March 31, 1997, except to the extent of any delays caused by a breach by
Seller of its obligations under this Agreement.
At the Closing the parties will execute and deliver all documents
(hereinafter collectively referred to as the "Closing Documents"), duly
witnessed and acknowledged where appropriate, necessary to consummate the
transaction contemplated by this Agreement pursuant to the terms of this
Agreement.
11.02 Seller's Deliveries at Closing. At the Closing Seller shall deliver
or cause to be delivered to Buyer or as directed by Buyer, in form and substance
reasonably acceptable to Buyer:
(A) a schedule of all resident and tenant deposits, Entrance Fee
liabilities, all security deposits, cleaning fees and similar deposits and
fees held by Seller and paid to Seller under the Leases, excluding interest
earned on such amounts to the
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extent not required to be paid to the party entitled to the return of each
such deposit. Seller shall pay such deposits listed upon the schedule to
Buyer at Closing;
(B) all resident or tenant records and the original copies of all
Leases and Contracts, relating to the operation of the Park Place
Independent Living Retirement Facility (Buyer shall also have the right to
copy at Buyer's expense, all operational and accounting records relating to
the facility);
(C) a schedule of (i) names, titles and job descriptions, (ii) amount
of current compensation due, (iii) earned vacation pay, holiday pay and
FICA and unemployment taxes thereunder, (iv) accrued vacation and sick pay,
(v) seniority, (vi) bonuses, (vii) current compensation levels of all
employees at the Park Place II Assisted Living and Special Care Facility on
the Closing Date, which Schedule will be attached hereto as Exhibit
"11.02(C)." Seller shall, on or before twenty (20) days after the Closing
Date, pay to the respective employees, in cash, the amount of the items
shown in subparagraphs (ii) and (iii) the accrued vacation pay described in
clause (iv) above and the accrued bonuses under clause (vi) above;
(D) a final schedule of Seller's accounts receivables as of the date
of Closing as required by Section 7.01 hereof;
(E) a notice executed by Seller and acceptable to Buyer, addressed to
each tenant, resident, supplier, contract party and purveyor of Seller
and/or the Park Place Independent Living Retirement Facility informing them
of the sale of the Assets and business to Buyer as of the Closing Date and
directing such party to make all future payments due under said documents
to Buyer and to direct all further communication to Buyer at such address
as Buyer shall designate in such notice (which notices shall be sent by
Buyer to the relevant addresses within five (5) days after Closing);
(F) possession of the Park Place Independent Living Retirement
Facility and the Assets, all keys, pass cards, master keys, access and
emergency codes and all other similar property and/or information;
(G) an executed and notarized statutory warranty deed conveying the
Real Property to Buyer in a form mutually agreed to by the parties in their
reasonable discretion;
(H) an executed bill of sale for the Assets in a form mutually agreed
to by the parties in their reasonable discretion;
(I) an executed Assignment of Contracts and Leases in a form mutually
agreed to by the parties in their reasonable discretion;
(J) an executed Assignment assigning all Intangibles, if any, included
in the Assets to Buyer;
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(K) the Title Policy;
(L) the required documents terminating all security interest in the
Assets.
(M) all certificates of title to all vehicles and other items of
personal property which are evidenced by a certificate of title; and
(N) such other items or documentation as Title Company or Buyer may
reasonably request in order to consummate the transactions contemplated by
this Agreement.
11.03 Buyer's Deliveries to Seller. At Closing Buyer shall deliver, or
cause to be delivered, to Seller:
(A) the Purchase Price, as adjusted by all credits and prorations as
determined under this Agreement, payable in cash or immediately available
wire transferred funds; and
(B) an Assumption Agreement of the Leases described in Exhibit
"2.05(A)" hereto and the Contracts described in Exhibit "2.05(B)" hereto in
a form mutually agreed to by the parties in their reasonable discretion.
11.04 Prorations. On the Closing Date, the parties shall deliver pro
rated monies as described in Article 3, Section 11.05 and Section 11.06 herein.
11.05 Buyer's Closing Costs. At Closing Buyer shall pay the following
costs:
(A) one half (1/2) of any Closing or escrow fees charged;
(B) one-half (1/2) of recording costs; and
(C) one-half (1/2) of the costs of the Uniform Commercial Code search.
11.06 Seller's Closing Costs. At Closing Seller shall pay the following
costs:
(A) one half (1/2) of any Closing or escrow fees charged;
(B) one-half (1/2) of recording costs;
(C) one-half (1/2) of the costs of the Uniform Commercial Code search;
and
(D) the real estate excise tax.
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11.07 Utility Services. Seller shall cause all utility meters to be read
prior to Closing and Seller shall be liable for all resulting final bills. The
utility services shall be switched to Buyer's name effective on the Closing
Date.
ARTICLE 12.
INDEMNIFICATIONS
12.01 Indemnification by Seller. Seller shall indemnify and hold Buyer
harmless from any and all liabilities, obligations, judgments, demands, damages,
causes of action, claims, costs and expenses, including reasonable attorneys'
fees, arising from (i) the breach of any representation, warranty, covenant or
agreement of Seller contained in this Agreement, (ii) any violation of
Environmental Laws and any contamination from Hazardous Materials on the Real
Property caused by Seller arising out of the ownership or operation of the
Assets prior to the Closing Date and (iii) any event arising from the ownership
and operation of the Assets on or before the Closing Date except to the extent
Buyer is liable for any such events pursuant to the terms of this Agreement.
12.02 Indemnification by Buyer. Buyer shall indemnify and hold Seller
harmless from any and all liabilities, obligations, judgments, demands, damages,
causes of action, claims, costs and expenses, including reasonable attorneys'
fees, arising from (i) the breach of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement, (ii) any violation of
Environmental Laws and any contamination from Hazardous Materials on the Real
Property caused by Buyer arising out of the ownership or operation of the Assets
by Buyer after the Closing Date and (iii) any event arising from the ownership
and operation of the Assets by Buyer on or after the Closing Date except to the
extent (a) arising from occurrences prior to the Closing Date or (b) Seller is
liable for any such events pursuant to the terms of this Agreement.
ARTICLE 13.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
In the event, at any time prior to Closing, a party learns that any of said
representations, warranties and covenants are no longer true or valid, the party
shall immediately notify the other party in writing and therein specify the
factors rendering such representations, warranties or covenants untrue or
invalid.
The parties hereby acknowledge that the covenants, representations and
warranties of each set forth herein were relied upon by the others and without
such representations, covenants and warranties each such other party would not
have executed this Agreement nor completed the transaction. Such
representations, covenants and warranties of the parties contained in this
Agreement and/or certificates or documents submitted pursuant to or in
connection with the transaction herein contemplated by one party to the other
shall not merge on Closing but shall survive the confirmation of the Closing of
the transaction and, not withstanding such Closing and regardless of any
investigation on behalf of that party with respect thereto, shall continue in
full force and effect after Closing.
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ARTICLE 14.
DAMAGE TO ASSETS
If prior to the Closing Date, all or any portion of the Assets are damaged,
destroyed or rendered inoperative (collectively the "Damage") by fire, natural
elements, or other causes beyond Seller's control, Seller shall immediately
notify Purchaser of such Damage and the following procedures shall apply:
(A) if the Damage is not Material (hereinafter defined) or the damage
is material but Buyer elects not to terminate this Agreement, Buyer shall
proceed to close and purchase the Assets as diminished by such Damage,
subject to a reduction in the Purchase Price equal to the full estimated
cost of repairing and/or replacing the Damage agreed to by Seller and Buyer
in their reasonable discretion;
(B) if the Damage is Material, then Buyer may terminate and cancel the
purchase of the Assets, the Earnest Money shall be returned to Buyer and
neither party hereto shall have any further rights against or obligations
to the other under this Agreement; and
(C) for the purposes of this paragraph, Damage shall be deemed to be
"Material" if the cost of repairing such Damage equals or exceeds One
Hundred Thousand and 00/100 Dollars ($100,000.00).
ARTICLE 15.
MISCELLANEOUS
15.01 Notices. Any notice required or permitted herein or by applicable
law shall be deemed properly given: (i) when personally delivered to Maker;
(ii) three (3) days following the date sent by United States Mail, certified or
registered, postage prepaid, return receipt requested; or (iii) one (1) business
day following the date sent by Federal Express or overnight United States Mail
or other national overnight carrier, and addressed in each such case as set
forth below:
if to Seller: Park Place General Partnership
104 S. Division
Spokane, WA 99202
Attn: John M. Stone
if to Buyer: Brookdale Living Communities, Inc
c/o The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, IL 60601
Attn: Mark J. Schulte
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with a copy to: The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, IL 60601
Attn: Robert J. Rudnik
15.02 Headings. The headings in this Agreement are intended solely for
convenience or reference, and shall be given no effect in the construction or
interpretation of this Agreement.
15.03 Binding Effect. This Agreement and the terms, covenants, benefits
and duties set forth herein shall inure to the benefit of and be binding upon
the parties, and the heirs, successors, legal representatives and assigns of
each of the parties.
15.04 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement.
15.05 Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
15.06 Incorporation of Recitals. The recitals are incorporated in the
body of this Agreement as if set forth at length.
15.07 Time of the Essence and Delivery of Documents. It is acknowledged
by both Seller and Buyer that time is of the essence with respect to all matters
relating to this transaction, including, but not limited to, the timely
submittal of all reports and information relating to the property to Buyer by
Seller. Seller shall be entitled to copies of the results of due diligence
studies, reports and findings to the extent Buyer is legally able to release
such information and except as provided on Exhibit "15.07" attached hereto.
Copies of due diligence will be provided to Seller as the information at the
conclusion of due diligence. Seller agrees to hold said materials in confidence
until such time, if ever, when negotiations for an agreement or a close have
been irrevocably terminated.
15.08 Exhibits. The exhibits attached hereto and all post-exhibits
attached hereafter, together with all documents incorporated by reference
therein, form an integral part of this Agreement and are hereby incorporated
into this Agreement wherever reference is made to them to the same extent as if
they were set out in full at the point at which such reference is made. To the
extent that any of the Exhibits attached hereto provide that the final form of
such Exhibit is to be attached by the parties, then Seller and Buyer shall
diligently proceed in good faith and in their reasonably discretions to finalize
such Exhibits by the relevant date set forth in each such Exhibit. The parties
may incorporate such final Exhibits into the body of this Agreement by either
executing a formal amendment or amendments to this Agreement or by both parties
initialling each such Exhibit and attaching it to this Agreement without a
formal amendment.
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15.09 Attorney Fees Recoverable. In the event any suit or action is
instituted to enforce or interpret any of the terms of this Agreement, including
any action or participation in or in connection with a case or proceeding under
any Chapter of the Bankruptcy Code or any successor statute, the prevailing
party shall be entitled to recover such sum as the court may adjudge reasonable
for a recovery of attorney fees and court costs incurred in such suit, action or
proceeding or any appeal from any judgment, order or decree entered therein. The
attorneys fees and court costs recoverable under this Section 15.09 are in
addition to, and not subject to, the limitations on damages referred to in
Section 17.01 and 17.02 below.
15.10 Further Assurances, Additional Documents and Acts. Each of the
parties hereto agrees that it will at any time and from time to time, do,
execute, acknowledge and deliver or shall cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, documents,
assignments, transfers, conveyances and assurances as may reasonably be required
by the other parties hereto in order to carry out fully and effectuate the
transactions herein contemplated by this Agreement.
ARTICLE 16
CONDEMNATION
In the event between the date of this Agreement and the date of the
Closing, Seller receives written notice that any condemnation or eminent domain
proceedings are threatened or initiated which might result in the taking of any
part of the Real Property, Buyer may:
A. terminate this Agreement, in which event, the Earnest Money shall
promptly be returned to Buyer and all rights and obligations of the parties
hereunder shall cease; or
B. consummate the transactions contemplated by this Agreement, in which
event Seller shall assign to Buyer all of Seller's right, title and
interest in and to any award made in connection with such condemnation or
eminent domain proceedings.
Seller shall immediately notify Buyer in writing of the occurrence of any
threat or commencement of condemnation or eminent domain proceedings. Buyer
shall then notify Seller within fifteen (15) days after the date of Buyer's
receipt of Seller's notice of such condemnation or eminent domain threat
proceedings whether Purchaser elects to exercise its right under Subsection A or
B of this Section. In the event Purchaser receives written notice of the
Casualty or threat or occurrence of such condemnation or eminent domain
proceedings within fifteen (15) days of the date of Closing, and Purchaser
elects to consummate the transactions contemplated by this Agreement within the
time period provided above, the date of the Closing shall be adjusted
accordingly.
ARTICLE 17.
DEFAULTS AND REMEDIES
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17.01 If Seller should breach any of its representations, warranties,
covenants or agreements contained in this Agreement or in any other agreement,
instrument, certificate or other document between Seller and Buyer, or from
Seller to Buyer, delivered pursuant to this Agreement, and such breach is not
cured within fifteen (15) days after written notice from Buyer to Seller of such
breach, or if a "Seller Default" has occurred under the the PPII Agreement (in
any case, a "Seller Default"), and such Seller Default is not caused by a Buyer
Default, Buyer may as its sole and exclusive remedy under this Agreement, at law
and in equity, (1) cancel this Agreement and receive the prompt return of the
Earnest Money, and collect monetary damages from Seller in an amount equal to
One Hundred Thirteen Thousand Two Hundred Forty Dollars and 41/100 ($113,240.41)
as full and final liquidated damages (except as otherwise provided in Section
15.09 above), Buyer and Seller hereby acknowledging that, in the event of
Sellers failure to consummate the sale contemplated hereby, actual damages
suffered by Buyer would be difficult and/or inconvenient to determine or
ascertain; or (2) enforce specific performance of this Agreement. In the event
that Buyer elects to enforce specific performance of this Agreement as provided
in clause (2) above, Buyer shall have the right, at any time prior to the time
the Assets are actually conveyed to Buyer, to change such election and instead
proceed under clause (1) above. Such change in election by Buyer shall not make
Seller a "prevailing party" under Section 15.09 above in connection with any
litigation or other proceeding relating to specific performance, but the court
shall instead look to whether Buyer is ultimately the prevailing party in
enforcing its rights under clause (1) above.
17.02 If Buyer should breach any of its representations, warranties,
covenants or agreements contained in this Agreement or in any other agreement,
instrument, certificate or other document between Seller and Buyer, or from
Buyer to Seller, delivered pursuant to this Agreement, and such failure is not
cured within fifteen (15) days after a written notice from Seller to Buyer of
such failure or if a "Buyer Default" has occurred under the PPG Agreement (in
any case a "Buyer Default"), and such Buyer Default is not caused by a Seller
Default, Seller, as Seller's sole and exclusive remedy under this Agreement, at
law and in equity, may upon written notice to Buyer, terminate this Agreement
and receive the Earnest Money, as full and final liquidated damages (except as
otherwise provided in Section 15.09 above), Buyer and Seller hereby
acknowledging that, in the event of Buyer's failure to consummate the sale
contemplated hereby, actual damages suffered by Seller would be difficult and/or
inconvenient to determine or ascertain; and, thereafter, there shall be no
further liability hereunder on the part of either party or the other party.
ARTICLE 18.
VENUE
This Agreement shall be construed and enforced according to the laws of the
State of Washington. Any suit or action in regard to or arising out of the
terms or conditions of this Agreement shall be litigated in the State Court
situated in the City of Spokane, County of Spokane, State of Washington or the
United States Federal District Court for the District of Eastern Washington and
each party hereto, individually and jointly, hereby submits their person to the
jurisdiction of said court. Venue for any action shall be in the
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City of Spokane, Spokane County, State of Washington. Each party hereto
expressly waives, to the fully extent it may effectively do so under applicable
law, any objection it may at anytime have: (i) the laying of venue in any
action or proceeding in any such forum; and (ii) further irrevocably waives any
claim that any such forum is inconvenient forum. Nothing contained herein shall
present Buyer from removing any action brought in any State or local Court to
Federal Court.
ARTICLE 19.
ACCESS TO RECORDS
Recognizing that Seller may from time to time require access to books,
records, data or other information delivered to Buyer, Buyer agrees that as
often as Seller may reasonably request, Buyer will permit Seller's employees and
agents reasonable access to the records during the normal business hours for the
purpose of reviewing, photocopying or making compilation of or from any of the
Seller's books, records, data or other information delivered by Seller to Buyer
pursuant to the terms of this Agreement.
ARTICLE 20.
ESCROW
This agreement shall constitute escrow instructions to the Title Company
herein named, as well as the agreement of the parties hereto with respect to the
purchase of the Assets by Buyer from Seller. Title Company is hereby appointed
and designated to act as the escrow Agent and is authorized and instructed to
deliver pursuant to the terms of this agreement the documents and monies to be
deposited into escrow as hereinafter provided. The parties hereto will executed
such supplemental escrow instructions as are customarily used by Title Company,
with such changes as the parties may negotiate to reflect the terms of this
transaction, which instructions, however, shall be subject to and governed by,
and shall not supersede in any way, the provisions of this Agreement.
ARTICLE 21.
ASSIGNABILITY
Buyer and Seller retain the right to assign all or part of this Agreement
for its purpose of achieving a 1031 like kind exchange hereto or in connection
herewith, this Agreement shall benefit and be binding upon such assignee to the
extent of such assignment notwithstanding the fact that such assignee was not an
original party hereto or thereto, but no such assignment by a party shall
release such party of its obligations under this Agreement. Each assignee to a
party's interest hereunder is entitled to all of the rights and benefits of the
party under this Agreement.
[Signature Page Follows]
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ARTICLE 22.
EXECUTION BY FACSIMILE SIGNATURE
This Agreement may be executed by facsimile signature. An executed copy
delivered with facsimile signature shall be deemed an original for all purposes
hereof. Each party executing by facsimile signature shall provide an original
signed copy to the party entitled thereto within five (5) days of such delivery.
IN WITNESS WHEREOF, the parties hereto have executed this instrument the
day and year first above written.
Seller: Buyer:
PARK PLACE GENERAL BROOKDALE LIVING
PARTNERSHIP COMMUNITIES, INC.
By Park Place Retirement Community, By: /s/ Mark J. Schulte
Inc., a Washington corporation, its ---------------------------------
general partner
Its: President/CEO
By: /s/ John M. Stone --------------------------------
--------------------------------
Name: John M. Stone
------------------------------
Title: CEO
-----------------------------
State of CALIFORNIA )
) ss.
County of RIVERSIDE )
On this day personally appeared before me JOHN M. STONE, to me known to be
the President of Park Place Retirement Community, Inc., the general partner of
PARK PLACE GENERAL PARTNERSHIP, the general partnership that executed the
foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said general partnership, for the uses and purposes
therein mentioned, and on oath stated that he is authorized to execute the said
instrument on behalf of said general partnership.
GIVEN under my hand and official seal this 20th day of FEBRUARY, 1997.
/s/ Renee M. Williams
-------------------------------------
NOTARY PUBLIC in and for the State of
[NOTARY PUBLIC STAMP] CA, residing at: PALM DESERT
Commission expires: AUGUST 19, 1997
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State of Illinois )
) ss.
County of Cook )
On this day personally appeared before me Mark J. Schulte, to me known to
be the President/CEO of BROOKDALE LIVING COMMUNITIES, INC., the corporation
that executed the foregoing instrument, and acknowledged the said instrument to
be the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he/she is authorized to
execute the said instrument on behalf of said corporation.
GIVEN under my hand and official seal this 25th day of February, 1997.
/s/ Donna J. Wadzita
-------------------------------------
[NOTARY PUBLIC STAMP] NOTARY PUBLIC in and for the State of
Illinois, residing at:
Commission expires: 3/1/01
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LIST OF EXHIBITS
Exhibit "1.01(A)" Legal Description of Property
Exhibit "2.03" Feasibility Period Conditions
Exhibit "2.05(A)" Leases
Exhibit "2.05(B)" Contracts
Exhibit "2.05(C)" Contracts Not Being Assigned
Exhibit "4.01(B)" Scheduled Lease Rates
Exhibit "4.02(A)(14)" Liens
Exhibit "6.02" Permitted Exceptions to Title Commitment
Exhibit "11.02(C)" Employee Compensation Schedule
Exhibit 15.07 Confidential Buyer Documents
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EXHIBIT "1.01(A)"
Legal Description of Property
Parcel "A" of Short Plat No. SP 1033-95, according to plat recorded in Volume 12
of Short Plats, Page 55, in Spokane County, Washington.
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EXHIBIT "2.03"
FEASIBILITY PERIOD CONDITIONS
<TABLE>
<CAPTION>
LENGTH OF FEASIBILITY PERIOD
ITEM RELATING TO SUCH ITEM
- ------------------------------------------ ----------------------------
<S> <C>
1. Appraisal of Properties February 21, 1997
2. Environmental Reports February 28, 1997
3. Review and Approval of all
1997 Budget Assumptions February 19, 1997
4. ALTA Survey, Title
and title exception documents February 28, 1997
5. All residential and comm. leases February 21, 1997
6. All service/maintenance agrmts. February 21, 1997
7. Results of Physical Inspection
performed by Adams Consulting
Engineers (ordered) February 25, 1997
8. All actual tax bills (with valuations)
for previous two years February 25, 1997
9. All employees, job title, description
and compensation schedules February 27, 1997
10. All employee policies/procedures February 27, 1997
11. All payment and payroll information February 27, 1997
12. Other material to be supplied
pursuant to the Purchase Agreement 10 Business days from receipt (or
period contained in the Purchase
Agreement)
</TABLE>
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EXHIBIT "2.05(A)"
Leases
To Be Attached
by the Parties on or before February 21, 1997
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EXHIBIT 2.05(A) Park Place General Partnership Leases
- --------------------------------------------------------------------------------
Park Place Rent Roll (IL)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rental Rates
---------------------------
Apt # Description Sq. Ft. Single Double First Name Last Name Phone # Res. Deposit/
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
223 1 bedroom/1 bath 417 $ 995 $1,245 Betty Tillett 891-5028 1
224 1 bedroom/1 bath 401 $ 880 $1,130 Virginia Libby 891-2571 1
226 1 bedroom/1 bath 425 $ 935 $1,185 Rose Cannon 921-9437 1
228 2 bedroom/2 bath 654 $1,365 $1,615 Ruth Hartzell 891-5958 1
229 1 bedroom/1 bath 417 $ 940 $1,190 Dennis Pottratz 928-5409 1
230 1 bedroom/1 bath 426 $ 950 $1,200 Yves (Ike) Mocaer 891-6856 1
231 2 bedroom/1 bath 633 $1,260 $1,510 Richard Christensen 891-7845 1
232 1 bedroom/1 bath 477 $1,070 $1,320 June Baker 892-1173 1
233 1 bedroom/1 bath 499 $1,045 $1,295 Maxine Ball 891-4177 1
234 1 bedroom/1 bath 477 $1,030 $1,280 Eva Delmonica 926-1634 1
241 2 bedroom/2 bath 808 $1,555 $1,805 Vera Spadafore 891-6417 1
242 1 bedroom/1 bath 550 $1,155 $1,405 Seva Ranniger 928-3654 1
243 2 bedroom/2 bath 808 $1,465 $1,715 Robert Perry 891-2008 1
244 1 bedroom/1 bath 550 $1,160 $1,410 Ira & Barbara Linn 921-6589 2
301 1 bedroom/1 bath 366 $ 805 $1,055 Robert Sears 924-3168 1
302 1 bedroom/1 bath 366 $ 815 $1,065 James Kelly 928-1360 1
303 1 bedroom/1 bath 366 $ 805 $1,055 Lillian Wright 891-6993 1
304 1 bedroom/1 bath 366 $ 815 $1,065 Stephen Watson 924-6016 1
305 2 bedroom/1 bath 497 $ 970 $1,220 Eleanor Malley 928-2025 1
306 2 bedroom/1 bath 497 $1,085 $1,335 Robert & Ruth Wood 922-4440 2
307 1 bedroom/1 bath 366 $ 825 $1,075 Margaret Collins 891-9920 1
308 1 bedroom/1 bath 366 $ 805 $1,055 Fran Mackey 926-3546 1
309 1 bedroom/1 bath 541 $1,150 $1,400 Harry & Margaret Wakefield 927-8140 1
310 1 bedroom/1 bath 366 $ 825 $1,075 Mike Reinhardt 891-8823 1
311 1 bedroom/1 bath 436 $ 940 $1,190 Edna Nesbitt 926-3541 1
312 1 bedroom/1 bath 366 $ 805 $1,055 Rita Tavian 927-2593 1
313 1 bedroom/1 bath 366 $ 805 $1,055 Martha Kirkingburg 926-8264 1
314 1 bedroom/1 bath 366 $ 825 $1,075 Edith Smith 927-4807 1
315 2 bedroom/1 bath 497 $1,100 $1,350 Mary Adams 928-5897 1
316 2 bedroom/1 bath 497 $1,080 $1,330 Hugh Stromswold 924-3850 1
317 1 bedroom/1 bath 366 $ 805 $1,055 Linda Crisp 891-1796 1
*318 1 bedroom/1 bath 497 $1,050 $1,300 Mildred Rickabaugh 2/6-5/1
319 1 bedroom/1 bath 514 $1,075 $1,325 Evelyn Gilbert 926-2048 1
320 1 bedroom/1 bath 366 $ 770 $1,020 Cora Balazs 2/15-2/28
321 1 bedroom/1 bath 426 $ 940 $1,190 Dorothy Hall 1
322 2 bedroom/2 bath 654 $1,330 $1,580 Phyllis Kelly 928-9117 1
323 1 bedroom/1 bath 417 $ 905 $1,155 Hilda Hougen 924-8596 1
324 1 bedroom/1 bath 401 $ 890 $1,140 Sophie Cahill 1
325 1 bedroom/1 bath 569 $1,100 $1,350 Lorraine Garvin 924-0239 1
326 1 bedroom/1 bath 425 $ 920 $1,170 Mary Jane Pierucci 891-9162 1
327 1 bedroom/1 bath 569 $1,170 $1,420 Dorrie Blain 891-0695 1
328 2 bedroom/2 bath 654 $1,330 $1,580 Ed & Ruth Harden 891-8791 2
329 1 bedroom/1 bath 417 $ 835 $1,085 Ethel Anderson 1 in 1/25
330 1 bedroom/1 bath 426 $ 930 $1,180 Laura Johnson 891-6070 1
341 2 bedroom/1 bath 581 $1,005 $1,255 Darrell Fero 928-4613 1
342 1 bedroom/1 bath 417 $ 910 $1,160 Guest Apt
343 2 bedroom/1 bath 581 $ 960 $1,210 Olga & Willis Walker 892-0659 2
344 1 bedroom/1 bath 417 $ 800 $1,050 Molly Erickson 927-1784 1
345 1 bedroom/1 bath 571 $1,065 $1,315 Jule Kish 891-2534 1
401 1 bedroom/1 bath 404 $ 925 $1,175 Lucille Melvin 1/19-3/15
402 1 bedroom/1 bath 352 $ 740 $ 990 Larry Flanagan 922-5170 1
403 1 bedroom/1 bath 445 $ 955 $1,205 Judy Triplett 921-1890 1
404 studio 333 $ 745 $ 995 Bea Kolander 891-9299 1
405 1 bedroom/1 bath 430 $ 325 Alfred Rathbun 891-1987 1
</TABLE>
<TABLE>
<CAPTION>
New Rent Total
Apt # End of lease Last City Last Zip Eff. Date Base Rent B/D Lunch Rent Age
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
223 Oct-95 Spokane 99203 1-Sep-96 $ 815 $180 $ 0 $ 995 66
224 Aug-94 Deer Park 99006 1-Jan-97 $ 700 $180 $ 0 $ 880 68
226 Mar-97 Spokane 1-May-96 $ 755 $180 $ 0 $ 935 88
228 Aug-94 Mead 99021 1-Jan-97 $1,180 $185 $ 0 $1,365 73
229 Oct-95 Spokane 99206 1-Jan-97 $ 760 $180 $ 0 $ 940 80
230 Aug-94 Pasco 99301 1-Jan-97 $ 770 $180 $75 $1,025 74
231 Apr-95 Hansville 98340 1-Jan-97 $1,080 $180 $ 0 $1,260 75
232 Feb-97 1-Jun-96 $ 890 $180 $ 0 $1,070 78
233 Jan-96 Spokane 99204 1-Jan-97 $ 865 $180 $ 0 $1,045 89
234 Jan-97 Spokane 99206 1-May-96 $ 850 $180 $ 0 $1,030 8X
241 Mar-94 Seattle 98125 1-Jan-97 $1,375 $180 $ 0 $1,555 7X
242 Apr-95 Spokane 99206 1-Jan-97 $ 975 $180 $ 0 $1,155 9X
243 Dec-93 Port Townsend 98368 1-Jan-97 $1,285 $180 $ 0 $1,465 7X
244 Oct-94 Richland 99352 1-Jan-97 $1,050 $360 $ 0 $1,410 15X
301 Oct-92 Spokane 99202 1-Jan-97 $ 625 $180 $ 0 $ 805 8X
302 Mar-97 Spokane 99212 1-Mar-96 $ 635 $180 $ 815 6X
303 Oct-92 Kent 98064 1-Jan-97 $ 625 $180 $ 0 $ 805 9X
304 Feb-97 Spokane 99212 1-Jul-96 $ 635 $180 $ 0 $ 815 8X
305 Apr-94 NM 87505 1-Jan-97 $ 790 $180 $ 0 $ 970 6X
306 Nov-96 Spokane 99212 1-Jan-97 $ 975 $360 $ 0 $1,335 15X
307 Jun-96 Spokane 99206 1-Jan-97 $ 645 $180 $ 0 $ 825 7X
308 Dec-92 Spokane 99202 1-Jan-97 $ 625 $180 $ 0 $ 805 8X
309 Nov-96 Deer Park 99006 1-Jan-97 $1,040 $360 $ 0 $1,400 16X
310 Feb-95 Spokane 99212 1-Jan-97 $ 645 $180 $ 0 $ 825 8X
311 Feb-96 Spokane 99212 1-Jan-97 $ 760 $180 $ 0 $ 940 8X
312 Jan-96 Spokane 99205 1-Jan-97 $ 625 $180 $ 0 $ 805 6X
313 Oct-93 Spokane 99212 1-Jan-97 $ 625 $180 $ 0 $ 805 9X
314 Apr-96 Spokane 99205 1-Jan-97 $ 645 $180 $ 0 $ 825 8X
315 Jan-96 Spokane 99218 1-Jan-97 $ 920 $180 $ 0 $1,100 9X
316 Apr-97 1-Dec-96 $ 900 $180 $ 0 $1,080 7X
317 Feb-96 Pullman 99163 1-Jan-97 $ 625 $180 $ 0 $ 805 6X
*318 CA 1-Jan-97 $ 865 $185 $ 0 $1,050
319 Oct-93 Spokane 99212 1-Jan-97 $ 895 $180 $ 0 $1,075 8X
320 1-Jan-97 $ 585 $185 $ 0 $ 770
321 Mar-97 1-Oct-96 $ 760 $180 $ 0 $ 940 7X
322 Oct-92 Spokane 99206 1-Jan-97 $1,150 $180 $ 0 $1,330 8X
323 Nov-92 Spokane 99206 1-Jan-97 $ 725 $180 $ 0 $ 905 9X
324 May-97 1-Jul-96 $ 710 $180 $ 0 $ 890
325 Oct-95 Spokane 99212 1-Jan-97 $ 920 $180 $ 0 $1,100 8X
326 May-96 Spokane 99223 1-Jan-97 $ 740 $180 $ 0 $ 920 8X
327 Nov-92 Spokane 99223 1-Jan-97 $ 990 $180 $ 0 $1,170 9X
328 Mar-95 Sultan 98294 1-Jan-97 $1,220 $360 $ 0 $1,580 16X
329 1-Jan-97 $ 655 $180 $ 835
330 Nov-92 Spokane 99205 1-Jan-97 $ 750 $180 $ 0 $ 930 8X
341 Jan-97 Spokane 99212 1-Jun-96 $ 825 $180 $ 0 $1,005 7X
342 1-Jan-97 $ 725 $185 $ 0 $ 910
343 Jan-97 Spokane 99207 1-Jun-96 $ 850 $360 $ 0 $1,210 15X
344 Sep-94 Spokane 99212 1-Jan-97 $ 620 $180 $ 0 $ 800 7X
345 Jun-94 NJ 7849 1-Jan-97 $ 885 $180 $ 0 $1,065 8X
401 1-Jan-97 $ 745 $180 $ 925
402 Mar-94 Spokane 99207 1-Jan-97 $ 560 $180 $ 0 $ 740 6X
403 May-96 Spokane 99212 1-Jan-97 $ 775 $180 $ 0 $ 955 8X
404 Apr-96 Newman Lk 99025 1-Jan-97 $ 565 $180 $ 0 $ 745 8X
405 Oct-92 Spokane 99202 1-Jan-97 $ 167 $158 $ 0 $ 325 7X
</TABLE>
<PAGE>
EXHIBIT 2.05(A) Park Place General Partnership Leases
- --------------------------------------------------------------------------------
Park Place Rent Roll (IL)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rental Rates
---------------------------
Apt # Description Sq. Ft. Single Double First Name Last Name Phone # Res. Deposit/
- ----------------------------------------------------------------------------------------------------------------------
Move-in
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
101 1 bedroom/1 bath 366 $ 825 $1,075 Ione Neal 926-2150 1
- ----------------------------------------------------------------------------------------------------------------------
102 1 bedroom/1 bath 336 $ 770 $1,020 Walter Barland 927-9925 1
- ----------------------------------------------------------------------------------------------------------------------
103 1 bedroom/1 bath 366 $ 835 $1,085 Maxine Miller 891-8767 1
- ----------------------------------------------------------------------------------------------------------------------
104 1 bedroom/1 bath 366 $ 820 $1,070 Shirley Piraino 927-4172 1
- ----------------------------------------------------------------------------------------------------------------------
105 2 bedroom/1 bath 497 $1,050 $1,300 Marguerite Walter 924-8010 1
- ----------------------------------------------------------------------------------------------------------------------
106 2 bedroom/1 bath 529 $1,125 $1,375 Vacant
- ----------------------------------------------------------------------------------------------------------------------
107 1 bedroom/1 bath 366 $ 815 $1,065 Rounsley Helen 891-9408 1
- ----------------------------------------------------------------------------------------------------------------------
108 1 bedroom/1 bath 366 $ 740 $ 990 Ann Fox 928-6912 1
- ----------------------------------------------------------------------------------------------------------------------
109 1 bedroom/1 bath 541 $1,155 $1,405 Helen Meyer 924-8751 1
- ----------------------------------------------------------------------------------------------------------------------
110 1 bedroom/1 bath 366 $ 740 $ 990 Nancy Casey 891-2434 1
- ----------------------------------------------------------------------------------------------------------------------
111 1 bedroom/1 bath 366 $ 940 $1,190 Vera Rodman 927-8174 1
- ----------------------------------------------------------------------------------------------------------------------
112 1 bedroom/1 bath 366 $ 845 $1,095 Mildred Childers 927-7015 1
- ----------------------------------------------------------------------------------------------------------------------
113 1 bedroom/1 bath 366 $ 815 $1,065 Mildred Jennings 921-1025 1
- ----------------------------------------------------------------------------------------------------------------------
114 1 bedroom/1 bath 366 $ 860 $1,110 Audrey Conrad 924-3672 1
- ----------------------------------------------------------------------------------------------------------------------
*115 2 bedroom/1 bath 497 $1,090 $1,340 Vacant
- ----------------------------------------------------------------------------------------------------------------------
116 2 bedroom/1 bath 497 $1,000 $1,250 Eva Elder 926-6874 1
- ----------------------------------------------------------------------------------------------------------------------
118 1 bedroom/1 bath 497 $1,050 $1,300 Myrle Vennum 891-2995 1
- ----------------------------------------------------------------------------------------------------------------------
120 1 bedroom/1 bath 366 $ 805 $1,055 John Teraceno 891-0465 1
- ----------------------------------------------------------------------------------------------------------------------
121 1 bedroom/1 bath 426 $ 950 $1,200 Anna Noll 924-5467 1
- ----------------------------------------------------------------------------------------------------------------------
122 2 bedroom/2 bath 654 $1,275 $1,525 Evelyn Gordon 922-7996 1
- ----------------------------------------------------------------------------------------------------------------------
123 1 bedroom/1 bath 417 $ 925 $1,175 Paul Druesen 921-9389 1
- ----------------------------------------------------------------------------------------------------------------------
124 1 bedroom/1 bath 401 $ 915 $1,165 Security
- ----------------------------------------------------------------------------------------------------------------------
126 1 bedroom/1 bath 425 $ 920 $1,170 Eula Reynolds 927-8816 1
- ----------------------------------------------------------------------------------------------------------------------
128 2 bedroom/2 bath 654 $1,350 $1,600 John & Margaret Foskett 891-9448 2
- ----------------------------------------------------------------------------------------------------------------------
129 1 bedroom/1 bath 417 $ 900 $1,150 Herb Winkler 891-7897 1 in 2/11
- ----------------------------------------------------------------------------------------------------------------------
130 1 bedroom/1 bath 426 $ 930 $1,180 Bevely Davis 891-1037 1
- ----------------------------------------------------------------------------------------------------------------------
131 1 bedroom/1 bath 477 $ 930 $1,180 Neil Wickware 1/29-3/1
- ----------------------------------------------------------------------------------------------------------------------
132 1 bedroom/1 bath 477 $1,015 $1,265 Maurie Follevaag 891-7961 1
- ----------------------------------------------------------------------------------------------------------------------
133 1 bedroom/1 bath 477 $ 930 $1,180 John Cobb 891-9577 1
- ----------------------------------------------------------------------------------------------------------------------
134 1 bedroom/1 bath 366 $ 325 Ruby Wheeler 891-1273 1
- ----------------------------------------------------------------------------------------------------------------------
135 1 bedroom/1 bath 468 $ 900 $1,150 Julia Mast 891-5150 1
- ----------------------------------------------------------------------------------------------------------------------
136 1 bedroom/1 bath 468 $ 900 $1,240 Norine Wise 928-5074 1
- ----------------------------------------------------------------------------------------------------------------------
201 1 bedroom/1 bath 366 $ 825 $1,075 Irene Jacobson 921-2267 1
- ----------------------------------------------------------------------------------------------------------------------
202 1 bedroom/1 bath 366 $ 825 $1,075 John Morton 921-5857 1
- ----------------------------------------------------------------------------------------------------------------------
203 1 bedroom/1 bath 366 $ 815 $1,065 Jack Moore 921-2269 1
- ----------------------------------------------------------------------------------------------------------------------
204 1 bedroom/1 bath 366 $ 835 $1,085 Donna Conklin 891-8066 1
- ----------------------------------------------------------------------------------------------------------------------
205 2 bedroom/1 bath 497 $1,040 $1,290 Katherine Blom 928-2571 1
- ----------------------------------------------------------------------------------------------------------------------
206 2 bedroom/1 bath 497 $1,025 $1,275 Cassie Zimmerman 927-1977 1
- ----------------------------------------------------------------------------------------------------------------------
207 1 bedroom/1 bath 366 $ 805 $1,055 Miriam Mast 891-1831 1
- ----------------------------------------------------------------------------------------------------------------------
208 1 bedroom/1 bath 366 $ 790 $1,040 Lavonne Preston 892-1025 1
- ----------------------------------------------------------------------------------------------------------------------
209 1 bedroom/1 bath 541 $1,120 $1,370 Eleanore Long 926-0084 1
- ----------------------------------------------------------------------------------------------------------------------
210 1 bedroom/1 bath 366 $ 805 $1,055 Charles Strain 891-6204 1
- ----------------------------------------------------------------------------------------------------------------------
211 1 bedroom/1 bath 436 $ 940 $1,190 Herbert & Rhoda Williams 926-6678 2
- ----------------------------------------------------------------------------------------------------------------------
212 1 bedroom/1 bath 366 $ 805 $1,055 Doris Fristoe 927-4759 1
- ----------------------------------------------------------------------------------------------------------------------
213 1 bedroom/1 bath 366 $ 805 $1,055 Maude Poffenroth 927-1920 1
- ----------------------------------------------------------------------------------------------------------------------
214 1 bedroom/1 bath 366 $ 805 $1,055 Sophia Ellingsen 926-3648 1
- ----------------------------------------------------------------------------------------------------------------------
215 2 bedroom/1 bath 497 $1,025 $1,275 Emma Ford 924-1235 1
- ----------------------------------------------------------------------------------------------------------------------
216 2 bedroom/1 bath 497 $1,050 $1,300 Bernie & Dorothy Schoen 926-6748 2
- ----------------------------------------------------------------------------------------------------------------------
217 1 bedroom/1 bath 366 $ 815 $1,065 Doris James 928-4835 1
- ----------------------------------------------------------------------------------------------------------------------
218 1 bedroom/1 bath 497 $1,040 $1,290 Helen Puls 921-9357 1
- ----------------------------------------------------------------------------------------------------------------------
219 2 bedroom/2 bath 735 $1,475 $1,725 Frank Giles 924-2802 1
- ----------------------------------------------------------------------------------------------------------------------
220 1 bedroom/1 bath 366 $ 740 $ 990 Bill Parks 924-8029 1
- ----------------------------------------------------------------------------------------------------------------------
221 1 bedroom/1 bath 426 $ 870 $1,120 Ruth Brown 924-4205 1
- ----------------------------------------------------------------------------------------------------------------------
222 2 bedroom/2 bath 654 $1,330 $1,580 Lucille Uggla 922-1063 1
- ----------------------------------------------------------------------------------------------------------------------
2/20/97
</TABLE>
<TABLE>
<CAPTION>
New Rent Total
Apt # End of lease Last City Last Zip Eff. Date Base Rent B/D Lunch Rent Age
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
101 Oct-95 Greenacres 99016 1-Jan-97 $ 645 $180 $ 0 $ 825 82
- ---------------------------------------------------------------------------------------------------------
102 Aug-96 Spokane 99202 1-Jan-97 $ 590 $180 $ 0 $ 770 70
- ---------------------------------------------------------------------------------------------------------
103 Sep-96 Spokane 99205 1-Jan-97 $ 650 $185 $ 0 $ 835
- ---------------------------------------------------------------------------------------------------------
104 Mar-94 Pullman 99163 1-Jan-97 $ 640 $180 $ 0 $ 820 74
- ---------------------------------------------------------------------------------------------------------
105 Dec-95 Spokane 99207 1-Jan-97 $ 870 $180 $ 0 $1,050 73
- ---------------------------------------------------------------------------------------------------------
1-Jan-97 $ 940 $185 $ 0 $1,125
- ---------------------------------------------------------------------------------------------------------
107 Sep-96 MT 59873 1-Jan-97 $ 635 $180 $ 0 $ 815 81
- ---------------------------------------------------------------------------------------------------------
108 Feb-95 Spokane 99207 1-Jan-97 $ 560 $180 $ 0 $ 740 86
- ---------------------------------------------------------------------------------------------------------
109 Jan-96 CA 92543 1-Jan-97 $ 975 $180 $ 0 $1,155 85
- ---------------------------------------------------------------------------------------------------------
110 Feb-96 Spokane 99202 1-Jan-97 $ 560 $180 $ 0 $ 740 86
- ---------------------------------------------------------------------------------------------------------
111 Nov-93 Spokane 99205 1-Jan-97 $ 760 $180 $ 0 $ 940 84
- ---------------------------------------------------------------------------------------------------------
112 Dec-96 Spokane 99212 1-Jan-97 $ 660 $185 $ 0 $ 845 71
- ---------------------------------------------------------------------------------------------------------
113 Jul-96 Bingen 98605 1-Jan-97 $ 635 $180 $ 0 $ 815 76
- ---------------------------------------------------------------------------------------------------------
114 Jan-94 Spokane 99223 1-Jan-97 $ 680 $180 $ 0 $ 860 85
- ---------------------------------------------------------------------------------------------------------
*115 1-Jan-97 $ 910 $180 $ 0 $1,090
- ---------------------------------------------------------------------------------------------------------
116 Apr-97 1-Sep-96 $ 825 $175 $ 0 $1,000 89
- ---------------------------------------------------------------------------------------------------------
118 Apr-97 1-Mar-96 $ 870 $180 $ 0 $1,050 85
- ---------------------------------------------------------------------------------------------------------
120 Dec-92 Spokane 99204 1-Jan-97 $ 625 $180 $ 0 $ 805 73
- ---------------------------------------------------------------------------------------------------------
121 Feb-96 Spokane 99206 1-Jan-97 $ 770 $180 $ 0 $ 950 79
- ---------------------------------------------------------------------------------------------------------
122 1-Nov-96 $1,095 $180 $ 0 $1,275
- ---------------------------------------------------------------------------------------------------------
123 1-Nov-96 $ 745 $180 $ 0 $ 925
- ---------------------------------------------------------------------------------------------------------
124 1-Jan-97
- ---------------------------------------------------------------------------------------------------------
126 Apr-94 Victorville,
CA 92392 1-Jan-97 $ 740 $180 $ 0 $ 920 84
- ---------------------------------------------------------------------------------------------------------
128 Apr-97 Spokane 99205 1-Sep-96 $1,245 $355 $ 0 $1,600 155
- ---------------------------------------------------------------------------------------------------------
129 Aug-97 Spokane 99218 1-Jan-97 $ 720 $180 $ 0 $ 900 80
- ---------------------------------------------------------------------------------------------------------
130 Jul-94 Spokane 99216 1-Jan-97 $ 750 $180 $ 0 $ 930 79
- ---------------------------------------------------------------------------------------------------------
131 1-Jan-97 $ 750 $180 $ 0 $ 930
- ---------------------------------------------------------------------------------------------------------
132 Aug-96 Spokane 99212 1-Jan-97 $ 835 $180 $ 0 $1,015 83
- ---------------------------------------------------------------------------------------------------------
133 Jun-94 OH 44121 1-Jan-97 $ 750 $180 $ 0 $ 930 83
- ---------------------------------------------------------------------------------------------------------
134 Jun-93 Spokane 99201 1-Jan-97 $ 167 $158 $ 0 $ 325 65
- ---------------------------------------------------------------------------------------------------------
135 Sep-96 OR 97495 1-Jan-97 $ 720 $180 $ 0 $ 900 88
- ---------------------------------------------------------------------------------------------------------
136 Dec-93 St. John 99171 1-Jan-97 $ 810 $180 $ 0 $ 990 78
- ---------------------------------------------------------------------------------------------------------
201 Nov-95 Spokane 99206 1-Jan-97 $ 645 $180 $ 0 $ 825 84
- ---------------------------------------------------------------------------------------------------------
202 Aug-94 Spokane 99223 1-Jan-97 $ 645 $180 $ 0 $ 825 92
- ---------------------------------------------------------------------------------------------------------
203 Mar-97 1-Jun-96 $ 635 $180 $ 0 $ 815 87
- ---------------------------------------------------------------------------------------------------------
204 Aug-96 Dayton 99328 1-Jan-97 $ 650 $185 $ 0 $ 835 74
- ---------------------------------------------------------------------------------------------------------
205 Mar-97 MT 1-Sep-96 $ 860 $180 $ 0 $1,040 82
- ---------------------------------------------------------------------------------------------------------
206 Nov-93 Spokane 99202 1-Jan-97 $ 845 $180 $ 0 $1,025 90
- ---------------------------------------------------------------------------------------------------------
207 Nov-92 Moses Lk 1-Jan-97 $ 625 $180 $ 0 $ 805 90
- ---------------------------------------------------------------------------------------------------------
208 Dec-96 Spokane 99212 1-Jan-97 $ 605 $185 $ 0 $ 720 77
- ---------------------------------------------------------------------------------------------------------
209 Mar-94 Spokane 99212 1-Jan-97 $ 940 $180 $ 0 $1,120 81
- ---------------------------------------------------------------------------------------------------------
210 Oct-92 MT 59405 1-Jan-97 $ 625 $180 $ 0 $ 805 94
- ---------------------------------------------------------------------------------------------------------
211 May-96 Spokane 99223 1-Jan-97 $ 830 $360 $ 0 $1,190 163
- ---------------------------------------------------------------------------------------------------------
212 Oct-92 Spokane 99212 1-Jan-97 $ 625 $180 $ 0 $ 805 84
- ---------------------------------------------------------------------------------------------------------
213 Nov-95 Colbert 99005 1-Jan-97 $ 625 $180 $ 0 $ 805 85
- ---------------------------------------------------------------------------------------------------------
214 Sep-93 Spokane 99223 1-Jan-97 $ 625 $180 $ 0 $ 805 81
- ---------------------------------------------------------------------------------------------------------
215 Oct-93 Boring, OR 97009 1-Jun-97 $ 845 $180 $75 $1,100 87
- ---------------------------------------------------------------------------------------------------------
216 Jan-95 Spokane 99212 1-Jan-97 $ 940 $360 $ 0 $1,300 169
- ---------------------------------------------------------------------------------------------------------
217 1-Nov-96 $ 635 $180 $ 0 $ 815
- ---------------------------------------------------------------------------------------------------------
218 Aug-94 Reardan 99029 1-Jan-97 $ 860 $180 $ 0 $1,040 84
- ---------------------------------------------------------------------------------------------------------
219 Apr-94 Spokane 99216 1-Jan-97 $1,295 $180 $ 0 $1,475 85
- ---------------------------------------------------------------------------------------------------------
220 Mar-94 Greenacres 99016 1-Jan-97 $ 560 $180 $ 0 $ 740 86
- ---------------------------------------------------------------------------------------------------------
221 Mar-93 Spokane 99212 1-Jan-97 $ 690 $180 $ 0 $ 870 8X
- ---------------------------------------------------------------------------------------------------------
222 Mar-95 Spokane 99206 1-Jan-97 $1,150 $180 $ 0 $1,330 9X
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 2.05(A) Park Place General Partnership Leases
- --------------------------------------------------------------------------------
Park Place Rent Roll (IL)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rental Rates
---------------------------
Apt # Description Sq. Ft. Single Double First Name Last Name Phone # Res. Deposit/
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
411 1 bedroom/1 bath 403 $ 880 $1,130 Margaret Watsom 924-2076 1
412 1 bedroom/1 bath 564 $1,165 $1,415 Margaret Richer 921-9943 1
413 1 bedroom/1 bath 564 $1,165 $1,415 Una Mathews 891-7865 1
415 1 bedroom/1 bath 569 $ 845 $1,095 Annette Meinhart 892-0602 1
416 1 bedroom/1 bath 592 $ 490 Jim Rice 891-2050 1
417 1 bedroom/1 bath 569 $ 845 $1,095 C. Ruth McCann 892-0650 1
418 1 bedroom/1 bath 564 $1,100 $1,350 Genevieve Pangburn 926-6680 1
419 1 bedroom/1 bath 564 $1,210 $1,460 Mary Taylor 924-8472 1
420 1 bedroom/1 bath 403 $ 900 $1,150 Charles Finck 891-8735 1
* model apartments
Notes: Lucille Melvin in 401 is moving from Portland in March. She will select
an apt. when she arrives. She placed a deposit down to keep her name on the list.
We've placed her in 401 for the time being, however, this apt. is open for rent. 116
Mildred Rickabaugh in 318 is moving from CA in May. She will select an apt.
when she arrives. We've placed her in 318, however, this apt. is open for rent.
</TABLE>
<TABLE>
<CAPTION>
New Rent Base Total
Apt # End of lease Last City Last Zip Eff. Date Rent B/D Lunch Rent Age
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
411 Dec-93 Spokane 99212 1-Jan-97 $ 700 $ 180 $ 0 $ 880 81
412 Feb-94 CA 95060 1-Jan-97 $ 985 $ 180 $ 0 $ 1,165 76
413 Dec-95 Metaline Falls 99153 1-Jan-97 $ 985 $ 180 $ 0 $ 1,165 81
415 1-Dec-96 $ 665 $ 180 $ 0 $ 845
416 Nov-92 Spokane 99205 1-Jan-97 $ 332 $ 158 $ 0 $ 490 48
417 Dec-96 Spokane 99205 1-Jan-97 $ 660 $ 185 $ 0 $ 845 92
418 Mar-97 Spokane 99206 1-Mar-96 $ 920 $ 180 $ 0 $ 1,100 84
419 Mar-96 Spokane 99212 1-Jan-97 $ 1,030 $ 180 $ 0 $ 1,210 72
420 Feb-95 Liberty lake 99019 1-Jan-97 $ 720 $ 720 $ 0 $ 900 85
$90,251 $22,294 $15 0 $112,695 78
</TABLE>
<PAGE>
EXHIBIT "2.05(B)"
Contracts
To Be Attached
by the Parties on or before February 21, 1997
-34-
<PAGE>
EXHIBIT "2.05(B)"
Page 1 of 2
Park Place General Partnership Contracts
----------------------------------------
1. Otis Elevator
Extended Coverage Maintenance Agreement
Dated: 2/11/92
2. Crow's Nest Entertainment, Inc.
Digital Music Express Commercial Music Agreement
Dated: 5/17/96
3. Kelly Assisted Living
Agreement
Dated: 10/1/96
4. Fire Power, Inc.
Preventative Maintenance Agreement
Dated: 1/18/96
5. Camp Chevrolet, Inc.
Motor Vehicle Open-Ended Business Lease Agreement
Dated: 10/10/92
6. Sturm Heating
Service Agreement
Dated: 11/7/96
7. Fikes Northwest, Inc.
Service Agreement*
*Note: no contract, see sample invoice attached, service cancellation requires
30-day notice, multiple air fresheners provided around campus
<PAGE>
Page 2 of 2
FIKES NORTHWEST, INC.
11616 E. Montgomery
Suite 17
Spokane, WA 99206
(509) 926-0534 . Toll-Free (800) 922-3808
- --------------------------------------------------------------------------------
Type of Business
- --------------------------------------------------------------------------------
Business Name Park Place II
- --------------------------------------------------------------------------------
Address 601 S. Park Phone
- --------------------------------------------------------------------------------
City Spokane State WA Zip Code 99212
- --------------------------------------------------------------------------------
Owner or Manager C.O.D.
- --------------------------------------------------------------------------------
Billed To Charge
- --------------------------------------------------------------------------------
Please Enter Our Order For 14AF Service at 4 Week intervals as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AIR | TOTAL | | | | | SOAP | COST PER
FRESHENERS | FIXTURES | BOWLS | | URINALS | SINKS | MACHINES | SERVICE
- -----------|----------|-------|-----|---------|-------|----------|--------------
BATT| | | | | | | | |
- -----------| | | | | | |
14 | | | | | | | $84.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEPOSIT ON AIR FRESHENER None taken/waive per Bill
- --------------------------------------------------------------------------------
All installs to be done by Bill as needed during construction
- --------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS per Tom's request
- --------------------------------------------------------------------------------
Invoice as installed
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIRTY DAYS NOTICE IS REQUIRED IN WRITING
IN THE EVENT OF TERMINATION OF SERVICE OR PAYMENT THEREOF.
- --------------------------------------------------------------------------------
Customer Notified of Change As Noted Above By: _________________Date:___________
Fresheners Are Loaned for Services Only And Remain The Property of FIKES
NORTHWEST, INC.
- --------------------------------------------------------------------------------
Signature of Owner or Manager.
- --------------------------------------------------------------------------------
Dated Sold: 2-28-96 Salesman: No. 1
- --------------------------------------------------------------------------------
Date Installed Installed By:
PP II
#5535 pp 3/7/96
<PAGE>
EXHIBIT "2.05(C)"
CONTRACTS NOT BEING ASSIGNED
1. Management Agreement dated October 10, 1995 between Seller and
Start/Northwest doing business as Senior Living Management Services.
-35-
<PAGE>
EXHIBIT "4.01(A)(14)"
Liens
None
-36-
<PAGE>
EXHIBIT "4.01(B)"
Schedule Lease Rates
To Be Attached
by the Parties on or before February 21, 1997
-37-
<PAGE>
EXHIBIT 4.01(B)
Park Place General Partnership Scheduled Lease Rates
----------------------------------------------------
Independent Living Rates
Floor Plans Monthly Rent
Studio $ 750 - 780
333-366 square feet
1 Bedroom/ 1 Bath $ 815 - 1,230
366 - 571 square feet
2 Bedroom/ 1 Bath $ 1,065 - 1,575
497 - 808 square feet
2 Bedroom/ 2 Bath $ 1,275 - 1,500
654 - 735 square feet
. The above rents are based on single occupancy.
$250 will be charged monthly for a second occupant.
The monthly rent includes:
. Breakfast and dinner daily
. Free laundry facilities
. Educational and activity programs
. Transportation services
. Emergency call system
. Water, sewer, garbage
. Maintenance-free living
PARK PLACE
RETIREMENT COMMUNITY
511 S. PARK ROAD . SPOKANE, WA 99212
(509) 922-7224
<PAGE>
EXHIBIT "6.02"
Permitted Exceptions to Title Commitment
To Be Attached
by the Parties on or before February 28, 1997
-38-
<PAGE>
EXHIBIT "11.02(C)"
Employee Compensation Schedule
To Be Attached
by the Parties on or before February 21, 1997
-39-
<PAGE>
EXHIBIT 11.02(C)
Park Place General Partnership Employee Compensation
Schedule
Park Place Retirement Community
Employee Compensation @x/xx/97
<TABLE>
Full Time/
Employee Name Job Title Pay Rate Part Time
<S> <C> <C> <C>
Androes, Treya Waitstaff $5.00 PT
Bassen, Lisa Waitstaff $5.50 PT
Biggs, Dorothy Housekeeper $5.25 FT
Christensen, William Waitstaff $5.00 PT
Clark, Gwenith Waitstaff $5.25 PT
Clark, Heather Waitstaff $5.00 PT
Ham Jr., Jerrold Waitstaff $5.00 PT
Heffernan, Beth Waitstaff $5.00 PT
Judge, Pamela Cook $7.00 FT
Kienbaum, Orval Dishwasher $5.50 PT
Luce, Kristy Waitstaff $5.25 PT
MacNall, Kay Cook $7.50 FT
McCollum, Claire Waitstaff $5.50 PT
McFarling, Rebecca Receptionist $6.35 FT
Morse, Shannon Waitstaff $5.00 PT
Neff, Mendy IL Program Director $1,800.00 FT
Plewnarz, Mike Maintenance Assistant $8.00 FT
Rausch, Gayle Activities Director $1,450.00 FT
Scarcello, Sarah Waitstaff $5.25 PT
Steward, Cheryl Waitstaff $5.75 PT
Urban, Theodore Marketing/Leasing Agent $1,400.00* FT
Whitaker, Terry Maintenance Supervisor $1,910.00 FT
</TABLE>
*Plus Commissions
<PAGE>
EXHIBIT "15.07"
Confidential Buyer Documents
1. Appraisal
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<PAGE>
EXHIBIT 10.26
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered into
as of this 20th day of February, 1997, by and between PARK PLACE II, L.L.C., a
Washington limited liability company (hereinafter "Seller") and BROOKDALE LIVING
COMMUNITIES, INC., a Delaware corporation (hereinafter "Buyer").
R E C I T A L S
WHEREAS, Seller owns real property, consisting of approximately 4.59 acres,
situated in the State of Washington, County of Spokane, 601 S. Park Road,
Spokane, Washington 99212, upon which an eight-three (83) unit assisted living
retirement facility and the personal property used in conjunction therewith is
located, which real property, improvements thereon and personal property are
operated by Seller under the name Park Place II Assisted Living and Special Care
Facility;
WHEREAS, Park Place General Partnership, a Washington general partnership,
("Park Place") owns real property, consisting of approximately 7.55 acres,
adjacent to Seller's property, and located at 511 S. Park Road, Spokane,
Washington 99212, upon which a one hundred and seventeen (117) unit independent
living retirement facility and other improvements thereon is located, and which
is operated by Park Place under the name Park Place Independent Living
Retirement Facility, which Park Place and Buyer have entered into a Purchase and
Sale Agreement executed on even date herewith;
WHEREAS, Park Place II Assisted Living and Special Care Facility and Park
Place Independent Living Retirement Facility, together, are operated by Seller
and Park Place under the name Park Place Retirement Community;
WHEREAS, Seller has agreed to sell to Buyer all of Seller's right, title
and interest in the real property and all improvements constructed or situated
thereon, together with all of Seller's tangible and intangible personal property
used in the operation of the Seller's business conducted upon the real property
(including, but not limited to, all trademarks, permits and licenses), and Buyer
has agreed to purchase same from Seller subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
promises specified in this Agreement, and for other good and valuable
consideration, Buyer and Seller agree as follows:
ARTICLE 1.
PURCHASE AND SALE
1.01 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, convey and transfer to Buyer, and Buyer agrees
to purchase from Seller, at Closing, all of Seller's right, title and interests
in and to the following assets owned by
<PAGE>
Seller and used in connection with the ownership or operation of the Park Place
II Assisted Living and Special Care Facility.
(A) All of the land situated in the State of Washington, County of
Spokane, 601 S. Park Road, Spokane, Washington 99212, legally described on
attached Exhibit "1.01(A)," consisting of approximately 4.59 acres,
together with any and all improvements located on such land, and all of the
rights, privileges, easements and appurtenances belonging or appertaining
to such land and improvements, including any right, title and interest in
and to streets, alleys and rights-of-way adjacent to such land (such land
and improvements and all such rights, privileges, easements and
appurtenances are collectively referred to herein as the "Real Property").
(B) All tangible or intangible personal property or interest therein
now or hereafter owned or held by Seller in connection with the Real
Property (or any portion thereof) or in connection with the ownership,
operation, management or use thereof, except for personal property
specifically excluded pursuant to the terms of this Agreement, including,
but not limited to: (1) any trade style or trade names used in connection
with the Real Property, including but not limited to the names Park Place
II Assisted Living and Special Care Facility and Park Place Retirement
Community; (2) any and all contract rights and other agreements or leases
affecting the Real Property; (3) all plans and specifications or other
construction drawings of any type in Seller's possession or control
prepared in connection with the construction of any improvements or
proposed improvements; (4) all current assignable contracts, guaranties and
warranties (including guaranties and warranties pertaining to the
acquisition of the Real Property, or any parcel thereof by Seller),
licenses and other permits, approvals, authorizations, certificates,
permissions, no action letters and similar assurances issues by any private
person or persons or by any governmental or quasi-governmental authority or
authorities relating to the Real Property, or any portion thereof, or the
ownership, operation, management or use thereof; (5) all site plans,
surveys, soil and substrata studies, water studies, environmental studies,
architectural renderings, engineering plans, and other plans, diagrams, or
studies of any kind relating to the Real Property, or any portion thereof;
and (6) all furniture, inventory, books and records, equipment, machinery,
tools, appliances, kitchen equipment, dishes and utensils and any and all
other tangible or intangible property on the Real Property, or used in
connection with the ownership and operation of the Real Property and/or the
operation of Seller's business on the Real Property (all of the foregoing
are hereinafter collectively called the "Personal Property.")
The assets and property interests of Seller described in Section 1.01(A) and
1.01(B) being sold pursuant hereto shall collectively be referred to as the
"Assets."
1.02 Excluded Assets. The parties hereto agree and acknowledge that
Seller is not transferring the following Assets to Buyer: (1) the existing
checking account with Wells Fargo Bank, Account No. 4159-491-224, for revenues,
deposits and expenses paid, any petty cash or utility deposits or interest on
utility deposits or reserves, relating to the Assets being
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<PAGE>
sold pursuant hereto or the operation by Seller of the Park Place II Assisted
Living and Special Care Facility prior to the Closing Date and (2) the money
market account existing with Wells Fargo Bank, Account No. 6428-170-245 for
security deposits.
1.03 Contingency. The purchase and sale of the Assets referred to herein
shall be conditioned upon the simultaneous closing of the purchase and sale of
the Assets owned by Park Place (hereinafter "Park Place Assets") referred to in
that certain Purchase and Sale Agreement between Park Place General Partnership
and Buyer dated as of the date hereof (hereinafter the "PPGP Agreement"). A
"Seller Default" by Park Place General Partnership under the PPGP Agreement
shall automatically be a Seller Default by Seller under this Agreement. A
"Buyer Default" by Buyer under the PPGP Agreement shall automatically be a Buyer
Default under this Agreement. In the event that Buyer terminates the PPGP
Agreement in accordance with its terms, this Agreement shall automatically
terminate and the Earnest Money (as defined below) shall be returned to Buyer,
except in the event such termination was the result of a Buyer Default. In the
event Park Place General Partnership terminates the PPGP Agreement in accordance
with its terms, this Agreement shall automatically terminate and Buyer shall
have no rights or remedies against Seller except in the event such termination
was a result of a Seller Default.
ARTICLE 2.
PURCHASE PRICE
2.01 Purchase Price. Subject to the remaining terms and conditions of
this Agreement, Seller agrees to sell and Buyer agrees to purchase the Assets
for a total purchase price (the "Purchase Price") of Seven Million, Eight
Hundred and Fifty Thousand Dollars ($7,850,000.00), subject to adjustments and
prorations in accordance with this Agreement. Seller and Buyer shall agree on
an allocation of the Purchase Price among the Real Property and the Personal
Property on or before Closing.
2.02 Earnest Money. Buyer has deposited in an escrow account with First
American Title, Spokane, Washington, which will provide title insurance for the
project ("Title Company"), the sum of Twenty-Seven Thousand, Three Hundred,
Fifty-One and 92/100 Dollars ($27,351.92) in cash as initial earnest money (the
"Initial Earnest Money"). Simultaneously with the execution of this Agreement
by Buyer, Buyer shall deposit an additional One Hundred and Nine Thousand, Four
Hundred, Seven and 67/100 Dollars ($109,407.67) in cash as additional earnest
money (the "Additional Earnest Money") which shall be applied to the purchase
price of the Assets herein upon Closing. The Initial Earnest Money and the
Additional Earnest Money, together with all accrued interest thereon, is
referred to herein as the "Earnest Money." The Initial Earnest Money along with
the Additional Earnest Money shall be invested by the title company in a money
market fund or in such other investment instrument or account designated by
Buyer. Upon successful completion of the Feasibility Period as provided in
Section 2.03 herein without Buyer terminating this Agreement, the Initial
Earnest Money and the Additional Earnest Money shall be nonrefundable and
payable to Seller in the event Buyer fails to complete the purchase of the
Assets in accordance with the terms and conditions of this Agreement
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<PAGE>
because of a Buyer Default. The Initial Earnest Money and the Additional
Earnest Money shall be held by the Company and applied to the purchase price at
Closing.
2.03 Feasibility Period. The feasibility period ("Feasibility Period"),
during which the Buyer shall conduct its due diligence with respect to the
Assets to be acquired by it under this Agreement, shall run from the date of
this Agreement through the periods specified in Exhibit "2.03" hereto. Seller
and Buyer acknowledge that the length of the Feasibility Period differs with
respect to each outstanding issue or item (an "Item") detailed in Exhibit
"2.03."
During the Feasibility Period, Buyer shall have the right to physically
inspect the condition of the Assets, to review the books and records maintained
for the Assets, to conduct various tests with respect to the Real Property at
the sole cost of Buyer, including, but not limited to, soil tests and
environmental and hazardous and toxic waste tests and to otherwise determine the
feasibility (economic or otherwise) of the acquisition, ownership and
development of the Assets. At any time during the Feasibility Period with
respect to any Item in question specified in Exhibit "2.03" for the period of
time specified in Exhibit "2.03", Buyer, in Buyer's sole and absolute
discretion, may, upon written notice to Seller, terminate this Agreement if
Buyer is not satisfied with the results of its due diligence investigations
and/or the materials delivered to Buyer relating to such Item, in which event,
the Earnest Money shall be returned to Buyer and all of the rights, duties and
obligations of the parties hereto shall immediately terminate, and this
Agreement shall be null, void and of no further force or effect. Regardless of
whether or not Buyer terminates this Agreement during the Feasibility Period,
Buyer shall provide Seller with copies of any reports, tests, inspections and
surveys with respect to the Real Property, including but not limited to, soil
tests and environmental and hazardous toxic waste tests, and any other tests and
reports and inspections which Buyer may have conducted during the Feasibility
Period, subject to the limitations contained in Section 15.07 below. Seller
shall reasonably cooperate with Buyer and Buyer's agents, employees and
representatives in connection with Buyer's inspections, tests, surveys and
studies of the Assets. Buyer shall complete all of Buyer's due diligence
relating to each Item, prior to the expiration of the Feasibility Period
relating to each such Item. Upon the expiration of the specific time period for
the specific Items set forth in Exhibit "2.03" without Buyer terminating this
Agreement, Buyer may no longer terminate this Agreement because of Buyer's
dissatisfaction relating to the specific Item in question.
In Exhibit "2.03", Buyer has set forth specific Items and the time needed
to review and approve each Item, which Exhibit "2.03" shall serve to extend the
Feasibility Period for the specific Items set forth therein for the time periods
set forth therein. If Buyer, in Buyer's sole and absolute discretion, is not
satisfied with the resolution of the specific Items set forth in Exhibit "2.03,"
within the time period set forth in Exhibit "2.03," Buyer shall then have the
right, in Buyer's sole and absolute discretion, to terminate this Agreement at
any time on or prior to the expiration date of the specific time period for the
outstanding Item, and Buyer shall be refunded the Earnest Money. Buyer shall
not otherwise terminate the Agreement with respect to any Item, except for its
dissatisfaction, in its sole and absolute discretion, with a specific Item
during the specific time period set forth in Exhibit "2.03." Once the specific
time period has expired for a specific Item, Buyer may not terminate this
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<PAGE>
Agreement and request a refund of the Earnest Money because of Buyer's
dissatisfaction with such Item. In the event of a Buyer Default (as defined in
Section 17.02 below) of any terms of this Agreement, the Earnest Money shall be
non-refundable to Buyer and payable to Seller as described in Section 17.02
below.
2.04 Manner of Payment of Purchase Price. The Purchase Price shall be
paid by Buyer to Seller in cash at Closing either by wire transfer funds or by
cashier's or certified check.
2.05 Liability Assumption. In addition to the payment of the Purchase
Price, at the date of Closing, Buyer shall assume and agree to pay and/or
perform in a timely manner and discharge as they come due, subsequent to Closing
the following liabilities and obligations of Seller:
(A) the obligations of Seller accruing after the date of Closing
under the Leases described in Exhibit "2.05(A)" hereto (the "Leases"); and
(B) the obligations of Seller accruing after the date of Closing
under the Contracts described in Exhibit "2.05(B)" hereto (the
"Contracts").
Buyer shall not assume Contracts described in Exhibit "2.05(C)" hereto
which shall be terminated by Seller prior to Closing (the "Nonassigned
Contracts"). At Closing, Seller shall indemnify and hold harmless Buyer for
obligations under the (i) foregoing Leases and Contracts that accrued prior to
Closing and (ii) the foregoing Nonassigned Contracts that accrue prior to and/or
after Closing. At Closing, Buyer shall indemnify and hold harmless Seller for
obligations under the Leases and Contracts that accrue subsequent to Closing.
ARTICLE 3.
PRORATIONS AND BROKERAGE FEE
3.01 Buyer and Seller agree to prorate the following items, in cash or
other immediately available funds, on a daily basis, as of the Closing Date:
(A) all real property taxes relating to the Assets (in the event the
actual amount of all real property taxes are not known at Closing, such
taxes shall be prorated on the basis 1997 budgeted assumptions submitted in
the 1997 budget prepared by S.L. Start and Associates, and included in
correspondence dated January 21, 1997 from Dee McGonigle on behalf of
Seller to Buyer (the "1997 Budget") and shall be reprorated after Closing
when the final amounts are known, and any such reproration payment shall be
due within ten (10) days after written demand from the party owed such
amount;
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<PAGE>
(B) All personal property taxes relating to the Personal Property
became a lien one (1) year prior to when the personal property tax is
normally payable, and Seller shall pay for the personal property taxes for
1996 normally payable in the year 1997 and personal property taxes normally
payable in year 1998 for calendar year 1997 will be prorated between the
parties;
(C) all costs and expenses of pre-paid services and inventory which
accrue to Buyer's benefit after Closing and amounts owed for services and
inventory which benefitted Seller prior to Closing and are to be paid by
Buyer after Closing;
(D) rents and other sums due under the Leases set forth in Exhibit
"2.05(A)" hereto;
(E) obligations due under Contracts set forth in Exhibit "2.05(B)"
hereto;
(F) advance payments by residents or tenants for future services not
yet rendered as of the Closing;
(G) payments for licenses with Department of Health, including
Boarding Home fee and food service fee to the extent any such payments
accrue to Buyer's benefit after Closing, it being understood that Buyer is
not taking an assignment of such permits and any such proration shall only
benefit Seller to the extent Buyer pays less for such new licenses than
Buyer would have otherwise paid.
3.02 Brokerage Fee. Seller and Buyer have agreed to a "referral fee" due
and payable to Gulf/Atlantic Valuation Services. Each party shall be
responsible for the payment of their own portion of said fee agreement outside
of Closing. Each fee agreement with Gulf/Atlantic Valuation Services is
negotiated through separate agreement. Each party shall be responsible for any
other brokerage fees or commissions which such party incurs as a result of this
transaction.
3.03 Security Deposits. At Closing, Seller shall either pay to Buyer, or
Buyer shall be entitled to a credit against the Purchase Price equal to, all
security deposits and other amounts paid by residents or tenants which are
refundable to such residents or tenants (the "Security Deposits"). The Security
Deposits shall not include accrued interest on the Security Deposits earned by
Seller to the extent such interest does not have to be paid to any tenants or
residents.
ARTICLE 4.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
4.01. Seller's Covenants. Between the date of the execution of this
Agreement and the date of the Closing, Seller shall:
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<PAGE>
(A) keep and perform all of the obligations to be performed by the
Seller under each and every agreement, permit, license and approval
relating to or affecting the Assets, including without limitation the
Leases listed in Exhibit "2.05(A)" attached hereto, the Contracts listed in
Exhibit "2.05(B)" attached hereto and the Nonassigned Contracts listed in
Exhibit "2.05(c)" attached hereto;
(B) not enter into, execute, extend, renew, terminate or modify any
lease, easement, license or any other agreement relating to or affecting
the Assets without, in each case, Buyer's prior written consent and
approval, other than residency agreements on Seller's standard form without
material modifications, and at rates equal to or greater than Seller's
current scheduled rates as depicted on Exhibit "4.01(B)" attached hereto.
Copies of such residency agreements shall be delivered by Seller to Buyer
within five (5) days after being signed (but in no event later than
Closing);
(C) effectuate, at Seller's own expense, all necessary maintenance,
repair, and replacements required to maintain the Assets in good condition
and repair;
(D) not convey or remove from the Assets or any portion thereof any
of the Personal Property located on the Assets; and
(E) cooperate with Buyer in obtaining all permits, licenses and
approvals described in this Agreement, and take all actions reasonably
requested by Buyer in connection therewith.
(F) not mortgage, hypothecate or further encumber the Assets or any
portion thereof or permit any liens on the Assets or any portion thereof to
arise by operation of law, except that Seller may mortgage (the "Seller
Deed of Trust") the Real Property to a current member in Seller in
connection with the acquisitions of such member's limited liability company
interests in Seller provided that the aggregate amount of all sums secured
by all liens, mortgages and other encumbrances on the Assets does not
exceed ninety percent (90%) of the Purchase Price.
(G) remedy, at Seller's own expense, all violations of laws,
ordinances, orders or other requirements relating to the ownership,
construction, development and operation of the Assets which have been or
may be imposed by any governmental authority having jurisdiction over, or
affecting, all or any part of the Assets prior to the date of the Closing;
provided, however, that if such remedy would cost in excess of Fifty
Thousand Dollars ($50,000.00), Seller shall notify Buyer that Seller elects
not to pay such amounts in excess of Fifty Thousand Dollars ($50,000.00),
and Buyer shall have ten (10) days after such notification to elect to
either (i) terminate this Agreement, in which case the Earnest Money shall
be returned to Purchaser or (ii) pay such amounts in excess of Fifty
Thousand Dollars ($50,000.00), and in the event Buyer does not make a
timely election, Buyer shall be deemed to have selected item (i) above.
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<PAGE>
4.02 Representations and Warranties.
(A) In order to induce Buyer to enter into this Agreement, Seller
represents and warrants to Buyer that on the date hereof and on the date of
the Closing:
(1) Seller has all the necessary and requisite authority to
enter into this Agreement and to consummate the transactions
contemplated hereby, and the persons executing this Agreement and all
other documents required to consummate the transactions contemplated
hereby on behalf of Seller are duly authorized to execute this
Agreement and such other documents on behalf of Seller.
(2) Seller is a limited liability company duly formed and
validly existing under the laws of the state of Washington;
(3) Seller is a "United States person," as defined by Internal
Revenue Code Section 1445 and Section 7701.
(4) The execution of this Agreement by Seller does not, and the
performance by Seller of the transactions contemplated by this
Agreement will not, violate or constitute a breach of its Certificate
of Formation and Operating Agreement or other organizational
documents, or any members resolution of Seller or any contract,
permit, license, order or decree to which Seller is a party or by
which Seller or its assets are bound.
(5) Seller has good, marketable and indefeasible fee simple
title to the Real Property, subject only to the matters disclosed in
the preliminary title report referred to in Section 8.01 of this
Agreement and the Seller Deed of Trust (and any related note) to be
recorded prior to Closing, and Seller will deliver to Buyer at
Closing, a statutory warranty deed, conveying good, marketable and
insurable title to the Real Property free and clear of all liens,
pledges, and encumbrances, except for the "Permitted Exceptions"
described in Exhibit "6.02" attached hereto.
(6) No party, person or entity is in possession of the Assets or
any portion thereof, and, no party, person or entity has any interest
in the Assets, or any portion thereof, except for (i) lessees under
the Leases referred to in Exhibit "2.05.A", (ii) Seller, (iii) the
matters disclosed in the Title Commitment and (iv) the Seller Deed of
Trust (and any related note) to be recorded prior to Closing.
(7) To the best of Seller's knowledge, the Assets and the
operation thereof are not in violation of any applicable federal or
state law, or any ordinance, order or regulation of any governmental
or quasi-governmental
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<PAGE>
agency having jurisdiction over the Assets. No proceedings of any
type (including condemnation or similar proceedings) have been
instituted or to the knowledge of the Seller are pending or
contemplated against the Real Property or any part thereof or the
Assets or any portion thereof.
(8) To the best of Seller's knowledge, there are no unrecorded
liens or encumbrances (including, but not limited to, liens relating
to environmental matters) against the Assets or any portion thereof.
(9) Seller has not been notified of, nor billed for, any special
assessments of any nature with respect to the Real Property or any
portion thereof, nor has the Seller received any written notice of,
nor has the Seller knowledge of, any such special assessment being
contemplated.
(10) To the best of Seller's knowledge, true, correct and
complete copies of the Leases, the Contracts and the Nonassigned
Contracts listed in Exhibits "2.05(A)", "2.05(B)" and "2.05(C)",
together with all amendments thereto and modifications thereof, have
been delivered to Buyer or will be delivered to Buyer within the time
period provided in this Agreement, and all subsequent amendments or
modifications to any such contract or lease shall be promptly
delivered to Buyer.
(11) There are no outstanding contracts or commitments made by
Seller for any work or materials in connection with the Assets which
have not been, or will not be, on or before the date of the Closing,
fully paid for on a timely basis and except for the Leases and
Contracts to be assigned to Buyer pursuant to this Agreement, there
are no leases, contracts, commitments or agreements which will bind
Buyer or the Assets from and after Closing.
(12) No person or entity has any right or option to acquire all
or any portion of the Assets, other than Buyer pursuant to this
Agreement.
(13) To the best of Seller's knowledge, there currently exist no
events of default by Seller, or events which with passage of time or
notice or both would constitute events of default by Seller, under the
terms and provisions of any leases or any other contracts or
agreements, with respect to the Assets to which Seller is a party, or
to Seller's best knowledge, by any other party thereto.
(14) Seller has no employees employed in connection with the
operation of the Assets, other than the employees listed on Exhibit
"11.02(C)" of this Agreement.
(15) Seller holds, and at all times through the Closing will
hold, good, valid and marketable title to the Personal Property, free
and clear of any liens, encumbrances or adverse claims, except the
liens set forth in Exhibit
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<PAGE>
"4.02(A)(15)" attached hereto, and Seller has and at all time through
the Closing will have, the right and authority to convey or assign to
Buyer all of the Personal Property.
(16) To the best of Seller's knowledge, there are no violations
by Seller, or to the best of Seller's knowledge, by any other person
or entity, of any restrictive covenants or other matters affecting the
Real Property.
(17) Seller has not been notified of any litigation or
governmental proceeding (including, without limitation, any eminent
domain proceeding) affecting the assets or any portion thereof, and to
Seller's best knowledge, no such litigation or proceeding is pending,
threatened, contemplated or exists.
(18) All the books and records maintained for the Assets by
Seller or Seller's agents, employees or representatives are located at
Seller's office at W. 25 Nora, Spokane, Washington 99210.
(19) Seller does not now owe and will not owe any taxes or any
penalties or interest thereon pursuant to any governmental law,
statute or regulation for which Buyer is or will be obligated to or
liable for a withholding of funds from the Purchase Price pursuant to
any so called "bulk sales" law or other applicable law, state or
regulation.
(20) Except as set forth in the Underground Storage Tank
Permanent Closure/Change-In-Service Checklist by Industrial Tank
dated April 10, 1992 (the "Tank Report") and Phase I Environmental
Report prepared by Howard Consultants, Inc. and dated April 20, 1995
(Phase I Report"), (a) Seller has not generated, treated, stored or
disposed of Hazardous Materials (as defined below) in, under or upon
the Real Property (above or below ground), or any portion thereof, or
used any Hazardous Materials in or on the Assets, or any portion
thereof, in violation of any Environmental Laws; (b) to the best of
Seller's knowledge, no prior owner and no prior or current occupant
generated, treated, stored or disposed of such Hazardous Materials in,
under or upon the Real Property, or used any Hazardous Materials in or
on the Assets, or any portion thereof, in violation of any
Environmental Laws; (c) to the best of Seller's knowledge, no
Hazardous Materials are present in, under or upon the Real Property,
or any portion thereof; (d) to the best of Seller's knowledge, the
Assets and the use and operation of the Assets are not in violation of
any Environmental Laws (as defined below); (e) to the best of Seller's
knowledge, no portion of the Real Property has ever been used as a
sanitary landfill or dump; (f) to the best of Seller's knowledge, no
underground storage tank or tanks are located on or under the Real
Property; and (g) to the best of Seller's knowledge, no Hazardous
Materials or underground storage tanks are present in, under or upon
any parcel of property adjacent to the Real Property.
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<PAGE>
(21) To the best of Seller's knowledge, no portion of the Real
Property is a wetland designated by the United States Army Corp of
Engineers or other federal, state or local body or agency having
jurisdiction over the Assets, or any portion thereof.
(22) To the best of Seller's knowledge and except as otherwise
disclosed in writing to Buyer on or before February 21, 1997, there
are no user or other fees being assessed relating to the aquifer
protection area.
(23) To the best of Seller's knowledge, no portion of the Assets
contains any building materials containing asbestos or manufactured
from asbestos.
(24) The Real Property is adequately served by all necessary
utilities including, without limitations, storm water systems,
sanitary sewer, water, electricity, telephone, gas, cable, television
and other utility services necessary to operate the Park Place II
Assisted Living and Special Care Facility. No assessments are
currently due in said utilities.
(25) Seller has not used the services of any broker or finder in
connection with the transactions contemplated hereby, except for the
referral fee to Gulf/Atlantic Valuation referred to in Section 3.02.
If any such fees or commissions are claimed or payable as a result of
Seller's claimed action or inaction, such shall be Seller's sole
responsibility. Seller shall indemnify, defend, and hold Buyer
harmless from and against any and all losses, damages, costs and
claims suffered or incurred by Buyer as a result or by reason of any
claim by any person or entity having dealt with Seller for any
brokerage commission or finder's or referral fee except as provided
herein.
(B) In the event at any time prior to Closing Seller learns or has
reason to believe that any of the aforesaid representations and warranties
is no longer true or valid, Seller shall immediately notify Buyer in
writing and therein specify the factors rendering, or likely to render,
such representations or warranties untrue or invalid. All representations
and warranties of Seller contained in this Section 4.02, or elsewhere in
this Agreement, shall be deemed remade as of the date of Closing.
4.03 Environmental Indemnity. Seller hereby agrees to indemnify, defend
and hold the Buyer harmless from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims incurred or suffered by or
asserted against Buyer arising from or related to Seller's breach of any
Environmental Law on or with respect to the operation of Seller's business on
the Real Property, or any of the warranties and representations stated in
Paragraphs, 4.02(A)(20) and 4.02 (A)(23) hereof. For purposes of this
Agreement, "Hazardous Material" means and includes any waste material or other
substance defined as hazardous in 42 U.S.C. Sec. 9601(14), or any related or
applicable federal, state or local statute, law, regulation or ordinance,
pollutants or contaminants (as defined in 42 U.S.C. (S) 9601(33), petroleum
(including crude oil or any fraction thereof), any form of natural or
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synthetic gas, sludge (as defined in 42 U.S.C. (S) 6903(26A)), radioactive
substances, hazardous waste (as defined in 42 U.S.C. (S) 6903(27)) and any other
hazardous wastes, hazardous substances, contaminants or pollutants as defined or
described in any of the Environmental Laws. As used in this Agreement,
"Environmental Laws" means all federal, state and local environmental laws, and
any rule or regulation promulgated thereunder, and any order, standard, interim
regulation, moratorium, policy or guideline of or pertaining to any federal,
state or local government, department or agency including but not limited to,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), the Clean Water Act, the Clean Air Act, the Toxic Substances
Control Act, the Occupational Safety and Health Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Maine Protection, Research, and Sanctuaries
Act, the National Environmental Policy Act, the Noise Control Act, the Safe
Drinking Water Act, the Resource Conservation and Recovery Act ("RCRA"), as
amended, the Hazardous Material Transportation Act, the Refuse Act, the Uranium
Mill Tailings Radiation Control Act and the Atomic Energy Act and regulations of
the Nuclear Regulatory Agency, and all state and local environmental laws and
regulations. The indemnification hereunder shall include and benefit Buyer, all
subsidiaries and affiliates of Buyer and any nominee or assignee of Buyer taking
title to the Assets at Closing.
ARTICLE 5.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
5.01 Buyer's Covenants. Buyer shall apply, within five (5) Business Days
after the date this Agreement is fully executed and a copy has been delivered to
both parties, for all permits, licenses and approvals necessary to operate Park
Place Retirement Community.
5.02 Buyer's Representations and Warranties.
(A) In order to induce Seller to enter this Agreement, Buyer represents,
warrants and covenants to Seller that on the date hereof and on the date of
Closing:
(1) Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware, has received all
necessary approval and authority to own its property and to carry on its
business as is now owned and operated by it. Buyer has the requisite corporate
authority to carry on business in the State of Washington.
(2) Authority. The Board of Directors of Buyer has duly approved the
agreements contemplated herein in accordance with Buyer's Articles of
Incorporation and Bylaws. The execution, delivery and performance hereof by
Buyer has been duly authorized by all necessary corporate actions of Buyer and
its Board of Directors.
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(3) Operating Permits and Licenses. Buyer will use good faith efforts to
obtain prior to Closing all licenses and permits necessary to own and operate
the Assets and carry on the acquired business of the Park Place Retirement
Community. Buyer shall timely make (within five (5) Business Days after the
date this Agreement is fully executed and a copy has been delivered to both
parties) and diligently proceed in good faith to complete all applications
necessary to operate Park Place Retirement Community, including without
limitations the transfer of the Department of Health Boarding Home License from
Seller to Buyer. Provided Buyer has timely made such application and diligently
pursued such permit or license, a failure of the State of Washington or any
applicable agency of the State of Washington to issue and/or transfer all such
licenses and permits shall not be a Purchaser Default under this Agreement.
(4) Payment of Liabilities Assumed. Buyer shall pay and discharge all the
liabilities and obligations of Seller assumed by Buyer hereunder to include,
without limitation, the Leases and Contracts listed in Exhibits "2.05(A)" and
"2.05(B)," when and as the same shall become due and payable or dischargeable.
(5) Payment of Washington Sales and Use Tax. Buyer covenants and agrees
to pay any and all Washington state sales and use taxes, arising by virtue of
the sale of the Assets by Seller to Buyer.
(6) Inspection. Buyer has inspected all tangible property of the acquired
business and, except as otherwise provided in this Agreement, such tangible
property is in a condition, as of the date of such inspection by Buyer,
acceptable to Buyer.
(7) Broker Fees. Buyer has not used the services of any broker or finder
in connection with the transactions contemplated hereby, except for the referral
fee to Gulf/Atlantic Valuation referred to in Section 3.02. If any such fees or
commissions are claimed or payable as a result of Buyer's claimed action or
inaction, such shall be Buyer's sole responsibility. Buyer shall indemnify,
defend, and hold Seller harmless from and against any and all losses, damages,
costs and claims suffered or incurred by Seller as a result or by reason of any
claim by any person or entity having dealt with Buyer for any brokerage
commission or finder's or referral fee except as provided herein.
(8) No Litigation. To the best of Buyer's knowledge there are no suits,
claims or actions, whether legal, administrative, arbitration or other
proceeding, or governmental investigations pending, or to Buyer's knowledge
threatened, as of February 18, 1997, which if determined adversely to Buyer
would in Buyer's estimation result in a judgment against Buyer in excess of
$100,000.00.
(9) Solvency. As of the date of this Agreement Buyer's assets at a fair
valuation exceed the amount of all of Buyer's debts at a fair valuation, and
Buyer is able to pay all of its debts (including trade debts and contingent
liabilities) as they become due, and that no transaction contemplated hereby
shall constitute preferential or fraudulent transfers within the meaning of 11
U.S.C. (S)(S) 547 or 548 and under (S)(S) 19.40 and 23.72 of the Revised Code of
Washington.
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(10) Accuracy of Representations and Warranties. Buyer's representations
and warranties set forth in this Agreement are true, accurate and correct.
B. In the event at any time prior to Closing, Buyer learns or has reason
to believe that any of the aforesaid representations and warranties is no longer
true or valid, Buyer shall immediately notify Seller in writing, and therein
specify the factors rendering or likely to render such representations or
warranties untrue or invalid. All representations and warranties of Buyer
contained in this Section 5.02 or elsewhere in this Agreement shall be deemed
remade as of the date of Closing.
ARTICLE 6.
TITLE AND SURVEY MATTERS
6.01 Uniform Commercial Code Search. Seller shall order a Uniform
Commercial Code security interest search under the name of Seller, as debtor.
Such searches shall be done both at the office of the local place for filing and
at the central place of filing in the state of Washington. Seller shall provide
Buyer with the results of all such searches at least ten (10) days prior to the
original expiration date of the Feasibility Period.
6.02 Issuance of Title Policy. At the Closing Seller shall cause the Title
Company to issue to Buyer an Owner's Policy of Title Insurance (the "Title
Policy") with extended coverage and with the following endorsements (i) 3.01
Zoning Endorsement with parking and sign coverage, (ii) access endorsement,
(iii) contiguity endorsement insuring that the Real Property is contiguous with
the "Real Property" under the PPGP Agreement and (iii) such other endorsements
as Buyer may reasonably request, and Seller reasonably approves, on or before
the expiration of the Feasibility Period as it relates to the Survey and title
exception documents (the "Title Review Period"), at Seller's cost and expense in
the full amount of the Purchase Price insuring good, marketable and insurable
fee simple title in Buyer of the Real Property, subject only to the Permitted
Exceptions described on Exhibit "6.02" attached hereto. In the event that Buyer
requests any additional title endorsements during the Title Review Period which
Seller refuses to include in the Title Policy, Buyer shall have the right within
seven (7) days of any such rejection in writing by Seller to either withdraw its
request for such endorsements, agree to pay for such endorsements itself, or
terminate this Agreement, in which case the Earnest Money shall be returned to
Buyer.
6.03 Commitment, Searches and Survey. Not later than ten (10) days prior
to the expiration of the Feasibility Period, Seller, at Seller's sole cost and
expense, shall deliver or cause to be delivered to Buyer, in form and substance
reasonably satisfactory to Buyer, six (6) copies of an ALTA-ACSM Class A "as-
built" survey ("Survey") (including field notes) with respect to the Real
Property, dated and certified as of a date subsequent to the date of this
Agreement, prepared by a Public Surveyor registered by the state of Washington,
setting forth the legal description of the Real Property, showing the location
of any improvements, and showing the size and location of all easements,
encroachments and encumbrances listed on the title commitment (identifying each
by volume and page reference
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or recording number if applicable), reciting the exact area of the Real Property
in acres and square feet, reciting the exact area of each easement, encroachment
and encumbrance, showing no portion of the Real Property situated in an area
designated by the U.S. Secretary of Housing and Urban Development (or by any
other governmental or quasi-governmental agency or authority having jurisdiction
over the Real Property) as a flood plain, special flood hazard area or general
hazard area, showing all visible utility lines upon the Real Property, and
indicating such other information reasonably requested by Buyer in writing prior
to the expiration of the Feasibility Period. The Survey shall meet the accuracy
requirements of an ALTA-ACSM Class A survey, and contain a certificate
specifically addressed to Buyer, the Title Company and any other party or
parties designated by Buyer reading as follows:
"The undersigned does hereby certify that (i) this survey was this day
made upon the ground of the property reflected hereon, for the benefit of
and reliance by Seller, Buyer, the Title Company and all other parties
listed above; (ii) the description contained hereon is correct; (iii) the
property and each parcel thereof has access to and from a dedicated roadway
as shown hereon; (iv) except as shown hereon, there are no discrepancies,
conflicts, shortages in area, encroachments, improvements, overlapping of
improvements, setback lines, easements, or roadways; (v) the total acreage
and the gross square footage and the square footage net of any portion of
the property lying within public roadways shown hereon are correct; (vi)
none of the property lies within the 100-year flood plain or any special
flood hazard area or general hazard area as designated by any governmental
agency; and (vii) this survey satisfies the accuracy requirements of an
ALTA-ACSM Class A "as-built" survey."
The Survey must be satisfactory to the Title Company so as to permit it to
issue extended coverage on the Title Policy at Closing.
ARTICLE 7.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
7.01 Accounts Receivable. Buyer agrees that the accounts receivable owned
by Seller as of the Closing Date for rent and services rendered prior to Closing
are not being transferred or sold hereunder, and that from the Closing Date
forward Seller will be entitled to receive payment of the same. Buyer shall
remit to Seller within ten (10) days following the end of each month, following
the Closing, all payments received by Buyer, for the prior month, on the
accounts receivable owned by Seller. Buyer will prepare a schedule of Seller's
accounts receivable showing all payments received thereon within ten (10) days
after the last day of each month, which schedule shall be subject to approval by
Seller, which approval shall not be unreasonably withheld or delayed. Seller
acknowledges and agrees that Buyer is not quaranteeing, collection of, nor will
Buyer be obligated to expend any sums to collect, any accounts receivable owed
to Seller. In the event any amounts are received from tenants or residents
which are not sufficient to bring such tenant's or resident's accounts current,
such amounts shall first be applied against the accounts receivable payable to
Seller.
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7.02 Accounts Payable. Seller agrees to timely pay and satisfy in full
all amounts due for products, goods, supplies, inventory and services received
or performed at the Park Place II Assisted Living and Special Care Facility
prior to the Closing Date. Buyer agrees to timely pay and satisfy in full all
amounts (i) accruing after the Closing under the Contracts being assumed by
Buyer and (ii) due for products, goods, supplies, inventory and services
received or performed in the ordinary course of business after the Closing Date
at the Park Place II Assisted Living and Special Care Facility pursuant to a
schedule to be prepared by Seller and approved by Buyer in Buyer's reasonable
discretion prior to Closing (it being agreed to by the parties that such
schedule may include general estimates of the amounts in question which do not
have to be specified to the exact dollar). Such schedule shall be revised and
reconciled by the parties after the Closing from time to time to reflect the
actual amounts owed.
ARTICLE 8.
DELIVERY OF DOCUMENTS PRIOR TO CLOSING
8.01 Seller's Deliveries. Seller has delivered prior to the execution of
this Agreement the following:
(A) the results of the Uniform Commercial Code search and tax
searches on Seller, as debtor, in the state of Washington and County of
Spokane;
(B) the preliminary title report;
(C) copies of all contracts, agreements, instruments or arrangements
described in Exhibits "2.05(A)", "2.05(B) and "2.05(C)";
(D) a preliminary schedule of Seller's accounts receivable;
(E) a list of all of Seller's present employees of Park Place
Retirement Community and their titles, job descriptions, rates of pay,
bonuses earned, length of employment and vacation and sick pay earned and
accrued;
(F) copies of financial statements on the operation of the Park Place
II Assisted Living and Special Care Facility for the immediately preceding
two (2) fiscal years;
(G) a copy of each survey, environmental report and appraisal, in the
possession of Seller and which relate to the Assets or the Park Place II
Assisted Living and Special Care Facility; and
(H) a schedule setting forth the name of each resident or tenant and
the applicable rental charged, and copies of all current Leases.
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8.02 Buyer's Deliveries. Within five (5) days from the date hereof Buyer
shall deliver to Seller:
(A) the Certificate of Secretary or Assistant Secretary of Buyer,
with attached resolutions authorizing the transaction, and authorizing one
or more of the officers of Buyer to execute and deliver the Agreement; and
(B) the Buyer's most recent Financial Statements for 1995 and 1996.
ARTICLE 9.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, at or before the Closing, of all conditions set out in this
Article 9. In the event all of the conditions contained in this Article 9 are
not satisfied by Closing other than because of a Buyer Default, Buyer may
terminate this Agreement and the Earnest Money shall be returned to Buyer.
Buyer may waive, in writing, any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by Buyer of any of its other rights or remedies under
Section 17.01 of this Agreement, if Seller shall be in default of any of its
representations, warranties or covenants under this Agreement or any term or
provision of this Agreement, unless such waiver is a waiver of such default.
9.01 Representations, Warranties and Covenants True at Closing. The
covenants, representations and warranties of Seller to Buyer contained in this
Agreement shall be true and correct on the date of this Agreement and at the
date of Closing with the same force and effect as if such covenants,
representations and warranties were made at such time.
9.02 Authorization. All actions required to be taken by Seller to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by Seller.
9.02 Compliance with Agreement. Seller shall have performed and complied
in all material respects with Seller's obligations under this Agreement which
are to be performed or complied with by Seller prior to or at the Closing.
9.03 Actions, Suits, and Proceedings. No actions, suits or proceedings
before any court, or any government body or authority pertaining to the Assets,
the operation of the Park Place II Assisted Living and Special Care Facility,
the transaction contemplated by this Agreement or to its consummation thereof
shall have been instituted or threatened on or before the Closing Date.
9.04 Authority and Approvals. Buyer shall have obtained all licenses,
permits, certificates, approvals and other authorizations from the appropriate
governmental agencies that are necessary to operate the Park Place Retirement
Community as a retirement
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apartment facility, including but not limited to the DSHS Medicaid Contract. In
the event State of Washington and/or other applicable authorities does not issue
by the time of Closing all such licenses and permits which are necessary to own
and operate the assets and carry out the business of Park Place Retirement
Community, and Buyer has timely made all such applications and diligently
pursued obtaining such licenses and permits, Buyer may terminate this Agreement,
the Earnest Money shall be returned to Buyer, and this Agreement shall be null
and void.
9.05 Uniform Commercial Code Lien Searches. The Buyer shall have received,
at least five (5) days prior to Closing, certified copies of Uniform Commercial
Code lien searches and tax and judgment lien searches, all dated no earlier than
ten (10) days prior to Closing. In the event such lien searches reveal the
existence of security interests or liens held by anyone in the subject Assets of
this Agreement, such security interests or liens shall be terminated at or prior
to Closing and Buyer shall be furnished with evidence of termination of the
security interests.
9.06 Simultaneous Closing. The purchase and sale of the Park Place Assets
referred to in that certain Purchase and Sale Agreement between Park Place
General Partnership and Buyer dated as of the date hereof shall close
simultaneously with the Closing of the purchase and sale of the Assets hereto.
ARTICLE 10.
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
The obligations of Seller under this Agreement are subject to the
satisfaction, at or before the Closing, of all of the conditions set out in this
Article 10. In the event all of the conditions contained in this Article 10 are
not satisfied by Closing other than because of a Seller Default, Seller may
terminate this Agreement. Seller may waive any or all of the conditions in
whole or in part without prior notice; provided, however, that no such waiver of
a conditions shall constitute a waiver by Seller of any of its other rights or
remedies under Section 17.02 of this Agreement, if Buyer shall be in default of
any of its representations, warranties or covenants or any other provision of
this Agreement, unless such waiver is a waiver of such default.
10.01 Representations, Warranties and Covenants True at Closing. The
covenants, representations and warranties of the Buyer to the Seller contained
in this Agreement shall be true and correct at the date of Closing with the same
force and effect as if such covenants, representations and warranties were made
at such time.
10.02 Authorization. All actions required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by Buyer.
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10.03 Compliance with Agreement. Buyer shall have performed and complied
in all material respects with all obligations under this Agreement which are to
be performed or complied with prior to or at the Closing.
10.04 Actions, Suits and Proceedings Against Buyer. No action, suit or
proceeding against Buyer, before any court or any government body or authority,
pertaining to the transaction contemplated by this Agreement and to its
consummation, shall have been instituted or threatened on or before the Closing
Date against Buyer which has the effect of materially adversely affecting
Buyer's ability to perform its obligations under this Agreement.
10.05 Simultaneous Closing. The purchase and sale of the Park Place
Assets referred to in that certain Purchase and Sale Agreement between Park
Place General Partnership and Buyer dated as of the date hereof shall close
simultaneously with the Closing of the purchase and sale of the Assets hereto.
10.06 Authority and Approvals. Buyer shall have obtained all licenses,
permits, certificates, approvals and other authorizations from the appropriate
governmental agencies that are necessary to operate the Park Place Retirement
Community as a retirement apartment facility, including but not limited to the
DSHS Medicaid Contract.
ARTICLE 11.
CLOSING AND POST CLOSING
11.01 Closing. Subject to the satisfaction of all conditions precedent to
Closing, Provided that (i) all conditions to Buyer's obligation to Close under
this Agreement have been satisfied or waived in writing by Buyer and (ii) all
conditions to Seller's obligation to Close under this Agreement have been
satisfied or waived in writing by Buyer, the Closing shall be held on or before
February 28, 1997 ("Closing Date"), unless another date is mutually agreed to by
Seller and Buyer. Buyer shall have the right to extend The Closing Date upon
written notice to Seller at any time prior to February 28, 1997 for a period of
thirty-one (31) days. Such extension shall not affect the condition or
designation of the Earnest Money. In no event shall the Closing Date extend
beyond March 31, 1997, except to the extent of any delays caused by a breach by
Seller of its obligations under this Agreement.
At the Closing the parties will execute and deliver all documents
(hereinafter collectively referred to as the "Closing Documents"), duly
witnessed and acknowledged where appropriate, necessary to consummate the
transaction contemplated by this Agreement pursuant to the terms of this
Agreement.
11.02 Seller's Deliveries at Closing. At the Closing Seller shall deliver
or cause to be delivered to Buyer or as directed by Buyer, in form and substance
reasonably acceptable to Buyer:
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(A) a schedule of all resident and tenant deposits, Entrance Fee
liabilities, all security deposits, cleaning fees and similar deposits and
fees held by Seller and paid to Seller under the Leases, excluding interest
earned on such amounts to the extent not required to be paid to the party
entitled to the return of each such deposit. Seller shall pay such
deposits listed upon the schedule to Buyer at Closing;
(B) all resident or tenant records and the original copies of all
Leases and Contracts, relating to the operation of the Park Place II
Assisted Living and Special Care Facility (Buyer shall also have the right
to copy at Buyer's expense, all operational and accounting records relating
to the facility);
(C) a schedule of (i) names, titles and job descriptions, (ii) amount
of current compensation due, (iii) earned vacation pay, holiday pay and
FICA and unemployment taxes thereunder, (iv) accrued vacation and sick pay,
(v) seniority, (vi) bonuses, (vii) current compensation levels of all
employees at the Park Place II Assisted Living and Special Care Facility on
the Closing Date, which Schedule will be attached hereto as Exhibit
"11.02(C)." Seller shall, on or before twenty (20) days after the Closing
Date, pay to the respective employees, in cash, the amount of the items
shown in subparagraphs (ii) and (iii) the accrued vacation pay described in
clause (iv) above and the accrued bonuses under clause (vi) above;
(D) a final schedule of Seller's accounts receivables as of the date
of Closing as required by Section 7.01 hereof;
(E) a notice executed by Seller and acceptable to Buyer, addressed to
each tenant, resident, supplier, contract party and purveyor of Seller
and/or the Park Place II Assisted Living and Special Care Facility
informing them of the sale of the Assets and business to Buyer as of the
Closing Date and directing such party to make all future payments due under
said documents to Buyer and to direct all further communication to Buyer at
such address as Buyer shall designate in such notice (which notices shall
be sent by Buyer to the relevant addresses within five (5) days after
Closing);
(F) possession of the Park Place II Assisted Living and Special Care
Facility and the Assets, all keys, pass cards, master keys, access and
emergency codes and all other similar property and/or information;
(G) an executed and notarized statutory warranty deed conveying the
Real Property to Buyer in a form mutually agreed to by the parties in their
reasonable discretion;
(H) an executed bill of sale for the Assets in a form mutually agreed
to by the parties in their reasonable discretion;
(I) an executed Assignment of Contracts and Leases in a form mutually
agreed to by the parties in their reasonable discretion;
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(J) an executed Assignment assigning all Intangibles, if any,
included in the Assets to Buyer;
(K) the Title Policy;
(L) the required documents terminating all security interest in the
Assets.
(M) all certificates of title to all vehicles and other items of
personal property which are evidenced by a certificate of title; and
(N) such other items or documentation as Title Company or Buyer may
reasonably request in order to consummate the transactions contemplated by
this Agreement.
11.03 Buyer's Deliveries to Seller. At Closing Buyer shall deliver, or
cause to be delivered, to Seller:
(A) the Purchase Price, as adjusted by all credits and prorations as
determined under this Agreement, payable in cash or immediately available
wire transferred funds; and
(B) an Assumption Agreement of the Leases described in Exhibit
"2.05(A)" hereto and the Contracts described in Exhibit "2.05(B)" hereto in
a form mutually agreed to by the parties in their reasonable discretion.
11.04 Prorations. On the Closing Date, the parties shall deliver pro
rated monies as described in Article 3, Section 11.05 and Section 11.06 herein.
11.05 Buyer's Closing Costs. At Closing Buyer shall pay the following
costs:
(A) one half (1/2) of any Closing or escrow fees charged;
(B) one-half (1/2) of recording costs; and
(C) one-half (1/2) of the costs of the Uniform Commercial Code
search.
11.06 Seller's Closing Costs. At Closing Seller shall pay the following
costs:
(A) one half (1/2) of any Closing or escrow fees charged;
(B) one-half (1/2) of recording costs;
(C) one-half (1/2) of the costs of the Uniform Commercial Code
search; and
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(D) the real estate excise tax.
11.07 Utility Services. Seller shall cause all utility meters to be read
prior to Closing and Seller shall be liable for all resulting final bills. The
utility services shall be switched to Buyer's name effective on the Closing
Date.
ARTICLE 12.
INDEMNIFICATIONS
12.01 Indemnification by Seller. Seller shall indemnify and hold Buyer
harmless from any and all liabilities, obligations, judgments, demands, damages,
causes of action, claims, costs and expenses, including reasonable attorneys'
fees, arising from (i) the breach of any representation, warranty, covenant or
agreement of Seller contained in this Agreement, (ii) any violation of
Environmental Laws and any contamination from Hazardous Materials on the Real
Property caused by Seller arising out of the ownership or operation of the
Assets prior to the Closing Date and (iii) any event arising from the ownership
and operation of the Assets on or before the Closing Date except to the extent
Buyer is liable for any such events pursuant to the terms of this Agreement.
12.02 Indemnification by Buyer. Buyer shall indemnify and hold Seller
harmless from any and all liabilities, obligations, judgments, demands, damages,
causes of action, claims, costs and expenses, including reasonable attorneys'
fees, arising from (i) the breach of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement, (ii) any violation of
Environmental Laws and any contamination from Hazardous Materials on the Real
Property caused by Buyer arising out of the ownership or operation of the Assets
by Buyer after the Closing Date and (iii) any event arising from the ownership
and operation of the Assets by Buyer on or after the Closing Date except to the
extent (a) arising from occurrences prior to the Closing Date or (b) Seller is
liable for any such events pursuant to the terms of this Agreement.
ARTICLE 13.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
In the event, at any time prior to Closing, a party learns that any of said
representations, warranties and covenants are no longer true or valid, the party
shall immediately notify the other party in writing and therein specify the
factors rendering such representations, warranties or covenants untrue or
invalid.
The parties hereby acknowledge that the covenants, representations and
warranties of each set forth herein were relied upon by the others and without
such representations, covenants and warranties each such other party would not
have executed this Agreement nor completed the transaction. Such
representations, covenants and warranties of the parties contained in this
Agreement and/or certificates or documents submitted pursuant to or in
connection with the transaction herein contemplated by one party to the other
shall not merge on Closing but shall survive the confirmation of the Closing of
the transaction and,
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not withstanding such Closing and regardless of any investigation on behalf of
that party with respect thereto, shall continue in full force and effect after
Closing.
ARTICLE 14.
DAMAGE TO ASSETS
If prior to the Closing Date, all or any portion of the Assets are damaged,
destroyed or rendered inoperative (collectively the "Damage") by fire, natural
elements, or other causes beyond Seller's control, Seller shall immediately
notify Purchaser of such Damage and the following procedures shall apply:
(A) if the Damage is not Material (hereinafter defined) or the damage
is material but Buyer elects not to terminate this Agreement, Buyer shall
proceed to close and purchase the Assets as diminished by such Damage,
subject to a reduction in the Purchase Price equal to the full estimated
cost of repairing and/or replacing the Damage agreed to by Seller and Buyer
in their reasonable discretion;
(B) if the Damage is Material, then Buyer may terminate and cancel
the purchase of the Assets, the Earnest Money shall be returned to Buyer
and neither party hereto shall have any further rights against or
obligations to the other under this Agreement; and
(C) for the purposes of this paragraph, Damage shall be deemed to be
"Material" if the cost of repairing such Damage equals or exceeds One
Hundred Thousand and 00/100 Dollars ($100,000.00).
ARTICLE 15.
MISCELLANEOUS
15.01 Notices. Any notice required or permitted herein or by applicable
law shall be deemed properly given: (i) when personally delivered to Maker;
(ii) three (3) days following the date sent by United States Mail, certified or
registered, postage prepaid, return receipt requested; or (iii) one (1) business
day following the date sent by Federal Express or overnight United States Mail
or other national overnight carrier, and addressed in each such case as set
forth below:
if to Seller: Park Place II, L.L.C.
104 S. Division
Spokane, WA 99202
Attn: John M. Stone
if to Buyer: Brookdale Living Communities, Inc
c/o The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, IL 60601
-23-
<PAGE>
Attn: Mark J. Schulte
with a copy to: The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, IL 60601
Attn: Robert J. Rudnik
15.02 Headings. The headings in this Agreement are intended solely
for convenience or reference, and shall be given no effect in the construction
or interpretation of this Agreement.
15.03 Binding Effect. This Agreement and the terms, covenants,
benefits and duties set forth herein shall inure to the benefit of and be
binding upon the parties, and the heirs, successors, legal representatives and
assigns of each of the parties.
15.04 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement.
15.05 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
15.06 Incorporation of Recitals. The recitals are incorporated in
the body of this Agreement as if set forth at length.
15.07 Time of the Essence and Delivery of Documents. It is
acknowledged by both Seller and Buyer that time is of the essence with respect
to all matters relating to this transaction, including, but not limited to, the
timely submittal of all reports and information relating to the property to
Buyer by Seller. Seller shall be entitled to copies of the results of due
diligence studies, reports and findings to the extent Buyer is legally able to
release such information and except as provided on Exhibit "15.07" attached
hereto. Copies of due diligence will be provided to Seller as the information
at the conclusion of due diligence. Seller agrees to hold said materials in
confidence until such time, if ever, when negotiations for an agreement or a
close have been irrevocably terminated.
15.08 Exhibits. The exhibits attached hereto and all post-exhibits
attached hereafter, together with all documents incorporated by reference
therein, form an integral part of this Agreement and are hereby incorporated
into this Agreement wherever reference is made to them to the same extent as if
they were set out in full at the point at which such reference is made. To the
extent that any of the Exhibits attached hereto provide that the final form of
such Exhibit is to be attached by the parties, then Seller and Buyer shall
diligently proceed in good faith and in their reasonably discretions to finalize
such Exhibits by the relevant date set forth in each such Exhibit. The parties
may incorporate such final Exhibits into the body of this Agreement by either
executing a formal amendment or amendments to this Agreement or by both parties
initialling each such Exhibit and attaching it to this Agreement without a
formal amendment.
-24-
<PAGE>
15.09 Attorney Fees Recoverable. In the event any suit or action is
instituted to enforce or interpret any of the terms of this Agreement, including
any action or participation in or in connection with a case or proceeding under
any Chapter of the Bankruptcy Code or any successor statute, the prevailing
party shall be entitled to recover such sum as the court may adjudge reasonable
for a recovery of attorney fees and court costs incurred in such suit, action or
proceeding or any appeal from any judgment, order or decree entered therein.
The attorneys fees and court costs recoverable under this Section 15.09 are in
addition to, and not subject to, the limitations on damages referred to in
Section 17.01 and 17.02 below.
15.10 Further Assurances, Additional Documents and Acts. Each of the
parties hereto agrees that it will at any time and from time to time, do,
execute, acknowledge and deliver or shall cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, documents,
assignments, transfers, conveyances and assurances as may reasonably be required
by the other parties hereto in order to carry out fully and effectuate the
transactions herein contemplated by this Agreement.
ARTICLE 16
CONDEMNATION
In the event between the date of this Agreement and the date of the
Closing, Seller receives written notice that any condemnation or eminent domain
proceedings are threatened or initiated which might result in the taking of any
part of the Real Property, Buyer may:
A. terminate this Agreement, in which event, the Earnest Money shall
promptly be returned to Buyer and all rights and obligations of the parties
hereunder shall cease; or
B. consummate the transactions contemplated by this Agreement, in which
event Seller shall assign to Buyer all of Seller's right, title and
interest in and to any award made in connection with such condemnation or
eminent domain proceedings.
Seller shall immediately notify Buyer in writing of the occurrence of any
threat or commencement of condemnation or eminent domain proceedings. Buyer
shall then notify Seller within fifteen (15) days after the date of Buyer's
receipt of Seller's notice of such condemnation or eminent domain threat
proceedings whether Purchaser elects to exercise its right under Subsection A or
B of this Section. In the event Purchaser receives written notice of the
Casualty or threat or occurrence of such condemnation or eminent domain
proceedings within fifteen (15) days of the date of Closing, and Purchaser
elects to consummate the transactions contemplated by this Agreement within the
time period provided above, the date of the Closing shall be adjusted
accordingly.
ARTICLE 17.
DEFAULTS AND REMEDIES
-25-
<PAGE>
17.01 If Seller should breach any of its representations, warranties,
covenants or agreements contained in this Agreement or in any other agreement,
instrument, certificate or other document between Seller and Buyer, or from
Seller to Buyer, delivered pursuant to this Agreement, and such breach is not
cured within fifteen (15) days after written notice from Buyer to Seller of such
breach, or if a "Seller Default" has occurred under the the PPGP Agreement (in
any case, a "Seller Default"), and such Seller Default is not caused by a Buyer
Default, Buyer may as its sole and exclusive remedy under this Agreement, at law
and in equity, (1) cancel this Agreement and receive the prompt return of the
Earnest Money, and collect monetary damages from Seller in an amount equal to
One Hundred Thirty Six Thousand Seven Hundred and Fifty Nine Dollars and 59/100
($136,759.59) as full and final liquidated damages (except as otherwise provided
in Section 15.09 above), Buyer and Seller hereby acknowledging that, in the
event of Sellers failure to consummate the sale contemplated hereby, actual
damages suffered by Buyer would be difficult and/or inconvenient to determine or
ascertain; or (2) enforce specific performance of this Agreement. In the event
that Buyer elects to enforce specific performance of this Agreement as provided
in clause (2) above, Buyer shall have the right, at any time prior to the time
the Assets are actually conveyed to Buyer, to change such election and instead
proceed under clause (1) above. Such change in election by Buyer shall not make
Seller a "prevailing party" under Section 15.09 above in connection with any
litigation or other proceeding relating to specific performance, but the court
shall instead look to whether Buyer is ultimately the prevailing party in
enforcing its rights under clause (1) above.
17.02 If Buyer should breach any of its representations, warranties,
covenants or agreements contained in this Agreement or in any other agreement,
instrument, certificate or other document between Seller and Buyer, or from
Buyer to Seller, delivered pursuant to this Agreement, and such failure is not
cured within fifteen (15) days after a written notice from Seller to Buyer of
such failure or if a "Buyer Default" has occurred under the PPG Agreement (in
any case a "Buyer Default"), and such Buyer Default is not caused by a Seller
Default, Seller, as Seller's sole and exclusive remedy under this Agreement, at
law and in equity, may upon written notice to Buyer, terminate this Agreement
and receive the Earnest Money, as full and final liquidated damages (except as
otherwise provided in Section 15.09 above), Buyer and Seller hereby
acknowledging that, in the event of Buyer's failure to consummate the sale
contemplated hereby, actual damages suffered by Seller would be difficult and/or
inconvenient to determine or ascertain; and, thereafter, there shall be no
further liability hereunder on the part of either party or the other party.
ARTICLE 18.
VENUE
This Agreement shall be construed and enforced according to the laws of the
State of Washington. Any suit or action in regard to or arising out of the
terms or conditions of this Agreement shall be litigated in the State Court
situated in the City of Spokane, County of Spokane, State of Washington or the
United States Federal District Court for the District of Eastern Washington and
each party hereto, individually and jointly, hereby submits their person to the
jurisdiction of said court. Venue for any action shall be in the
-26-
<PAGE>
City of Spokane, Spokane County, State of Washington. Each party hereto
expressly waives, to the full extent it may effectively do so under applicable
law, any objection it may at anytime have: (i) the laying of venue in any
action or proceeding in any such forum; and (ii) further irrevocably waives any
claim that any such forum is inconvenient forum. Nothing contained herein shall
present Buyer from removing any action brought in any State or local Court to
Federal Court.
ARTICLE 19.
ACCESS TO RECORDS
Recognizing that Seller may from time to time require access to books,
records, data or other information delivered to Buyer, Buyer agrees that as
often as Seller may reasonably request, Buyer will permit Seller's employees and
agents reasonable access to the records during the normal business hours for the
purpose of reviewing, photocopying or making compilation of or from any of the
Seller's books, records, data or other information delivered by Seller to Buyer
pursuant to the terms of this Agreement.
ARTICLE 20.
ESCROW
This agreement shall constitute escrow instructions to the Title Company
herein named, as well as the agreement of the parties hereto with respect to the
purchase of the Assets by Buyer from Seller. Title Company is hereby appointed
and designated to act as the escrow Agent and is authorized and instructed to
deliver pursuant to the terms of this agreement the documents and monies to be
deposited into escrow as hereinafter provided. The parties hereto will execute
such supplemental escrow instructions as are customarily used by Title Company,
with such changes as the parties may negotiate to reflect the terms of this
transaction, which instructions, however, shall be subject to and governed by,
and shall not supersede in any way, the provisions of this Agreement.
ARTICLE 21.
ASSIGNABILITY
Buyer and Seller retain the right to assign all or part of this Agreement
for its purpose of achieving a 1031 like kind exchange hereto or in connection
herewith, this Agreement shall benefit and be binding upon such assignee to the
extent of such assignment notwithstanding the fact that such assignee was not an
original party hereto or thereto, but no such assignment by a party shall
release such party of its obligations under this Agreement. Each assignee to a
party's interest hereunder is entitled to all of the rights and benefits of the
party under this Agreement.
-27-
<PAGE>
[Signature Page Follows]
-28-
<PAGE>
ARTICLE 22.
EXECUTION BY FACSIMILE SIGNATURE
This Agreement may be executed by facsimile signature. An executed copy
delivered with facsimile signature shall be deemed an original for all purposes
hereof. Each party executing by facsimile signature shall provide an original
signed copy to the party entitled thereto within five (5) days of such delivery.
IN WITNESS WHEREOF, the parties hereto have executed this instrument the
day and year first above written.
Seller: Buyer:
PARK PLACE II, L.L.C. BROOKDALE LIVING
COMMUNITIES, INC.
By: /s/ John M. Stone
-------------------------
John M. Stone, CEO By: /s/ Mark J. Schulte
-------------------------
Its: President/CEO
------------------------
State of CALIFORNIA )
) ss.
County of RIVERSIDE )
On this day personally appeared before me JOHN M. STONE, to me known to be
the CEO of PARK PLACE II, L.L.C., the limited liability company that executed
the foregoing instrument, and acknowledged the said instrument to be the free
and voluntary act and deed of said limited liability company, for the uses and
purposes therein mentioned, and on oath stated that he is authorized to execute
the said instrument on behalf of said limited liability company.
GIVEN under my hand and official seal this 20th day of FEBRUARY, 1997.
/s/ Renee M. Williams
--------------------------------------
[NOTARY PUBLIC STAMP] NOTARY PUBLIC in and for the State of
CALIFORNIA, residing at: PALM DESERT
Commission expires: AUGUST 19, 1997
State of___________________)
) ss.
County of__________________)
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<PAGE>
On this day personally appeared before me Mark J. Schulte, to me known to
be the President/CEO of BROOKDALE LIVING COMMUNITIES, INC., the corporation that
executed the foregoing instrument, and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he/she is authorized to
execute the said instrument on behalf of said corporation.
GIVEN under my hand and official seal this 25th day of February, 1997.
/s/Donna J. Wadzita
-------------------------------------
NOTARY PUBLIC in and for the State of
Illinois, residing at: ____________
Commission expires: March 1, 2001
-30-
<PAGE>
LIST OF EXHIBITS
Exhibit "1.01(A)" Legal Description of Property
Exhibit "2.03" Feasibility Period Conditions
Exhibit "2.05(A)" Leases
Exhibit "2.05(B)" Contracts
Exhibit "2.05(C)" Contracts Not Being Assigned
Exhibit "4.01(B)" Scheduled Lease Rates
Exhibit "4.02(A)(14)" Liens
Exhibit "6.02" Permitted Exceptions to Title Commitment
Exhibit "11.02(C)" Employee Compensation Schedule
Exhibit 15.07 Confidential Buyer Documents
-31-
<PAGE>
EXHIBIT "1.01(A)"
Legal Description of Property
Parcel "B" of SHORT PLAT NO. SP 1033-95, according to plat recorded in Volume 12
of Short Plats, Page 58, in Spokane County, Washington.
-32-
<PAGE>
EXHIBIT "2.03"
FEASIBILITY PERIOD CONDITIONS
LENGTH OF FEASIBILITY PERIOD
ITEM RELATING TO SUCH ITEM
- ------------------------------------------ ----------------------------
1. Appraisal of Properties February 21, 1997
2. Environmental Reports February 28, 1997
3. Review and Approval of all
1997 Budget Assumptions February 19, 1997
4. ALTA Survey, Title
and title exception documents February 28, 1997
5. All residential and comm. leases February 21, 1997
6. All service/maintenance agrmts. February 21, 1997
7. Results of Physical Inspection
performed by Adams Consulting
Engineers (ordered) February 25, 1997
8. All actual tax bills (with valuations)
for previous two years February 25, 1997
9. All employees, job title, description
and compensation schedules February 27, 1997
10. All employee policies/procedures February 27, 1997
11. All payment and payroll information February 27, 1997
12. Other material to be supplied
pursuant to the Purchase Agreement 10 Business days from receipt (or
period contained in the Purchase
Agreement)
-33-
<PAGE>
EXHIBIT "2.05(A)"
Leases
To Be Attached
by the Parties on or before February 21, 1997
-34-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 2.05 (4)
page 1 of 3
- ---------------------------------------------------------------------------------------------------------------------------------
Park Place II LLC - Special Care Rent Roll
- ----------------------------------------------------------------------------------------------------------------------------------
Apt.# First Name Last Name Move-In Date Private/Semi Monthly Rent # Res. Age
<S> <C> <C> <C> <C> <C> <C> <C>
1D Semi-Private $ 2,700.00
1W Semi-Private $ 2,700.00
2 Frances Crabtree 12/18/96 Private $ 3,200.00 1
3 George Brower 12/5/96 Private $ 3,200.00 1 72
4D Mary "Bess" Oliver 9/6/96 Semi-Private $ 2,700.00 1 83
4W Sylvia Kane 11/29/96 Semi-Private $ 2,700.00 1 88
5 Louise Starr 4/23/96 Private $ 3,200.00 1 84
6 Ann Pearson 2/1/96 Private $ 3,200.00 1 72
7D Robert Henderson 2/10/97 Semi-Private $ 2,700.00 1 82
7W Harold Balazs 2/12/97 Semi-Private $ 2,700.00 1 90
8 Archie Scott 12/28/96 Private $ 3,200.00 1 82
9 William "Bill" Tandy 10/23/96 Private ($5200 Entry) $ 2,950.00 1 82
10 Marion Wold 3/14/96 Private $ 3,200.00 1 91
11 Grace Stewart 3/1/96 Private ($5200 Entry) $ 2,950.00 1 84
12D Wanda Friedman 1/25/97 Semi-Private $ 2,700.00 1 88
12W Semi-Private $ 2,700.00 1 86
13D Helen Self 5/30/96 Semi-Private $ 2,700.00 1 84
13W Coriena Baxter 8/9/96 Semi-Private $ 2,700.00 1 83
14D Harold VandeKamp 2/1/96 Semi-Private $ 2,100.00 1 62
14W Carl Barden 2/1/96 Semi-Private $ 2,700.00 1 82
15D Semi-Private $ 2,700.00
15W George Jackman 1/7/97 Semi-Private $ 2,700.00 1 92
16D Edith "Millie" Lungwitz 5/31/96 Semi-Private $ 2,700.00 1 92
16W Florence Giles 7/18/96 Semi-Private $ 2,700.00 1 85
17D Nova Schuster 1/25/97 Semi-Private $ 2,700.00 1 85
17W Clara Powell 1/13/97 Semi ($3100 entry) $ 2,450.00 1 86
18 Charles Dixon 11/17/96 Private $ 3,200.00 1 83
19 Eunice VanHam 7/29/96 Private ($5200 entry) $ 2,950.00 1 84
20 Loyd Vandeberg 10/4/96 Private $ 3,200.00 1 78
Total $ 76,800.00 26 80.0
Notes:
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 2.05 (A)
Park Place II, L.L.C. Leases
- ----------------------------------------------------------------------------------------------------------------------------------
Park Place II LLC - Assisted Living
- ----------------------------------------------------------------------------------------------------------------------------------
Apt.# Description Sq. Ft. First Name Last Name # Res. Phone Number Deposit Rec'd Base Rent Loc 2nd
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
302 studio alcove 400 $ 1,750.00
303 studio 354 $ 1,650.00
304 studio alcove 400 $ 1,750.00
305 1 bedroom 525 Betty Pence 1 921-5779 in 1/19/97 $ 1,950.00 zero
306 studio 354 Walter Baxter 1 928-3544 in 9/30 $ 1,650.00 zero
307 1 bedroom 525 Mildred Mielke 1 891-5921 in 10/1 $ 1,950.00 zero
308 1 bedroom 525 Ella Mae Schini 1 in 12/28 $ 1,950.00 zero
MODEL 309 studio alcove 400 $ 1,750.00
310 studio alcove 400 Ann Gray 1 922-4233 in 1/25/97 $ 1,750.00
311 1 bedroom 525 Lewis Mosley 1 928-3157 in 9/1/96 $ 1,950.00 zero
312 2 bedroom 836 Vern & Peggy Joyer 2 927-7755 in 5/1/96 $ 2,200.00 zero $
313 studio alcove 400 Margarete Leffek 1 927-4333 in 5/1/96 $ 1,700.00 $ 600.00
*314 studio alcove 400 Lillian Mayer 1 891-7130 in 9/25 $ 1,718.64
MODEL 315 2 bedroom 836 $ 2,300.00
316 1 bedroom 525 $ 1,950.00
RESPITE317 studio alcove 400 $ 1,750.00
318 studio alcove 400 Ruth Waters 1 927-8173 in 9/5/96 $ 1,750.00 zero
319 1 bedroom 525 James Haensly 1 891-6189 in 10/18 $ 1,950.00 $ 400.00
320 1 bedroom 525 Earl & Marie Henton 2 924-2882 in 5/1/96 $ 1,950.00 zero $
*321 studio 354 Diane Ross 1 891-8688 in 10/5 $ 1,650.00 $ 68.64
322 1 bedroom 525 Jane Hix 1 in 12/31/96 $ 1,950.00 $ 400.00
*323 studio alcove 400 Lillian Ragland 1 928-6172 in 9/25 $ 1,718.64
*324 studio 354 Florence Alexandrovski 1 891-6429 in 10/1 $ 1,650.00 $ 68.64
325 studio alcove 400 $ 1,750.00
326 1 bedroom 525 Dorothy Evans 1 891-7102 in 10/4 $ 1,950.00 zero
48 $115,643.20 $4,674.56 $
NOTES:
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 2.05 (A) Park Place II, L.L.C. Leases
- ---------------------------------------------------------------------------------------------------------------------------------
PARK PLACE II LLC - ASSISTED LIVING
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apt.# Description Sq. Ft. First Name Last Name # Res Phone Number Deposit Rec'd Base Rent LOC 2nd
- ---------------------------------------------------------------------------------------------------------------------------------
101 1 bedroom 525 Clarella Toone 1 927-7127 in 5/3/96 $1,950.00 $ 200.00
- ---------------------------------------------------------------------------------------------------------------------------------
102 studio alcove 400 $1,750.00
- ---------------------------------------------------------------------------------------------------------------------------------
103 studio 354 Grace Makey 1 891-8517 in 9/12/96 $1,650.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
*104 studio 354 Vera Kozel 1 924-7972 in 7/3/96 $1,650.00 $ 68.64
- ---------------------------------------------------------------------------------------------------------------------------------
105 1 bedroom 525 H.L.& Pauline Brown 2 922-8042 in 8/17/96 $1,950.00 zero $
- ---------------------------------------------------------------------------------------------------------------------------------
106 studio 354 $1,650.00
- ---------------------------------------------------------------------------------------------------------------------------------
107 1 bedroom 525 Dora Meredith 1 928-8115 in 5/1/96 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
108 1 bedroom 525 Juanita Bley 1 928-6561 in 5/6/96 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
109 studio alcove 400 Nellie Pupo 1 927-9296 in 5/1/96 $1,650.00 $ 400.00
- ---------------------------------------------------------------------------------------------------------------------------------
110 studio 354 Alberta McCann 1 928-3750 in 5/31/96 $1,650.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
111 1 bedroom 525 Frieda Greeves 1 926-3437 in 9/27 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
201 1 bedroom 525 Dora Case 1 892-1767 in 7/22/96 $1,950.00 $ 200.00
- ---------------------------------------------------------------------------------------------------------------------------------
202 studio alcove 400 $1,750.00
- ---------------------------------------------------------------------------------------------------------------------------------
203 studio 354 $1,650.00
- ---------------------------------------------------------------------------------------------------------------------------------
204 studio alcove 400 $1,750.00
- ---------------------------------------------------------------------------------------------------------------------------------
205 1 bedroom 525 Al & Elsie Lafky 2 924-3475 in 8/9/96 $1,950.00 zero $
- ---------------------------------------------------------------------------------------------------------------------------------
206 studio 354 Larry Hengen 1 926-4554 in 5/9/96 $1,650.00 $ 200.00
- ---------------------------------------------------------------------------------------------------------------------------------
207 1 bedroom 525 Margaret Rapp 1 927-7214 in 5/1/96 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
208 1 bedroom 525 Irene Barbour 1 926-2240 in 9/15/96 $1,950.00 $ 200.00
- ---------------------------------------------------------------------------------------------------------------------------------
*209 studio alcove 400 Dorothy Hansen 1 892-1410 in 7/26/96 $1,718.64
- ---------------------------------------------------------------------------------------------------------------------------------
210 studio alcove 400 $1,750.00
- ---------------------------------------------------------------------------------------------------------------------------------
211 1 bedroom 525 $1,950.00
- ---------------------------------------------------------------------------------------------------------------------------------
212 2 bedroom 836 $2,300.00
- ---------------------------------------------------------------------------------------------------------------------------------
213 studio alcove 400 Ray Gist 1 1/30-2/18 $1,650.00
- ---------------------------------------------------------------------------------------------------------------------------------
*214 studio alcove 400 Marjorie Harlan 1 892-0211 in 8/12/96 $1,718.64
- ---------------------------------------------------------------------------------------------------------------------------------
215 2 bedroom 836 Mary Broz 1 927-4222 in 12/19 $2,200.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
216 1 bedroom 525 Walter & Alma Burt 2 891-7353 in 10/1 $1,950.00 $1,000.00 $
- ---------------------------------------------------------------------------------------------------------------------------------
217 studio alcove 400 Mary Berglund 1 926-7315 in 5/13/96 $1,750.00 $ 200.00
- ---------------------------------------------------------------------------------------------------------------------------------
218 studio alcove 400 Betty Banks 1 892-0343 in 7/31/96 $1,750.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
219 1 bedroom 525 Jean Nuess-Carter in 2/9/97 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
220 1 bedroom 525 Walter & Ann Goodyear 2/8-3/1 $1,950.00 $
- ---------------------------------------------------------------------------------------------------------------------------------
221 studio 354 Evelyn Bollman 1 924-1570 in 10/31 $1,650.00 $ 600.00
- ---------------------------------------------------------------------------------------------------------------------------------
222 1 bedroom 525 Harriet Hurt 926-8490 in 12/14 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
*223 studio alcove 400 Robert Millheisler 1 921-1703 in 10/30 $1,718.64
- ---------------------------------------------------------------------------------------------------------------------------------
*224 studio 354 Mary Jane Hankel 1 892-1802 in 8/1/96 $1,650.00 $ 68.64
- ---------------------------------------------------------------------------------------------------------------------------------
225 studio alcove 400 $1,750.00
- ---------------------------------------------------------------------------------------------------------------------------------
226 1 bedroom 525 Irene Stone 1 891-9068 in 5/5/96 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
301 1 bedroom 525 Adrienne Laverdiere 1 892-1787 in 8/26/96 $1,950.00 zero
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT "2.05(B)"
Contracts
To Be Attached
by the Parties on or before February 21, 1997
-35-
<PAGE>
EXHIBIT "2.05(B)"
Park Place II, L.L.C. Contracts
-------------------------------
1. Senske Lawn & Tree Care, Inc.
Agreement
Dated: 1/1/97
2. Evergreen Pharmaceutical East
Pharmaceutical Products Contract
Dated: 2/1/96
3. BFI Medical Waste Systems
Service Agreement
Dated: 3/14/96
4. Cox Cable of Spokane, Inc.
Multiple Dwelling Unit Cable Service and Access Agreement
Dated: 2/2/96
5. Judie Engel
Agreement to Provide Consulting Dietician Services
Dated: 1/30/96
6. Fire Power, Inc.
Preventative Maintenance Agreement
Dated: 1/18/96
7. GT Graphic Consultants, Inc.
LVC Full-Service Copier Maintenance Agreement and Equipment Lease
Dated: 3/20/96
8. Fikes Northwest, Inc.
Service Agreement*
9. Sturm Heating
Service Agreement
Dated: 11/7/96
* Note: no contract, see sample invoice attached, service cancellation requires
30-day notice, multiple air fresheners provided around campus
<PAGE>
EXHIBIT "2.05(C)"
CONTRACTS NOT BEING ASSIGNED
1. Management Agreement dated October 10, 1995 between Seller and
Start/Northwest doing business as Senior Living Management Services.
-36-
<PAGE>
EXHIBIT "4.01(A)(14)"
Liens
None
-37-
<PAGE>
EXHIBIT "4.01(B)"
Schedule Lease Rates
To Be Attached
by the Parties on or before February 21, 1997
See Following Page
-38-
<PAGE>
Park Place II, L.L.C. Scheduled Lease Rates
-------------------------------------------
EXHIBIT 4.01(B)
Special Care Rates
Floor Plans Monthly Rent
Shared apartments $2,700
Private apartments $3,200
The monthly rent includes:
. 20 private or shared apartments
. Month-to-month rent; no entry fee
. Three meals daily
. Individualized activity programs
. Innovative behavior management program
. Enclosed garden and walking path
. Incontinence program
. Arts and crafts room
. Therapeutic and recreational exercise program
. Specialized nutritional planning
. Comprehensive initial and ongoing needs assessments
. Physical, occupational and speech therapy providers on-campus
. Music and pet therapies
. Alzheimer's support group and educational seminars for families and residents
. Assistance with grooming, bathing, medication management and other personal
care
. Laundry and housekeeping
. Utilities and cable TV
. Worship services
. Transportation to community activities
Park Place
Retirement Community
511 S. Park Road . Spokane, WA 99212
(509) 922-7224
Assisted Living Rates
Floor Plans Monthly Rent
Studio $1,650
Studio with Alcove $1,750
1 Bedroom $1,950
2 Bedroom $2,200
. The above rents are based on single occupancy.
$400 will be charged monthly for a second occupant.
The monthly rent includes:
. Three meals daily
. Month-to-month rents, no entry fee
. 24-hour licensed nursing staff
. Free laundry facilities
. Educational and activity programs
. Transportation services
. Emergency call system
. Weekly housekeeping
. Utilities and cable TV
. Maintenance-free living
Additional Services: $250 - $600 per month
Initial and ongoing assessments will determine
additional services required. These services may include:
. Assistance with grooming
. Bathing
. Medication monitoring
. Other personal care services
Park Place
Retirement Community
511 S. Park Road . Spokane, WA 99212
(509) 922-7224
<PAGE>
EXHIBIT "6.02"
Permitted Exceptions to Title Commitment
To Be Attached
by the Parties on or before February 28, 1997
-39-
<PAGE>
EXHIBIT "11.02(C)"
Employee Compensation Schedule
To Be Attached
by the Parties on or before February 21, 1997
Park Place II, L.L.C.
Employee Compensation Schedule
<TABLE>
<CAPTION>
Park Place II LLC
Employee Compensation @ 2/15/97
Full Time/
Employee Name Job Title Pay Rate Part Time
<S> <C> <C> <C>
Ashar, Melissa A Resident Svc Assistant $6.50 PT
Austin, Suzanne G Waitstaff $6.00 FT
Bassen, Katy A Waitstaff $5.25 PT
Boggs, Judi L Resident Svc Assistant $6.50 FT
Brewer, April D Resident Svc Assistant $6.50 FT
Burrill, Melissa A Resident Svc Assistant $6.75 FT
Choate, Jackie J Resident Svc Assistant $6.50 FT
Dover, Lillian R Resident Svc Assistant $7.50 PT
Eaton, Lindsy R Waitstaff $5.25 PT
Etherington, Trina A Resident Svc Assistant $7.25 FT
Fackrell, Marie L Resident Svc Assistant $6.75 FT
Fomasi, Connie L Marketing/Leasing Agent $1,800.00* FT
Glasser, Melissa J Waitstaff $5.50 PT
Gollehon, Ronda L Community Resource Mgr $1,800.00 FT
Hinton, Kimberly A Resident Svc Assistant $8.50 FT
Hunter, Debra L Resident Svc Assistant $6.75 FT
Husak, Nancy E Resident Svc Assistant $6.50 PT
Jackson, Marie A Resident Svc Assistant $6.50 FT
Johnson, Lilea T Resident Svc Assistant $6.50 FT
Johnston, Kimberly A Resident Svc Assistant $7.50 FT
Jones, Adrian L Waitstaff $5.25 PT
Kaiser, Justin C Waitstaff $5.25 PT
Kappen, Jayson M Resident Svc Assistant $6.50 FT
Krauss, Cory S Dishwasher $5.25 PT
Leach, Tammy J Resident Svc Assistant $7.50 PT
Leahy, Virginia L Resident Svc Assistant $6.75 FT
Lockert, Darlene R Waitstaff $5.50 PT
Locklin, Jason K Dishwasher $5.00 PT
Lundin, Darlene R Receptionist $6.35 FT
Lyman, Kum O Cook $6.50 FT
McCormick, Angela C Resident Svc Assistant $6.75 FT
O'Hara, Constance A Resident Svc Director $3,000.00 FT
Palmer, Carol Resident Svc Assistant $7.00 PT
Peterson, Delynn R Resident Svc Assistant $6.50 PT
Reed, Sara L Resident Svc Assistant $6.25 FT
Reiner, Dean A Housekeeper $5.50 PT
Robertson, Pamela F Activities Director $7.50 FT
Rose, Cathy L Resident Svc Assistant $6.75 PT
Sands, Myra J Waitstaff $5.50 PT
Severn, Hilary M Resident Svc Assistant $7.25 FT
Silva, Jerome M Food Services Director $2,500.00 FT
Smith, Merry A Housekeeper $5.50 FT
Stark, Angela M Resident Svc Assistant $6.50 FT
Stark, Diana L Resident Svc Assistant $7.25 FT
Stidam, Charles E Housekeeper $6.00 FT
Tibbits, Elizabeth E Resident Svc Assistant $7.25 FT
Wall, Mackensie M Waitstaff $5.25 PT
Watson, Maria Y Resident Svc Assistant $6.50 FT
Widick, Michelle M Licensed Practical Nurse $12.00 PT
Wilke, Cindie D Registered Nurse $15.00 FT
Wing, Julie M Resident Svc Assistant $6.75 FT
Wyatt, Brandi M Resident Svc Assistant $6.00 FT
Zeller, Jackie M Resident Svc Assistant $6.75 PT
</TABLE>
*Plus Commissions
-40-
<PAGE>
EXHIBIT "15.07"
Confidential Buyer Documents
1. Appraisal
-41-
<PAGE>
EXHIBIT 10.27
MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 27, 1996
BY AND BETWEEN
HEALTH AND RETIREMENT PROPERTIES TRUST,
AS LANDLORD,
AND
BLC PROPERTY, INC.,
AS TENANT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1: DEFINITIONS...................................................... 1
1.1 Additional Rent................................................... 1
1.2 Additional Charges................................................ 2
1.3 Adjusted Purchase Price........................................... 2
1.4 Affiliated Person................................................. 2
1.5 Agreement......................................................... 2
1.6 Applicable Laws................................................... 2
1.7 Award............................................................. 3
1.8 Base Revenues..................................................... 3
1.9 Brookdale......................................................... 3
1.10 Business Day...................................................... 3
1.11 Capital Addition.................................................. 4
1.12 Capital Additions Cost............................................ 4
1.13 Change in Control................................................. 4
1.14 Code.............................................................. 5
1.15 Collective Leased Properties...................................... 5
1.16 Commencement Date................................................. 5
1.17 Condemnation...................................................... 5
1.18 Condemnor......................................................... 5
1.19 Consolidated Financials........................................... 5
1.20 Date of Taking.................................................... 5
1.21 Declaration....................................................... 5
1.22 Default........................................................... 6
1.23 Distribution...................................................... 6
1.24 Encumbrance....................................................... 6
1.25 Entity............................................................ 6
1.26 Environment....................................................... 6
1.27 Environmental Obligation.......................................... 6
1.28 Environmental Notice.............................................. 6
1.29 Environmental Report.............................................. 6
1.30 Event of Default.................................................. 6
1.31 Excess Total Revenues............................................. 6
1.32 Extended Terms.................................................... 6
1.33 Facility.......................................................... 7
1.34 Facility Mortgage................................................. 7
1.35 Facility Mortgagee................................................ 7
1.36 Facility Trade Name............................................... 7
1.37 Fair Market Added Value........................................... 7
1.38 Fair Market Value................................................. 7
1.39 Fair Market Value Purchase Price.................................. 7
1.40 Financial Officer's Certificate................................... 7
1.41 Fiscal Year....................................................... 8
1.42 Fixed Term........................................................ 8
1.43 Fixtures.......................................................... 8
1.44 GAAP.............................................................. 8
1.45 Government Agencies............................................... 8
1.46 Guarantors........................................................ 8
1.47 Guaranty.......................................................... 8
1.48 Hazardous Substances.............................................. 8
1.49 Immediate Family.................................................. 9
1.50 Impositions....................................................... 9
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C> <C>
1.51 Incidental Documents............................................. 10
1.52 Indebtedness..................................................... 10
1.53 Independent Trustees............................................. 10
1.54 Insurance Requirements........................................... 10
1.55 Interest Rate.................................................... 10
1.56 Investment....................................................... 10
1.57 IPO.............................................................. 11
1.58 Land............................................................. 11
1.59 Landlord......................................................... 11
1.60 Lease Year....................................................... 11
1.61 Leased Improvements.............................................. 11
1.62 Leased Personal Property......................................... 11
1.63 Leased Property.................................................. 11
1.64 Legal Requirements............................................... 11
1.65 Lending Institution.............................................. 12
1.66 Lien............................................................. 12
1.67 Management Agreement............................................. 12
1.68 Manager.......................................................... 12
1.69 Minimum Rent..................................................... 12
1.70 Notice........................................................... 12
1.71 Officer's Certificate............................................ 12
1.72 Overdue Rate..................................................... 12
1.73 Parent........................................................... 12
1.74 Permitted Encumbrances........................................... 13
1.75 Permitted Liens.................................................. 13
1.76 Permitted Subleases.............................................. 13
1.77 Permitted Subtenant.............................................. 13
1.78 Person........................................................... 13
1.79 Pledge and Security Agreement.................................... 13
1.80 Primary Intended Use............................................. 13
1.81 Prime............................................................ 13
1.82 Provider Agreements.............................................. 13
1.83 Qualified Appraiser.............................................. 14
1.84 Records.......................................................... 14
1.85 Regulated Medical Wastes......................................... 14
1.86 Rent............................................................. 14
1.87 Residents' Personal Property..................................... 14
1.88 SEC.............................................................. 14
1.89 State............................................................ 14
1.90 Stock Pledge Agreement........................................... 14
1.91 Subordinated Creditor............................................ 14
1.92 Subordination Agreement.......................................... 14
1.93 Subsidiary....................................................... 15
1.94 Tangible Net Worth............................................... 15
1.95 Tenant........................................................... 15
1.96 Tenant's Capital Additions....................................... 15
1.97 Tenant's Personal Property....................................... 15
1.98 Term............................................................. 15
1.99 Third Party Payor Programs....................................... 16
1.100 Third Party Payors............................................... 16
1.101 Total Revenues................................................... 16
1.102 Trustees......................................................... 16
1.103 Unsuitable for Its Primary Intended Use.......................... 16
1.104 Work............................................................. 17
</TABLE>
<PAGE>
-iii-
<TABLE>
<S> <C> <C>
ARTICLE 2: COLLECTIVE LEASED PROPERTIES AND TERM........................... 17
2.1 Collective Leased Properties...................................... 17
2.2 Condition of Collective Leased Properties......................... 18
2.3 Fixed Term........................................................ 19
2.4 Extended Term..................................................... 19
ARTICLE 3: RENT............................................................ 20
3.1 Rent.............................................................. 20
3.1.1 Minimum Rent............................................... 20
3.1.2 Additional Rent............................................ 20
3.1.3 Additional Charges......................................... 23
3.2 Late Payment of Rent.............................................. 25
3.3 Net Lease......................................................... 25
3.4 No Termination, Abatement, Etc. .................................. 25
ARTICLE 4: USE OF THE COLLECTIVE LEASED PROPERTIES......................... 26
4.1 Permitted Use..................................................... 26
4.1.1 Primary Intended Use....................................... 26
4.1.2 Necessary Approvals........................................ 27
4.1.3 Lawful Use, Etc. .......................................... 27
4.2 Compliance with Legal and Insurance Requirements, Etc. ........... 27
4.3 Compliance with Medicaid and Medicare Requirements................ 28
4.4 Environmental Matters............................................. 28
4.4.1 Restriction on Use, Etc. .................................. 28
4.4.2 Environment Report......................................... 29
4.4.3 Indemnification of Landlord................................ 30
4.4.4 Survival................................................... 31
ARTICLE 5: MAINTENANCE AND REPAIRS, ETC. .................................. 31
5.1 Maintenance and Repair............................................ 31
5.1.1 Tenant's Obligations....................................... 31
5.1.2 Landlord's Obligations..................................... 32
5.1.3 Nonresponsibility of Landlord; No Mechanics Liens.......... 32
5.2 Tenant's Personal Property........................................ 33
5.3 Yield Up.......................................................... 33
5.4 Encroachments, Restrictions, Etc. ................................ 35
5.5 Landlord to Grant Easements, Etc. ................................ 35
ARTICLE 6: CAPITAL ADDITIONS, ETC.......................................... 36
6.2 Capital Additions Financed or Paid For by Tenant.................. 37
6.2.1 Financing of Capital Additions............................. 37
6.2.2 Purchase by Landlord....................................... 37
6.3 Capital Additions Financed by Landlord............................ 38
6.4 Non-Capital Additions............................................. 39
6.5 Improvement Advances.............................................. 39
6.6 Salvage........................................................... 40
</TABLE>
<PAGE>
-iv-
<TABLE>
<S> <C> <C>
ARTICLE 7: LIENS........................................................... 40
7.1 Liens............................................................. 40
7.2 Landlord's Lien................................................... 41
ARTICLE 8: PERMITTED CONTESTS.............................................. 41
ARTICLE 9: INSURANCE AND INDEMNIFICATION................................... 42
9.1 General Insurance Requirements.................................... 42
9.2 Replacement Cost.................................................. 44
9.3 Waiver of Subrogation............................................. 44
9.4 Form Satisfactory, Etc. .......................................... 44
9.5 Blanket Policy.................................................... 45
9.6 No Separate Insurance............................................. 45
9.7 Indemnification of Landlord....................................... 46
ARTICLE 10: CASUALTY....................................................... 47
10.1 Insurance Proceeds............................................... 47
10.2 Damage or Destruction............................................ 47
10.2.1 Damage or Destruction of Leased Property................. 47
10.2.2 Partial Damage or Destruction............................ 48
10.2.3 Insufficient Insurance Proceeds.......................... 48
10.2.4 Disbursement of Proceeds................................. 48
10.3 Damage Near End of Term.......................................... 49
10.4 Tenant's Property................................................ 49
10.5 Restoration of Tenant's Property................................. 50
10.6 No Abatement of Rent............................................. 50
10.7 Waiver........................................................... 50
ARTICLE 11: CONDEMNATION................................................... 50
11.1 Total Condemnation, Etc. ........................................ 50
11.2 Partial Condemnation............................................. 50
11.3 Abatement of Rent................................................ 51
11.4 Temporary Condemnation........................................... 52
11.5 Allocation of Award.............................................. 52
ARTICLE 12: DEFAULTS AND REMEDIES.......................................... 52
12.1 Events of Default................................................ 52
12.2 Remedies......................................................... 56
12.3 Tenant's Waiver.................................................. 58
12.4 Application of Funds............................................. 58
12.5 Landlord's Right to Cure Tenant's Default........................ 59
12.6 Trade Names...................................................... 59
ARTICLE 13: HOLDING OVER................................................... 59
ARTICLE 14: LANDLORD'S DEFAULT............................................. 60
ARTICLE 15: PURCHASE OF LEASED PROPERTY.................................... 60
</TABLE>
<PAGE>
-v-
<TABLE>
<S> <C> <C>
ARTICLE 16: SUBLETTING AND ASSIGNMENT...................................... 61
16.1 Subletting and Assignment........................................ 61
16.2 Required Sublease Provisions..................................... 62
16.3 Permitted Sublease............................................... 63
16.4 Sublease Limitation.............................................. 63
ARTICLE 17: ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS................. 64
17.1 Estoppel Certificates............................................ 64
17.2 Financial Statements............................................. 64
17.3 General Operations............................................... 65
17.3.1 Reimbursement, Licensure, Etc. .......................... 65
17.3.2 Annual Budgets........................................... 66
ARTICLE 18: LANDLORD'S RIGHT TO INSPECT.................................... 66
ARTICLE 19: APPRAISAL...................................................... 67
19.1 Appraisal Procedure.............................................. 67
19.2 Landlord's Right to Appraisal.................................... 68
ARTICLE 20: REPRESENTATIONS AND WARRANTIES................................. 69
20.1 Representations of Tenant........................................ 69
20.1.1 Status and Authority of Tenant........................... 69
20.1.2 Action of Tenant......................................... 69
20.1.3 No Violations of Agreements.............................. 69
20.1.4 Litigation............................................... 70
20.1.5 Disclosure............................................... 70
20.1.6 Compliance With Law...................................... 70
20.1.7 Hazardous Substances..................................... 70
20.2 Representations of Landlord...................................... 71
20.2.1 Status and Authority of Landlord......................... 71
20.2.2 Action of Landlord....................................... 71
20.2.3 No Violations of Agreements.............................. 71
20.2.4 Litigation............................................... 71
ARTICLE 21: FACILITY MORTGAGES............................................. 72
21.1 Landlord May Grant Liens......................................... 72
21.2 Subordination of Lease........................................... 72
21.3 Notice to Mortgagee and Ground Landlord.......................... 73
ARTICLE 22: ADDITIONAL COVENANTS OF TENANT................................. 74
22.1 Prompt Payment of Indebtedness................................... 74
22.2 Conduct of Business.............................................. 74
22.3 Maintenance of Accounts and Records.............................. 74
22.4 Notice of Change of Name, Etc. .................................. 74
22.5 Notice of Litigation, Potential Event of Default, Etc. .......... 75
22.6 Indebtedness of Tenant........................................... 75
</TABLE>
<PAGE>
-vi-
<TABLE>
<S> <C> <C>
22.7 Financial Condition of Tenant.................................... 76
22.8 Distributions, Payments to Affiliated Persons, Etc. ............. 76
22.9 Prohibited Transactions.......................................... 76
22.10 Management of Collective Leased Properties....................... 76
22.11 Liens and Encumbrances........................................... 77
22.12 Merger; Sale of Assets; Etc. .................................... 77
22.13 Permitted Subleases.............................................. 78
ARTICLE 23: MISCELLANEOUS.................................................. 78
23.1 Limitation on Payment of Rent.................................... 78
23.2 No Waiver........................................................ 78
23.3 Remedies Cumulative.............................................. 78
23.4 Severability..................................................... 78
23.5 Acceptance of Surrender.......................................... 79
23.6 No Merger of Title............................................... 79
23.7 Conveyance by Landlord........................................... 79
23.8 Quiet Enjoyment.................................................. 79
23.9 NON-LIABILITY OF TRUSTEES........................................ 80
23.10 Landlord's Consent of Trustees................................... 80
23.11 Memorandum of Lease.............................................. 80
23.12 Notices.......................................................... 80
23.13 Construction..................................................... 82
23.14 Counterparts; Headings........................................... 82
23.15 Applicable Law, Etc. ............................................ 82
23.16 Payment of Fees.................................................. 83
</TABLE>
EXHIBITS
- --------
A-1 - A-3 - Legal Descriptions
B - Allocable Purchase Prices
<PAGE>
MASTER LEASE AGREEMENT
----------------------
THIS MASTER LEASE AGREEMENT is entered into as of this 27th day of
December, 1996, by and between HEALTH AND RETIREMENT PROPERTIES TRUST, a
Maryland real estate investment trust, having its principal office at 400 Centre
Street, Newton, Massachusetts 02158, as landlord ("Landlord"), and BLC PROPERTY,
INC., a Delaware corporation, having its principal office at 77 West Wacker
Drive, Suite 3900, Chicago, Illinois 60601, as tenant ("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord, on the date hereof, is acquiring at the request of
Tenant, fee simple title to the three (3) Collective Leased Properties (this and
other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Collective Leased Properties to
Tenant and Tenant wishes to lease the Collective Leased Properties from
Landlord, all subject to and upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Additional Rent" shall have the meaning given such term in
Section 3.1.2(a).
<PAGE>
-2-
1.2 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.3 "Adjusted Purchase Price" shall mean, with respect to any of the
Collective Leased Properties, the allocated purchase price of such Leased
Property as set forth in Exhibit B plus the aggregate amount of all
disbursements made by Landlord with respect to such Leased Property pursuant to
the terms of Section 6.5 of this Agreement, plus any other amount disbursed or
advanced by Landlord to finance, or to reimburse Tenant for its financing of,
any Capital Addition to such Leased Property less the amount of any Award or the
proceeds of any insurance received by Landlord in connection with a partial
Condemnation or a partial casualty involving such Leased Property as described
in Section 11.2 or 10.2.2, and not applied by Landlord to the restoration of
such Leased Property as provided therein.
1.4 "Affiliated Person" shall mean, with respect to any Person, (a)
in the case of any such Person which is a partnership, any general partner in
such partnership or any limited partner holding, directly or indirectly, fifty
percent (50%) or more of the partnership interests in such partnership; (b) in
the case of any such Person which is a limited liability company, any member of
such company holding, directly or indirectly, fifty percent (50%) or more of the
membership interests in such company; (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b); (d) any
other Person who is an officer, director or trustee of, or partner holding,
directly or indirectly, fifty percent (50%) or more of the partnership interests
in, such Person or any Person referred to in the preceding clauses (a), (b) and
(c); and (e) any other Person who is a member of the Immediate Family of such
Person or of any Person referred to in the preceding clauses (a) through (d).
1.5 "Agreement" shall mean this Master Lease Agreement, including
Exhibits A-1 to A-3 and B hereto, as it and they may be amended from time to
time as herein provided.
1.6 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders (whether now
existing or hereafter enacted or promulgated irrespective of whether its
enactment is foreseeable or contemplated), of all courts of competent
jurisdiction and Government Agencies, and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including common
law rulings and determinations, relating to injury to, or the protection of,
real or personal property or human health (except those requirements which, by
definition, are solely the responsibility of employers) or the Environment,
<PAGE>
-3-
including, without limitation, all valid and lawful requirements of courts and
other Government Agencies pertaining to reporting, licensing, permitting,
investigation, remediation and removal of underground improvements (including,
without limitation, treatment or storage tanks, or water, gas or oil wells), or
emissions, discharges, releases or threatened releases of Hazardous Substances,
chemical substances, pesticides, petroleum or petroleum products, pollutants,
contaminants or hazardous or toxic substances, materials or wastes whether
solid, liquid or gaseous in nature, into the Environment, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances or Regulated Medical Wastes,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
1.7 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Collective Leased Properties (after deduction of all reasonable legal fees and
other reasonable costs and expenses, including, without limitation, expert
witness fees, incurred by Landlord, in connection with obtaining any such
award).
1.8 "Base Revenues" shall mean, with respect to each Leased Property,
Total Revenues for such Leased Property for the 1998 calendar year; provided,
however, that in the event that, with respect to any Lease Year, or portion
thereof, for any reason (including, without limitation, a taking or casualty
with respect to such Leased Property) there shall be a change in the number of
units available at the applicable Facility or in the services provided at such
Facility from the number of such units or the services provided during the 1998
calendar year, in determining Additional Rent payable with respect to such Lease
Year, Base Revenues shall be adjusted on a proportional basis, based on the
number of units and services remaining after such change; it being understood
and agreed that Base Revenues shall be calculated separately for each Leased
Property and shall not be determined on an aggregate basis for the Collective
Leased Properties.
1.9 "Brookdale" shall mean Brookdale Living Communities, Inc., a
Delaware corporation.
1.10 "Business Day" shall mean any day other than Saturday, Sunday,
or any other day on which banking institutions in The Commonwealth of
Massachusetts or the State of Illinois are authorized by law or executive action
to close.
<PAGE>
-4-
1.11 "Capital Addition" shall mean one or more new buildings, or one
or more additional structures annexed to any portion of any of the Leased
Improvements with respect to any of the Collective Leased Properties, or the
material expansion of existing improvements, which are constructed on any parcel
or portion of the Land during the Term, including the construction of a new wing
or new story, the renovation of existing improvements on any of the Collective
Leased Properties in order to provide a functionally new facility needed to
provide services not previously offered, or any expansion, construction,
renovation or conversion in order to increase the number of units of any
Facility to change the purpose for which such units are utilized or to improve
materially the quality of any Facility.
1.12 "Capital Additions Cost" shall mean the cost of any Capital
Addition proposed to be made by Tenant at any of the Collective Leased
Properties, whether paid for by Tenant or Landlord. Such cost shall include,
but not be limited to, the following: (a) the cost of construction of the
Capital Addition, including site preparation and improvement, materials, labor,
supervision, developer and administrative fees, legal fees, and related design,
engineering and architectural services, the cost of any fixtures, the cost of
equipment and other personalty, the cost of construction financing (including,
but not limited to, capitalized interest) and other miscellaneous costs approved
by Landlord, which approval shall not be unreasonably withheld or delayed (b) if
agreed to by Landlord in writing, in advance, the cost of any land (including
all related acquisition costs incurred by Tenant) contiguous to the applicable
Leased Property which is to become a part of such Leased Property purchased for
the purpose of placing thereon a Capital Addition or any portion thereof or for
providing means of access thereto, or parking facilities therefor, including the
cost of surveying the same, (c) the cost of insurance, real estate taxes, water
and sewage charges and other carrying charges for such Capital Addition during
construction, (d) title insurance charges, (e) reasonable attorneys' fees and
expenses, (f) filing, registration and recording taxes and fees, (g) documentary
stamp or transfer taxes, and (h) all actual and reasonable costs and expenses of
Landlord and Tenant and, if agreed to by Landlord in writing, in advance, any
Lending Institution committed to finance the Capital Addition.
1.13 "Change in Control" shall mean the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC) of 50% or more, or rights, options or warrants
to acquire 50% or more, of the outstanding shares of voting stock of Tenant or
any Guarantor, as the case may be, or the merger or consolidation of Tenant or
any Guarantor, as the case may be with or into any other Person or any one or
more sales or conveyances to any
<PAGE>
-5-
Person of all or substantially all of the assets of Tenant or any Guarantor, as
the case may be.
1.14 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.15 "Collective Leased Properties" shall have the meaning given
such term in Section 2.1.
1.16 "Commencement Date" shall mean the date of this Agreement.
1.17 "Condemnation" shall mean, with respect to any of the Collective
Leased Properties, (a) the exercise of any governmental power with respect to
such Leased Property, whether by legal proceedings or otherwise, by a Condemnor
of its power of condemnation; (b) a voluntary sale or transfer of such Leased
Property by Landlord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending; and (c) a taking or
voluntary conveyance of all or part of such Leased Property, or any interest
therein, or right accruing thereto or use thereof, as the result or in
settlement of any condemnation or other eminent domain proceeding affecting such
Leased Property, whether or not the same shall have actually been commenced.
1.18 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal Year or
other accounting period of Prime and its consolidated subsidiaries prior to the
IPO and of Brookdale and its consolidated subsidiaries subsequent to the IPO,
annual audited and quarterly unaudited financial statements prepared on a
consolidated basis, including Prime's or Brookdale's, as the case may be,
consolidated balance sheet and the related statements of income and cash flows,
all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal Year,
and prepared in accordance with GAAP throughout the periods reflected.
1.20 "Date of Taking" shall mean, as to any of the Collective Leased
Properties, the date the Condemnor has the right to possession of such Leased
Property, or any portion thereof, in connection with a Condemnation.
1.21 "Declaration" shall mean the Declaration of Trust establishing
Landlord, dated October 9, 1986, as amended and restated from time to time.
<PAGE>
-6-
1.22 "Default" shall mean any event or condition which with the
giving of notice and/or lapse of time may ripen into an Event of Default.
1.23 "Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, (b) any purchase,
redemption, retirement or other acquisition of any shares of any class of
capital stock of a corporation, (c) any other distribution on or in respect of
any shares of any class of capital stock of a corporation, or (d) any return of
capital to shareholders.
1.24 "Encumbrance" shall have the meaning given such term in Section
21.1.
1.25 "Entity" shall mean any general partnership, limited
partnership, limited liability company or partnership, corporation, joint
venture, trust, business trust, cooperative or association.
1.26 "Environment" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
1.27 "Environmental Obligation" shall have the meaning given such
term in Section 4.4.1.
1.28 "Environmental Notice" shall have the meaning given such term
in Section 4.4.1.
1.29 "Environmental Report" shall have the meaning given such term
in Section 4.4.2.
1.30 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.31 "Excess Total Revenues" shall mean, for each Leased Property,
with respect to any Lease Year, or portion thereof, the amount, if any, of Total
Revenues for such Leased Property for such Lease Year, or portion thereof, in
excess of Base Revenues for the equivalent period; it being understood and
agreed that Excess Total Revenues shall be calculated separately for each Leased
Property and shall not be calculated at an aggregate basis with respect to the
Collective Leased Properties.
1.32 "Extended Terms" shall have the meaning given such term in
Section 2.4.
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1.33 "Facility" shall mean, with respect to any of the Collective
Leased Properties, the senior housing facility being operated or proposed to be
operated on such Leased Property.
1.34 "Facility Mortgage" shall mean, with respect to any of the
Collective Leased Properties, any Encumbrance placed upon such Leased Property
in accordance with Article 21.
1.35 "Facility Mortgagee" shall mean the holder of any Facility
Mortgage.
1.36 "Facility Trade Name" shall mean, with respect to any Facility,
any name under which Tenant has conducted the business of operating such
Facility at any time during the Term.
1.37 "Fair Market Added Value" shall mean, with respect to any of the
Collective Leased Properties, the Fair Market Value of such Leased Property
(including all Capital Additions) less the Fair Market Value of such Leased
Property determined as if no Tenant's Capital Additions had been constructed.
1.38 "Fair Market Value" shall mean, with respect to any of the
Collective Leased Properties, the price that a willing buyer not compelled to
buy would pay a willing seller not compelled to sell for such Leased Property,
(a) assuming the same is unencumbered by this Agreement, (b) determined by
agreement between Landlord and Tenant or, failing agreement, the appraisal
procedures set forth in Article 19, and (c) not taking into account any
reduction in value resulting from any indebtedness to which such Leased Property
is subject.
1.39 "Fair Market Value Purchase Price" shall mean, with respect to
any of the Collective Leased Properties, the Fair Market Value of such Leased
Property less the Fair Market Added Value.
1.40 "Financial Officer's Certificate" shall mean, as to any Person,
a certificate of the chief financial officer of such Person, duly authorized,
accompanying the financial statements required to be delivered by such Person
pursuant to Section 17.2, in which such officer shall certify (a) that, to such
officer's knowledge, such statements have been properly prepared in accordance
with GAAP and are true, correct and complete in all material respects and fairly
present the consolidated financial condition of such Person at and as of the
dates thereof and the results of its and their operations for the periods
covered thereby, and (b) that such officer has reviewed this Agreement and, to
such officer's knowledge, has no knowledge of any Default or Event of Default
hereunder.
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1.41 "Fiscal Year" shall mean the twelve (12) month period from
January 1 to December 31.
1.42 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.43 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.44 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.45 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Collective Leased Properties or any portion thereof or the Facilities operated
thereon.
1.46 "Guarantors" shall mean, collectively, each and every guarantor
of Tenant's obligations under this Agreement, and each such guarantor's
successors and assigns.
1.47 "Guaranty" shall mean any guaranty agreement executed by a
Guarantor in favor of Landlord, together with all modifications, amendments or
supplements thereto.
1.48 "Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. et seq.) and the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 et seq.) and the regulations
promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission,
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board, agency or instrumentality of the United States, any state of the
United States, or any political subdivision thereof; or
(d) the presence of which on any of the Collective Leased
Properties causes or threatens to cause a violation of Applicable Laws upon
such Leased Property or to adjacent properties or poses or threatens to
pose a hazard to any of the Collective Leased Properties or to the health
or safety of persons on or about any of the Collective Leased Properties;
or
(e), without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
(f), without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(g), without limitation, which contains or emits radioactive
particles, waves or material; or
(h), without limitation, constitutes Regulated Medical Wastes.
1.49 "Immediate Family" shall mean, with respect to any individual,
such individual's spouse, parents, brothers, sisters, children (natural or
adopted), stepchildren, grandchildren, grandparents, parents- in-law, brothers-
in-law, sisters-in-law, nephews and nieces.
1.50 "Impositions" shall mean, with respect to any of the Collective
Leased Properties, collectively, all taxes (including, without limitation, all
taxes imposed under the laws of the State, as such laws may be amended from time
to time, and all ad valorem, sales and use, single business, gross receipts,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Landlord, Tenant or the business conducted upon such Leased
Property), assessments (including, without limitation, all assessments for
public improvements or benefit, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), water,
sewer or other rents and charges, excises, tax levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees) and all
other governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of such
Leased Property or the business conducted thereon by Tenant (including all
interest and penalties thereon due to any failure in payment by Tenant), which
at any time prior to, during or in
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respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon (a) Landlord's interest in such Leased Property, (b) such Leased
Property or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with such Leased Property
or the leasing or use of such Leased Property or any part thereof by Tenant;
provided, however, that nothing contained herein shall be construed to require
Tenant to pay (i) any tax based on net income imposed on Landlord, (ii) any net
revenue tax of Landlord, (iii) any transfer fee or other tax imposed with
respect to the sale, exchange or other disposition by Landlord of the applicable
Leased Property or the proceeds thereof (other than in connection with the sale,
exchange or other disposition to, or in connection with a transaction involving,
Tenant), or (iv) any single business, gross receipts (other than a tax on any
rent received by Landlord from Tenant), transaction privilege, rent or similar
taxes as the same relate to or are imposed upon Landlord, except to the extent
that any tax, assessment, tax levy or charge, which Tenant is obligated to pay
pursuant to the first sentence of this definition and which is in effect at any
time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (i) or (ii) preceding is
levied, assessed or imposed expressly in lieu thereof.
1.51 "Incidental Documents" shall mean, collectively, the Guaranty,
the Stock Pledge Agreement, the Pledge and Security Agreement and the side
letter agreement of even date.
1.52 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.53 "Independent Trustees" shall mean Trustees who, in their
individual capacity, are not Affiliated Persons as to Tenant and do not perform
any services for Landlord except as Trustees.
1.54 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Agreement and all requirements of the issuer of any such
policy.
1.55 "Interest Rate" shall mean a compounded rate of interest of
eleven percent (11%) per annum.
1.56 "Investment" shall mean all loans, advances, extensions of
credit (except for accounts and notes receivable for merchandise sold or
services furnished in the ordinary course of business, and amounts paid in
advance on account of the purchase price of merchandise to be delivered to the
payor within
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one year of the date of the advance), or purchases of stock, notes, bonds or
other securities or evidences of indebtedness or capital contribution to any
Person, whether in cash or other property. The amount of an Investment shall be
its cost (the amount of cash or the fair market value of other property given in
exchange therefor), whether or not written or charged off or sold or otherwise
disposed of, except to the extent such cost shall have been paid to Tenant by a
Person in which Tenant had no present or prospective financial interest at the
time of such payment.
1.57 "IPO" shall mean the initial public offering of the stock of
Brookdale as contemplated by Form S-1 Registration Statement No. 333-12259, a
true, correct and complete copy of which has heretofore been delivered by Tenant
to Landlord, as the same may be amended from time to time, with Landlord's prior
written consent with respect to any amendments affecting the Collective Leased
Properties or Total Revenues, which consent shall not be unreasonably withheld,
delayed or conditioned.
1.58 "Land" shall have the meaning given such term in Section 2.1(a).
1.59 "Landlord" shall have the meaning given such term in the
preambles to this Agreement.
1.60 "Lease Year" shall mean each calendar year, or portion thereof,
during the term, commencing with the 1997 calendar year.
1.61 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.62 "Leased Personal Property" shall have the meaning given such
term in Section 2.1(e).
1.63 "Leased Property" shall mean any one of the Collective Leased
Properties.
1.64 "Legal Requirements" shall mean, with respect to any of the
Collective Leased Properties, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting such Leased Property or the maintenance,
construction, alteration or operation thereof, whether now or hereafter enacted
or in existence, including, without limitation, (a) all permits, licenses,
certificates of need, authorizations and regulations necessary to operate such
Leased Property for its Primary Intended Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force
affecting such Leased Property, including those (i) which may require material
repairs, modifications or alterations in or to
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such Leased Property or (ii) with respect to which a violation thereof would in
any way adversely affect the use and enjoyment thereof.
1.65 "Lending Institution" shall mean any insurance company,
federally insured commercial or savings bank, national banking association,
savings and loan association, employees' welfare, pension or retirement fund or
system, corporate profit sharing or pension trust, college or university, real
estate investment trust, including any corporation qualified to be treated for
federal tax purposes as a real estate investment trust, such trust having a net
worth of at least $100,000,000, brokerage house or other entity in the business
of making loans.
1.66 "Lien" shall mean any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or any
transfer of any property or assets for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors.
1.67 "Management Agreement" shall mean any agreement whether written
or oral entered into between Tenant and any other party (including any
Affiliated Person as to Tenant) pursuant to which management services are
provided to any Facility, together with all amendments, modifications or
supplements thereto.
1.68 "Manager" shall mean the management party under any Management
Agreement.
1.69 "Minimum Rent" shall mean (a) with respect to the period
commencing on the Commencement Date and expiring December 31, 1997, $692,709 per
month; (b) with respect to the 1998 Lease Year, $729,167 per month; (c) with
respect to the 1999 Lease Year, $765,625 per month; and (d) with respect to the
2000 Lease Year and each Lease Year thereafter (including each Lease Year during
any Extended Term), $802,084 per month.
1.70 "Notice" shall mean a notice given in accordance with Section
23.12.
1.71 "Officer's Certificate" shall mean a certificate signed by an
officer of Tenant duly authorized by the board of directors of Tenant.
1.72 "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of fifteen percent (15%) and the maximum rate then
permitted under applicable law.
1.73 "Parent" shall mean, with respect to any Person, any Person
which owns directly, or indirectly through one or more
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Subsidiaries or Affiliated Persons, fifty percent (50%) or more of the voting or
beneficial interest in, or otherwise has the right or power (whether by
contract, through ownership of securities or otherwise) to control, such Person.
1.74 "Permitted Encumbrances" shall mean, with respect to any of the
Collective Leased Properties, all rights, restrictions, and easements of record
set forth on Schedule B to the applicable owner's title insurance policy issued
to Landlord on the date hereof, this Lease, the Permitted Subleases and any
other such encumbrances as may have been granted or caused by Landlord or
otherwise consented to in writing by Landlord from time to time.
1.75 "Permitted Liens" shall mean any Liens granted in accordance
with Section 22.11(a).
1.76 "Permitted Subleases" shall mean those Sublease Agreements,
dated as of the date hereof, between Tenant, as sublandlord, and the Permitted
Subtenants, as tenant.
1.77 "Permitted Subtenant" shall mean (a) Brookdale Living
Communities of Illinois, Inc., a Delaware corporation, with respect to the
Leased Property located in Chicago, Illinois; (b) Brookdale Living Communities
of New York, Inc., a Delaware corporation, with respect to the Leased Property
located in Brighton, New York; and (c) Brookdale Living Communities of Arizona,
Inc., a Delaware corporation, with respect to the Leased Property located in
East Mesa, Arizona.
1.78 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits.
1.79 "Pledge and Security Agreement" shall mean the Pledge and
Security Agreement, dated as of the date hereof, made by Tenant and the
Permitted Subtenants for the benefit of Landlord.
1.80 "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.81 "Prime" shall mean The Prime Group, Inc., an Illinois
corporation.
1.82 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements now or hereafter in effect for the
benefit of Tenant in connection with the operation of any Facility relating to
any right of payment or other claim arising out of or in connection with
Tenant's participation in any Third Party Payor Program.
<PAGE>
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1.83 "Qualified Appraiser" shall mean an appraiser who is not in
control of, controlled by or under common control with either Landlord or Tenant
and has not been an employee of Landlord or Tenant or any Affiliated Person with
respect to either of Landlord or Tenant at any time during the ten (10) year
period preceding the relevant date, who is qualified to appraise commercial real
estate in the State and is a member of the American Institute of Real Estate
Appraisers (or any successor association or body of comparable standing if such
Institute is not then in existence) and who has held his or her certificate as
an M.A.I. or its equivalent for a period of not less than three (3) years, and
has been actively engaged in the appraisal of commercial real estate in such
area for a period of not less than five (5) years, immediately preceding his or
her appointment hereunder.
1.84 "Records" shall have the meaning given such term in Section 7.2.
1.85 "Regulated Medical Wastes" shall mean all materials generated by
Tenant, subtenants, patients, occupants or the operators of the Collective
Leased Properties which are now or may hereafter be subject to regulation
pursuant to the Material Waste Tracking Act of 1988, or any Applicable Laws
promulgated by any Governmental Agencies.
1.86 "Rent" shall mean, collectively, the Minimum Rent, Additional
Rent and Additional Charges.
1.87 "Residents' Personal Property" shall mean such items of
furniture, clothing and other personalty as are the property of any of the
residents of any of the units at any of the Collective Leased Properties.
1.88 "SEC" shall mean the Securities and Exchange Commission.
1.89 "State" shall mean the State in which the applicable Leased
Property is located.
1.90 "Stock Pledge Agreement" shall mean the Stock Pledge and
Security Agreement, dated as of the date hereof, made by Prime Group Limited
Partnership, an Illinois limited partnership, and Tenant to Landlord.
1.91 "Subordinated Creditor" shall mean any creditor of Tenant which
is a party to a Subordination Agreement in favor of Landlord.
1.92 "Subordination Agreement" shall mean any agreement executed by a
Subordinated Creditor pursuant to which the payment
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and performance of Tenant's obligations to such Subordinated Creditor are
subordinated to the payment and performance of Tenant's obligations to Landlord
under this Agreement.
1.93 "Subsidiary" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, fifty percent (50%) or more of the voting or beneficial interest
or (b) which such Person otherwise has the right or power to control (whether by
contract, through ownership of securities or otherwise).
1.94 "Tangible Net Worth" shall mean the excess of total assets over
total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (a) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (b) all
deferred charges or unamortized debt discount and expense; (c) all reserves
carried and not deducted from assets; (d) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary; (e) securities which are not readily marketable; (f) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to the Commencement Date; and (g) any items not included in clauses
(a) through (g) above that are treated as intangibles in conformity with GAAP.
1.95 "Tenant" shall have the meaning given such term in the preambles
to this Agreement.
1.96 "Tenant's Capital Additions" shall have the meaning given such
term in Section 6.2.2.
1.97 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other personal property of Tenant
acquired by Tenant on and after the date hereof and located at any of the
Collective Leased Properties or used in Tenant's business at any of the
Collective Leased Properties and all modifications, replacements, alterations
and additions to such personal property installed at the expense of Tenant.
1.98 "Term" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
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1.99 "Third Party Payor Programs" shall mean all third party payor
programs in which Tenant presently or in the future may participate, including,
without limitation, Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield,
Managed Care Plans, other private insurance programs and employees assistance
programs.
1.100 "Third Party Payors" shall mean Medicare, Medicaid, CHAMPUS,
Blue Cross and/or Blue Shield, private insurers and any other Person which
presently or in the future maintains Third Party Payor Programs.
1.101 "Total Revenues" shall mean, with respect to each Leased
Property, all revenues (determined on an accrual basis in accordance with GAAP)
received or receivable from or by reason of the operation of the Facility
located on the applicable Leased Property, or any portion thereof, or any other
use of such Leased Property, or any portion thereof, including, without
limitation, all resident rents and revenues received or receivable for the use
of or otherwise by reason of all units, beds and other facilities provided,
meals served, services performed, space or facilities subleased or goods sold on
such Leased Property, or any portion thereof, including, without limitation, and
except as provided below, any other arrangements with third parties relating to
the possession or use of any portion of such Leased Property; provided, however,
that Total Revenues shall not include: (a) allowances according to GAAP for
uncollectible accounts, including credit accounts and charity care and other
administrative discounts; (b) revenue from professional fees or charges by
physicians and unaffiliated providers of services, when and to the extent such
charges are paid over to such physicians or unaffiliated providers of services,
or are separately billed and not included in comprehensive fees; (c) non-
operating revenues such as interest income or income from the sale of assets not
sold in the ordinary course of business; (d) revenues attributable to services
actually provided off-site or otherwise away from such Facility, such as home
health care, to persons that are not residents of such Facility; and (e)
security deposits of residents of such Facility; it being understood and agreed
that Total Revenues shall be calculated separately for each Leased Property and
shall not be determined on an aggregate basis for the Collective Leased
Properties.
1.102 "Trustees" shall mean the trustees of Landlord.
1.103 "Unsuitable for Its Primary Intended Use" shall mean, with
respect to any Facility, a state or condition of such Facility, such that (a)
following any damage or destruction involving such Leased Property, such Leased
Property cannot reasonably be expected to be restored to substantially the same
condition as existed immediately before such damage or
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destruction, and as otherwise required by Section 10.2.4, within twelve (12)
months following such damage or destruction or such other period of time as to
which business interruption insurance is available to cover Rent and other costs
related to such Leased Property following such damage or destruction; or (b) as
the result of a partial taking by Condemnation, such Facility or Leased
Improvements, as the case may be, cannot be operated, in the good faith judgment
of Landlord and Tenant, on a commercially practicable basis for its Primary
Intended Use taking into account, among other relevant factors, the number of
usable units, the amount of square footage or the revenues affected by such
damage or destruction or partial taking.
1.104 "Work" shall have the meaning given such term in Section
10.2.4.
ARTICLE 2
---------
COLLECTIVE LEASED PROPERTIES AND TERM
-------------------------------------
2.1 Collective Leased Properties. Upon and subject to the terms and
conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases
from Landlord all of the following (collectively, the "Collective Leased
Properties"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibits A-1 to A-3, attached hereto and
made a part hereof (the "Land");
(b) all buildings, structures, Fixtures and other improvements of
every kind including, but not limited to, alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such
buildings and structures presently situated upon the Land and all
Capital Additions other than Tenant's Capital Additions
(collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of property,
now or hereafter permanently affixed to or incorporated into the
Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-
conditioning systems and apparatus, sprinkler systems
<PAGE>
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and fire and theft protection equipment, all of which, to the
maximum extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically
excluding all items included within the category of Tenant's
Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable walls
or partitions, computers or trade fixtures or other personal
property of any kind or description used or useful in Tenant's
business on or in the Leased Improvements, and located on or in
the Leased Improvements, and all modifications, replacements,
alterations and additions to such personal property, except items,
if any, included within the category of Fixtures, but specifically
excluding all items included within the category of Tenant's
Personal Property and Residents' Personal Property (collectively,
the "Leased Personal Property"); and
(f) all leases of space (including any security deposits held by
Tenant pursuant thereto) in the Leased Improvements to tenants
thereof.
2.2 Condition of Collective Leased Properties. Tenant acknowledges
receipt and delivery of possession of the Collective Leased Properties and
Tenant accepts the Collective Leased Properties in their "as is" condition,
subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, reservations, mineral leases,
easements and other matters of record or that are visible or apparent on the
Collective Leased Properties, all applicable Legal Requirements, the lien of
financing instruments, mortgages and deeds of trust, and such other matters
which would be disclosed by an inspection of the Collective Leased Properties
and the record title thereto or by an accurate survey thereof. TENANT REPRESENTS
THAT IT HAS INSPECTED THE COLLECTIVE LEASED PROPERTIES AND ALL OF THE FOREGOING
AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH
RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN
RESPECT OF THE CONDITION OF THE COLLECTIVE LEASED PROPERTIES. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE COLLECTIVE
LEASED PROPERTIES OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN
OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY
OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT
ALL SUCH RISKS
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ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law, however,
Landlord hereby assigns to Tenant all of Landlord's rights to proceed against
any predecessor in title for breaches of warranties or representations, whether
by contract, at law or in equity, or for latent defects in the Collective Leased
Properties. Landlord shall fully cooperate with Tenant in the prosecution of
any such claims, in Landlord's or Tenant's name, all at Tenant's sole cost and
expense. Tenant shall indemnify, defend, and hold harmless Landlord from and
against any loss, cost, damage or liability (including reasonable attorneys'
fees) incurred by Landlord in connection with such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed
Term") shall commence on the Commencement Date and expire December 31, 2019.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing and this Agreement shall be in full force and effect,
Tenant shall have the right to extend the Term for two consecutive twenty-five
(25) year renewal terms (collectively, the "Extended Terms").
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of
the terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall elect to exercise either
of the aforesaid options, it shall do so by giving Landlord Notice thereof not
later than two (2) years prior to the scheduled expiration of the then current
Term of this Agreement (Fixed or Extended, as the case may be), it being
understood and agreed that time shall be of the essence with respect to the
giving of such Notice. Tenant may not exercise its option for more than one
such Extended Term at a time. If Tenant shall fail to give any such Notice,
this Agreement shall automatically terminate at the end of the Term then in
effect and Tenant shall have no further option to extend the Term of this
Agreement. If Tenant shall give such Notice, the extension of this Agreement
shall be automatically effected without the execution of any additional
documents; it being understood and agreed, however, that Tenant and Landlord
shall execute such documents and agreements as either party shall reasonably
require to evidence the same.
<PAGE>
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ARTICLE 3
---------
RENT
----
3.1 Rent. Tenant shall pay to Landlord, in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, without offset, abatement, demand or deduction, Minimum Rent,
Additional Rent and Additional Charges, during the Term, except as hereinafter
expressly provided. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion. Rent for any partial month shall be prorated on a per diem
basis based on a 360 day year consisting of twelve (12) 30-day months.
3.1.1 Minimum Rent:
(a) During Term. Minimum Rent shall be paid in advance on the
first day of each calendar month; provided, however, that the payment of
Minimum Rent with respect to any partial month in which the Commencement
Date occurs and the first full month of the Fixed Term shall be payable on
the Commencement Date.
(b) Adjustments of Minimum Rent Following Disbursements Under
Section 6.5. Effective on the date of each disbursement to pay for the cost
of any renovations pursuant to Section 6.5, the Minimum Rent shall be
increased, effective on the date of such disbursement, to an annual sum
equal to the product of the amount advanced and the Interest Rate. If any
such disbursement is made during any calendar month on a day other than the
first day of a calendar month, Tenant shall pay to Landlord on the first
day of the immediately following calendar month (in addition to the amount
of Minimum Rent payable with respect to such month, as adjusted pursuant to
this paragraph (b)) the amount by which Minimum Rent for the preceding
month, as adjusted for such disbursement, exceeded the amount of Minimum
Rent payable by Tenant for such preceding month without giving effect to
such adjustment.
3.1.2 Additional Rent:
(a) Amount. For each Lease Year or portion thereof during the
Term, commencing with the Lease Year beginning January 1, 1999, Tenant
shall pay, with respect to each Leased Property, additional rent
("Additional Rent") with respect to such Lease Year equal to the greatest
of (x) ten percent (10%) of Excess Total Revenues for such Leased Property
for such Lease Year; (y) the Additional Rent payable in the immediately
preceding Lease Year less the
<PAGE>
-21-
Variable Factor Amount (as hereinafter defined); and (z) zero.
As used herein, "Variable Factor Amount" shall mean an amount equal to
twenty-five percent (25%) of the amount of Additional Rent payable for the
applicable Leased Property for the last Lease Year for which Additional Rent was
payable pursuant to clause (x) above. For calculations of Additional Rent for
periods of less than a full calendar year, the Variable Factor Amount shall be
adjusted proportionately.
(b) Monthly Installments. Installments of Additional Rent for
any each Lease Year or portion thereof shall be calculated and paid monthly
in arrears based on the amount of Additional Rent payable for the preceding
Lease Year.
(c) Date of Payment of Additional Rent. Tenant shall deliver to
Landlord an Officer's Certificate setting forth the calculation of
Additional Rent due and payable for each Leased Property for each month of
any Lease Year. Each monthly payment of Additional Rent is due and payable
and shall be delivered to Landlord, together with such Officer's
Certificate, together with the applicable installment of the Minimum Rent
and shall be payable in the manner hereinabove provided for payment of
Minimum Rent.
(d) Reconciliation of Additional Rent. In addition, on or
before March 31, of each year, commencing March 31, 1998, Tenant shall
deliver to Landlord certified audits of Tenant's financial operations for
the preceding Lease Year, together with a certificate from certified public
accountants reasonably acceptable to Landlord, in form reasonably
acceptable to Landlord, setting forth the Total Revenues for each Leased
Property for such preceding Lease Year and such other matters as Landlord
may from time to time reasonably request.
If the annual Additional Rent for the Collective Leased
Properties for such preceding Lease Year as shown in the year-end
certificate exceeds the amount previously paid with respect thereto by
Tenant, Tenant shall pay such excess to Landlord at such time as the
certificate is delivered, together with interest at the Interest Rate,
which interest shall accrue from the close of such preceding Lease Year
until the date paid. If the Annual Additional Rent for the Collective
Leased Properties for such preceding Lease Year as shown in the year-end
certificate is less than the amount previously paid with respect thereto by
Tenant, provided that no Event of Default has occurred and is continuing,
Landlord shall grant Tenant a credit equal to the amount of such
overpayment against Additional Rent next coming due in the amount of such
overpayment, as finally agreed or determined. If such a credit cannot be
made because the
<PAGE>
-22-
Term has expired before such credit can be effected, provided that no Event
of Default has occurred and is continuing, Landlord shall pay the amount of
such difference to Tenant. If an Event of Default has occurred, Landlord
shall apply such amounts to amounts due and owing under this Agreement and
to the costs of collection of the same and shall pay any excess to Tenant.
(e) Confirmation of Additional Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the Collective Leased
Properties in accordance with its usual and customary practices and in
accordance with GAAP, which will accurately record all Total Revenues, and
shall employ Ernst & Young LLP or other independent accountants reasonably
acceptable to Landlord, and Tenant shall retain, for at least five (5)
years after the expiration of each Lease Year, reasonably adequate records
conforming to such accounting system showing all Total Revenues for such
Lease Year. Landlord, at its own expense except as provided hereinbelow,
shall have the right from time to time by its accountants or
representatives to audit the information set forth in the Officer's
Certificate referred to in subparagraph (c) above or the year-end
certificate referred to in subparagraph (d) above and, in connection with
such audits, to examine Tenant's books and records (upon reasonable notice
during customary business hours) with respect thereto (including supporting
data and sales and excise tax returns) subject to any prohibitions or
limitations on disclosure of any such data under applicable law or
regulations, including such limitations as may be necessary to preserve the
confidentiality of the facility-patient relationship and the physician-
patient privilege and/or other similar privilege or confidentiality
obligations. If any such audit discloses that the Total Revenues actually
received by Tenant for any Lease Year exceed those reported by Tenant by
more than three percent (3%), Tenant shall pay the reasonable cost of such
audit and examination. If any such audit discloses that Tenant paid more
Additional Rent for any Lease Year than was due hereunder, provided no
Event of Default has occurred and is continuing, Landlord shall grant
Tenant a credit equal to the amount of such overpayment against Additional
Rent next coming due in the amount of such difference. If such a credit
cannot be made because the Term has expired before such credit can be
effected, provided that no Event of Default has occurred and is continuing,
Landlord shall pay the amount of such difference to Tenant. If an Event of
Default has occurred, Landlord shall apply such amounts to amounts due and
owing under this Agreement and to the costs of collection of the same and
shall pay any excess to Tenant.
<PAGE>
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Any proprietary information obtained by Landlord pursuant to the
provisions of this Agreement shall be treated as confidential, except that
such information may be used, subject to appropriate confidentiality
safeguards, in any litigation between the parties and except further that
Landlord may disclose such information to its prospective lenders. The
obligations of Tenant and Landlord contained in this Section 3.1.2 shall
survive the expiration or earlier termination of this Agreement.
3.1.3 Additional Charges. In addition to the Minimum Rent and
Additional Rent payable hereunder, Tenant shall pay and discharge as and when
due and payable the following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to Permitted
Contests, Tenant shall pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost (other than any opportunity cost as a
result of a failure to take advantage of any discount for early payment)
may be added for non-payment, such payments to be made directly to the
taxing authorities where feasible, and shall promptly, upon request,
furnish to Landlord copies of official receipts or other satisfactory proof
evidencing such payments. If any such Imposition may, at the option of the
taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Tenant may exercise the
option to pay the same (and any accrued interest on the unpaid balance of
such Imposition) in installments and, in such event, subject to Article 8
relating to Permitted Contests, shall pay such installments which are due
during or with respect to periods occurring during the Term as the same
become due and before any fine, penalty, premium, further interest or cost
may be added thereto. Landlord, at its expense, shall, to the extent
required or permitted by applicable law, prepare and file all tax returns
in respect of Landlord's net income, gross receipts, sales and use, single
business, transaction privilege, rent, ad valorem, franchise taxes and
taxes on its capital stock, and Tenant, at its expense, shall, to the
extent required or permitted by applicable laws and regulations, prepare
and file all other tax returns and reports in respect of any Imposition as
may be required by Government Agencies. Provided no Event of Default shall
have occurred and be continuing, if any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be
paid over to or retained by Tenant. If an Event of Default has occurred,
Landlord shall apply such amounts to amounts due and owing under this
Agreement and to the costs of collection of the same and shall pay any
excess to Tenant. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made
with
<PAGE>
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respect to the Collective Leased Properties as may be necessary to prepare
any required returns and reports. In the event Government Agencies classify
any property covered by this Agreement as personal property, Tenant shall
file all personal property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses the same,
provide the other, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. All Impositions assessed
against such personal property shall be (irrespective of whether Landlord
or Tenant shall file the relevant return) paid by Tenant not later than the
last date on which the same may be made without interest or penalty,
subject to the provisions of Article 8 relating to Permitted Contests. If
the provisions of any Facility Mortgage require deposits on account of
Impositions to be made with such Facility Mortgagee, provided the Facility
Mortgagee has not elected to waive such provision, Tenant shall either pay
Landlord the monthly amounts required at the time and place that payments
of Minimum Rent are required and Landlord shall transfer such amounts to
such Facility Mortgagee or, pursuant to written direction by Landlord,
Tenant shall make such deposits directly with such Facility Mortgagee and
any interest paid to Landlord with respect thereto shall be credited to
Tenant.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has knowledge;
provided, however, that Landlord's failure to give any such notice shall in
no way diminish Tenant's obligation hereunder to pay such Impositions,
except that Tenant shall not be obligated to pay any late charges or
penalties attributable to Landlord's failure to give such Notice promptly
to Tenant.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in
connection with the Collective Leased Properties.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained pursuant
to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations which Tenant assumes or agrees
to pay under this Agreement, including, without limitation, all agreements
to indemnify Landlord under Sections 4.4 and 9.7.
<PAGE>
-25-
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar Additional Charges attributable
to periods after the end of the Term, whether upon expiration or sooner
termination of this Agreement (other than termination following an Event of
Default) and Tenant has not exercised its right to purchase the Collective
Leased Properties as provided herein, Tenant may, within sixty (60) days of
the end of the Term, provide Notice to Landlord of its estimate of such
amounts. Landlord shall promptly reimburse Tenant for all payments of such
taxes and other similar Additional Charges that are attributable to any
period after the Term of this Agreement (unless this Agreement shall have
been terminated following an Event of Default). If an Event of Default has
occurred, Landlord shall apply such amounts to amounts due and owing under
this Agreement and to the costs of collection of the same and shall pay any
excess to Tenant.
3.2 Late Payment of Rent. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid on its due date,
Tenant shall pay Landlord, on demand, as Additional Charges, a late charge (to
the extent permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges, every
fine, penalty, interest and cost which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in this Agreement or by statute or
otherwise in the case of non-payment of the Additional Charges as in the case of
non-payment of the Minimum Rent and Additional Rent.
3.3 Net Lease. The Minimum Rent and Additional Rent shall be
absolutely net to Landlord so that this Agreement shall yield to Landlord the
full amount of the installments or amounts of Minimum Rent and Additional Rent
throughout the Term, subject to any other provisions of this Agreement which
expressly provide for adjustment or abatement of such Rent.
3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Agreement, Tenant, to the maximum extent permitted by law,
shall remain bound by this Agreement in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate
<PAGE>
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this Agreement, nor seek, nor be entitled to any abatement, deduction, deferment
or reduction of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a) any
damage to or destruction of any of the Collective Leased Properties or any
portion thereof from whatever cause or any Condemnation; (b) the lawful or
unlawful prohibition of, or restriction upon, Tenant's use of any of the
Collective Leased Properties, or any portion thereof, or the interference with
such use by any Person or by reason of eviction by paramount title; (c) any
claim which Tenant may have against Landlord by reason of any default or breach
of any warranty by Landlord under this Agreement; (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Landlord or any assignee or transferee
of Landlord; or (e) for any other cause whether similar or dissimilar to any of
the foregoing. Tenant hereby waives all rights arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law, to (a)
modify, surrender or terminate this Agreement or quit or surrender any of the
Collective Leased Properties or any portion thereof; or (b) entitle Tenant to
any abatement, reduction, suspension or deferment of the Rent or other sums
payable or other obligations to be performed by Tenant hereunder, except as
otherwise specifically provided in this Agreement. The obligations of Tenant
hereunder shall be separate and independent covenants and agreements, and the
Rent and all other sums payable by Tenant hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated,
modified or amended pursuant to the express provisions of this Agreement.
ARTICLE 4
---------
USE OF THE COLLECTIVE LEASED PROPERTIES
---------------------------------------
4.1 Permitted Use.
4.1.1 Primary Intended Use. Tenant shall, at all times during
the Term and at any other time that Tenant shall be in possession of any
Leased Property, continuously use each of the Collective Leased Properties
as a senior housing and assisted living facility and for such other uses as
may be related, incidental or necessary thereto (such use being hereinafter
referred to as such Leased Property's "Primary Intended Use"). Except for
uses as provided and described in Section 16.3, Tenant shall not use any of
the Collective Leased Properties or any portion thereof for any other use
without the prior written consent of Landlord. No use shall be made or
permitted to be made of any of the Collective Leased Properties and no acts
shall be done thereon which will cause the cancellation of any insurance
policy covering any of the Collective Leased Properties or
<PAGE>
-27-
any part thereof (unless another adequate policy is available), nor shall
Tenant sell or otherwise provide to residents or patients therein, or
permit to be kept, used or sold in or about any of the Collective Leased
Properties any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required
to be carried hereunder, or fire underwriter's regulations. Tenant shall,
at its sole cost, comply with all of the requirements pertaining to the
Collective Leased Properties of any insurance board, association,
organization or company necessary for the maintenance of insurance, as
herein provided, covering the Collective Leased Properties and Tenant's
Personal Property, including, without limitation, the Insurance
Requirements. Tenant shall not take or omit to take any action, the taking
or omission of which may materially impair the value or the usefulness of
any of the Collective Leased Properties or any part thereof for its Primary
Intended Use.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain all approvals
necessary to use and operate, for its Primary Intended Use, each of the
Collective Leased Properties and each Facility located thereon under
applicable law and, without limiting the foregoing, shall use its best
efforts to maintain appropriate certifications for reimbursement and
licensure, if any.
4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or permit
the use of any of the Collective Leased Properties or Tenant's Personal
Property for any unlawful purpose. Tenant shall not commit or suffer to be
committed any waste on any of the Collective Leased Properties, or in any
Facility, nor shall Tenant cause or permit any nuisance thereon or therein.
Tenant shall neither suffer nor permit any of the Collective Leased
Properties or any portion thereof, including any Capital Addition, or
Tenant's Personal Property, to be used in such a manner as (a) might
reasonably tend to impair Landlord's (or Tenant's, as the case may be)
title thereto or to any portion thereof, or (b) may reasonably make
possible a claim or claims for adverse usage or adverse possession by the
public, as such, or of implied dedication of the applicable Leased Property
or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Etc. Subject to
the provisions of Article 8, Tenant, at its sole expense, shall (a) comply in
all material respects with Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration
of all of the Collective Leased Properties, and (b) procure, maintain
<PAGE>
-28-
and comply in all material respects with all appropriate licenses, certificates
of need, permits, provider agreements and other authorizations and agreements
required for any use of the Collective Leased Properties and Tenant's Personal
Property then being made, and for the proper erection, installation, operation
and maintenance of the Collective Leased Properties or any part thereof,
including, without limitation, any Capital Additions, except where the failure
to comply will not have a material adverse effect on the use or operation of any
of the Collective Leased Properties for its Primary Intended Use or adversely
effect Total Revenues.
4.3 Compliance with Medicaid and Medicare Requirements. Tenant shall,
at its sole cost and expense, make whatever improvements (capital or ordinary)
as are required to conform in all material respects each of the Collective
Leased Properties to such standards, if any, as may, from time to time, be
required by Federal Medicare (Title 18) or Medicaid (Title 19) skilled and/or
intermediate care nursing programs, to the extent Tenant is a participant in
such programs, or any other applicable programs or legislation, or capital
improvements required by any other governmental agency having jurisdiction over
such Leased Property as a condition of the continued operation of such Leased
Property for its Primary Intended Use, except where the failure to comply will
not have a material adverse effect on the use or operation of any of the
Collective Leased Properties for its Primary Intended Use or adversely effect
Total Revenues.
4.4 Environmental Matters.
4.4.1 Restriction on Use, Etc. Tenant shall not store, spill
upon, dispose of or transfer to or from the Collective Leased Properties
any Hazardous Substance, except that Tenant may store, transfer and dispose
of Hazardous Substances in material compliance with all Applicable Laws.
Tenant shall maintain the Collective Leased Properties at all times free of
any Hazardous Substance (except such Hazardous Substances as are maintained
in compliance with all Applicable Laws). Tenant shall promptly: (a) notify
Landlord in writing of any change in the nature or extent of Hazardous
Substances at any of the Collective Leased Properties to the extent such
change violates Applicable Laws; (b) transmit to Landlord a copy of any
Community Right to Know report which is required to be filed by Tenant with
respect to any of the Collective Leased Properties pursuant to SARA Title
III or any other Applicable Law; (c) transmit to Landlord copies of any
citations, orders, notices or other governmental communications received by
Tenant or its agents or representatives with respect thereto (collectively,
"Environmental Notice"), which Environmental Notice requires a written
response or any action to be taken
<PAGE>
-29-
and/or if such Environmental Notice gives notice of and/or could give rise
to a violation of any Applicable Law and/or could give rise to any cost,
expense, loss or damage (an "Environmental Obligation"); (d) observe and
comply in all material respects with all Applicable Laws relating to the
use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction
relating to the use or maintenance or requiring the removal, treatment,
containment or other disposition thereof; and (e) pay or otherwise dispose
of any fine, charge or Imposition related thereto, unless Tenant shall
contest the same in good faith and by appropriate proceedings and the right
to use and the value of any of the Collective Leased Properties is not
materially and adversely affected thereby.
If, at any time prior to the termination of this Agreement,
Hazardous Substances are discovered on any of the Collective Leased
Properties in violation of Applicable Law, Tenant shall take all actions
and incur any and all expenses, as may be reasonably necessary and as may
be required by any Government Agency, (i) to clean up and remove from and
about the Collective Leased Properties all Hazardous Substances thereon,
(ii) to contain and prevent any further release or threat of release of
Hazardous Substances on or about the Collective Leased Properties and (iii)
to use good faith efforts to eliminate any further release or threat of
release of Hazardous Substances on or about the Collective Leased
Properties.
4.4.2 Environment Report. Six (6) months prior to expiration of
the Term, Tenant, at its sole cost and expense, shall designate a qualified
environmental engineer, satisfactory to Landlord in its sole discretion,
which engineer shall conduct an environmental investigation of the
Collective Leased Properties and prepare an environmental site assessment
report (the "Environmental Report") with respect thereto. The scope of such
Environmental Report shall include, without limitation, review of relevant
records, interviews with persons knowledgeable about the Collective Leased
Properties and relevant governmental agencies, a site inspection of the
Collective Leased Properties, any buildings, the fencelines of the
Collective Leased Properties and adjoining properties (Phase I) and shall
otherwise be reasonably satisfactory in form and substance to Landlord. If
such investigation, in the opinion of the performing engineer, indicates
that any of the Collective Leased Properties are not free from oil,
asbestos, radon and other Hazardous Substances (except in compliance with
Applicable Laws), such investigation shall also include a more detailed
physical site inspection,
<PAGE>
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appropriate testing, subsurface and otherwise, and review of historical
records (Phase II) to demonstrate the compliance of such of the Collective
Leased Properties with Applicable Laws and the absence of Hazardous
Substances.
Copies of the Environmental Report, and supplements and
amendments thereto, shall be provided to Landlord. With respect to any
recommendations contained in the Environmental Report, violations of
Applicable Laws and/or the existence of any conditions at any of the
Collective Leased Properties which could give rise to an Environmental
Obligation, Tenant shall promptly give Notice thereof to Landlord, together
with a description, setting forth in reasonable detail, all actions Tenant
proposes to take in connection therewith and Tenant shall promptly take all
actions, and incur any and all expenses, as may be reasonably necessary and
as may be required by any Government Agency and as may be reasonably
required by Landlord, to the extent required by Applicable Law, (i) to
clean up, remove or remediate from and about the Collective Leased
Properties all Hazardous Substances thereon, (ii) to contain, prevent and
eliminate any further release or threat of release of Hazardous Substances
on or about the Collective Leased Properties, and (iii) otherwise to
eliminate such violation or condition from the Collective Leased Properties
to the reasonable satisfaction of Landlord.
4.4.3 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Facility Mortgagee, their
trustees, officers, agents, employees and beneficiaries, and any of their
respective successors or assigns (hereafter the "Indemnitees," and when
referred to singly, an "Indemnitee") for, from and against any and all
debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation,
reasonable attorneys' fees and expenses) imposed upon, incurred by or
asserted against any Indemnitee resulting from, either directly or
indirectly, the presence in, upon or under the soil or ground water of any
of the Collective Leased Properties or any properties surrounding any of
the Collective Leased Properties of any Hazardous Substances in violation
of any Applicable Law or otherwise by reason of any failure by Tenant or
any Person to perform or comply with any of the terms of this Section 4.4.
Tenant's duty herein includes, but is not limited to, costs associated with
personal injury or property damage claims as a result of the presence of
Hazardous Substances in, upon or under the soil or ground water of any of
the Collective Leased Properties in violation of any Applicable Law. Upon
Notice
<PAGE>
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from Landlord, Tenant shall undertake the defense, at Tenant's sole cost
and expense, of any indemnification duties set forth herein.
Tenant shall, upon demand, pay to Landlord, as an Additional
Charge, any cost, expense, loss or damage (including, without limitation,
reasonable attorneys' fees) incurred by Landlord and arising from a failure
of Tenant strictly to observe and perform the foregoing requirements, which
amounts shall bear interest from the date incurred until paid by Tenant to
Landlord at the Overdue Rate.
4.4.4 Survival. The provisions of this Section 4.4 shall
survive the expiration or sooner termination of this Agreement.
ARTICLE 5
---------
MAINTENANCE AND REPAIRS, ETC.
-----------------------------
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations. Tenant shall, at its sole cost and
expense, keep each of the Collective Leased Properties and all private
roadways, sidewalks and curbs appurtenant thereto (and Tenant's Personal
Property) in good order and repair, reasonable wear and tear excepted
(whether or not the need for such repairs occurs as a result of Tenant's
use, any prior use, the elements or the age of the Collective Leased
Properties or Tenant's Personal Property, or any portion thereof), and
shall promptly make all necessary and appropriate repairs and replacements
thereto of every kind and nature, whether interior or exterior, structural
or nonstructural, ordinary or extraordinary, foreseen or unforeseen or
arising by reason of a condition existing prior to the commencement of the
Term (concealed or otherwise); provided, however, that Tenant shall be
permitted to prosecute claims against Landlord's predecessors in title for
breach of any representation or warranty made to or on behalf of Landlord,
whether in contract, at law or in equity, or for any latent defects in the
Collective Leased Properties. All repairs shall be made in good,
workmanlike and first-class manner, in accordance with all applicable
federal, state and local statutes, ordinances, by-laws, codes, rules and
regulations relating to any such work. Tenant shall not take or omit to
take any action, the taking or omission of which would materially impair
the value or the usefulness of any of the Collective Leased Properties or
any part thereof for its respective Primary Intended Uses. Tenant's
obligations under this
<PAGE>
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Section 5.1.1 as to any of the Collective Leased Properties shall be
limited in the event of any casualty or Condemnation involving such Leased
Property as set forth in Sections 10.2 and 11.2. Notwithstanding any
provisions of this Section 5.1 to the contrary, Tenant's obligations with
respect to Hazardous Substances are as set forth in Section 4.4.
5.1.2 Landlord's Obligations. Landlord shall not, under any
circumstances, be required to build or rebuild any improvement on the
Collective Leased Properties, or to make any repairs, replacements,
alterations, restorations or renewals of any nature or description to the
Collective Leased Properties, whether ordinary or extraordinary, structural
or nonstructural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto (except as provided in Articles 10 and 11
with respect to disbursement of insurance and Award proceeds), or to
maintain the Collective Leased Properties in any way, except as
specifically provided herein. Tenant hereby waives, to the maximum extent
permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect on the date hereof or hereafter enacted.
Landlord shall have the right to give, record and post, as appropriate,
notices of nonresponsibility under any mechanic's lien laws now or
hereafter existing.
5.1.3 Nonresponsibility of Landlord; No Mechanics Liens.
Landlord's interest in the Collective Leased Properties shall not be
subject to liens for Capital Additions made by Tenant and Tenant shall have
no power or authority to create any lien or permit any lien to attach to
any of the Collective Leased Properties or the present estate, reversion or
other estate of Landlord in the Collective Leased Properties or on the
building or other improvements thereon as a result of Capital Additions
made by Tenant or for any other cause or reason. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting
with Tenant with respect to the Collective Leased Properties, or any part
thereof, are hereby charged with notice that such liens are expressly
prohibited and that they must look solely to Tenant to secure payment for
any work done or material furnished for Capital Additions by Tenant or for
any other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed
in any way as constituting the consent or request of Landlord, express or
implied, by inference or otherwise, to any contractor, subcontractor,
laborer or materialmen for the performance of any labor or the furnishing
of any
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materials for any alteration, addition, improvement or repair to any of the
Collective Leased Properties or any part thereof or as giving Tenant any
right, power or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to the
filing of any lien against any of the Collective Leased Properties or any
part thereof nor to subject Landlord's estate in any of the Collective
Leased Properties or any part thereof to liability under any Mechanic's
Lien Law of the State in any way, it being expressly understood Landlord's
estate shall not be subject to any such liability.
5.2 Tenant's Personal Property. Tenant may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of Tenant's Personal
Property, and Tenant may, subject to the conditions set forth below, remove the
same at any time, provided that no Event of Default has occurred and is
continuing. Tenant shall provide and maintain throughout the Term all such
Tenant's Personal Property as shall be necessary in order to operate all of the
Facilities located at the Collective Leased Properties in material compliance
with all applicable licensure and certification requirements, in compliance with
applicable Legal Requirements and Insurance Requirements. All of Tenant's
Personal Property not removed by Tenant on or prior to the expiration or earlier
termination of this Agreement shall be considered abandoned by Tenant and may be
appropriated, sold, destroyed or otherwise disposed of by Landlord without the
necessity of first giving notice thereof to Tenant, without any payment to
Tenant and without any obligation to account therefor. Tenant shall, at its
expense, restore each of the Collective Leased Properties to the condition
required by Section 5.3, including repair of all damage to the Collective Leased
Properties caused by the removal of Tenant's Personal Property, whether effected
by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than
motor vehicles) on, or in connection with, any Leased Property which belongs to
anyone other than Tenant, Tenant shall use its reasonable efforts to require the
agreement permitting such use to provide that Landlord or its designee may
assume Tenant's rights under such agreement upon management or operation of the
applicable Facility by Landlord or its designee.
5.3 Yield Up. (a) Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate and surrender each of the Collective Leased
Properties to Landlord in the condition in which each of the Collective Leased
Properties was in on the Commencement Date, except as repaired, rebuilt,
restored, altered or added to as permitted or required by the
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provisions of this Agreement, reasonable wear and tear excepted (and casualty
damage and Condemnation, in the event that this Agreement is terminated with
respect to any of the Collective Leased Properties following a casualty or total
Condemnation in accordance with Article 10 or Article 11).
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its best
efforts to transfer to and cooperate with Landlord or Landlord's nominee in
connection with the processing of all applications for licenses, operating
permits and other governmental authorizations and all contracts, including
contracts with governmental or quasi-governmental entities which may be
necessary for the operation of the Facilities located on the Collective Leased
Properties. If requested by Landlord, Tenant will continue to manage any such
Facility after the expiration of the Term and for as long thereafter as is
necessary to obtain all necessary licenses, operating permits and other
governmental authorizations, on such reasonable terms (which shall include an
agreement to pay Tenant a market rate management fee and reimburse Tenant for
its reasonable out-of-pocket costs and expenses, and reasonable administrative
costs) as Landlord shall request.
(b) Effective on not less than fifteen (15) days' prior Notice given
at least sixty (60) days prior to expiration of the Term (or such shorter period
as shall be appropriate if this Agreement is terminated with respect to any of
the Collective Leased Properties prior to its expiration date), Landlord shall
have the option to purchase all (but not less than all) of Tenant's Personal
Property (except motor vehicles) with respect to any of the Collective Leased
Properties, at the expiration or sooner termination of this Agreement with
respect to such Leased Property, for an amount equal to the then fair market
value thereof (determined by the agreement of Landlord and Tenant if they can
agree and otherwise in accordance with the appraisal procedures set forth in
Article 19), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, security interests and other
encumbrances to which such Tenant's Personal Property is subject. Tenant's
Personal Property shall be conveyed to Landlord on an "as-is" basis, in its then
current condition and state of repair. Tenant shall provide Landlord with
warranties of title, reflecting no encumbrances as to which adjustments to the
purchase price thereof, as required by the previous sentence, have not been
made. Failure of Landlord to notify Tenant of its election to purchase Tenant's
Personal Property at any of the Collective Leased Properties by the 75th day
prior to the expiration of this Agreement (or such shorter period as may be
appropriate if this Agreement is terminated with respect to any of the
Collective Leased Properties prior to its expiration date)
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shall be deemed to constitute a waiver of Landlord's right to purchase Tenant's
Personal Property with respect to such Leased Property.
5.4 Encroachments, Restrictions, Etc. If any of the Leased
Improvements shall, at any time, encroach upon any property, street or right-of-
way adjacent to the affected Leased Property, or shall violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting any of the Collective Leased Properties, or any part thereof, or shall
impair the rights of others under any easement or right-of-way to which any of
the Collective Leased Properties is subject, upon the request of Landlord (but
only as to any encroachment, violation or impairment that is not a Permitted
Encumbrance) or of any Person affected by any such encroachment, violation or
impairment, Tenant shall, at its sole cost and expense, subject to its right to
contest the existence of any encroachment, violation or impairment in accordance
with the provisions of Article 8, either (a) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Landlord or
Tenant, or (b) make such changes in the Leased Improvements and take such other
actions, as are reasonably practicable to remove such encroachment and to end
such violation or impairment, including, if necessary, the alteration of any of
the Leased Improvements and, in any event, take all such actions as may be
necessary in order to ensure the continued operation of the affected Leased
Improvements for their respective Primary Intended Use substantially in the
manner and to the extent such Leased Improvements were operated prior to the
assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of this Article 5.
Tenant's obligations under this Section 5.4 shall be in addition to and shall in
no way discharge or diminish any obligation of any insurer under any policy of
title or other insurance.
5.5 Landlord to Grant Easements, Etc. Landlord shall from time to
time, so long as no Event of Default shall have occurred and be continuing, at
the request of Tenant and at Tenant's sole cost and expense, (a) grant easements
and other rights in the nature of easements with respect to any of the
Collective Leased Properties to third parties; (b) release existing easements or
other rights in the nature of easements which are for the benefit of any of the
Collective Leased Properties; (c) dedicate or transfer unimproved portions of
any of the Collective Leased Properties for road, highway or other public
purposes; (d) execute petitions to have any of the Collective Leased Properties
annexed to any municipal corporation or utility district; (e) execute amendments
to any covenants and restrictions affecting any of the Collective Leased
Properties; and (f) execute and
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deliver to any Person any instrument appropriate to confirm or effect such
grants, release, dedications, transfers, petitions and amendments (to the extent
of its interests in such Leased Property); provided, however, that Landlord
shall have first reasonably determined in good faith that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the operation
of the applicable Leased Property for its Primary Intended Use and does not
materially reduce the value of such Leased Property, and Landlord shall have
received an Officer's Certificate certifying that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the operation
of the applicable Leased Property for its Primary Intended use and does not
materially reduce the value of such Leased Property, together with such
additional information with respect thereto as Landlord may reasonably request.
ARTICLE 6
---------
CAPITAL ADDITIONS, ETC.
-----------------------
6.1 Construction of Capital Additions. Tenant shall not construct or
install Capital Additions on any of the Collective Leased Properties without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned, provided that no consent shall be
required for any Capital Addition so long as (a) the Capital Additions Costs for
such Capital Addition are less than $250,000 in the aggregate; (b) such
construction or installation would not adversely affect or violate any Legal
Requirement or Insurance Requirement applicable to the applicable Leased
Property; and (c) Landlord shall have received an Officer's Certificate
certifying as to the satisfaction of the conditions set out in clauses (a) and
(b) above. If Landlord's consent is required, prior to commencing construction
of any Capital Addition, Tenant shall submit to Landlord, in writing, a proposal
setting forth, in reasonable detail, any proposed Capital Addition and shall
provide to Landlord such plans and specifications, permits, licenses, contracts
and other information concerning the proposed Capital Addition as Landlord may
reasonably request. Landlord shall have ten (10) Business Days to review all
materials submitted to Landlord in connection with any such proposal. Failure of
Landlord to respond to Tenant's proposal within ten (10) Business Days after
receipt of all information and materials requested by Landlord in connection
with the proposed Capital Addition shall be deemed to constitute approval of
such proposed Capital Addition. Without limiting the generality of the
foregoing, such proposal shall indicate the approximate projected cost of
constructing such Capital Addition and the use or uses to which it will be put.
No Capital Addition shall be made which would tie in or connect any Leased
Improvement on the applicable
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Leased Property with any other improvements on property adjacent to such Leased
Property (and not part of the Land), including, without limitation, tie-ins of
buildings or other structures or utilities. Tenant shall not finance the cost
of any construction of any Capital Addition except as provided in Section 6.2.1.
Any Capital Additions (including Tenant's Capital Additions) shall, upon the
expiration or sooner termination of this Agreement, pass to and become the
property of Landlord, free and clear of all encumbrances other than Permitted
Encumbrances but subject to Landlord's obligation to compensate Tenant for
Tenant's Capital Additions as provided below.
6.2 Capital Additions Financed or Paid For by Tenant.
6.2.1 Financing of Capital Additions. Tenant may arrange for
financing for Capital Additions, provided, that (a) the terms and
conditions of any such financing shall be commercially reasonable; (b) any
lender with respect thereto shall be a Subordinated Creditor and any
security interests in any property of Tenant, including, without
limitation, the applicable Leased Property, shall be expressly and fully
subordinated to this Agreement and to the interest of Landlord in the
applicable Leased Property and to the rights of any Facility Mortgagee; and
(c) the aggregate proceeds of such financing shall be used for improvements
in or at the Collective Leased Properties. Otherwise, the terms of Tenant's
financing of any Capital Additions shall be subject to Landlord's prior
written approval, which approval may be given or withheld by Landlord in
Landlord's sole discretion.
6.2.2 Purchase by Landlord. If, pursuant to the provisions of
this Agreement, Tenant either pays for or arranges financing (to the extent
permitted in Section 6.2.1) to pay for the costs of construction or
installation of any Capital Addition ("Tenant's Capital Additions") (but
excluding, in any event, any Capital Addition financed by or through
Landlord including, without limitation, all Capital Additions paid for or
financed through disbursements under Section 6.5), upon the expiration or
earlier termination of this Agreement (but if this Agreement is terminated
by reason of an Event of Default, only after Landlord is fully compensated
for all damages resulting therefrom), Landlord shall compensate Tenant for
all Tenant's Capital Additions in any of the following ways determined in
Landlord's sole discretion:
(a) By purchasing such Tenant's Capital Additions from Tenant
for cash in the amount of the then Fair Market Added Value of such Tenant's
Capital Additions; or
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(b) By making such other arrangement regarding such compensation
as shall be mutually acceptable to Landlord and Tenant.
6.3 Capital Additions Financed by Landlord. If Landlord shall, at
the request of Tenant and in Landlord's sole discretion (except as provided in
Section 6.5), elect to finance any proposed Capital Addition, Tenant shall
provide Landlord with such information as Landlord may from time to time
request, including, without limitation, the following:
(a) Evidence that such Capital Addition will be, and, upon
completion, has been, completed in compliance with the applicable
requirements of State and federal law with respect to capital expenditures
for facilities like the Facilities;
(b) Copies of all building, zoning and land use permits and
approvals and upon completion of such Capital Addition, a copy of the
certificate of occupancy for such Capital Addition, if required;
(c) Such information, certificates, licenses, permits or other
documents necessary to confirm that Tenant will be able to use the Capital
Addition upon completion thereof in accordance with the Primary Intended
Use, including all required federal, State or local government licenses and
approvals;
(d) An Officer's Certificate and a certificate from Tenant's
architect, if available, setting forth, in reasonable detail, the projected
(or actual, if available) Capital Additions Cost and invoices and lien
waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired for
the purpose of constructing the Capital Addition free and clear of any
liens or encumbrances, except those approved by Landlord, and, upon
completion of the Capital Addition, a final as-built survey thereof
reasonably satisfactory to Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the applicable Leased Property or commitments therefor, reasonably
satisfactory in form and substance to Landlord, (i) updating the same
without any additional exceptions except as reasonably approved by
Landlord, and (ii) increasing the coverage thereof by an amount equal to
the Fair Market Value of the Capital Addition (except to the extent covered
by the owner's policy of title insurance referred to in subparagraph (g)
below);
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(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant to
subparagraph (e) above, free and clear of all liens and encumbrances,
except those reasonably approved by Landlord, and (ii) a lender's policy of
title insurance, reasonably satisfactory in form and substance to Landlord
and any Facility Mortgagee; and
(h) Prints of architectural and engineering drawings relating
to such Capital Addition and such other certificates, documents, opinions
of counsel, appraisals, surveys, certified copies of duly adopted
resolutions of the board of directors of Tenant authorizing the execution
and delivery of any lease amendment or other instruments reasonably
required by Landlord, any Facility Mortgagee and any Lending Institution
advancing or reimbursing Landlord or Tenant for any portion of the Capital
Additions Cost.
If Landlord shall finance the proposed Capital Addition, Tenant shall
pay to Landlord all reasonable costs and expenses paid or incurred by Landlord
and any Facility Mortgagee or Lending Institution which has committed to finance
such Capital Addition in connection therewith, including, but not limited to,
(a) the reasonable attorneys' fees and expenses, (b) all printing expenses, (c)
all filing, registration and recording taxes and fees, (d) documentary stamp
taxes, (e) title insurance charges, appraisal fees, and rating agency fees, and
(f) commitment fees.
6.4 Non-Capital Additions. Tenant shall have the right, at Tenant's
sole cost and expense, without Landlord consent, to make additions,
modifications or improvements to the Collective Leased Properties which are not
Capital Additions ("Non-Capital Additions") from time to time as Tenant, in its
discretion, may deem desirable for the applicable Primary Intended Use provided
that any such Non-Capital Addition will not materially alter the character or
purpose or materially detract from the value, operating efficiency or revenue-
producing capability of the applicable Leased Property or adversely affect the
ability of Tenant to comply with the provisions of this Agreement and, without
limiting the foregoing, will not adversely affect or violate any Legal
Requirement or Insurance Requirement applicable to the applicable Leased
Property. All such Non-Capital Additions shall, upon expiration or earlier
termination of this Agreement, pass to and become the property of Landlord, free
and clear of all liens and encumbrances, other than Permitted Encumbrances.
6.5 Improvement Advances. At any time during that portion of the
Term commencing on the Commencement Date and expiring June 30, 1998, Landlord
agrees to advance to Tenant, from time to time, as hereinafter provided, an
aggregate amount of up to Two
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Million Five Hundred Thousand Dollars ($2,500,000) for the purpose of making
Capital Additions and Non-Capital Additions to the Collective Lease Properties.
The obligation of Landlord to make each advance pursuant to this Section 6.5
shall be subject to the prior or simultaneous satisfaction of the following
conditions:
(a) at the time of each disbursement, no Event of Default shall
have occurred and be continuing; and
(b) at least fifteen (15) Business Days before the date on which
Tenant desires a disbursement to be made hereunder (but in no event
subsequent to June 30, 1998), Tenant shall submit to Landlord a written
requisition and the substantiation therefor which shall include bills and
invoices with respect to the work for which reimbursement is sought,
together with such other information with respect thereto as Landlord may
reasonably require, including, without limitation, the items identified in
Section 6.3, if applicable. Any such requisition shall be for not less than
$250,000 (or such lesser amount as shall constitute the difference between
$2,500,000 and the aggregate of all prior disbursements). Such requisitions
shall be made not more frequently than monthly.
6.6 Salvage. All materials which are scrapped or removed in
connection with the making of either Capital Additions or Non-Capital Additions
or repairs required by Article 5 shall be or become the property of the party
that paid for such work.
ARTICLE 7
---------
LIENS
-----
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge or bond over
in a manner reasonably satisfactory to Landlord, at its expense, any lien,
encumbrance, attachment, title retention agreement or claim upon the Collective
Leased Properties or Tenant's leasehold interest therein or any attachment,
levy, claim or encumbrance in respect of the Rent, other than (a) Permitted
Encumbrances; (b) restrictions, liens and other encumbrances which are consented
to in writing by Landlord; (c) liens for those taxes of Landlord which Tenant is
not required to pay hereunder; (d) subleases permitted by Article 17; (e) liens
for Impositions or for sums resulting from noncompliance with Legal Requirements
so long as
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(i) the same are not yet payable, or (ii) are being contested in accordance with
Article 8; (f) liens of mechanics, laborers, materialmen, suppliers or vendors
incurred in the ordinary course of business that are not yet due and payable or
are for sums that are being contested in accordance with Article 8; and (g) any
Facility Mortgages or other liens which are the responsibility of Landlord
pursuant to the provisions of Article 21.
7.2 Landlord's Lien. In addition to any statutory landlord's lien
and in order to secure payment of the Rent and all other sums payable hereunder
by Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Agreement, Tenant hereby grants unto
Landlord a security interest in and an express contractual lien upon Tenant's
Personal Property (except motor vehicles), and all ledger sheets, files,
records, documents and instruments (including, without limitation, computer
programs, tapes and related electronic data processing) relating primarily to
the operation of the Facilities (the "Records") and all proceeds therefrom,
subject to any Permitted Encumbrances; and such Tenant's Personal Property shall
not be removed from the Collective Leased Properties at any time when an Event
of Default has occurred and is continuing.
Upon Landlord's reasonable request, Tenant shall execute and deliver
to Landlord financing statements in form sufficient to perfect the security
interest of Landlord in Tenant's Personal Property and the proceeds thereof in
accordance with the provisions of the applicable laws of the State. Tenant
hereby grants Landlord an irrevocable limited power of attorney, coupled with an
interest, upon the occurrence and during the continuance of any Event of
Default, to execute all such financing statements in Tenant's name, place and
stead. The security interest herein granted is in addition to any statutory
lien for the Rent.
ARTICLE 8
---------
PERMITTED CONTESTS
------------------
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively, "Claims") as to any of the
Collective Leased Properties, by appropriate legal proceedings, conducted in
good faith and with due diligence, provided that (a) the foregoing shall in no
way be construed as relieving, modifying or extending Tenant's obligation to pay
any Claims as finally determined; (b)
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such contest shall not cause Landlord or Tenant to be in default under any
mortgage or deed of trust encumbering such Leased Property or any interest
therein or result in a lien attaching to such Leased Property; (c) no part of
such Leased Property nor any Rent therefrom shall be in any immediate danger of
sale, forfeiture, attachment or loss; and (d) Tenant shall indemnify and hold
harmless Landlord from and against any cost, claim, damage, penalty or
reasonable expense, including reasonable attorneys' fees, incurred by Landlord
in connection therewith or as a result thereof. Upon Landlord's request, Tenant
shall either (i) provide a bond, title indemnity, endorsement or other assurance
reasonably satisfactory to Landlord that all Claims which may be assessed
against any of the Collective Leased Properties, together with all interest and
penalties thereon will be paid, or (ii) deposit within the time otherwise
required for payment with a bank or trust company, as trustee, as security for
the payment of such Claims, an amount sufficient to pay the same, together with
interest and penalties in connection therewith and all Claims which may be
assessed against or become a Claim on any of the Collective Leased Properties,
or any part thereof, in connection with any such contest. Tenant shall furnish
Landlord and any Facility Mortgagee with reasonable evidence of such deposit,
title indemnity, endorsement or other assurance within five (5) days after
request therefor. Landlord agrees to join in any such proceedings if required
legally to prosecute such contest, provided that Landlord shall not thereby be
subjected to any liability therefor (including, without limitation, for the
payment of any costs or expenses in connection therewith). Tenant shall be
entitled to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord and for which
Landlord has been fully reimbursed by Tenant. If Tenant shall fail (x) to pay
any Claims when finally determined, (y) to provide security therefor as provided
in this Article 8, or (z) to prosecute any such contest diligently and in good
faith, Landlord may, upon reasonable notice to Tenant which notice shall not be
required if Landlord shall reasonably determine that the same is not
practicable), pay such charges, together with interest and penalties due with
respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as
Additional Charges.
ARTICLE 9
---------
INSURANCE AND INDEMNIFICATION
-----------------------------
9.1 General Insurance Requirements. Tenant shall, at all times
during the Term and at any other time Tenant shall be in possession of any of
the Collective Leased Properties, keep each of the Collective Leased Properties
and all property located therein or thereon, including Tenant's Personal
Property, insured
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against the risks and in the amounts as follows and shall maintain the following
insurance:
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, explosion of
steamboilers, pressure vessels or other similar apparatus, now or hereafter
installed in the Facility located at such Leased Property, extended
coverage perils, earthquake and all physical loss perils insurance,
including, but not limited to, sprinkler leakage, in an amount equal to one
hundred percent (100%) of the then full Replacement Cost thereof (as
defined in Section 9.2) with the usual extended coverage endorsements,
including a Replacement Cost Endorsement and Builder's Risk Coverage during
the continuance of any construction at such Leased Property;
(b) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy covering risk of loss during
the lesser of the first twelve (12) months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the hazards
described in subparagraphs (a) and (b) above, in such amounts as may be
customary for comparable properties in the area and in an amount sufficient
to prevent Landlord or Tenant from becoming a co-insurer;
(c) Comprehensive general liability insurance, including bodily
injury and property damage (on an occurrence basis and on a 1988 ISO CGL
form or its equivalent or otherwise in the broadest form available,
including, without limitation, broad form contractual liability, fire legal
liability independent contractor's hazard and completed operations
coverage) in an amount not less than One Million Dollars ($1,000,000) per
occurrence, Two Million Dollars ($2,000,000) in the aggregate and umbrella
coverage of all such claims in an amount not less than Twenty-Five Million
Dollars ($25,000,000);
(d) Flood (when the applicable Leased Property is located in
whole or in part within an area identified as an area having special flood
hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968, as amended, or the Flood Disaster
Protection Act of 1973, as amended (or any successor acts thereto)) and
such other hazards and in such amounts as may be customary for comparable
properties in the area;
(e) Worker's compensation insurance coverage for all persons
employed by Tenant on the applicable Leased Property with statutory limits
and otherwise with limits of and
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provisions in accordance with the requirements of applicable local, State
and federal law, and employer's liability insurance in such amounts as
Landlord and any Facility Mortgagee shall reasonably require; and
(f) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Replacement Cost. "Replacement Cost" as used herein shall mean
the actual replacement cost of the property requiring replacement from time to
time, including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy. In the event either
party believes that the then full Replacement Cost has increased or decreased at
any time during the Term, such party, at its own cost, shall have the right to
have such full Replacement Cost redetermined by an accredited appraiser approved
by the other, which approval shall not be unreasonably withheld or delayed. The
party desiring to have the full Replacement Cost so redetermined shall
forthwith, on receipt of such determination by such appraiser, give written
notice thereof to the other. The determination of such appraiser shall be final
and binding on the parties hereto, and Tenant shall forthwith conform the amount
of the insurance carried to the amount so determined by the appraiser.
9.3 Waiver of Subrogation. Landlord and Tenant agree that (insofar
as and to the extent that such agreement may be effective without invalidating
or making it impossible to secure insurance coverage from responsible insurance
companies doing business in the State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant, respectively,
the party carrying such insurance and suffering said loss releases the other of
and from any and all claims with respect to such loss; and they further agree
that their respective insurance companies shall have no right of subrogation
against the other on account thereof, even though extra premium may result
therefrom. In the event that any extra premium is payable by Tenant as a result
of this provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for, nonassessable and
shall contain such provisions and expiration dates and be in such form and
amounts and issued by insurance carriers authorized to do business in the State,
having a general policy holder's rating of A or A+ in Best's latest rating
guide, and as otherwise shall be approved by Landlord. Without limiting the
foregoing, such policies shall include no deductible in excess of $25,000
(unless consistent with
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deductibles included in policies carried by entities engaged in similar
businesses and owning similar properties similarly situated and agreed to in
advance by Landlord) and, with the exception of the insurance described in
Section 9.1(e), shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. All losses shall be payable to
Landlord, any Facility Mortgagee or Tenant as provided in Article 10. Any loss
adjustment shall require the prior written consent of Landlord, Tenant, and each
Facility Mortgagee, which consent shall not be unreasonably withheld, delayed or
conditioned by Landlord. Tenant shall pay all insurance premiums and deliver
policies or certificates thereof to Landlord prior to their effective date (and,
with respect to any renewal policy, thirty (30) days prior to the expiration of
the existing policy) and, in the event Tenant shall fail to effect such
insurance as herein required, to pay the premiums therefor or to deliver such
policies or certificates to Landlord or any Facility Mortgagee at the times
required, Landlord shall have the right, but not the obligation, upon the giving
of written Notice thereof to Tenant, to acquire such insurance and pay the
premiums therefor, which amounts shall be payable to Landlord, upon demand, as
Additional Charges, together with interest accrued thereon at the Overdue Rate
from the date such payment is made until the date repaid. All such policies
shall provide Landlord (and any Facility Mortgagee, if required by the same)
thirty (30) days' prior written notice of any modification, expiration or
cancellation of such policy.
9.5 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article 9, Tenant's obligation to maintain the insurance
herein required may be brought within the coverage of a so-called blanket policy
or policies of insurance carried and maintained by Tenant and its Affiliated
Persons, provided, that (a) the coverage thereby afforded will not be reduced or
diminished from that which would exist under a separate policy meeting all other
requirements of this Agreement, and (b) the requirements of this Article 9 are
otherwise satisfied. Without limiting the foregoing, the amounts of insurance
that are required to be maintained pursuant to Section 9.1 shall be on a
Facility by Facility basis, and shall not be subject to an aggregate limit less
than the sum of the coverages required for each Leased Property (except in the
case of the umbrella coverage required under Section 9.1(c)).
9.6 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9, or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including
Landlord and all Facility Mortgagees, are included
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therein as additional insureds and the loss is payable under such insurance in
the same manner as losses are payable under this Agreement. In the event Tenant
shall take out any such separate insurance or increase any of the amounts of the
then existing insurance, Tenant shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the existence of
any insurance provided for herein and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify and hold harmless Landlord for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord (except to the extent that any
of the following result from Landlord's gross negligence or willful misconduct)
by reason of: (a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Collective Leased Properties or
adjoining sidewalks or rights of way, including, without limitation, any claims
of malpractice; (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Tenant or anyone claiming under Tenant of
the Collective Leased Properties or Tenant's Personal Property or any
litigation, proceeding or claim by governmental entities or other third parties
to which Landlord is made a party or participant relating to the Collective
Leased Properties or Tenant's Personal Property or such use, misuse, non-use,
condition, management, maintenance, or repair thereof including, failure to
perform obligations (other than Condemnation proceedings) to which Landlord is
made a party; (c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Agreement); and (d) any failure on
the part of Tenant or anyone claiming under Tenant to perform or comply with any
of the terms of this Agreement. Tenant shall pay all amounts payable under this
Section 9.7 within ten (10) Business Days after demand therefor, and if not
timely paid, such amounts shall bear interest at the Overdue Rate from the date
of determination to the date of payment. Tenant, at its expense, shall contest,
resist and defend any such claim, action or proceeding asserted or instituted
against Landlord or may compromise or otherwise dispose of the same, with
Landlord's prior written consent (which consent may not be unreasonably
withheld, delayed or conditioned). The obligations of Tenant under this Section
9.7 are in addition to the obligations set forth in Section 4.4 and shall
survive the termination of this Agreement.
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ARTICLE 10
----------
CASUALTY
--------
10.1 Insurance Proceeds. All proceeds payable by reason of any loss
or damage to the Collective Leased Properties, or any portion thereof, and
insured under any policy of insurance required by Article 9 (including, without
limitation, proceeds of any business interruption insurance) shall be paid
directly to Landlord (subject to the provisions of Section 10.2). If Tenant is
required to reconstruct or repair any of the Collective Leased Properties as
provided herein, such proceeds shall be paid out by Landlord from time to time
for the reasonable costs of reconstruction or repair of such Leased Property
necessitated by such damage or destruction, subject to the provisions of Section
10.2.4. Provided no Event of Default has occurred and is continuing, any excess
proceeds of insurance remaining after the completion of the restoration shall be
paid to Tenant. In the event that Section 10.2.1 below is applicable, the
insurance proceeds shall be retained by the party entitled thereto pursuant to
Section 10.2.1. All salvage resulting from any risk covered by insurance shall
belong to Landlord, except any salvage related to Tenant's Capital Additions and
Tenant's Personal Property shall belong to Tenant.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. If, during the
Term, any of the Collective Leased Properties shall be totally or partially
destroyed and the Facility located thereon is thereby rendered Unsuitable
for Its Primary Intended Use, Tenant shall, at its option, exercisable by
the giving of Notice thereof to Landlord within sixty (60) days after the
date of casualty, elect either (a) to purchase such Leased Property from
Landlord for a purchase price equal to the greater of (i) the Adjusted
Purchase Price of such Leased Property and (ii) the Fair Market Value
Purchase Price of such Leased Property immediately prior to such damage or
destruction, or (b) terminate this Agreement with respect to the affected
Leased Property. Failure by Tenant to give such Notice prior to the
expiration of such 60-day period shall be deemed an election by Tenant to
purchase such Leased Property in accordance with clause (a) preceding. In
the event Tenant elects to terminate this Agreement with respect to the
affected Leased Property, this Agreement shall, thereupon, terminate with
respect to the applicable Leased Property and Landlord shall be entitled to
retain the insurance proceeds payable on account of such damage. In the
event Tenant purchases such Leased Property as provided in this Section
10.2.1, the insurance proceeds payable on account of such damage shall be
paid to Tenant. If Tenant purchases the applicable Leased Property as
provided herein, the closing
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with respect thereto shall occur on a date designated by Landlord by Notice
to Tenant (but in no event prior to 30 days after such Notice), this
Agreement shall terminate as to the applicable Leased Property upon payment
of the purchase price therefor, and Landlord shall remit to Tenant all
insurance proceeds pertaining to the applicable Leased Property then held
by Landlord. Upon termination of this Agreement with respect to such Leased
Property as hereinabove provided, the Minimum Rent thereafter payable
hereunder shall be reduced by an amount reasonably determined by Landlord
in good faith to be that portion of the Minimum Rent allocable to such
Leased Property.
10.2.2 Partial Damage or Destruction. If, during the Term, any
of the Collective Leased Properties shall be totally or partially destroyed
but the Facility located thereon is not rendered Unsuitable for Its Primary
Intended Use, Tenant shall promptly restore such Facility as provided in
Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the applicable Leased Property exceeds the amount
of insurance proceeds received by Landlord pursuant to Article 9, Tenant
shall contribute any excess amounts needed to restore such Leased Property.
Such difference shall be paid by Tenant to Landlord and held by Landlord,
together with any other insurance proceeds, for application to the cost of
repair and restoration.
10.2.4 Disbursement of Proceeds. In the event Tenant is
required to restore the applicable Leased Property pursuant to Section
10.2, Tenant shall, at its sole cost and expense, commence promptly and
continue diligently to perform the repair and restoration of such Leased
Property (hereinafter called the "Work"), or shall cause the same to be
done, so as to restore such Leased Property in full compliance with all
Legal Requirements and so that such Leased Property shall be at least equal
in value and general utility to its general utility and value immediately
prior to such damage or destruction. Subject to the terms hereof, Landlord
shall advance the insurance proceeds (other than proceeds of business
interruption insurance which shall be advanced as provided below) and the
amounts paid to it pursuant to Section 10.2.3 to Tenant regularly during
the repair and restoration period so as to permit payment for the cost of
any such restoration and repair. Any such advances shall be for not less
than $250,000 (or such lesser amount as equals the entire balance of the
repair and restoration) and Tenant shall submit to Landlord a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or on
such other form or forms as may be acceptable to Landlord). Landlord may,
at its option, condition advancement of said insurance proceeds and other
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amounts on (a) the absence of any Default or Event of Default; (b) its
reasonable approval of plans and specifications of an architect reasonably
satisfactory to Landlord; (c) general contractors' estimates; (d)
architect's certificates; (e) unconditional lien waivers of general
contractors; (f) evidence of approval by all governmental authorities and
other regulatory bodies whose approval is required; and (g) such other
certificates as Landlord may, from time to time, reasonably require.
Proceeds of business interruption insurance shall be applied by Landlord to
the payment of all Minimum Rent, Additional Rent and Additional Charges
then due and payable and to become due and payable for the period for which
such proceeds have been paid by the insurance provider. Any excess shall,
provided no Event of Default has occurred and is continuing, be disbursed
to Tenant. If an Event of Default has occurred, Landlord shall apply such
amounts to amounts due and owing under this Agreement and to the costs of
collection of the same and shall pay any excess to Tenant.
Landlord's obligation to disburse insurance proceeds under this
Article 10 shall be subject to the release of such proceeds by the
applicable Facility Mortgagee to Landlord.
Tenant's obligation to restore the applicable Leased Property
pursuant to this Article 10 shall be subject to the release of available
insurance proceeds by the applicable Facility Mortgagee to Landlord and by
Landlord to Tenant in accordance with the terms of this Agreement.
10.3 Damage Near End of Term. Notwithstanding any provisions of
Section 10.1 or 10.2 to the contrary, if damage to or destruction of any of the
Collective Leased Properties occurs during the last twenty-four (24) months of
the Term and if such damage or destruction cannot reasonably be expected to be
fully repaired and restored prior to the date that is twelve (12) months prior
to the end of such Term, the provisions of Section 10.2.1 shall apply as if such
Leased Property had been totally or partially destroyed and the Facility located
thereon rendered Unsuitable for its Primary Intended Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of
any loss of or damage to any of Tenant's Personal Property or Tenant's Capital
Additions shall be paid to Tenant and, to the extent necessary to repair or
replace Tenant's Capital Additions or Tenant's Personal Property in accordance
with Section 10.5, Tenant shall hold such proceeds in trust to pay the cost of
repairing or replacing damaged Tenant's Personal Property or Tenant's Capital
Additions.
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10.5 Restoration of Tenant's Property. If Tenant is required to
restore the applicable Leased Property as hereinabove provided, Tenant shall
either (a) restore all alterations and improvements made by Tenant, Tenant's
Personal Property and all Tenant's Capital Additions, or (b) replace such
alterations and improvements, Tenant's Personal Property, and/or Tenant's
Capital Additions with improvements or items of the same or better quality and
utility in the operation of such Leased Property.
10.6 No Abatement of Rent. This Agreement shall remain in full force
and effect and Tenant's obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall, except as
otherwise provided in Section 10.2.1, remain unabated during the Term
notwithstanding any damage involving any of the Collective Leased Properties
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10
shall be considered an express agreement governing any cause of damage or
destruction to the applicable Leased Property and, to the maximum extent
permitted by law, no local or State statute, law, rule, regulation or ordinance
in effect during the Term which provide for such a contingency shall have any
application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of any of the
Collective Leased Properties.
ARTICLE 11
----------
CONDEMNATION
------------
11.1 Total Condemnation, Etc. If either (a) the whole of any of the
Collective Leased Properties shall be taken by Condemnation or (b) a
Condemnation of less than the whole of any of the Collective Leased Properties
renders such Leased Property Unsuitable for Its Primary Intended Use, this
Agreement shall terminate with respect to such Leased Property, Tenant and
Landlord shall seek the Award for their interests in such Leased Property as
provided in Section 11.5 and the Minimum Rent thereafter payable shall be
reduced by an amount reasonably determined by Landlord in good faith to be that
portion of the Minimum Rent allocable to such Leased Property. If the Award
received by Landlord for Landlord's interest in such Leased Property is less
than the greater of (x) the Adjusted Purchase Price or (y) the Fair Market Value
Purchase Price of such Leased Property immediately prior to such Condemnation,
Tenant shall contribute and pay to Landlord the amount of such shortfall.
11.2 Partial Condemnation. In the event of a Condemnation of less
than the whole of any of the Collective Leased Properties such that such Leased
Property is still suitable for its Primary Intended Use, Tenant shall, at its
sole cost and expense,
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commence promptly and continue diligently to restore the untaken portion of the
Leased Improvements on such Leased Property so that such Leased Improvements
shall constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as the Leased
Improvements existing immediately prior to such Condemnation, in full compliance
with all Legal Requirements. Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements, to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of such Award
and other amounts on (a) the absence of any Event of Default; (b) its approval
of plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld or delayed); (c) general
contractors' estimates; (d) architect's certificates; (e) unconditional lien
waivers of general contractors; (f) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required; and (g) such
other certificates as Landlord may, from time to time, reasonably require.
Landlord's obligation under this Section 11.2 to disburse the Award and such
other amounts shall be subject to (x) the collection thereof by Landlord and (y)
the satisfaction of any applicable requirements of any Facility Mortgage, and
the release of such Award by the applicable Facility Mortgagee. Tenant's
obligation to restore the applicable Leased Property shall be subject to the
release of the Award by the applicable Facility Mortgagee to Landlord and
Landlord's release of the Award to Tenant in accordance with the terms of this
Agreement. If the cost of the restoration of the applicable Leased Property
exceeds that part of the Award necessary to complete such restoration, together
with severance and other damages awarded for the taken Leased Improvements,
Tenant shall contribute upon the demand of Landlord any excess amounts needed to
restore such Leased Property. Such difference shall be paid by Tenant to
Landlord and held by Landlord, together with such part of the Award and such
severance and other damages, for application to the cost of restoration.
11.3 Abatement of Rent. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Collective Leased Properties.
The provisions of this Article 11 shall be considered an express agreement
governing any Condemnation involving any or all of the Collective Leased
Properties and, to the maximum extent permitted bylaw, no local or State
statute, law, rule, regulation or ordinance in effect during the Term which
provides for such a contingency shall have any application in such case.
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11.4 Temporary Condemnation. In the event of any temporary
Condemnation of all or any part of the Collective Leased Properties or Tenant's
interest therein, this Agreement shall continue in full force and effect, and
Tenant shall continue to pay, in the manner and on the terms herein specified,
the full amount of the Rent. Tenant shall continue to perform and observe all
of the other terms and conditions this Agreement on the part of the Tenant to be
performed and observed. Provided no Event of Default has occurred and is
continuing, the entire amount of any Award made for such temporary Condemnation
allocable to the Term, whether paid by way of damages, rent or otherwise, shall
be paid to Tenant. Tenant shall, promptly upon the termination of any such
period of temporary Condemnation, at its sole cost and expense, restore such
Leased Property to the condition that existed immediately prior to such
Condemnation, in full compliance with all Legal Requirements, unless such period
of temporary Condemnation shall extend beyond the expiration of the Term, in
which event Tenant shall not be required to make such restoration. For purposes
of this Section 11.4, a Condemnation shall be deemed to be temporary if the
period of such Condemnation is not expected to, and does not, exceed twenty-four
(24) months.
11.5 Allocation of Award. Except as provided in the second sentence
of this Section 11.5, the total Award shall be solely the property of and
payable to Landlord. Any portion of the Award made for the taking of Tenant's
leasehold interest in the applicable Leased Property, Tenant's Capital
Additions, loss of business during the remainder of the Term, the taking of
Tenant's Personal Property, or Tenant's removal and relocation expenses shall be
the sole property of and payable to Tenant (subject to the provisions of Section
11.2). In any Condemnation proceedings, Landlord and Tenant shall each seek its
own Award in conformity herewith, at its own expense.
ARTICLE 12
----------
DEFAULTS AND REMEDIES
---------------------
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent when due
and such failure shall continue for a period of five (5) Business Days
after the due date or should Tenant fail to pay any other sum (including,
but not limited to, payment of the purchase price for any of the Collective
Leased Properties which Tenant shall be obligated to purchase pursuant to
the terms of this Agreement) payable hereunder when due and such failure
shall continue for a period of five (5) Business Days after Notice thereof;
or
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(b) should Tenant shall fail to maintain the insurance coverages
required under Article 9; or
(c) should Tenant default in the due observance or performance
of any of the terms, covenants or agreements contained herein to be
performed or observed by it (other than as specified in clauses (a) and (b)
above) or should any Guarantor or any Permitted Subtenant default in the
due observance or performance of any of the terms, covenants or agreements
contained in any Incidental Document, and, in any such case, such default
shall continue for a period of fifteen (15) days after Notice thereof from
Landlord to Tenant (provided that no such notice shall be required if
Landlord shall reasonably determine immediate action is necessary to
protect person or property); provided, however, that if such default is
susceptible of cure but such cure cannot be accomplished with due diligence
within such period of time and if, in addition, Tenant, such Guarantor or
such Permitted Subtenant commences to cure such default within thirty (30)
days after Notice thereof from Landlord and thereafter prosecutes the
curing of such default with all due diligence, such period of time shall be
extended to such period of time (not to exceed an additional sixty (60)
days in the aggregate) as may be necessary to cure such default with all
due diligence; or
(d) should any obligation of Tenant or any of the Permitted
Subtenants, in respect of any Indebtedness for money borrowed or for the
deferred purchase price of any material property or services (excluding
trade accounts payable in the ordinary course of business on customary
trade terms) or any guaranty relating thereto, be declared to be or become
due and payable prior to the stated maturity thereof and any applicable
grace or notice period with respect thereto shall have lapsed, or should
there occur and be continuing with respect to any such Indebtedness or
deferred purchase price any default under any instrument or agreement
evidencing or securing the same, the effect of which is to permit the
holder or holders of such instrument or agreement or a trustee, agent or
other representative on behalf of such holder or holders, to cause such any
such obligations to become due prior to its stated maturity and any
applicable grace or notice period with respect thereto shall have lapsed
(provided that, in any such event, the same shall not be deemed an Event of
Default if Tenant or any Permitted Subtenant shall be contesting the same
in good faith and shall provide such security with respect thereto as
Landlord may reasonably require); or
(e) should any obligation of any Guarantor, in respect of any
Indebtedness for money borrowed or for the deferred purchase price of any
material property or services (excluding trade accounts payable in the
ordinary course of business on customary trade terms) or any guaranty
relating
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thereto, be declared to be or become due and payable prior to the stated
maturity thereof and any applicable grace or notice period with respect
thereto shall have lapsed, or should there occur and be continuing with
respect to any such Indebtedness or deferred purchase price any default
under any instrument or agreement evidencing or securing the same, the
effect of which is to permit the holder or holders of such instrument or
agreement or a trustee, agent or other representative on behalf of such
holder or holders, to cause such any such obligations to become due prior
to its stated maturity and any applicable grace or notice period with
respect thereto shall have lapsed and Landlord shall reasonably determine
such event may materially and adversely impact such Guarantor's ability to
perform its respective obligations under the Guaranty (provided that, in
any such event, the same shall not be deemed an Event of Default if such
Guarantor shall be contesting the same in good faith and shall provide such
security with respect thereto as Landlord may reasonably require); or
(f) should there occur a final unappealable determination by
applicable State authorities of the revocation or limitation of any
license, permit, certification or approval required for the lawful
operation of any of the Facilities in accordance with its Primary Intended
Use or the loss or limitation of any license, permit, certification or
approval under any other circumstances under which Tenant or any of the
Permitted Subtenants is required to cease its operation of such Facility in
accordance with its Primary Intended Use at the time of such loss or
limitation and such event or failure has a material adverse effect on the
use or operation of the applicable Leased Property or an adverse effect on
Total Revenues; or
(g) should any representation or warranty made by or on behalf
of Tenant, any Guarantor or any Permitted Subtenant under or in connection
with this Agreement, any Incidental Document, or in any document,
certificate or agreement delivered in connection herewith or therewith
prove to have been false or misleading in any material respect on the day
when made or deemed made; or
(h) should Tenant, any Guarantor or any Permitted Subtenant
generally not be paying its debts as they become due, or should Tenant, any
Guarantor or any Permitted Subtenant, make a general assignment for the
benefit of creditors; or
(i) should any petition be filed by or against Tenant, any
Guarantor or any Permitted Subtenant under the Federal bankruptcy laws, or
should any other proceeding be instituted by or against Tenant, any
Guarantor or any Permitted Subtenant seeking to adjudicate it a bankrupt or
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insolvent, or seeking liquidation, reorganization, arrangement, adjustment
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for Tenant, such Guarantor or Permitted Subtenant,
or for any substantial part of the property of Tenant, such Guarantor or
Permitted Subtenant, and any such proceeding is not dismissed within ninety
(90) days after institution thereof, or should Tenant, such Guarantor or
Permitted Subtenant take any action to authorize or effect any of the
actions set forth above in this paragraph; or
(j) should Tenant, any Guarantor or any Permitted Subtenant any
proceeding for its dissolution or termination; or
(k) should Tenant or any of the Permitted Subtenants voluntarily
cease operation of any of the Collective Leased Properties for its Primary
Intended Use for a period in excess of thirty (30) consecutive days, except
as a result of damage, destruction or partial or complete Condemnation; or
(l) should a default shall occur under any mortgage which is
secured by Tenant's leasehold interest hereunder or the mortgagee under any
such mortgage accelerates the indebtedness secured thereby or commence a
foreclosure action in connection with said mortgage; or
(m) should the estate or interest of Tenant or any of the
Permitted Subtenants in any of the Collective Leased Properties or any part
thereof be levied upon or attached in any proceeding and the same shall not
be vacated or discharged within the later of (x) one hundred and twenty
(120) days after commencement thereof, unless the amount in dispute is less
than $10,000, in which case Tenant shall give notice to Landlord of the
dispute but Tenant may defend in any suitable way, and (y) thirty (30) days
after receipt by Tenant of Notice thereof from Landlord (unless Tenant
shall be contesting such lien or attachment in good faith in accordance
with Article 8); or
(n) should there occur any Change in Control of the Tenant, any
Guarantor or any of the Permitted Subtenants, except for any Change in
Control of Tenant as a result of the closing of the IPO, or as otherwise
permitted by Section 16.1; or
(o) should any default occur under the Permitted Subleases and
continue beyond the expiration of any applicable notice or cure period;
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then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of
the Collective Leased Properties by giving Notice thereof to Tenant and
upon the expiration of the time, if any, fixed in such Notice, this
Agreement shall terminate and all rights of Tenant under this Agreement
shall cease with respect to such of the Collective Leased Properties as
shall have been identified in such Notice. Landlord shall have and may
exercise all rights and remedies available at law and in equity to Landlord
as a result of Tenant's breach of this Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, subject to applicable law, enter upon the
Collective Leased Properties or any portion thereof and take possession of any
and all of Tenant's Personal Property and the Records (subject to any
prohibitions or limitations to disclosure of any such data as described in
Section 3.1.2(e)) on any such Leased Property, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same at public or private sale,
after giving Tenant reasonable Notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or any
portion of Tenant's Personal Property unless otherwise prohibited by law.
Unless otherwise provided by law and without intending to exclude any other
manner of giving Tenant reasonable notice, the requirement of reasonable Notice
shall be met if such Notice is given at least ten (10) days before the date of
sale. The proceeds from any such disposition, less all expenses incurred in
connection with the taking of possession, holding and selling of such property
(including, reasonable attorneys' fees) shall be applied as a credit against the
indebtedness which is secured by the security interest granted in Section 7.2.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.
12.2 Remedies. None of (a) the termination of this Agreement with
respect to any or all of the Collective Leased Properties pursuant to Section
12.1; (b) the repossession of any or all of the Collective Leased Properties or
any portion thereof; (c) the failure of Landlord to re-let any or all of the
Collective Leased Properties or any portion thereof; nor (d) the reletting of
all or any of portion of the Collective Leased Properties, shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or re-letting. In the event of any such termination,
Tenant shall forthwith pay to Landlord all Rent due and payable with respect to
the any of the Collective Leased Properties as to which this Agreement is so
terminated through and including the date of such termination and, if this
Agreement shall be terminated with respect to less than all of the Collective
Leased Properties, the allocation of the Rent with
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respect to the Collective Leased Properties as to which this Agreement shall
have been terminated shall be made in such manner as Landlord, in Landlord's
sole and absolute discretion, shall determine. Thereafter, Tenant, until the
end of what would have been the Term of this Agreement in the absence of such
termination, and whether or not any of the Collective Leased Properties as to
which this Agreement is so terminated or any portion thereof shall have been re-
let, shall be liable to Landlord for, and shall pay to Landlord, as current
damages, the Rent and other charges which would be payable hereunder for the
remainder of the Term had such termination not occurred, less the net proceeds,
if any, of any re-letting of the applicable Leased Property, after deducting all
expenses in connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
advertising, expenses of employees, alteration costs and expenses of preparation
for such reletting, and, if this Agreement shall be terminated with respect to
less than all of the Collective Leased Properties, the allocation of the Rent
with respect to the Collective Leased Properties as to which this Agreement
shall have been terminated shall be made in such manner as Landlord, in
Landlord's reasonable discretion in good faith, shall determine. Tenant shall
pay such current damages to Landlord monthly on the days on which the Minimum
Rent would have been payable hereunder if this Agreement had not been so
terminated with respect to such of the Collective Leased Properties.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord either
(a) an amount equal to the excess, if any, of the Rent and other charges which
would be payable hereunder from the date of such termination (assuming that, for
the purposes of this paragraph, annual payments by Tenant on account of
Impositions would be the same as payments required for the immediately preceding
twelve calendar months, or if less than twelve calendar months have expired
since the Commencement Date, the payments required for such lesser period
projected to an annual amount) for what would be the then unexpired term of this
Agreement if the same remained in effect, over the Fair Market Rental for the
same period, or (b) an amount equal to the lesser of (i) the Rent and other
charges that would have been payable for the balance of the Term had it not been
terminated, and (ii) the aggregate of the Rent and other charges accrued in the
twelve (12) months ended next prior to such termination (without reduction for
any free rent or other concession or abatement); provided, however, that if this
Agreement shall have been terminated with respect to less than all of the
Collective Leased Properties, the allocation of the Rent with respect to the
Collective Leased Properties as to which this Agreement shall have been
terminated shall be made in such manner as Landlord, in Landlord's sole and
absolute discretion, shall determine. In the event this Agreement is so
terminated prior to the expiration of the first full year of the Term, the
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liquidated damages which Landlord may elect to recover pursuant to clause (b)
(ii) of this paragraph shall be calculated as if such termination had occurred
on the first anniversary of the Commencement Date. Nothing contained in this
Agreement shall, however, limit or prejudice the right of Landlord to prove and
obtain in proceedings for bankruptcy or insolvency an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (a) relet any of
the Collective Leased Properties as to which this Agreement is so terminated or
any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in any applicable Leased Property or any
portion thereof as Landlord, in its reasonable discretion, in good faith,
considers advisable and necessary for the purpose of reletting any such Leased
Property; and the making of such alterations, repairs and decorations shall not
operate or be construed to release Tenant from liability hereunder as aforesaid.
Landlord shall in no event be liable in any way whatsoever for any failure to
relet all or any portion of the Collective Leased Properties, or, in the event
that any of the Collective Leased Properties is relet, for failure to collect
the rent under such reletting. To the maximum extent permitted by law, Tenant
hereby expressly waives any and all rights of redemption granted under any
present or future laws in the event of Tenant being evicted or dispossessed, or
in the event of Landlord obtaining possession of any of the Collective Leased
Properties, by reason of the violation by Tenant of any of the covenants and
conditions of this Agreement.
12.3 Tenant's Waiver. IF THIS AGREEMENT IS TERMINATED WITH RESPECT
TO ANY OF THE COLLECTIVE LEASED PROPERTIES PURSUANT TO SECTION 12.1 OR 12.2,
TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN
THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN THIS
ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING
PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds. Any payments received by Landlord under
any of the provisions of this Agreement during the existence or continuance of
any Event of Default (and any payment made to Landlord rather than Tenant due to
the existence of any Event of Default) shall be applied to Tenant's obligations
under
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this Agreement in such order as Landlord may determine or as may be required by
applicable law.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of
Default shall have occurred and be continuing, Landlord, after Notice to Tenant
(which Notice shall not be required if Landlord shall reasonably determine in
good faith immediate action is necessary to protect person or property), without
waiving or releasing any obligation of Tenant and without waiving or releasing
any Event of Default, may (but shall not be obligated to), at any time
thereafter, make such payment or perform such act for the account and at the
expense of Tenant, and may, to the maximum extent permitted by law, enter upon
any of the Collective Leased Properties or any portion thereof for such purpose
and take all such action thereon as, in Landlord's reasonable discretion, in
good faith, may be necessary or appropriate therefor, including the management
of the Facility located thereon by Landlord or its designee, and Tenant hereby
irrevocably appoints, in the event of such election by Landlord, upon the
occurrence and during the continuance of any Event of Default, Landlord or its
designee as manager of any such Facility and its attorney in fact for such
purpose, irrevocably and coupled with an interest, in the name, place and stead
of Tenant. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Trade Names. If this Agreement is terminated with respect to
any of the Collective Leased Properties for any reason, Tenant shall not use a
Facility Trade Name in the same market in which the Facility located thereon is
located in connection with any business that competes with such Facility.
ARTICLE 13
----------
HOLDING OVER
------------
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum Rent and the Additional Rent then in effect
plus Additional Charges and other charges herein provided (prorated on a daily
basis). Tenant shall also pay to Landlord all damages (direct or indirect)
sustained by reason of any such holding over. Otherwise, such holding over shall
be on the terms and conditions set forth in this Agreement, to the extent
applicable. Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Agreement.
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ARTICLE 14
----------
LANDLORD'S DEFAULT
------------------
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Agreement and such default shall
continue for a period of thirty (30) days after Notice thereof from Tenant to
Landlord and any applicable Facility Mortgagee, or such additional period as may
be reasonably required to correct the same, Tenant may declare the occurrence of
a "Landlord Default" by a second Notice to Landlord and to such Facility
Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject to the
provisions of the following paragraph, invoice Landlord for costs and expenses
(including reasonable attorneys' fees and court costs) incurred by Tenant in
curing the same, together with interest thereon from the date Landlord receives
Tenant's invoice, at the Overdue Rate. Tenant shall have no right to terminate
this Agreement for any default by Landlord hereunder and no right, for any such
default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof. If Tenant and Landlord shall fail, in good faith, to resolve any such
dispute within ten (10) days after Landlord's Notice of dispute, either may
submit the matter for resolution to a court of competent jurisdiction.
ARTICLE 15
----------
PURCHASE OF LEASED PROPERTY
---------------------------
In the event Tenant shall purchase any of the Collective Leased
Properties from Landlord pursuant to the terms of this Agreement, Landlord
shall, upon receipt from Tenant of the applicable purchase price, together with
full payment of any unpaid Rent and other charges due and payable with respect
to any period ending on or before the date of the purchase, deliver to Tenant an
appropriate deed or other instruments, conveying the entire interest of Landlord
in and to such Leased Property to Tenant, free and clear of all encumbrances
created through the act or omission of Landlord other than (i) Permitted
Encumbrances and such other liens, if any, which Tenant has agreed in writing to
accept and take title subject to, and (ii) encumbrances imposed on such Leased
Property under Section 5.5. The
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difference between the applicable purchase price and the total cost of
discharging the encumbrances described in clause (i) preceding shall be paid to
Landlord or as Landlord may direct, by wire transfer of immediately available
federal funds. Such Leased Property shall be conveyed to Tenant on an "as is"
basis and in its "as-is" physical condition. The closing of any such sale shall
be subject to all terms and conditions with respect thereto set forth in this
Agreement and shall, unless waived by Tenant, be contingent upon and subject to
Tenant's obtaining all required governmental consents and approvals for such
transfer. All expenses of such conveyance, including, without limitation, all
transfer and sales taxes, documentary fees, the fees and expenses of counsel to
Landlord and the cost of any title examination or title insurance, shall be paid
by Tenant.
ARTICLE 16
----------
SUBLETTING AND ASSIGNMENT
-------------------------
16.1 Subletting and Assignment. Except as provided in the last
sentence of this paragraph and Section 16.3 below, Tenant shall not, without the
prior written consent of a majority of the Independent Trustees and a majority
of the Trustees, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer this Agreement or sublease (which term shall be deemed to include the
granting of concessions, licenses and the like), all or any part of the
Collective Leased Properties or suffer or permit this Agreement or the leasehold
estate created hereby or any other rights arising under this Agreement to be
assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in whole
or in part, whether voluntarily, involuntarily or by operation of law, or permit
the use or occupancy of any of the Collective Leased Properties by anyone other
than Tenant, or any of the Collective Leased Properties to be offered or
advertised for assignment or subletting. For purposes of this Section 16.1, an
assignment of this Agreement shall be deemed to include any Change in Control of
Tenant (other than any Change in Control resulting from (x) the closing of the
IPO, (y) the trading of shares by the public on a nationally recognized
exchange, including, without limitation, NASDAQ, or (z) the issuance of
additional equity interests in Tenant or any Guarantor on commercially
reasonable terms) or any transaction pursuant to which Tenant is merged or
consolidated with another entity or pursuant to which all or substantially all
of Tenant's assets are transferred to any other entity, as if such change in
control or transaction were an assignment of this Agreement. Landlord's consent
shall not be required in connection with the transfer of all of the interests in
Tenant to Prime, provided that Prime shall, simultaneously therewith, execute
and deliver to Landlord a Stock Pledge and Security Agreement in the form of the
Stock Pledge Agreement.
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If this Agreement is assigned or if any of the Collective Leased
Properties or any part thereof are sublet (or occupied by anybody other than
Tenant or residents of the units at the Facilities) Landlord may collect the
rents from such assignee, subtenant or occupant, as the case may be, and apply
the net amount collected to the Rent herein reserved, but no such collection
shall be deemed a waiver of the provisions set forth in the first paragraph of
this Section 16.1, the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or a release of Tenant from the
future performance by Tenant of its covenants, agreements or obligations
contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder, and no consent to any subletting or
assignment in a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 16.1. No assignment, subletting or
occupancy shall affect any Primary Intended Use. Any subletting, assignment or
other transfer of Tenant's interest under this Agreement in contravention of
this Section 16.1 shall be voidable at Landlord's option.
16.2 Required Sublease Provisions. Any sublease of all or any
portion of any of the Collective Leased Properties (except to residents of the
units located at the Facilities) shall provide (a) that it is subject and
subordinate to this Agreement and to the matters to which this Agreement is or
shall be subject or subordinate; (b) that in the event of termination of this
Agreement or reentry or dispossession of Tenant by Landlord under this
Agreement, Landlord may, at its option, terminate such sublease or take over all
of the right, title and interest of Tenant, as sublessor under such sublease,
and such subtenant shall, at Landlord's option, attorn to Landlord pursuant to
the then executory provisions of such sublease, except that neither Landlord nor
any Facility Mortgagee, as holder of a mortgage or as Landlord under this
Agreement, if such mortgagee succeeds to that position, shall (i) be liable for
any act or omission of Tenant under such sublease, (ii) be subject to any
credit, counterclaim, offset or defense which theretofore accrued to such
subtenant against Tenant, (iii) be bound by any previous modification of such
sublease not consented to in writing by Landlord or by any previous prepayment
of more than one (1) month's Rent, (iv) be bound by any covenant of Tenant to
undertake or complete any construction of such Leased Property or any portion
thereof, (v) be required to account for any security deposit of the subtenant
other than any security deposit actually delivered to Landlord by Tenant, (vi)
be bound by any obligation to make any payment to such subtenant or grant any
credits, except for services, repairs, maintenance and restoration provided for
under the sublease that are performed after the date
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of such attornment, (vii) be responsible for any monies owing by Tenant to the
credit of such subtenant, or (viii) be required to remove any Person occupying
any portion of the Collective Leased Properties; and (c), in the event that such
subtenant receives a written Notice from Landlord or any Facility Mortgagee
stating that an Event of Default has occurred and is continuing, such subtenant
shall thereafter be obligated to pay all rentals accruing under such sublease
directly to the party giving such Notice or as such party may direct. All
rentals received from such subtenant by Landlord or the Facility Mortgagee, as
the case may be, shall be credited against the amounts owing by Tenant under
this Agreement and such sublease shall provide that the subtenant thereunder
shall, at the request of Landlord, execute a suitable instrument in confirmation
of such agreement to attorn. An original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in form and substance reasonably satisfactory to
Landlord, shall be delivered promptly to Landlord and (a) in the case of an
assignment, the assignee shall assume in writing and agree to keep and perform
all of the terms of this Agreement on the part of Tenant to be kept and
performed and shall be, and become, jointly and severally liable with Tenant for
the performance thereof and (b) in case of either an assignment or subletting,
Tenant shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of
the covenants and conditions to be performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of
the provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Subleases. Notwithstanding the foregoing, but subject
to the provisions of Section 16.4 and any other express conditions or
limitations set forth herein, Tenant may enter into the Permitted Subleases and
third party residency agreements with respect to the units located at the
Facilities and may, in each instance after Notice to Landlord, sublease space at
any of the Collective Leased Properties for laundry, commissary or child care
purposes or other concessions in the ordinary course of business, so long as
such sublease will not reduce the number of units at the applicable Facility,
will not violate or affect any Legal Requirement or Insurance Requirement, and
Tenant shall provide such additional insurance coverage applicable to the
activities to be conducted in such subleased space as Landlord and any Facility
Mortgagee may require.
16.4 Sublease Limitation. Anything contained in this Agreement to
the contrary notwithstanding, Tenant shall not sublet any of the Collective
Leased Properties on any basis such that the rental to be paid by any sublessee
thereunder would be
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based, in whole or in part, on either (a) the income or profits derived by the
business activities of such sublessee, or (b) any other formula such that any
portion of such sublease rental would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto.
ARTICLE 17
----------
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
----------------------------------------------
17.1 Estoppel Certificates. At any time and from time to time, upon
not less than ten (10) days prior Notice by a party, the other party shall
furnish to the requesting party an Officer's Certificate certifying that this
Agreement is unmodified and in full force and effect (or that this Agreement is
in full force and effect as modified and setting forth the modifications), the
date to which the Rent has been paid, that, to such party's knowledge, no
Default or an Event of Default has occurred and is continuing or, if a Default
or an Event of Default shall exist, specifying in reasonable detail the nature
thereof, and the steps being taken to remedy the same, and such additional
information as the requesting party may reasonably request. Any such
certificate furnished pursuant to this Section 17.1 may be relied upon by the
requesting party, any Facility Mortgagee and any prospective purchaser or
mortgagee of any of the Collective Leased Properties.
17.2 Financial Statements.
Tenant shall furnish the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, the most recent Consolidated Financials and
the most recent unaudited financial statements of Tenant prepared on a
Facility by Facility basis, in each case accompanied by the Financial
Officer's Certificate;
(b) within one hundred twenty (120) days after the end of each
Fiscal Year, the most recent Consolidated Financials for such year,
including the most recent financial statements of Tenant prepared on a
Facility by Facility basis, in each case certified by Ernst & Young LLP or
another independent certified public accountant reasonably satisfactory to
Landlord and accompanied by a Financial Officer's Certificate;
(c) within thirty (30) days after the end of each calendar
month, an unaudited statement of income prepared on
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a Facility by Facility basis, including occupancy percentages and payor
mix, accompanied by a Financial Officer's Certificate;
(d) promptly after the sending or filing thereof, copies of all
reports which Tenant and/or any Guarantor sends to its security holders
generally, and copies of all periodic reports which Tenant and/or any
Guarantor files with the SEC or any stock exchange on which its shares are
listed or traded;
(e) promptly after the delivery thereof to Tenant or any
Guarantor, or either of their management, a copy of any management letter
or written report prepared by the certified public accountants with respect
to the financial condition, operations, business or prospects of Tenant or
such Guarantor, as the case may be;
(f) at any time and from time to time upon not less than twenty
(20) days Notice from Landlord (or such additional period as may be
reasonably required to comply with such request), any Consolidated
Financials or any other financial reporting information required to be
filed by Landlord with any securities and exchange commission, the SEC or
any successor agency, or any other governmental authority, or required
pursuant to any order issued by any court, governmental authority or
arbitrator in any litigation to which Landlord is a party, for purposes of
compliance therewith; and
(g) promptly, upon Notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant and any
Guarantor as Landlord may reasonably request from time to time.
Landlord may at any time, and from time to time, provide any Facility Mortgagee
with copies of any of the foregoing statements.
17.3 General Operations.
Tenant covenants and agrees to furnish to Landlord:
17.3.1 Reimbursement, Licensure, Etc. Within thirty (30) days
after receipt or modification thereof, copies of:
(a) all licenses authorizing Tenant to operate each Facility
for its Primary Intended Use;
(b) all Medicare and Medicaid certifications, together with
provider agreements and all material correspondence
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relating thereto with respect to each Facility (excluding, however,
correspondence which may be subject to any attorney-client privilege);
(c) all reports of surveys, statements of deficiencies, plans of
correction, and all material correspondence relating thereto, including,
without limitation, all reports and material correspondence concerning
compliance with or enforcement of licensure, Medicare/Medicaid, and
accreditation requirements, including physical environment and Life Safety
Code survey reports (excluding, however, correspondence which may be
subject to any attorney-client privilege); and
(d) with reasonable promptness, such other confirmation as to
the licensure and Medicare and Medicaid participation of Tenant as Landlord
may reasonably request from time to time.
17.3.2 Annual Budgets. Commencing with the 1998 Fiscal Year, not
less than thirty (30) days prior to commencement of any Fiscal Year, proposed
annual income and ordinary expense and capital improvement budgets setting forth
projected income and costs and expenses projected to be incurred by Tenant in
managing, owning, maintaining and operating the Facilities during the next
succeeding Fiscal Year.
ARTICLE 18
----------
LANDLORD'S RIGHT TO INSPECT
---------------------------
Tenant shall permit Landlord and its authorized representatives to
inspect the Collective Leased Properties during usual business hours upon not
less than twenty-four (24) hours' notice (provided that no such notice shall be
required if Landlord shall reasonably determine immediate action is necessary to
protect person or property), and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of this Agreement, provided that any
inspection or repair by Landlord or its representatives will not unreasonably
interfere with Tenant's use and operation of the applicable Leased Property and
further provided that in the event of an emergency, as determined by Landlord in
its sole discretion, prior Notice shall not be necessary.
<PAGE>
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ARTICLE 19
----------
APPRAISAL
---------
19.1 Appraisal Procedure. In the event that it becomes necessary to
determine the Fair Market Value of any of the Collective Leased Properties for
any purpose of this Agreement and the parties cannot agree thereon, such Fair
Market Value shall be determined upon the written demand of either party in
accordance with the following procedure.
The party requesting an appraisal, by Notice given within thirty (30)
days after the date of the event which requires or permits such procedure, shall
propose and unilaterally approve a Qualified Appraiser. The other party, by
Notice given within fifteen (15) days after receipt of such Notice appointing
the first Qualified Appraiser, may appoint a second Qualified Appraiser. If the
other party fails to appoint the second Qualified Appraiser within such fifteen
(15) day period, such party shall have waived its right to appoint a Qualified
Appraiser, the first Qualified Appraiser shall appoint a second Qualified
Appraiser within fifteen (15) days thereafter and the Fair Market Value shall be
determined by the Qualified Appraisers as set forth below.
The two Qualified Appraisers shall thereupon endeavor to agree upon
the Fair Market Value. If the two Qualified Appraisers so named cannot agree
upon such value within thirty (30) days after the designation of the second such
appraiser, each such appraiser shall, within five (5) days after the expiration
of such thirty (30) day period, submit his appraisal of fair market value to the
other appraiser in writing, and if the fair market values set forth in such
appraisals vary by five percent (5%) or less of the greater value, the fair
market value shall be determined by calculating the average of the two fair
market values determined by the two appraisers.
If the fair market values set forth in the two appraisals vary by more
than five percent (5%) of the greater value, the two Qualified Appraisers shall
select a third Qualified Appraiser within an additional fifteen (15) days
following the expiration of the aforesaid five (5) day period. If the two
appraisers are unable to agree upon the appointment of a third appraiser within
such fifteen (15) day period, either party may, upon written notice to the
other, request that such appointment be made by the then President (or
equivalent officer) of the State's Chapter of the American Institute of Real
Estate Appraisers, or his or her designee or, if there is no such organization
or if such individual declines to make such appointment, by any state or Federal
court of competent jurisdiction for the State.
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In the event that all three of the appraisers cannot agree upon Fair
Market Value within twenty (20) days following the selection of the third
appraiser, each appraiser shall, within ten (10) days thereafter, submit his
appraisal of fair market value to the other two appraisers in writing, and the
fair market value shall be determined by calculating the average of the two
numerically closest values (or, if the values are equidistant, the average of
all three values) determined by the three appraisers.
In the event that any appraiser appointed hereunder does not or is
unable to perform his or her obligation hereunder, then the party or the
appraisers appointing such appraiser shall have the right to propose and approve
unilaterally a substitute Qualified Appraiser, but if the party or the
appraisers who have the right to appoint a substitute Qualified Appraiser fail
to do so within ten (10) days after written notice from the other party (or
either party in the event such appraiser was appointed by the other appraisers)
either party may, upon written notice to the party having the right to appoint a
substitute Qualified Appraiser, request that such appointment be made by such
officer of the American Institute of Real Estate Appraisers or court of
competent jurisdiction as described above; provided, however, that a party who
has the right to appoint an appraiser or a substitute appraiser shall have the
right to make such appointment only up until the time such appointment is made
by such officer or court.
In connection with the appraisal process, Tenant shall provide the
appraisers full access during normal business hours to examine the applicable
Leased Property, the books, records and files of Tenant and all agreements,
leases and other operating agreements relating to the applicable Leased
Property.
The costs (other than Landlord's counsel fees) of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges. Upon determining such value, the appraisers shall promptly notify
Landlord and Tenant in writing of such determination. If any party shall fail
to appear at the hearings appointed by the appraisers, the appraisers may act in
the absence of such party.
The determination of the Qualified Appraisers made in accordance with
the foregoing provisions shall be final and binding upon the parties, such
determination may be entered as an award in arbitration in a court of competent
jurisdiction, and judgment thereon may be entered.
19.2 Landlord's Right to Appraisal. Landlord shall have the right,
exercisable twice at any time during the Term, to appoint a Qualified Appraiser
to perform a complete appraisal of
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any or all of the Collective Leased Properties, (each such appraisal to include
complete valuations of any such Leased Property based upon (a) the "Cost
Approach", (b) the "Market Approach" and (c) the "Income Approach"), which
appraisal shall meet all requirements of any state or Federal bank regulatory
authority that Landlord considers relevant or any Facility Mortgagee. The costs
of each such appraisal shall be borne by Tenant and shall be included as part of
the Additional Charges.
ARTICLE 20
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
20.1 Representations of Tenant. To induce Landlord to enter into
this Agreement, Tenant represents and warrants to Landlord as follows:
20.1.1 Status and Authority of Tenant. Tenant is a corporation
duly organized, validly existing and in corporate good standing under the
laws of its state of incorporation. Tenant has all requisite power and
authority under the laws of its state of formation and its charter
documents to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. Tenant has duly
qualified to transact business in each jurisdiction in which the nature of
the business conducted by it requires such qualification.
20.1.2 Action of Tenant. Tenant has taken all necessary action
to authorize the execution, delivery and performance of this Agreement, and
this Agreement constitutes the valid and binding obligation and agreement
of Tenant, enforceable against Tenant in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
20.1.3 No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement by Tenant, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any of the Collective Leased Properties pursuant to the terms of any
indenture, mortgage, deed of trust, note, evidence of indebtedness or any
other material agreement or instrument by which Tenant is bound.
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20.1.4 Litigation. Tenant has received no written notice of
and, to Tenant's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding
has begun, which questions the validity of this Agreement or any action
taken or to be taken pursuant hereto, will result in any material adverse
change in the business, operation, affairs or condition of any of the
Collective Leased Properties, result in or subject the Collective Leased
Properties to a material liability, or involves condemnation or eminent
domain proceedings against any material part of the Collective Leased
Properties.
20.1.5 Disclosure. To Tenant's knowledge, there is no fact or
condition which materially and adversely affects the business or condition
of the Collective Leased Properties which has not been set forth in this
Agreement or in the other documents, certificates or statements furnished
to Landlord in connection with the transactions contemplated hereby.
20.1.6 Compliance With Law. Except as disclosed in writing to
Landlord, to Tenant's knowledge, the Collective Leased Properties and the
use and operation thereof do not violate any material federal, state,
municipal and other governmental statutes, ordinances, by-laws, rules,
regulations or any other legal requirements, including, without limitation,
those relating to construction, occupancy, zoning, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and there are presently in effect all material
licenses, permits and other authorizations necessary for the current use,
occupancy and operation thereof. Tenant has not received written notice of
any threatened request, application, proceeding, plan, study or effort
which would materially adversely affect the present use or zoning of any of
the Collective Leased Properties or which would modify or realign any
adjacent street or highway in a manner which would materially adversely
affect the use and operation of the Collective Leased Properties.
20.1.7 Hazardous Substances. Except as disclosed to Landlord
or as described in any environmental report delivered to Landlord, to
Tenant's knowledge, none of Tenant nor any tenant or other occupant or user
of any of the Collective Leased Properties, or any portion thereof, has
stored or disposed of (or engaged in the business of storing or disposing
of) or has released or caused the release of any Hazardous Substances on
any of the Collective Leased Properties, or any portion thereof, the
removal of which is required or the maintenance of which is prohibited or
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penalized by any Applicable Law, and, to Tenant's knowledge, except as
disclosed to Landlord or as described in any environmental report delivered
to Landlord, the Collective Leased Properties are free from any such
Hazardous Substances, except any such materials maintained in accordance
with Applicable Law.
20.2 Representations of Landlord. To induce Tenant to enter in this
Agreement, Landlord represents and warrants to Tenant as follows:
20.2.1 Status and Authority of Landlord. Landlord is a Maryland
real estate investment trust duly organized, validly existing and in trust
good standing under the laws of the State of Maryland, and has all
requisite power and authority under the laws of such state and under its
charter documents to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. Landlord
has duly qualified and is in good standing as a trust or unincorporated
business association in each jurisdiction in which the nature of the
business conducted by it requires such qualification.
20.2.2 Action of Landlord. Landlord has taken all necessary
action to authorize the execution, delivery and performance of this
Agreement, and upon the execution and delivery of this Agreement by
Landlord constitutes the valid and binding obligation and agreement of
Landlord, enforceable against Landlord in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
20.2.3 No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement by Landlord, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any property or assets of Landlord pursuant to the terms of any indenture,
mortgage, deed of trust, note, evidence of indebtedness or any other
agreement or instrument by which Landlord is bound.
20.2.4 Litigation. No investigation, action or proceeding is
pending and, to Landlord's actual knowledge, no action or proceeding is
threatened and no investigation looking toward such an action or proceeding
has begun, which questions the validity of this Agreement or any action
taken or to be taken pursuant hereto.
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ARTICLE 21
----------
FACILITY MORTGAGES
------------------
21.1 Landlord May Grant Liens. Without the consent of Tenant,
Landlord may, subject to the terms and conditions set forth in this Section
21.1, from time to time, directly or indirectly, create or otherwise cause to
exist any lien, encumbrance or title retention agreement ("Encumbrance") upon
any of the Collective Leased Properties, or any portion thereof or interest
therein, whether to secure any borrowing or other means of financing or
refinancing. Any such Encumbrance shall include the right to prepay (whether or
not subject to a prepayment penalty) and shall provide (subject to Section 21.2
below) that it is subject to the rights of Tenant under this Agreement,
including the rights of Tenant to acquire the Collective Leased Properties
pursuant to the applicable provisions of this Agreement.
21.2 Subordination of Lease. Subject to Section 21.1, this
Agreement, any and all rights of Tenant hereunder, are and shall be subject and
subordinate to any ground or master lease, and all renewals, extensions,
modifications and replacements thereof, and to all mortgages and deeds of trust,
which may now or hereafter affect the Collective Leased Properties, or any of
them, or any improvements thereon and/or any of such leases, whether or not such
mortgages or deeds of trust shall also cover other lands and/or buildings and/or
leases, to each and every advance made or hereafter to be made under such
mortgages and deeds of trust, and to all renewals, modifications, replacements
and extensions of such leases and such mortgages and deeds of trust and all
consolidations of such mortgages and deeds of trust. This section shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly execute, acknowledge
and deliver any instrument that Landlord, the lessor under any such lease or the
holder of any such mortgage or the trustee or beneficiary of any deed of trust
or any of their respective successors in interest may reasonably request to
evidence such subordination provided that such agreement does not amend or
modify this Agreement and includes customary non-disturbance and recognition
provisions. Any lease to which this Agreement is, at the time referred to,
subject and subordinate is herein called "Superior Lease" and the lessor of a
Superior Lease or its successor in interest at the time referred to, is herein
called "Superior Landlord" and any mortgage or deed of trust to which this
Agreement is, at the time referred to, subject and subordinate, is herein called
"Superior Mortgage" and the holder, trustee or beneficiary of a Superior
Mortgage is herein called "Superior Mortgagee".
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If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Agreement with respect to one or more of the
Collective Leased Properties, whether through possession or foreclosure action
or delivery of a new lease or deed, or otherwise, then at the request of such
party so succeeding to Landlord's rights (herein called "Successor Landlord")
and upon such Successor Landlord's written agreement to accept Tenant's
attornment, Tenant shall attorn to and recognize such Successor Landlord as
Tenant's landlord under this Agreement with respect to one or more of the
Collective Leased Properties, and shall promptly execute and deliver any
instrument that such Successor Landlord may reasonably request to evidence such
attornment provided that such agreement does not amend or modify this Agreement
and includes customary non-disturbance and recognition provisions. Upon such
attornment, this Agreement shall continue in full force and effect as a direct
lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Agreement, except that the
Successor Landlord (unless formerly the landlord under this Agreement or its
nominee or designee) shall not be (a) liable in any way to Tenant for any act or
omission, neglect or default on the part of Landlord under this Agreement; (b)
responsible for any monies owing by or on deposit with Landlord to the credit of
Tenant; (c) subject to any counterclaim or setoff which theretofore accrued to
Tenant against Landlord; (d) bound by any modification of this Agreement
subsequent to such Superior Lease or Mortgage, or by any previous prepayment of
Minimum Rent or Additional Rent for more than one (1) month, which was not
approved in writing by the Superior Landlord or the Superior Mortgagee thereto;
(e) liable to Tenant beyond the Successor Landlord's interest in the applicable
Leased Property and the rents, income, receipts, revenues, issues and profits
issuing from such Leased Property; (f) responsible for the performance of any
work to be done by the Landlord under this Agreement to render the applicable
Leased Property ready for occupancy by Tenant; or (g) required to remove any
Person occupying the applicable Leased Property or any part thereof, except if
such person claims by, through or under the Successor Landlord. Tenant agrees
at any time and from time to time to execute a suitable instrument in
confirmation of Tenant's agreement to attorn, as aforesaid.
21.3 Notice to Mortgagee and Ground Landlord. Subsequent to the
receipt by Tenant of notice from any Person that it is a Facility Mortgagee, or
that it is the ground lessor under a lease with Landlord, as ground lessee,
which includes the applicable Leased Property as part of the demised premises,
no notice from Tenant to Landlord as to the applicable Leased Property shall be
effective unless and until a copy of the same is given to such Facility
Mortgagee or ground lessor, and the curing of any of
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Landlord's defaults by such Facility Mortgagee or ground lessor shall be treated
as performance by Landlord.
ARTICLE 22
----------
ADDITIONAL COVENANTS OF TENANT
------------------------------
22.1 Prompt Payment of Indebtedness. Tenant shall, and shall cause
the Permitted Subtenants to, (a) pay or cause to be paid when due all payments
of principal of and premium and interest on Indebtedness for money borrowed and
shall not permit or suffer any such Indebtedness to become or remain in default
beyond any applicable grace or cure period; (b) pay or cause to be paid when due
all lawful claims for labor and rents; (c) pay or cause to be paid when due all
trade payables; and (d) pay or cause to be paid when due all other Indebtedness
upon which it is or becomes obligated, except, in each case, to the extent
payment is being contested in good faith by appropriate proceedings in
accordance with Article 8 and if Tenant shall have set aside on its books
adequate reserves with respect thereto in accordance with GAAP or unless and
until foreclosure, distraint sale or other similar proceedings shall have been
commenced.
22.2 Conduct of Business. Tenant shall, and shall cause the
Permitted Subtenants to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect and in good standing its
corporate existence and its rights and licenses necessary to conduct its
business.
22.3 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account in which full, true and correct entries will be
made of dealings and transactions in relation to the business and affairs of
Tenant in accordance with GAAP. Tenant shall apply accounting principles in the
preparation of the financial statements of Tenant which, in the judgment of and
the opinion of its independent public accountants, are in accordance with GAAP,
except for changes approved by such independent public accountants. Tenant
shall provide to Landlord either in a footnote to the financial statements
delivered under Section 17.2 which relate to the period in which such change
occurs, or in separate schedules to such financial statements, information
sufficient to show the effect of any such changes on such financial statements.
22.4 Notice of Change of Name, Etc. Tenant shall give prompt Notice
to Landlord of any change in (a) the name (operating or otherwise) of Tenant or
any Facility; (b) the individual licensed as executive director of any Facility;
(c) the number of units available for use at any Facility; and (d)
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the patient and/or child care services, if any, that are offered at any
Facility.
22.5 Notice of Litigation, Potential Event of Default, Etc. Tenant
shall give prompt Notice to Landlord of any litigation or any administrative
proceeding to which it, any Guarantor or any of the Permitted Subtenants may
hereafter become a party which involves a potential liability equal to or
greater than Two Hundred Fifty Thousand Dollars ($250,000) or which may
otherwise result in any material adverse change in the business, operations,
property, prospects, results of operation or condition, financial or other, of
Tenant, such Guarantor or Permitted Subtenant. Forthwith upon Tenant obtaining
knowledge of any Default, Event of Default or any default or event of default
under any agreement relating to Indebtedness for money borrowed in an aggregate
amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant, any Guarantor or any of the Permitted
Subtenants on Form 8-K or in Part II of a quarterly report on Form 10-Q if
Tenant, any Guarantor or any of their Affiliated Persons required to file such
reports under the Securities Exchange Act of 1934, as amended, Tenant shall
furnish Notice thereof to Landlord specifying the nature and period of existence
thereof and what action Tenant has taken or is taking or proposes to take with
respect thereto.
22.6 Indebtedness of Tenant. None of Tenant or the Permitted
Subtenants shall create, incur, assume or guarantee, or permit to exist, or
become or remain liable directly or indirectly upon, any Indebtedness except the
following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for taxes, assessments, governmental
charges or levies, to the extent that payment thereof shall not at the time
be required to be made in accordance with the provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period and
in respect of which execution thereof shall have been stayed pending such
appeal or review, or (ii) which are fully covered by insurance payable to
Tenant, or (iii) which are for an amount not in excess of $10,000 in the
aggregate at any one time outstanding and (x) which have been in force for
not longer than the applicable appeal period, so long as execution is not
levied thereunder or (y) in respect of which an appeal or proceedings for
review shall at the time be prosecuted in good faith in accordance with the
provisions of Article 8, and in respect
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of which execution thereof shall have been stayed pending such appeal or
review;
(d) unsecured borrowings from Affiliated Persons which are by
their terms expressly subordinate pursuant to a Subordination Agreement to
the payment and performance of Tenant's obligations under this Agreement;
(e) Indebtedness for purchase money financing or goods and
services incurred in the ordinary course of business; or
(f) Indebtedness permitted pursuant to the terms of Section
6.2.1.
22.7 Financial Condition of Tenant. Tenant shall at all times
maintain Tangible Net Worth in an amount at least equal to one year's Minimum
Rent; provided, however, that so long as Prime or Brookdale is a Guarantor
pursuant to a Guaranty, any demand promissory note made by Prime or Brookdale to
the order of Tenant shall, to the extent of the outstanding principal amount
thereof, be counted toward satisfying such requirement.
22.8 Distributions, Payments to Affiliated Persons, Etc. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distributions or
any payment to any Affiliated Person of Tenant (including payments in the
ordinary course of business and payments pursuant to management agreements with
any such Affiliated Person) or set apart any sum or property therefor, or agree
to do so, if, at the time of such proposed action, or immediately after giving
effect thereto, there shall exist any (a) Monetary Default, (b) Default as to
which Landlord shall have given Tenant Notice thereof or (c) Event of Default.
22.9 Prohibited Transactions. Tenant shall not permit to exist or
enter into any agreement or arrangement whereby it or any Permitted Subtenant
engages in a transaction of any kind with any Affiliated Person as to Tenant or
any Guarantor, except on terms and conditions which are not less favorable to
Tenant or the Permitted Subtenant than those on which similar transactions
between unaffiliated parties could fairly be expected to be entered into on an
arms-length basis.
22.10 Management of Collective Leased Properties. Tenant shall not
enter into or permit to exist any Management Agreement unless the terms thereof
have been previously approved in writing by Landlord, which approval may be
given or withheld in Landlord's reasonable discretion in good faith. All
management fees, payments in connection with any extension of credit and fees
for services provided in connection with the operation of the applicable Leased
Property, payable by Tenant to any Guarantor (or any Affiliated Person as to
Tenant or such
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Guarantor), shall be subordinated to all of the obligations of Tenant due under
this Agreement pursuant to a Subordination Agreement. Tenant shall not agree to
any change in the Manager of any of the Collective Leased Properties and/or any
Facility, to any change in any Management Agreement, terminate any Management
Agreement or permit any Manager to assign any Management Agreement without the
prior written approval of Landlord in each instance, which approval may be given
or withheld in Landlord's reasonable discretion in good faith. Any Management
Agreement shall provide that Landlord shall be provided notice of any defaults
thereunder and, at Landlord's option, an opportunity to cure such defaults and
shall otherwise be in form and substance satisfactory to Landlord in its
reasonable discretion in good faith. If Landlord shall cure any of Tenant's
defaults under any Management Agreement, the cost of such cure shall be payable
upon demand by Tenant to Landlord with interest accruing from the demand date at
the Overdue Rate and Landlord shall have the same rights and remedies for
failure to pay such costs on demand as for Tenant's failure to pay Minimum Rent.
Tenant shall deliver to Landlord any instrument requested by Landlord to
implement the intent of the foregoing provision.
22.11 Liens and Encumbrances. Except as permitted by Section 7.1,
subject to the provisions of Article 8 relating to Permitted Contests, Tenant
shall not create or incur or suffer to be created or incurred or to exist any
Lien on this Agreement, Tenant's Personal Property or any of its other
respective assets, properties, rights or income, or any of its interest therein,
now or at any time hereafter owned, other than:
(a) Security interests securing Indebtedness permitted pursuant
to Section 22.6; and
(b) Permitted Encumbrances.
22.12 Merger; Sale of Assets; Etc. Except as otherwise expressly
provided in this Agreement, Tenant shall not (a) sell, lease (as lessor or
sublessor), transfer or otherwise dispose of, or abandon, all or any material
portion of its assets (including capital stock) or business to any Person; (b)
merge into or with or consolidate with any other Entity; or (c) sell, lease (as
lessor or sublessor), transfer or otherwise dispose of, or abandon, any personal
property or fixtures or any real property; provided, however, that,
notwithstanding the provisions of clause (c) preceding, Tenant may dispose of
equipment or fixtures which have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary, provided substitute equipment or
fixtures having equal or greater value and utility (but not necessarily having
the same function) have been provided.
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22.13 Permitted Subleases. Tenant shall not amend, modify or
terminate the Permitted Subleases without the prior written consent of Landlord.
ARTICLE 23
----------
MISCELLANEOUS
-------------
23.1 Limitation on Payment of Rent. All agreements between Landlord
and Tenant herein are hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of acceleration of Rent, or otherwise, shall
the Rent or any other amounts payable to Landlord under this Agreement exceed
the maximum permissible under applicable law, the benefit of which may be
asserted by Tenant as a defense, and if, from any circumstance whatsoever,
fulfillment of any provision of this Agreement, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, or if from any circumstances Landlord should ever receive as
fulfillment of such provision such an excessive amount, then, ipso facto, the
amount which would be excessive shall be applied to the reduction of the
installment(s) of Minimum Rent next due and not to the payment of such excessive
amount. This provision shall control every other provision of this Agreement
and any other agreements between Landlord and Tenant.
23.2 No Waiver. No failure by Landlord to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
23.3 Remedies Cumulative. To the maximum extent permitted by law,
each legal, equitable or contractual right, power and remedy of Landlord, now or
hereafter provided either in this Agreement or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Landlord of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord of any or all of such other rights, powers
and remedies.
23.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this
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Agreement, but rather the effect thereof shall be confined to the clause,
sentence, paragraph, section or provision so held to be invalid, illegal or
ineffective, and this Agreement shall be construed as if such invalid, illegal
or ineffective provisions had never been contained therein.
23.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of any of the Collective Leased Properties or any part thereof, or
of any interest therein, shall be valid or effective unless agreed to and
accepted in writing by Landlord and no act by Landlord or any representative or
agent of Landlord, other than such a written acceptance by Landlord, shall
constitute an acceptance of any such surrender.
23.6 No Merger of Title. It is expressly acknowledged and agreed
that it is the intent of the parties that there shall be no merger of this
Agreement or of the leasehold estate created hereby by reason of the fact that
the same Person may acquire, own or hold, directly or indirectly this Agreement
or the leasehold estate created hereby and the fee estate or ground landlord's
interest in any of the Collective Leased Properties.
23.7 Conveyance by Landlord. If Landlord or any successor owner of
all or any portion of any of the Collective Leased Properties shall convey all
or any portion of the Collective Leased Properties in accordance with the terms
hereof other than as security for a debt, and the grantee or transferee of such
of the Collective Leased Properties shall expressly assume all obligations of
Landlord hereunder arising or accruing from and after the date of such
conveyance or transfer, Landlord or such successor owner, as the case may be,
shall thereupon be released from all future liabilities and obligations of
Landlord under this Agreement with respect to such of the Collective Leased
Properties arising or accruing from and after the date of such conveyance or
other transfer and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
23.8 Quiet Enjoyment. So long as Tenant shall pay the Rent as the
same becomes due and shall comply with all of the terms of this Agreement,
Tenant shall peaceably and quietly have, hold and enjoy the Collective Leased
Properties for the Term, free of hindrance or molestation by Landlord or anyone
claiming by, through or under Landlord, but subject to (a) any Encumbrance
permitted under Article 21 or otherwise permitted to be created by Landlord
hereunder, (b) all Permitted Encumbrances, (c) liens as to obligations of
Landlord that are either not yet due or which are being contested in good faith
and by proper proceedings, and (d) liens that have been consented to in writing
by Tenant. Except as otherwise provided in this Agreement, no failure by
Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate this Agreement or
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abate, reduce or make a deduction from or offset against the Rent or any other
sum payable under this Agreement, or to fail to perform any other obligation of
Tenant hereunder.
23.9 NON-LIABILITY OF TRUSTEES. THE DECLARATION, A COPY OF WHICH IS
DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
23.10 Landlord's Consent of Trustees. Where provision is made in
this Agreement for Landlord's consent and Landlord shall fail or refuse to give
such consent, Tenant shall not be entitled to any damages for any withholding by
Landlord of its consent, it being intended that Tenant's sole remedy shall be an
action for specific performance or injunction, and that such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
unreasonably to withhold its consent.
23.11 Memorandum of Lease. Neither Landlord nor Tenant shall record
this Agreement. However, Landlord and Tenant shall promptly, upon the request
of the other, enter into a short form memorandum of this Agreement, in form
suitable for recording under the laws of the State in which reference to this
Agreement, and all options contained herein, shall be made. Tenant shall pay all
costs and expenses of recording such memorandum.
23.12 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall
be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial
carrier, addressed to the recipient of the notice, postpaid and registered
or certified with return receipt requested (if by mail), or with all
freight charges prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall
be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and,
in all other cases, upon the date of receipt or refusal, except
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that whenever under this Agreement a notice is either received on a day
which is not a Business Day or is required to be delivered on or before a
specific day which is not a Business Day, the day of receipt or required
delivery shall automatically be extended to the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
BLC Property, Inc.
c/o The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attn: Mr. Mark J. Schulte
[Telecopier No. (312) 917-0460]
with a copy to:
The Prime Group, Inc.
77 West Walker Drive, Suite 3900
Chicago, Illinois 60601
Attn: Robert J. Rudnik, Esq.
[Telecopier No. (312) 917-1684]
and to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601-9703
Attn: Wayne D. Boberg, Esq.
[Telecopier No. (312) 558-5700]
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right
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from time to time and at any time during the term of this Agreement to
change their respective addresses effective upon receipt by the other
parties of such notice and each shall have the right to specify as its
address any other address within the United States of America.
23.13 Construction. Anything contained in this Agreement to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to any of the Collective Leased Properties shall survive
such termination or expiration. In no event shall Landlord be liable for any
consequential damages suffered by Tenant as the result of a breach of this
Agreement by Landlord. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing
signed by the party to be charged. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Each term or provision of this
Agreement to be performed by Tenant shall be construed as an independent
covenant and condition. Time is of the essence with respect to the exercise of
any rights of Tenant under this Agreement. Except as otherwise set forth in
this Agreement, any obligations of Tenant (including without limitation, any
monetary, repair and indemnification obligations) shall survive the expiration
or sooner termination of this Agreement.
23.14 Counterparts; Headings. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but which,
when taken together, shall constitute but one instrument and shall become
effective as of the date hereof when copies hereof, which, when taken together,
bear the signatures of each of the parties hereto shall have been signed.
Headings in this Agreement are for purposes of reference only and shall not
limit or affect the meaning of the provisions hereof.
23.15 Applicable Law, Etc. Except as to matters regarding the
internal affairs of Landlord and issues of or limitations on any personal
liability of the shareholders and trustees of Landlord for obligations of
Landlord, as to which the laws of the State of Maryland shall govern, this
Agreement shall be interpreted, construed, applied and enforced in accordance
with the laws of the State of New York applicable to contracts between residents
of New York which are to be performed entirely within New York, regardless of
(i) where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any
<PAGE>
-83-
action or other proceeding is instituted or pending; or (v) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State of New York; or (vii) any combination of the foregoing.
Notwithstanding the foregoing, the laws of the State shall apply to the
perfection and priority of liens upon and the disposition of and disposition
with respect to any of the Collective Leased Properties.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in New York and to service of
process by registered mail, return receipt requested, or by any other manner
provided by law.
23.16 Payment of Fees. Tenant shall pay to Landlord, upon demand,
all costs and expenses (including, without limitation, reasonable attorneys'
fees) incurred by Landlord in connection with the preparation, execution and
delivery of this Agreement and all acts undertaken by Landlord in contemplation
thereof or in connection therewith.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
HEALTH AND RETIREMENT PROPERTIES TRUST
/s/ David J. Hegarty
By:______________________________
President
Its:________________________
TENANT:
BLC PROPERTY, INC.
/s/ Mark J. Schulte
By:_______________________________
Its Executive (Vice) President
<PAGE>
EXHIBITS A-1 TO A-3
-------------------
The Land
--------
[See attached copies.]
<PAGE>
EXHIBIT A-1
PARCEL 1:
THE NORTH 50 FEET OF THE SOUTH 105 FEET OF THE EAST 180 FEET OF THAT PART OF THE
LOT 8 LYING WEST OF THE WEST BOUNDARY LINE OF LINCOLN PARK, AS ESTABLISHED BY
DECREE OF THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS ENTERED OCTOBER 31, 1904,
IN CASE GENERAL NUMBER 256886, ALL IN COUNTY CLERK'S DIVISION OF LOTS 2, 3 AND 4
AND OF THE SOUTH 33 FEET OF LOT 1 IN THE ASSESSOR'S DIVISION OF LOTS 1 AND 2 IN
THE CITY OF CHICAGO SUBDIVISION OF THE EAST FRACTIONAL HALF OF SECTION 28,
TOWNSHIP 40 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN, MEANING AND
INTENDING TO DESCRIBED A TRACT OF LAND BOUNDED AS FOLLOWS:
BEGINNING ON THE WEST BOUNDARY LINE OF LINCOLN PARK ESTABLISHED AS AFORESAID,
AT A POINT 55 FEET NORTH OF THE NORTH LINE OF OAKDALE AVENUE; THENCE NORTH 50
FEET; THENCE WEST 180 FEET; THENCE SOUTH 50 FEET; THENCE EAST 180 FEET TO THE
POINT OF BEGINNING IN COOK COUNTY, ILLINOIS.
PARCEL 2:
THAT PART OF LOT 2 IN ASSESSOR'S DIVISION OF LOTS 1 AND 2 IN THE CITY OF CHICAGO
SUBDIVISION OF THE EAST FRACTIONAL HALF OF SECTION 28, TOWNSHIP 40 NORTH, RANGE
14 EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE WEST BOUNDARY LINE OF LINCOLN PARK, AS ESTABLISHED
BY DECREE OF THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS ENTERED OCTOBER 31, 1904
IN CASE 256886, SAID POINT OF BEGINNING BEING 80 FEET DUE SOUTH FROM THE SOUTH
LINE OF WELLINGTON STREET EXTENDED EAST; THENCE RUNNING WEST 200 FEET ALONG A
LINE AT ALL POINTS 80 FEET DUE SOUTH FROM THE SOUTH LINE OF WELLINGTON STREET
EXTENDED EAST; RUNNING THENCE SOUTHERLY ON A LINE AT ALL POINTS 200 FEET WEST OF
SAID WEST BOUNDARY LINE OF LINCOLN PARK TO A POINT ON THE NORTH LINE OF THE
ALLEY AS DEDICATED BY INSTRUMENT RECORDED IN THE RECORDER'S OFFICE OF COOK
COUNTY, ILLINOIS ON MARCH 16, 1915 AS DOCUMENT 5594071; RUNNING THENCE EAST ON
THE NORTH LINE OF SAID ALLEY TO A POINT 180 FEET WEST OF SAID WEST BOUNDARY LINE
OF LINCOLN PARK; RUNNING THENCE SOUTHERLY ON THE EAST LINE OF SAID ALLEY TO A
POINT 105 FEET NORTH OF THE NORTH LINE OF OAKDALE AVENUE, SAID POINT BEING ON
THE NORTH LINE OF THE PREMISES CONVEYED TO FRANK A. HECHT, CLARA K. HECHT AND
FRANK A. HECHT, JR. BY DEED DATED NOVEMBER 16, 1917 AND RECORDED IN THE
RECORDER'S OFFICE OF COOK COUNTY, ILLINOIS AS DOCUMENT 6231480, RUNNING THENCE
EAST ON A LINE PARALLEL WITH THE NORTH LINE OF OAKDALE AVENUE AND BEING THE
NORTH LINE OF THE PREMISES CONVEYED TO FRANK A. HECHT, CLARA K. HECHT AND FRANK
A. HECHT, JR., 180 FEET TO SAID WEST BOUNDARY LINE OF LINCOLN PARK AND RUNNING
THENCE NORTH ALONG SAID WEST BOUNDARY LINE OF LINCOLN PARK TO THE PLACE OF
BEGINNING, IN COOK COUNTY, ILLINOIS.
PARCEL 3:
THAT PART OF LOTS 2 AND 3 IN THE ASSESSOR'S DIVISION OF LOTS 1 AND 2 IN A
SUBDIVISION BY THE CITY OF CHICAGO OF THE EAST FRACTIONAL HALF OF SECTION 28,
TOWNSHIP 40 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN AND OF THE
ACCRETIONS EAST OF AND ADJOINING SAID PREMISES DESCRIBED AS FOLLOWS:
COMMENCING AT A POINT IN THE WEST BOUNDARY LINE OF LINCOLN PARK, AS ESTABLISHED
BY DECREE OF THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS ENTERED OCTOBER 31, 1904
IN CASE 256886, WHERE SAID BOUNDARY LINE IS INTERSECTED BY THE NORTH LINE OF
OAKDALE AVENUE; THENCE NORTH ALONG SAID BOUNDARY LINE 55 FEET; THENCE WEST ALONG
A LINE PARALLEL WITH THE NORTH LINE OF SAID OAKDALE AVENUE 180 FEET; THENCE
SOUTH PARALLEL WITH THE BOUNDARY LINE OF LINCOLN PARK AS ESTABLISHED IN CASE
256886. 55 FEET TO THE NORTH LINE OF SAID OAKDALE AVENUE; THENCE EAST ALONG THE
NORTH LINE OF SAID OAKDALE AVENUE 180 FEET TO THE POINT OF BEGINNING IN COOK
COUNTY, ILLINOIS.
<PAGE>
EXHIBIT A-2
ALL THAT PIECE OR PARCEL OF PROPERTY, situate in Town Lot 46, Township 13,
Range 7, Town of Brighton, County of Monroe and New York State as shown on the
map prepared by LaVern R. Celestino, PLS, dated November 20, 1996 and more
particularly described as follows:
Commencing at the intersection of the existing westerly boundary of Clinton
Avenue South with the existing southerly boundary of Clinton Avenue South, said
point also being the northeast corner of lands now or formerly owned by
Kathleen Chapman (Liber 6822 of Deeds, page 105), thence S 87 degrees 15' 31" W
along the last mentioned southerly boundary of Clinton Avenue South a distance
of 10.70 feet to the point of beginning, said point also being the intersection
of the existing westerly boundary of Clinton Avenue South with the common
division line between lands now or formerly owned by the Gables at Brighton
Associates on the north and lands now or formerly owned by Kathleen Chapman on
the south; thence
1. S 87 degrees 15' 31" W, along the last mentioned common division line and
also along the common division line between lands now or formerly owned by the
Rochester Gas and Electric Corporation, Frederic W. Perau and the People of the
State of New York on the south and lands now or formerly owned by the
aforementioned The Gables at Brighton Associates, on the north, a distance of
659.08 feet to point at its intersection with the common division line between
lands now or formerly owned by the People of the State of New York on the west
and lands now or formerly owned by The Gables at Brighton Associates, on the
east; thence
2. N 20 degrees 29' 49" E, along the last mentioned common division line a
distance of 647.89 feet to a point at its intersection with the common division
line between lands now or formerly owned by Donald H. and Helen Ross on the
north and lands now or formerly owned by The Gables at Brighton Associates, on
the south; thence
3. N 87 degrees 15' 31" E, along the last mentioned common division line a
distance of 270.59 feet to a point at its intersection with the common division
line between lands now or formerly owned by the Alpha Lutheran School of the
Deaf on the east, and lands now or formerly owned by The Gables at Brighton
Associates, on the west; thence
4. S 06 degrees 29' 54" W, along the last mentioned common division line a
distance of 94.19 feet to a point at its intersection with the common division
line between lands now or formerly owned by the Alpha Lutheran School of the
Deaf on the north and lands now or formerly owned by The Gables at Brighton
Associates, on the south; thence
5. S 83 degrees 30' 06" E, along the last mentioned common division line a
distance of 143.63 feet to a point at its intersection with the common division
line between lands now or formerly owned by Marie G. Cragg on the east and lands
now or formerly owned by The Gables at Brighton Associates, on the west; thence
6. S 14 degrees 05' 34" W, along the last mentioned common division line a
distance of 124.33 feet to a point at its intersection with the common division
Page 1 of 2
<PAGE>
EXHIBIT A-2
line between lands now or formerly owned by Marie G. Cragg on the north, and
lands now or formerly owned by The Gables at Brighton Associates, on the south;
thence
7. S 75 degrees 54' 26" E, along the last mentioned common division line a
distance of 144.75 feet to a point at its intersection with the before mentioned
existing westerly boundary of Clinton Avenue North; thence
8. S 14 degrees 05' 34" W, along the said existing westerly boundary of Clinton
Avenue South a distance of 332.76 feet to the point and place of beginning.
Together with an easement as more particularly described in a certain instrument
from Rochester Gas and Electric Corporation to 2001 Associates, Limited
Partnership dated August 4, 1986 and recorded in Liber 7442 of Deeds, at page
207 on September 14, 1988.
Page 2 of 2
<PAGE>
EXHIBIT A-3
Lot 9, of BROADVIEW CENTER, according to the plat of record in the office of the
County Recorder of Maricopa County, Arizona, recorded in Book 272 of Maps, Page
26.
<PAGE>
EXHIBIT B
---------
Allocable Purchase Prices
-------------------------
<TABLE>
<S> <C>
East Mesa, Arizona $14,800,000
Rochester, New York $10,700,000
Chicago, Illinois $62,000,000
</TABLE>
<PAGE>
EXHIBIT 10.28
SUBLEASE AGREEMENT
------------------
This Sublease Agreement (the "Sublease") is made as of December 27, 1996,
by and between BLC PROPERTY, INC., a Delaware corporation ("Sublandlord"), and
BROOKDALE LIVING COMMUNITIES OF ARIZONA, INC., a Delaware corporation
("Subtenant").
RECITALS:
--------
A. Sublandlord is the lessee of that certain premises (the "Premises")
commonly known as 6220 East Broadway Road, East Mesa, Arizona, pursuant to that
certain Master Lease Agreement (hereinafter referred to as the "Prime Lease")
dated December 27, 1996, with Health and Retirement Properties Trust, a
Maryland real estate investment trust ("Landlord") which is attached hereto as
EXHIBIT A.
B. Sublandlord desires to sublease the Premises to Subtenant and Subtenant
desires to sublease the Premises from Sublandlord, for the term and upon the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Demise. Sublandlord hereby subleases the Premises to Subtenant, and
Subtenant hereby accepts and subleases the Premises from Sublandlord, for the
term and upon the conditions set forth herein.
2. Term. The term of this Sublease shall commence on December 27, 1996,
and shall end on December 31, 2019, unless sooner terminated as hereinafter
provided.
3. Prime Lease Incorporated. This Sublease is subject and subordinate to
the terms of the Prime Lease, and all of the provisions of the Prime Lease are
explicitly incorporated herein by reference and made a part hereof. Provided
however, no consent, waiver, amendment, or other change by Landlord of
Sublandlord's obligations and liabilities as tenant under the Prime Lease shall
modify Subtenant's obligations and liabilities to Sublandlord hereunder unless
Subtenant and Sublandlord shall have agreed in writing that such consent,
waiver, amendment or change shall be effective hereunder. Unless the context
requires otherwise, (i) references in the Prime Lease to Landlord shall refer to
Sublandlord, and (ii) references in the Prime Lease to Lessee shall refer to
Subtenant. Subtenant expressly assumes toward Sublandlord and agrees to perform
all of the obligations, responsibilities and covenants as tenant under the Prime
Lease.
<PAGE>
Notwithstanding the incorporation herein of the Prime Lease, Sublandlord
shall not have any responsibility or liability to Subtenant on account of any
act or omission of Landlord, any default by Landlord under or breach by Landlord
of any term, covenant or condition of the Prime Lease, or any failure by
Landlord to perform any of its obligations under the Prime Lease. Provided
however, Sublandlord covenants and agrees that in the event of a breach by
Landlord under the Prime Lease, either it shall take all necessary actions and
pursue all rights and remedies set forth in the Prime Lease (all to be at the
sole cost and expense of Subtenant), or it shall permit Subtenant in the name of
Sublandlord as tenant under the Prime Lease to pursue all rights and remedies
set forth in the Prime Lease. Additionally, except as expressly set forth
herein, any right and remedy available to Sublandlord as tenant under the Prime
Lease shall be available to Subtenant under this Sublease as to the extent
permitted under the Prime Lease.
4. Property Located in or about the Subleased Premises. All improvements,
fixtures, equipment and personal property in or about the Premises shall be in
or about the Premises at the sole risk of Subtenant, and Sublandlord shall have
no liability for loss or damage to such fixtures, equipment or property from any
cause whatsoever.
5. Surrender. At the termination of this Sublease, by lapse of time or
otherwise, Subtenant shall surrender possession of the Premises to Sublandlord
and deliver all keys to the Premises and all locks therein to Sublandlord and
make known to Sublandlord the combination of all combination locks in the
Premises and shall return the Premises and all equipment and fixtures to
Sublandlord in broom clean condition and in as good condition as Subtenant
originally took possession, normal wear and tear excepted, failing which
Sublandlord may restore the Premises and such equipment and fixtures to such
condition and the Subtenant shall pay the cost thereof to Sublandlord on demand.
6. Indemnification. Subtenant agrees, to the extent not expressly
prohibited by law, to pay, and to protect, indemnify and save harmless
Sublandlord, and its shareholders, directors, officers, employees and agents
from and against, any liabilities, damages, costs or expenses (including, but
not limited to, attorneys' fees and expenses, including all costs of litigation
through post-judgment and appellate proceedings, if any) of any nature
whatsoever which may be imposed upon, incurred by, or asserted against
Sublandlord by reason of (a) any accident, injury to, or death of any person or
any damage to property occurring on or about the Premises, or (b) any breach by
Subtenant of any term or condition of the Prime Lease or this Sublease or any
failure by Subtenant to perform or comply with any of the terms of the Prime
Lease, or of this Sublease, or of any restrictions, statutes, laws, ordinances
or regulations affecting the Premises or any part
2
<PAGE>
thereof.
7. Insurance. Subtenant shall include Sublandlord and its shareholders,
directors, officers, agents and employees, as additional named insureds under
all insurance policies required under the terms of the Prime Lease and under all
insurance policies which Subtenant may carry with respect to the Premises, any
property located thereon, or with respect to any claim or accident arising on or
about the Premises. Prior to the commencement of the term of this Sublease,
Subtenant shall deliver to Sublandlord certified copies of the policies of such
insurance and certificates showing such policies to be valid and in effect. Any
rights of settlement allocated to Sublandlord as tenant under the Prime Lease
shall be the rights of Sublandlord hereunder.
8. Defaults. It shall be an Event of Default hereunder if:
a. Subtenant shall fail to pay when due any payments required to be
made as described in the Prime Lease; or
b. Subtenant shall fail to keep or perform any one or more of the
other terms, conditions, covenants or agreements of this Sublease or of
the Prime Lease.
9. Sublandlord's Remedies. In the event of a breach or threatened breach
by Subtenant of any of the covenants, agreements, terms or conditions which are
contained herein or in the Prime Lease herein, Sublandlord, in addition to or,
at its option, in lieu of, any or all other remedies provided for herein or in
the Prime Lease, shall be entitled to enjoin such breach or threatened breach.
10. Tenant Improvements. The Premises are leased to Subtenant in their
strictly "as is" condition and Sublandlord shall have no duty or obligation to
construct any improvements or perform any work in or about the Premises.
11. Alterations. Subtenant shall make no alterations or improvements to
the Premises except in accordance with the requirements of the Prime Lease, and
except with the prior written consent of Sublandlord. Upon the request of
Landlord and/or Sublandlord upon the expiration of the term of this Sublease,
whether by lapse of time or otherwise, any such alterations shall be removed by
Subtenant, at the sole cost and expense of Subtenant, and the Premises shall be
restored, at the sole cost and expense of Subtenant, to its original condition
at the commencement of this Sublease (ordinary wear and tear excepted).
3
<PAGE>
12. Notices. All notices and demands hereunder shall be in writing and
shall be served in person, by prepaid certified United States Mail, return
receipt requested, or by nationally recognized overnight courier, as follows:
If to Sublandlord:
____________________________
____________________________
____________________________
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne Boberg, Esq.
If to Subtenant:
____________________________
____________________________
____________________________
Such notices shall be deemed served when delivered, if served in person, or two
(2) business days after the date mailed, if mailed, or on the next business day
after delivery to a nationally recognized overnight courier service. Either
party may change the address for notices to it by a notice given as described
herein. All notices received by Sublandlord from Landlord shall promptly be
delivered to Subtenant.
13. Brokers. Subtenant represents that Subtenant has not dealt with any
broker, finder or like third party in connection with the sublease of the
Premises. Subtenant hereby agrees to indemnify, defend and hold Sublandlord,
its shareholders, directors, officers, employees and agents harmless from and
against any and all loss, cost, liability or obligations (including attorneys'
fees and all costs of litigation through and including post-judgment and
appellate proceedings, if any) related to any fees or commissions claimed by any
party to the extent such claims are based on the acts or agreements of
Subtenant.
14. Miscellaneous.
a. Sublandlord and its agents shall have the right of access to the
Premises at all reasonable times, and after delivering oral or written
notice to Subtenant, in order to inspect or exhibit the Premises.
4
<PAGE>
b. This Sublease contains the entire agreement between the parties
hereto, and shall not be modified in any manner except by a writing signed
by the party against which such modification is sought to be enforced.
c. The agreements, terms, covenants, and conditions herein shall bind
and inure to the benefit of Sublandlord and Subtenant and their respective
heirs, personal representatives, successors, and except as otherwise
provided herein, their assigns.
d. Each of the indemnifications contained in this Sublease shall
survive the expiration or earlier termination of this Sublease.
[Signature Page Follows]
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sublease as of the day
and year first above written.
SUBLANDLORD:
BLC PROPERTY, INC., a Delaware
corporation
/s/ Mark J. Schulte
By:______________________________
Executive Vice President
Title:________________________
SUBTENANT:
BROOKDALE LIVING COMMUNITIES OF
ARIZONA, INC., a Delaware
corporation
/s/ Mark J. Schulte
By:______________________________
Executive Vice President
Title:________________________
6
<PAGE>
EXHIBIT A
---------
[See Master Lease Agreement filed as Exhibit 10.27]
<PAGE>
EXHIBIT 10.29
SUBLEASE AGREEMENT
------------------
This Sublease Agreement (the "Sublease") is made as of December 27, 1996,
by and between BLC PROPERTY, INC., a Delaware corporation ("Sublandlord"), and
BROOKDALE LIVING COMMUNITIES OF ILLINOIS, INC., a Delaware corporation
("Subtenant").
RECITALS:
--------
A. Sublandlord is the lessee of that certain premises (the "Premises")
commonly known as 2960 North Lake Shore Drive, Chicago, Illinois, pursuant to
that certain Master Lease Agreement (hereinafter referred to as the "Prime
Lease") dated December 27, 1996, with Health and Retirement Properties Trust, a
Maryland real estate investment trust ("Landlord") which is attached hereto as
EXHIBIT A.
B. Sublandlord desires to sublease the Premises to Subtenant and Subtenant
desires to sublease the Premises from Sublandlord, for the term and upon the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Demise. Sublandlord hereby subleases the Premises to Subtenant, and
Subtenant hereby accepts and subleases the Premises from Sublandlord, for the
term and upon the conditions set forth herein.
2. Term. The term of this Sublease shall commence on December 27, 1996,
and shall end on December 31, 2019, unless sooner terminated as hereinafter
provided.
3. Prime Lease Incorporated. This Sublease is subject and subordinate to
the terms of the Prime Lease, and all of the provisions of the Prime Lease are
explicitly incorporated herein by reference and made a part hereof. Provided
however, no consent, waiver, amendment, or other change by Landlord of
Sublandlord's obligations and liabilities as tenant under the Prime Lease shall
modify Subtenant's obligations and liabilities to Sublandlord hereunder unless
Subtenant and Sublandlord shall have agreed in writing that such consent,
waiver, amendment or change shall be effective hereunder. Unless the context
requires otherwise, (i) references in the Prime Lease to Landlord shall refer to
Sublandlord, and (ii) references in the Prime Lease to Lessee shall refer to
Subtenant. Subtenant expressly assumes toward Sublandlord and agrees to perform
all of the obligations, responsibilities and covenants as tenant under the Prime
Lease.
<PAGE>
Notwithstanding the incorporation herein of the Prime Lease, Sublandlord
shall not have any responsibility or liability to Subtenant on account of any
act or omission of Landlord, any default by Landlord under or breach by Landlord
of any term, covenant or condition of the Prime Lease, or any failure by
Landlord to perform any of its obligations under the Prime Lease. Provided
however, Sublandlord covenants and agrees that in the event of a breach by
Landlord under the Prime Lease, either it shall take all necessary actions and
pursue all rights and remedies set forth in the Prime Lease (all to be at the
sole cost and expense of Subtenant), or it shall permit Subtenant in the name of
Sublandlord as tenant under the Prime Lease to pursue all rights and remedies
set forth in the Prime Lease. Additionally, except as expressly set forth
herein, any right and remedy available to Sublandlord as tenant under the Prime
Lease shall be available to Subtenant under this Sublease as to the extent
permitted under the Prime Lease.
4. Property Located in or about the Subleased Premises. All improvements,
fixtures, equipment and personal property in or about the Premises shall be in
or about the Premises at the sole risk of Subtenant, and Sublandlord shall have
no liability for loss or damage to such fixtures, equipment or property from any
cause whatsoever.
5. Surrender. At the termination of this Sublease, by lapse of time or
otherwise, Subtenant shall surrender possession of the Premises to Sublandlord
and deliver all keys to the Premises and all locks therein to Sublandlord and
make known to Sublandlord the combination of all combination locks in the
Premises and shall return the Premises and all equipment and fixtures to
Sublandlord in broom clean condition and in as good condition as Subtenant
originally took possession, normal wear and tear excepted, failing which
Sublandlord may restore the Premises and such equipment and fixtures to such
condition and the Subtenant shall pay the cost thereof to Sublandlord on demand.
6. Indemnification. Subtenant agrees, to the extent not expressly
prohibited by law, to pay, and to protect, indemnify and save harmless
Sublandlord, and its shareholders, directors, officers, employees and agents
from and against, any liabilities, damages, costs or expenses (including, but
not limited to, attorneys' fees and expenses, including all costs of litigation
through post-judgment and appellate proceedings, if any) of any nature
whatsoever which may be imposed upon, incurred by, or asserted against
Sublandlord by reason of (a) any accident, injury to, or death of any person or
any damage to property occurring on or about the Premises, or (b) any breach by
Subtenant of any term or condition of the Prime Lease or this Sublease or any
failure by Subtenant to perform or comply with any of the terms of the Prime
Lease, or of this Sublease, or of any restrictions, statutes, laws, ordinances
or regulations affecting the Premises or any part
2
<PAGE>
thereof.
7. Insurance. Subtenant shall include Sublandlord and its shareholders,
directors, officers, agents and employees, as additional named insureds under
all insurance policies required under the terms of the Prime Lease and under all
insurance policies which Subtenant may carry with respect to the Premises, any
property located thereon, or with respect to any claim or accident arising on or
about the Premises. Prior to the commencement of the term of this Sublease,
Subtenant shall deliver to Sublandlord certified copies of the policies of such
insurance and certificates showing such policies to be valid and in effect. Any
rights of settlement allocated to Sublandlord as tenant under the Prime Lease
shall be the rights of Sublandlord hereunder.
8. Defaults. It shall be an Event of Default hereunder if:
a. Subtenant shall fail to pay when due any payments required to be
made as described in the Prime Lease; or
b. Subtenant shall fail to keep or perform any one or more of the
other terms, conditions, covenants or agreements of this Sublease or of the
Prime Lease.
9. Sublandlord's Remedies. In the event of a breach or threatened breach
by Subtenant of any of the covenants, agreements, terms or conditions which are
contained herein or in the Prime Lease herein, Sublandlord, in addition to or,
at its option, in lieu of, any or all other remedies provided for herein or in
the Prime Lease, shall be entitled to enjoin such breach or threatened breach.
10. Tenant Improvements. The Premises are leased to Subtenant in their
strictly "as is" condition and Sublandlord shall have no duty or obligation to
construct any improvements or perform any work in or about the Premises.
11. Alterations. Subtenant shall make no alterations or improvements to
the Premises except in accordance with the requirements of the Prime Lease, and
except with the prior written consent of Sublandlord. Upon the request of
Landlord and/or Sublandlord upon the expiration of the term of this Sublease,
whether by lapse of time or otherwise, any such alterations shall be removed by
Subtenant, at the sole cost and expense of Subtenant, and the Premises shall be
restored, at the sole cost and expense of Subtenant, to its original condition
at the commencement of this Sublease (ordinary wear and tear excepted).
3
<PAGE>
12. Notices. All notices and demands hereunder shall be in writing and
shall be served in person, by prepaid certified United States Mail, return
receipt requested, or by nationally recognized overnight courier, as follows:
If to Sublandlord:
____________________________
____________________________
____________________________
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne Boberg, Esq.
If to Subtenant:
____________________________
____________________________
____________________________
Such notices shall be deemed served when delivered, if served in person, or two
(2) business days after the date mailed, if mailed, or on the next business day
after delivery to a nationally recognized overnight courier service. Either
party may change the address for notices to it by a notice given as described
herein. All notices received by Sublandlord from Landlord shall promptly be
delivered to Subtenant.
13. Brokers. Subtenant represents that Subtenant has not dealt with any
broker, finder or like third party in connection with the sublease of the
Premises. Subtenant hereby agrees to indemnify, defend and hold Sublandlord,
its shareholders, directors, officers, employees and agents harmless from and
against any and all loss, cost, liability or obligations (including attorneys'
fees and all costs of litigation through and including post-judgment and
appellate proceedings, if any) related to any fees or commissions claimed by any
party to the extent such claims are based on the acts or agreements of
Subtenant.
14. Miscellaneous.
a. Sublandlord and its agents shall have the right of access to the
Premises at all reasonable times, and after delivering oral or written
notice to Subtenant, in order to inspect or exhibit the Premises.
4
<PAGE>
b. This Sublease contains the entire agreement between the parties
hereto, and shall not be modified in any manner except by a writing signed
by the party against which such modification is sought to be enforced.
c. The agreements, terms, covenants, and conditions herein shall bind
and inure to the benefit of Sublandlord and Subtenant and their respective
heirs, personal representatives, successors, and except as otherwise
provided herein, their assigns.
d. Each of the indemnifications contained in this Sublease shall
survive the expiration or earlier termination of this Sublease.
[Signature Page Follows]
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sublease as of the day
and year first above written.
SUBLANDLORD:
BLC PROPERTY, INC., a Delaware
corporation
/s/ Mark J. Schulte
By:______________________________
Executive Vice President
Title:________________________
SUBTENANT:
BROOKDALE LIVING COMMUNITIES OF
ILLINOIS, INC., a Delaware
corporation
/s/ Mark J. Schulte
By:______________________________
Executive Vice President
Title:________________________
6
<PAGE>
The Hallmark
EXHIBIT A
---------
Legal Description
PARCEL 1:
THE NORTH 50 FEET OF THE SOUTH 105 FEET OF THE EAST 180 FEET OF THAT PART OF THE
LOT 8 LYING WEST OF THE WEST BOUNDARY LINE OF LINCOLN PARK, AS ESTABLISHED BY
DECREE OF THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS ENTERED OCTOBER 31, 1904,
IN CASE GENERAL NUMBER 256886, ALL IN COUNTY CLERK'S DIVISION OF LOTS 2, 3 AND 4
AND OF THE SOUTH 33 FEET OF LOT 1 IN THE ASSESSOR'S DIVISION OF LOTS 1 AND 2 IN
THE CITY OF CHICAGO SUBDIVISION OF THE EAST FRACTIONAL HALF OF SECTION 28,
TOWNSHIP 40 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN, MEANING AND
INTENDING TO DESCRIBE A TRACT OF LAND BOUNDED AS FOLLOWS:
BEGINNING ON THE WEST BOUNDARY LINE OF LINCOLN PARK ESTABLISHED AS AFORESAID,
AT A POINT 55 FEET NORTH OF THE NORTH LINE OF OAKDALE AVENUE; THENCE NORTH 50
FEET; THENCE WEST 180 FEET; THENCE SOUTH 50 FEET; THENCE EAST 180 FEET TO THE
POINT OF BEGINNING IN COOK COUNTY, ILLINOIS.
PARCEL 2:
THAT PART OF LOT 2 IN ASSESSOR'S DIVISION OF LOTS 1 AND 2 IN THE CITY OF CHICAGO
SUBDIVISION OF THE EAST FRACTIONAL HALF OF SECTION 28, TOWNSHIP 40 NORTH, RANGE
14 EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE WEST BOUNDARY LINE OF LINCOLN PARK, AS ESTABLISHED
BY DECREE OF THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS ENTERED OCTOBER 31, 1904
IN CASE 256886, SAID POINT OF BEGINNING BEING 80 FEET DUE SOUTH FROM THE SOUTH
LINE OF WELLINGTON STREET EXTENDED EAST; THENCE RUNNING WEST 200 FEET ALONG A
LINE AT ALL POINTS 80 FEET DUE SOUTH FROM THE SOUTH LINE OF WELLINGTON STREET
EXTENDED EAST; RUNNING THENCE SOUTHERLY ON A LINE AT ALL POINTS 200 FEET WEST OF
SAID WEST BOUNDARY LINE OF LINCOLN PARK TO A POINT ON THE NORTH LINE OF THE
ALLEY AS DEDICATED BY INSTRUMENT RECORDED IN THE RECORDER'S OFFICE OF COOK
COUNTY, ILLINOIS ON MARCH 16, 1915 AS DOCUMENT 5594071; RUNNING THENCE EAST ON
THE NORTH LINE OF SAID ALLEY TO A POINT 180 FEET WEST OF SAID WEST BOUNDARY LINE
OF LINCOLN PARK; RUNNING THENCE SOUTHERLY ON THE EAST LINE OF SAID ALLEY TO A
POINT 105 FEET NORTH OF THE NORTH LINE OF OAKDALE AVENUE, SAID POINT BEING ON
THE NORTH LINE OF THE PREMISES CONVEYED TO FRANK A. HECHT, CLARA K. HECHT AND
FRANK A. HECHT, JR. BY DEED DATED NOVEMBER 16, 1917 AND RECORDED IN THE
RECORDER'S OFFICE OF COOK COUNTY, ILLINOIS AS DOCUMENT 6231480; RUNNING THENCE
EAST ON A LINE PARALLEL WITH THE NORTH LINE OF OAKDALE AVENUE AND BEING THE
NORTH LINE OF THE PREMISES CONVEYED TO FRANK A. HECHT, CLARA K. HECHT AND FRANK
A. HECHT, JR., 180 FEET TO SAID WEST BOUNDARY LINE OF LINCOLN PARK AND RUNNING
THENCE NORTH ALONG SAID WEST BOUNDARY LINE OF LINCOLN PARK TO THE PLACE OF
BEGINNING, IN COOK COUNTY, ILLINOIS.
Page 1 of 2
<PAGE>
PARCEL 3:
THAT PART OF LOTS 2 AND 3 IN THE ASSESSOR'S DIVISION OF LOTS 1 AND 2 IN A
SUBDIVISION BY THE CITY OF CHICAGO OF THE EAST FRACTIONAL HALF OF SECTION 28,
TOWNSHIP 40 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN AND OF THE
ACCRETIONS EAST OF AND ADJOINING SAID PREMISES DESCRIBED AS FOLLOWS:
COMMENCING AT A POINT IN THE WEST BOUNDARY LINE OF LINCOLN PARK, AS ESTABLISHED
BY DECREE OF THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS ENTERED OCTOBER 31, 1904
IN CASE 256886, WHERE SAID BOUNDARY LINE IS INTERSECTED BY THE NORTH LINE OF
OAKDALE AVENUE; THENCE NORTH ALONG SAID BOUNDARY LINE 55 FEET; THENCE WEST ALONG
A LINE PARALLEL WITH THE NORTH LINE OF SAID OAKDALE AVENUE 180 FEET; THENCE
SOUTH PARALLEL WITH THE BOUNDARY LINE OF LINCOLN PARK AS ESTABLISHED IN CASE
256886, 55 FEET TO THE NORTH LINE OF SAID OAKDALE AVENUE; THENCE EAST ALONG THE
NORTH LINE OF SAID OAKDALE AVENUE 180 FEET TO THE POINT OF BEGINNING IN COOK
COUNTY, ILLINOIS.
PROPERTY ADDRESS: 2960 NORTH LAKE SHORE DRIVE
CHICAGO, ILLINOIS 60611
PERMANENT INDEX NOS.: 14-28-203-015; -016; and -017
Page 2 of 2
<PAGE>
EXHIBIT 10.30
SUB-SUBLEASE AGREEMENT
----------------------
This Sub-Sublease Agreement (the "Sub-Sublease") is made as of December 27,
1996, by and between BROOKDALE LIVING COMMUNITIES OF ILLINOIS, INC., a Delaware
corporation ("Sub-Sublandlord"), and HALLMARK PARTNERS L.P., an Illinois limited
partnership ("Sub-Subtenant").
RECITALS:
--------
A. Sub-Sublandlord is the sublessee of that certain premises (the
"Premises") commonly known as 2960 North Lake Shore Drive, Chicago, Illinois,
pursuant to that certain Sublease Agreement (hereinafter referred to as the
"Sublease") dated December 27, 1996, with Brookdale Living Communities of
Illinois, Inc., a Delaware corporation ("Sublandlord") which is attached hereto
as EXHIBIT A.
B. Sub-Sublandlord desires to sub-sublease the Premises to Sub-Subtenant
and Sub-Subtenant desires to sub-sublease the Premises from Sub-Sublandlord, for
the term and upon the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Demise. Sub-Sublandlord hereby sub-subleases the Premises to Sub-
Subtenant, and Sub-Subtenant hereby accepts and sub-subleases the Premises from
Sub-Sublandlord, for the term and upon the conditions set forth herein.
2. Term. The term of this Sub-Sublease shall commence on December 27,
1996, and shall end on December 31, 2019, unless sooner terminated as
hereinafter provided.
3. Sublease Incorporated. This Sub-Sublease is subject and subordinate to
the terms of the Sublease, and all of the provisions of the Sublease are
explicitly incorporated herein by reference and made a part hereof. Provided
however, no consent, waiver, amendment, or other change by Sublandlord of Sub-
Sublandlord's obligations and liabilities as tenant under the Sublease shall
modify Sub-Subtenant's obligations and liabilities to Sub-Sublandlord hereunder
unless Sub-Subtenant and Sub-Sublandlord shall have agreed in writing that such
consent, waiver, amendment or change shall be effective hereunder. Unless the
context requires otherwise, (i) references in the Sublease to Sublandlord shall
refer to Sub-Sublandlord, and (ii) references in the Sublease to SubLessee shall
refer to Sub-Subtenant. Sub-Subtenant expressly assumes toward Sub-Sublandlord
and agrees to
<PAGE>
perform all of the obligations, responsibilities and covenants as tenant under
the Sublease.
Notwithstanding the incorporation herein of the Sublease, Sub-Sublandlord
shall not have any responsibility or liability to Sub-Subtenant on account of
any act or omission of Sublandlord, any default by Sublandlord under or breach
by Sublandlord of any term, covenant or condition of the Sublease, or any
failure by Sublandlord to perform any of its obligations under the Sublease.
Provided however, Sub-Sublandlord covenants and agrees that in the event of a
breach by Sublandlord under the Sublease, either it shall take all necessary
actions and pursue all rights and remedies set forth in the Sublease (all to be
at the sole cost and expense of Sub-Subtenant), or it shall permit Sub-Subtenant
in the name of Sub-Sublandlord as tenant under the Sublease to pursue all rights
and remedies set forth in the Sublease. Additionally, except as expressly set
forth herein, any right and remedy available to Sub-Sublandlord as tenant under
the Sublease shall be available to Sub-Subtenant under this Sub-Sublease as to
the extent permitted under the Sublease.
4. Property Located in or about the Sub-Subleased Premises. All
improvements, fixtures, equipment and personal property in or about the Premises
shall be in or about the Premises at the sole risk of Sub-Subtenant, and Sub-
Sublandlord shall have no liability for loss or damage to such fixtures,
equipment or property from any cause whatsoever.
5. Surrender. At the termination of this Sub-Sublease, by lapse of time
or otherwise, Sub-Subtenant shall surrender possession of the Premises to Sub-
Sublandlord and deliver all keys to the Premises and all locks therein to Sub-
Sublandlord and make known to Sub-Sublandlord the combination of all combination
locks in the Premises and shall return the Premises and all equipment and
fixtures to Sub-Sublandlord in broom clean condition and in as good condition as
Sub-Subtenant originally took possession, normal wear and tear excepted, failing
which Sub-Sublandlord may restore the Premises and such equipment and fixtures
to such condition and the Sub-Subtenant shall pay the cost thereof to Sub-
Sublandlord on demand.
6. Indemnification. Sub-Subtenant agrees, to the extent not expressly
prohibited by law, to pay, and to protect, indemnify and save harmless Sub-
Sublandlord, and its shareholders, directors, officers, employees and agents
from and against, any liabilities, damages, costs or expenses (including, but
not limited to, attorneys' fees and expenses, including all costs of litigation
through post-judgment and appellate proceedings, if any) of any nature
whatsoever which may be imposed upon, incurred by, or asserted against Sub-
Sublandlord by reason of (a) any accident, injury to, or death of any person or
any damage to property occurring on or about the Premises, or (b) any breach by
Sub-
2
<PAGE>
Subtenant of any term or condition of the Sublease or this Sub-Sublease or any
failure by Sub-Subtenant to perform or comply with any of the terms of the
Sublease, or of this Sub-Sublease, or of any restrictions, statutes, laws,
ordinances or regulations affecting the Premises or any part thereof.
7. Insurance. Sub-Subtenant shall include Sub-Sublandlord and its
shareholders, directors, officers, agents and employees, as additional named
insureds under all insurance policies required under the terms of the Sublease
and under all insurance policies which Sub-Subtenant may carry with respect to
the Premises, any property located thereon, or with respect to any claim or
accident arising on or about the Premises. Prior to the commencement of the
term of this Sub-Sublease, Sub-Subtenant shall deliver to Sub-Sublandlord
certified copies of the policies of such insurance and certificates showing such
policies to be valid and in effect. Any rights of settlement allocated to Sub-
Sublandlord as tenant under the Sublease shall be the rights of Sub-Sublandlord
hereunder.
8. Defaults. It shall be an Event of Default hereunder if:
a. Sub-Subtenant shall fail to pay when due any payments required to
be made as described in the Sublease; or
b. Sub-Subtenant shall fail to keep or perform any one or more of the
other terms, conditions, covenants or agreements of this Sub-Sublease or of
the Sublease.
9. Sub-Sublandlord's Remedies. In the event of a breach or threatened
breach by Sub-Subtenant of any of the covenants, agreements, terms or conditions
which are contained herein or in the Sublease herein, Sub-Sublandlord, in
addition to or, at its option, in lieu of, any or all other remedies provided
for herein or in the Sublease, shall be entitled to enjoin such breach or
threatened breach.
10. Tenant Improvements. The Premises are leased to Sub-Subtenant in
their strictly "as is" condition and Sub-Sublandlord shall have no duty or
obligation to construct any improvements or perform any work in or about the
Premises.
11. Alterations. Sub-Subtenant shall make no alterations or improvements
to the Premises except in accordance with the requirements of the Sublease, and
except with the prior written consent of Sub-Sublandlord. Upon the request of
Sublandlord and/or Sub-Sublandlord upon the expiration of the term of this Sub-
Sublease, whether by lapse of time or otherwise, any
3
<PAGE>
such alterations shall be removed by Sub-Subtenant, at the sole cost and expense
of Sub-Subtenant, and the Premises shall be restored, at the sole cost and
expense of Sub-Subtenant, to its original condition at the commencement of this
Sub-Sublease (ordinary wear and tear excepted).
12. Notices. All notices and demands hereunder shall be in writing and
shall be served in person, by prepaid certified United States Mail, return
receipt requested, or by nationally recognized overnight courier, as follows:
If to Sub-Sublandlord:
____________________________
____________________________
____________________________
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne Boberg, Esq.
If to Sub-Subtenant:
____________________________
____________________________
____________________________
Such notices shall be deemed served when delivered, if served in person, or two
(2) business days after the date mailed, if mailed, or on the next business day
after delivery to a nationally recognized overnight courier service. Either
party may change the address for notices to it by a notice given as described
herein. All notices received by Sub-Sublandlord from Sublandlord shall promptly
be delivered to Sub-Subtenant.
13. Brokers. Sub-Subtenant represents that Sub-Subtenant has not dealt
with any broker, finder or like third party in connection with the sub-sublease
of the Premises. Sub-Subtenant hereby agrees to indemnify, defend and hold Sub-
Sublandlord, its shareholders, directors, officers, employees and agents
harmless from and against any and all loss, cost, liability or obligations
(including attorneys' fees and all costs of litigation through and including
post-judgment and appellate proceedings, if any) related to any fees or
commissions claimed by any party to the extent such claims are based on the acts
or agreements of Sub-Subtenant.
4
<PAGE>
14. Miscellaneous.
a. Sub-Sublandlord and its agents shall have the right of access to the
Premises at all reasonable times, and after delivering oral or written notice to
Sub-Subtenant, in order to inspect or exhibit the Premises.
b. This Sub-Sublease contains the entire agreement between the parties
hereto, and shall not be modified in any manner except by a writing signed by
the party against which such modification is sought to be enforced.
c. The agreements, terms, covenants, and conditions herein shall bind and
inure to the benefit of Sub-Sublandlord and Sub-Subtenant and their respective
heirs, personal representatives, successors, and except as otherwise provided
herein, their assigns.
d. Each of the indemnifications contained in this Sub-Sublease shall
survive the expiration or earlier termination of this Sub-Sublease.
[Signature Page Follows]
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sub-Sublease as of the
day and year first above written.
SUB-SUBLANDLORD:
BROOKDALE LIVING COMMUNITIES OF ILLINOIS,
INC., a Delaware corporation
/s/ Mark J. Schulte
By:_______________________________
Name: Mark J. Schulte
Title: Executive Vice President
SUB-SUBTENANT:
HALLMARK PARTNERS, L.P., an Illinois
limited partnership
By: PRIME HALLMARK, INC., General Partner
/s/ Mark J. Schulte
By:____________________________
Name: Mark J. Schulte
Title: Vice President
6
<PAGE>
EXHIBIT A
---------
[See Sublease Agreement filed as Exhibit 10.29]
<PAGE>
EXHIBIT 10.31
SUBLEASE AGREEMENT
------------------
This Sublease Agreement (the "Sublease") is made as of December 27, 1996,
by and between BLC PROPERTY, INC., a Delaware corporation ("Sublandlord"), and
BROOKDALE LIVING COMMUNITIES OF NEW YORK, INC., a Delaware corporation
("Subtenant").
RECITALS:
--------
A. Sublandlord is the lessee of that certain premises (the "Premises")
commonly known as 2001 Clinton Avenue South, Brighton, New York, pursuant to
that certain Master Lease Agreement (hereinafter referred to as the "Prime
Lease") dated December 27, 1996, with Health and Retirement Properties Trust, a
Maryland real estate investment trust ("Landlord") which is attached hereto as
EXHIBIT A.
B. Sublandlord desires to sublease the Premises to Subtenant and Subtenant
desires to sublease the Premises from Sublandlord, for the term and upon the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Demise. Sublandlord hereby subleases the Premises to Subtenant, and
Subtenant hereby accepts and subleases the Premises from Sublandlord, for the
term and upon the conditions set forth herein.
2. Term. The term of this Sublease shall commence on December 27, 1996,
and shall end on December 31, 2019, unless sooner terminated as hereinafter
provided.
3. Prime Lease Incorporated. This Sublease is subject and subordinate to
the terms of the Prime Lease, and all of the provisions of the Prime Lease are
explicitly incorporated herein by reference and made a part hereof. Provided
however, no consent, waiver, amendment, or other change by Landlord of
Sublandlord's obligations and liabilities as tenant under the Prime Lease shall
modify Subtenant's obligations and liabilities to Sublandlord hereunder unless
Subtenant and Sublandlord shall have agreed in writing that such consent,
waiver, amendment or change shall be effective hereunder. Unless the context
requires otherwise, (i) references in the Prime Lease to Landlord shall refer to
Sublandlord, and (ii) references in the Prime Lease to Lessee shall refer to
Subtenant. Subtenant expressly assumes toward Sublandlord and agrees to perform
all of the obligations, responsibilities and covenants as tenant under the Prime
Lease.
<PAGE>
Notwithstanding the incorporation herein of the Prime Lease, Sublandlord
shall not have any responsibility or liability to Subtenant on account of any
act or omission of Landlord, any default by Landlord under or breach by Landlord
of any term, covenant or condition of the Prime Lease, or any failure by
Landlord to perform any of its obligations under the Prime Lease. Provided
however, Sublandlord covenants and agrees that in the event of a breach by
Landlord under the Prime Lease, either it shall take all necessary actions and
pursue all rights and remedies set forth in the Prime Lease (all to be at the
sole cost and expense of Subtenant), or it shall permit Subtenant in the name of
Sublandlord as tenant under the Prime Lease to pursue all rights and remedies
set forth in the Prime Lease. Additionally, except as expressly set forth
herein, any right and remedy available to Sublandlord as tenant under the Prime
Lease shall be available to Subtenant under this Sublease as to the extent
permitted under the Prime Lease.
4. Property Located in or about the Subleased Premises. All improvements,
fixtures, equipment and personal property in or about the Premises shall be in
or about the Premises at the sole risk of Subtenant, and Sublandlord shall have
no liability for loss or damage to such fixtures, equipment or property from any
cause whatsoever.
5. Surrender. At the termination of this Sublease, by lapse of time or
otherwise, Subtenant shall surrender possession of the Premises to Sublandlord
and deliver all keys to the Premises and all locks therein to Sublandlord and
make known to Sublandlord the combination of all combination locks in the
Premises and shall return the Premises and all equipment and fixtures to
Sublandlord in broom clean condition and in as good condition as Subtenant
originally took possession, normal wear and tear excepted, failing which
Sublandlord may restore the Premises and such equipment and fixtures to such
condition and the Subtenant shall pay the cost thereof to Sublandlord on demand.
6. Indemnification. Subtenant agrees, to the extent not expressly
prohibited by law, to pay, and to protect, indemnify and save harmless
Sublandlord, and its shareholders, directors, officers, employees and agents
from and against, any liabilities, damages, costs or expenses (including, but
not limited to, attorneys' fees and expenses, including all costs of litigation
through post-judgment and appellate proceedings, if any) of any nature
whatsoever which may be imposed upon, incurred by, or asserted against
Sublandlord by reason of (a) any accident, injury to, or death of any person or
any damage to property occurring on or about the Premises, or (b) any breach by
Subtenant of any term or condition of the Prime Lease or this Sublease or any
failure by Subtenant to perform or comply with any of the terms of the Prime
Lease, or of this Sublease, or of any restrictions, statutes, laws, ordinances
or regulations affecting the Premises or any part
2
<PAGE>
thereof.
7. Insurance. Subtenant shall include Sublandlord and its shareholders,
directors, officers, agents and employees, as additional named insureds under
all insurance policies required under the terms of the Prime Lease and under all
insurance policies which Subtenant may carry with respect to the Premises, any
property located thereon, or with respect to any claim or accident arising on or
about the Premises. Prior to the commencement of the term of this Sublease,
Subtenant shall deliver to Sublandlord certified copies of the policies of such
insurance and certificates showing such policies to be valid and in effect. Any
rights of settlement allocated to Sublandlord as tenant under the Prime Lease
shall be the rights of Sublandlord hereunder.
8. Defaults. It shall be an Event of Default hereunder if:
a. Subtenant shall fail to pay when due any payments required to be
made as described in the Prime Lease; or
b. Subtenant shall fail to keep or perform any one or more of the
other terms, conditions, covenants or agreements of this Sublease or of the
Prime Lease.
9. Sublandlord's Remedies. In the event of a breach or threatened breach
by Subtenant of any of the covenants, agreements, terms or conditions which are
contained herein or in the Prime Lease herein, Sublandlord, in addition to or,
at its option, in lieu of, any or all other remedies provided for herein or in
the Prime Lease, shall be entitled to enjoin such breach or threatened breach.
10. Tenant Improvements. The Premises are leased to Subtenant in their
strictly "as is" condition and Sublandlord shall have no duty or obligation to
construct any improvements or perform any work in or about the Premises.
11. Alterations. Subtenant shall make no alterations or improvements to
the Premises except in accordance with the requirements of the Prime Lease, and
except with the prior written consent of Sublandlord. Upon the request of
Landlord and/or Sublandlord upon the expiration of the term of this Sublease,
whether by lapse of time or otherwise, any such alterations shall be removed by
Subtenant, at the sole cost and expense of Subtenant, and the Premises shall be
restored, at the sole cost and expense of Subtenant, to its original condition
at the commencement of this Sublease (ordinary wear and tear excepted).
3
<PAGE>
12. Notices. All notices and demands hereunder shall be in writing and
shall be served in person, by prepaid certified United States Mail, return
receipt requested, or by nationally recognized overnight courier, as follows:
If to Sublandlord:
____________________________
____________________________
____________________________
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne Boberg, Esq.
If to Subtenant:
____________________________
____________________________
____________________________
Such notices shall be deemed served when delivered, if served in person, or two
(2) business days after the date mailed, if mailed, or on the next business day
after delivery to a nationally recognized overnight courier service. Either
party may change the address for notices to it by a notice given as described
herein. All notices received by Sublandlord from Landlord shall promptly be
delivered to Subtenant.
13. Brokers. Subtenant represents that Subtenant has not dealt with any
broker, finder or like third party in connection with the sublease of the
Premises. Subtenant hereby agrees to indemnify, defend and hold Sublandlord,
its shareholders, directors, officers, employees and agents harmless from and
against any and all loss, cost, liability or obligations (including attorneys'
fees and all costs of litigation through and including post-judgment and
appellate proceedings, if any) related to any fees or commissions claimed by any
party to the extent such claims are based on the acts or agreements of
Subtenant.
14. Miscellaneous.
a. Sublandlord and its agents shall have the right of access to the
Premises at all reasonable times, and after delivering oral or written
notice to Subtenant, in order to inspect or exhibit the Premises.
4
<PAGE>
b. This Sublease contains the entire agreement between the parties
hereto, and shall not be modified in any manner except by a writing signed
by the party against which such modification is sought to be enforced.
c. The agreements, terms, covenants, and conditions herein shall bind
and inure to the benefit of Sublandlord and Subtenant and their respective
heirs, personal representatives, successors, and except as otherwise
provided herein, their assigns.
d. Each of the indemnifications contained in this Sublease shall
survive the expiration or earlier termination of this Sublease.
[Signature Page Follows]
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sublease as of the day
and year first above written.
SUBLANDLORD:
BLC PROPERTY, INC., a Delaware
corporation
/s/ Mark J. Schulte
By:______________________________
Executive Vice President
Title:________________________
SUBTENANT:
BROOKDALE LIVING COMMUNITIES OF
NEW YORK, INC., a Delaware
corporation
/s/ Mark J. Schulte
By:______________________________
Executive Vice President
Title:________________________
6
<PAGE>
Exhibit 10.32
REAL ESTATE PURCHASE AGREEMENT
BY AND BETWEEN
Firstar DuPage Bank Trust No. 3612 dated December 4, 1989,
Firstar DuPage Bank Trust No. 3625 dated February 22, 1990,
West Suburban Bank Trust No. 1975 dated December 13, 1978,
and the direct and indirect beneficiaries thereof
(collectively, the Sellers)
AND
THE PRIME GROUP, INC. (the Purchaser)
<PAGE>
REAL ESTATE PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPHS PAGES
<S> <C>
1. Sale and Purchase -1-
-----------------
2. Purchase Price, Earnest Money -2-
-----------------------------
3. Feasibility Period -3-
------------------
4. Infrastructure Improvements and Reciprocal Easement Agreement -4-
-------------------------------------------------------------
5. Conveyance; Permitted Title Exceptions -11-
--------------------------------------
6. Closing -11-
-------
7. Method of Closing -12-
-----------------
8. Commitment and Survey -12-
---------------------
9. Title Policy -13-
------------
10. Correction of Defects........................ -14-
---------------------------------------------
11. Seller's Deliveries; Inspection.............. -14-
---------------------------------------------
12. Seller's Covenants........................... -15-
---------------------------------------------
13. Representations and Warranties............... -16-
---------------------------------------------
14. Environmental Indemnity...................... -21-
---------------------------------------------
15. Conditions to Purchaser's Obligation to Close -22-
---------------------------------------------
16. Provisions with Respect to Closing........... -24-
---------------------------------------------
17. Closing Adjustments.......................... -25-
---------------------------------------------
18. Condemnation................................. -26-
---------------------------------------------
19. Defaults and Remedies........................ -27-
---------------------------------------------
20. Modification, Waiver, etc.................... -27-
---------------------------------------------
21. Notices...................................... -28-
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22. Governing Law................................ -29-
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</TABLE>
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REAL ESTATE PURCHASE AGREEMENT
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THIS REAL ESTATE PURCHASE AGREEMENT ("Agreement") is made and entered into
as of the Effective Date (defined on the signature page below), by and between
The Prime Group, Inc., an Illinois corporation ("Purchaser"); and Firstar DuPage
Bank (Glen Ellyn, Illinois) Trust No. 3612 dated December 4, 1989, Firstar
DuPage Bank (Glen Ellyn, Illinois) Trust No. 3625 dated February 22, 1990, West
Suburban Bank (Lombard, Illinois) Trust No. 1975 dated December 13, 1978 (such
three trusts hereinafter referred to as the "Trusts"), and the respective direct
and indirect beneficiaries of the Trusts including L/M Development, an Illinois
general partnership, and Leland M. Stahelin and Gladys Stahelin, individuals
acting as custodian for Michael Stahelin under the Uniform Gift to Minors Act
(such direct and indirect beneficiaries of the Trusts hereinafter referred to as
the "Beneficiaries") (the Trusts and the Beneficiaries are collectively
hereinafter referred to as the "Sellers").
In consideration of the mutual covenants, agreements, representations and
warranties set forth in this Agreement, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Sale and Purchase.
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Sellers agree to sell, convey and assign to Purchaser, and Purchaser agrees
to purchase, acquire and accept under the terms and conditions and for the
Purchase Price (as defined below) the following:
(1) All of the land situated at the southwest corner of the intersection
of DuPage Boulevard and Nicoll Avenue in Glen Ellyn, DuPage County,
Illinois, and legally described on Exhibit A which is attached hereto and
made a part hereof, consisting of approximately 357,000 square feet (which
number includes the area occupied by a right of way known as Milton Avenue
and which is further discussed in Paragraph 30(a) of this Agreement, but
which right of way is not owned by Sellers), together with the improvements
(if any) located on such land, all rights, privileges, easements and
appurtenances belonging or appertaining to such land, including any right,
title and interest in and to streets, alleys and rights-of-way adjacent to
such land (such land and all such improvements, rights, privileges,
easements and appurtenances are collectively referred to herein as the
"Real Estate").
(2) All tangible or intangible personal property or interest therein now
or hereafter owned or held by Sellers in connection with the Real Estate
(or any portion thereof) or in
<PAGE>
connection with the ownership, operation, management or use thereof,
including, but not limited to, (a) any contract rights and other agreements
or leases designated by Purchaser pursuant to Paragraph 10B hereof; (b) all
current assignable contracts guarantees and warranties (including
guarantees and warranties pertaining to the acquisition of the Real Estate,
or any parcel thereof by Sellers), licenses and other permits, approvals,
authorizations, certificates, permissions, no action letters and similar
assurances issued by any private person or persons or by any governmental
or quasi-governmental authority or authorities relating to the Real Estate,
or any portion thereof, or the ownership, operation, management or use
thereof, and (c) any surveys, soil and substrata studies, water studies or
environmental studies in Sellers' possession relating to the Real Estate,
or any portion thereof (all of the foregoing are hereinafter collectively
called the "Personal Property").
The Real Estate and the Personal Property are herein sometimes collectively
called the "Premises".
2. Purchase Price, Earnest Money.
A. The purchase price (the "Purchase Price") for the Premises shall be Two
Million Six Hundred Thousand and no/100ths Dollars ($2,600,000.00) payable
at the Closing (defined below) as provided in this Agreement.
B. Within five (5) business days after the execution and delivery of this
Agreement by Purchaser and Sellers, Purchaser shall deposit the sum of Ten
Thousand and no/100 Dollars ($10,000.00) "Earnest Money" in an escrow
("Escrow") established with Chicago Title Insurance Company (the "Title
Company") in accordance with escrow instructions substantially in the form
attached hereto as Exhibit B (the "Instructions"). Within five business
days after the expiration of the Feasibility Period (defined below),
Purchaser shall deposit additional Earnest Money in the amount of Forty
Thousand and no/100ths Dollars ($40,000.00) into the Escrow with the Title
Company governed by the Instructions. The Earnest Money (in whatever amount
is in the Escrow with the Title Company from time to time) shall be
invested in a money market fund or in such other investment instrument or
account designated by Purchaser. At the Closing, the Earnest Money,
together with all interest and earnings accrued thereon, shall be returned
to Purchaser in accordance with Paragraph 15(C) below (unless it has been
applied toward Purchaser's obligation to deposit the Purchase Price for the
Closing in accordance with Paragraphs 3 and 15(B) below).
3. Feasibility Period. This Agreement shall be contingent upon the
satisfactory inspection of the Premises by Purchaser, in
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Purchaser's sole and absolute discretion and judgment, during the period (the
"Feasibility Period") commencing on the Effective Date of this Agreement, and
ending on the later of (a) the date which is sixty (60) days after the Effective
Date of this Agreement, or (b) the date which is thirty (30) days after the date
on which Purchaser receives the last of the following:
(1) The Commitment (as defined below);
(2) The Survey (as defined below);
(3) The Searches (as defined below); and
(4) The information referenced in Paragraph 10 below.
During the Feasibility Period, Purchaser shall have the right to physically
inspect the condition of the Premises, to review the books, files and records
maintained for the Premises, to conduct various tests with respect to the
Premises, including, but not limited to, soil tests and environmental and
hazardous and toxic waste tests and to otherwise determine the feasibility
(economic or otherwise) of the acquisition, ownership and development of the
Premises.
At any time during the Feasibility Period, Purchaser, in Purchaser's sole
and absolute discretion, may, upon written notice to Sellers, terminate this
Agreement, in which event, all of the rights, duties and obligations of the
parties hereto shall immediately terminate, and this Agreement shall be null,
void and of no further force or effect. If, in Purchaser's sole judgment and
discretion, Purchaser decides that it does not wish to proceed with the
purchase, Purchaser shall give Sellers written notice of such fact on or before
the end of the Feasibility Period; promptly after Sellers' receipt of such
notice from Purchaser, Sellers and Purchaser shall direct the Title Company to
return all of the Earnest Money in the Escrow, together with all interest and
earnings accrued thereon, to Purchaser.
In the event Purchaser does not notify Sellers in writing on or before the
end of the Feasibility Period of Purchaser's election to terminate this
Agreement, Purchaser shall purchase the Premises in accordance with and subject
to the terms and conditions set forth in this Agreement, and all Earnest Money
shall be credited to Purchaser and applied toward Purchaser's obligations under
Paragraph 15(B) below to deliver consideration to the Sellers at the Closing.
Sellers shall cooperate fully with Purchaser and Purchaser's agents, employees
and representatives in connection with Purchaser's inspections, tests, surveys
and studies of the Premises.
Sellers acknowledge and approve Purchaser's intent to develop the Real
Estate as a congregate-care and assisted-living senior
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housing facility. During the Feasibility Period, Purchaser shall deliver to
Sellers a proposed site plan and a conceptual exterior elevation drawing for
Sellers' review and approval, such approval not to be unreasonably withheld and
such review and approval period not to exceed five (5) business days.
Anything in this Agreement to the contrary notwithstanding, the obligations
of the parties under this Agreement are conditioned upon the negotiation and
agreement, prior to the expiration of the Feasibility Period, of the reciprocal
easement and maintenance agreement discussed in Paragraphs 15A(7), 30(b), 30(c)
and 30(d) below.
4. Conveyance; Permitted Title Exceptions. Conveyance of the Real Estate
shall be by trustee's deeds delivered to Purchaser, or to a person or entity
designated by Purchaser ("Purchaser's Nominee"), in recordable form, conveying
to Purchaser or Purchaser's Nominee good, marketable and indefeasible fee simple
title to the Real Estate, subject only to (a) covenants, conditions and
restrictions of record as revealed in the Commitment (defined below) and not
objected to in writing by Purchaser within the time period required under
Paragraph 9 below; and (b) general real estate taxes which are not yet due and
payable (hereinafter called the "Permitted Title Exceptions"). Unless expressly
agreed to by Purchaser in writing and in Purchaser's sole discretion, any title
exceptions pertaining to liens (except for any lien(s) caused by Purchaser) of a
definite or ascertainable amount ("Removable Liens") shall be removed by Sellers
by the payment of money on or before the date of Closing and shall not be
Permitted Title Exceptions hereunder.
5. Closing. When used herein, the term "Closing" shall mean the conveyance
of the Premises to Purchaser, the payment of the Purchase Price to Sellers and
the issuance to Purchaser of the title insurance policy described in Paragraph 8
below. Subject to the potential rescheduling of the Closing by Sellers (as
described below in this Paragraph 5), the Closing shall take place on or before
the thirtieth (30th) day after the Purchaser has received each and all of the
Approvals (defined below), provided that all conditions to Purchaser's
obligation to close under this Agreement (including, but not limited to, the
receipt by Purchaser of all Approvals described in Paragraph 14F hereof) have
been satisfied or waived in writing by Purchaser. Each party hereto shall be
responsible for paying the fees and expenses of its respective attorneys and
other advisors; the payment of any costs incurred in connection with the
Closing, other than those costs specifically designated in this Agreement as the
responsibility of a particular party, shall be shared equally by Sellers and
Purchaser.
If the Closing has not occurred by Friday, October 31, 1997, Sellers
may unilaterally defer the Closing to the first
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<PAGE>
business day of 1998 by giving written notice thereof to Purchaser. In the
events that (a) Sellers choose to defer the Closing to the first business day of
1998, and (b) Purchaser wishes to commence construction activities on the Real
Estate during the months of November or December of 1997, Purchaser shall give
written notice to Sellers of Purchaser's desire to commence construction prior
to the Closing and Purchaser will attach the following documents to Purchaser's
notice: the certificate(s) of insurance obtained by Purchaser with respect to
the Real Estate and the proposed development thereof, indicating general
insurance coverage(s) of no less than Two Million Dollars ($2,000,000.00) and
naming Sellers as additional insureds; Purchaser's financial statements; and a
letter addressed to Sellers whereby Purchaser agrees to indemnify and hold
harmless Sellers with respect to Purchaser's pre-Closing construction activities
on the Real Estate, Purchaser's promise to remove any and all liens on the Real
Estate caused by Purchaser's action(s), and Purchaser's promise to restore the
Real Estate to its condition as of the Effective Date in the event that
Purchaser fails to close the purchase of the Premises for any reason other than
Sellers' default(s). If the form and substance of Purchaser's notice and
attachments are reasonably satisfactory to Sellers, Sellers shall promptly grant
Purchaser's request by giving written notice to Purchaser (which notice shall
include Sellers' grant of an appropriate consent, right and license to permit
Purchaser and its architects, contractors, sub-contractors, and others to
mobilize and commence activities on the Real Estate). In the event that
Purchaser elects to commence construction upon the Real Estate prior to the
Closing pursuant to this Paragraph 5, Purchaser shall be deemed to have
irrevocably waived all conditions (except for any default(s) by Sellers) to
Purchaser's obligations to close the transactions contemplated by this
Agreement.
6. Method of Closing. The Closing shall be a "New York style" closing,
pursuant to which the title insurance policy to be delivered to Purchaser
pursuant to this Agreement shall be delivered at the Closing and shall be dated
as of the date of Closing.
7. Commitment, Searches and Survey. Not later than ten (10) days following
the Effective Date of this Agreement, Sellers (at Sellers' sole cost and
expense) shall deliver or cause to be delivered to Purchaser, in form and
substance reasonably satisfactory to Purchaser:
A. A commitment ("Commitment") to issue an ALTA owner's title insurance
policy for the Real Estate for the benefit of Purchaser, issued by the
Title Company in the amount of the Purchase Price covering title to the
Real Estate on or after the date hereof, showing good, marketable and
indefeasible fee simple title to the Real Estate in the Trusts. Sellers
shall also deliver to Purchaser, together with the Commitment, a
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<PAGE>
copy of all documents of record and all exceptions to title to the Real
Estate as indicated in the Commitment.
B. Six (6) copies of an ALTA-ACSM Class A survey ("Survey") (including
field notes) with respect to the Real Estate and the Improvements, dated
and certified as of a date subsequent to the Effective Date of this
Agreement, prepared by a Public Surveyor registered by the State of
Illinois, setting forth the legal description of the Real Estate showing
the location of any improvements, and showing the size and location of all
easements, encroachments and encumbrances listed on the Commitment
(identifying each by volume and page reference, if applicable), reciting
the exact area of the Real Estate in acres and square feet, reciting the
exact area of each easement, encroachment and encumbrance, showing no
portion of the Real Estate situated in an area designated by the U.S.
Secretary of Housing and Urban Development (or by any other governmental or
quasi-governmental agency or authority having jurisdiction over the Real
Estate) as a flood plain, special flood hazard area or general hazard area,
showing all visible utility lines upon the Real Estate, and indicating such
other information reasonably requested by Purchaser in writing prior to the
expiration of the Feasibility Period. The Survey shall meet the accuracy
requirements of an ALTA-ACSM Class A survey, and contain a certificate
specifically addressed to Purchaser, the Title Company and any other party
or parties designated by Purchaser reading as follows:
"The undersigned does hereby certify that (i) this survey was
this day made upon the ground of the property reflected hereon, for
the benefit of and reliance by Sellers, Purchaser, the Title Company
and all other parties listed above; (ii) the description contained
hereon is correct; (iii) the property and each parcel thereof has
access to and from a dedicated roadway as shown hereon; (iv) except as
shown hereon, there are no discrepancies, conflicts, shortages in
area, encroachments, improvements, overlapping of improvements,
setback lines, easements, or roadways; (v) the total acreage and the
gross square footage and the square footage net of any portion of the
property lying within public roadways shown hereon are correct; (vi)
none of the property lies within the 100-year flood plain or any
special flood hazard area or general hazard area as designated by any
governmental agency; and (vii) this survey satisfies the accuracy
requirements of an ALTA/ACSM Class A survey."
The Survey must be satisfactory to the Title Company so as to permit
it to delete the area and boundary exception in the Title Policy except for
"shortages in area."
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<PAGE>
C. Searches, dated not more than one (1) week prior to delivery, of all
Uniform Commercial Code financing statements and tax liens related to the
Premises filed against Sellers, as debtors, with the appropriate public
official of the State of Illinois, the appropriate public official of
DuPage County, Illinois, or with any other governmental agency or authority
or in any public record (the "Searches").
If such Commitment, Survey or Searches are not delivered to Purchaser
within the specified time, then, without limiting other rights available to
Purchaser hereunder or under law, Purchaser may elect to terminate this
Agreement by written notice to Sellers and, thereupon, this Agreement shall
become null, void and of no further force or effect. In the alternative,
Purchaser may elect to extend the time for delivery of the above-described
items, and the time for delivery of the above-described items shall be deemed
extended unless and until Purchaser sends the written notice of termination.
8. Title Policy. Sellers, at Sellers' sole cost and expense, shall
deliver or cause the Title Company to deliver to Purchaser, prior to the
disbursement by the Title Company of the Purchase Price deposited by Purchaser
an ALTA owner's title insurance policy (the "Title Policy") with respect to the
Real Estate, in the amount of the Purchase Price, in a form reasonably
acceptable to Purchaser, issued by the Title Company pursuant to the Commitment
containing no exceptions other than the Permitted Title Exceptions and insuring
fee simple title to the Real Estate and improvements in Purchaser or Purchaser's
Nominee. The Title Policy shall provide extended coverage over the general
exceptions and include the following endorsements: (i) zoning, (ii) access,
(iii) contiguity, if appropriate, (iv) location and (v) such other endorsements
as reasonably requested by Purchaser; provided, however, that the costs of such
endorsements payable by Sellers shall not exceed the amount of Five Hundred
Dollars ($500.00).
9. Correction of Defects. If the Commitment, the Survey or the Searches
disclose exceptions to title or other matters not permitted hereunder or
otherwise objectionable to Purchaser, and Purchaser sends written notice to
Sellers objecting to such matters within fifteen (15) business days after the
date of Purchaser's receipt of the last of the Commitment, Survey and Searches,
then Sellers shall have fifteen (15) business days from delivery by Purchaser of
such notice in which to have such exceptions or other matters corrected, removed
or otherwise waived. Notwithstanding anything in this Agreement to the contrary,
the Feasibility Period shall not end before the day which is ten (10) business
days following the day on which Purchaser receives written evidence, reasonably
satisfactory to Purchaser, that such exceptions or other matters have been
corrected, removed or otherwise waived. If Purchaser does not receive written
evidence, reasonably satisfactory to Purchaser, that such unpermitted exceptions
or other matters have been corrected, removed or otherwise waived to Purchaser's
reasonable satisfaction within the permitted time,
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<PAGE>
Purchaser may elect, upon written notice delivered to Sellers within fifteen
(15) business days after the expiration of the time permitted for curing such
defects to terminate this Agreement, or to extend the time permitted for such
cure. Any extension or extensions of time permitted by this Paragraph shall not
affect any of Purchaser's rights under this Agreement.
10. Sellers' Deliveries; Inspection.
-------------------------------
A. Sellers shall deliver to Purchaser no later than ten (10) days after
the Effective Date of this Agreement:
(1) a true and correct copy of the real estate and personal property
tax bills and notices of assessed valuation pertaining to the Premises
for the five most recent years, including any pending or past tax
protests or appeals, if any, and all documents, correspondence,
pleadings and all other information relating to any and all pending or
past tax protests and appeals relating to the Real Estate, or the
Premises;
(2) true and correct copies of all leases, contracts and agreements,
and all amendments or modifications thereto, which Sellers or their
agents or affiliates have entered into in connection with or related
to the ownership, development, construction, operation, management or
use of the Premises and of all guarantees and warranties extended or
assigned to Sellers in connection therewith which are currently in
effect, if any;
(3) true and correct copies of all permits, licenses, authorizations
and other approvals issued with respect to the Premises or any
proposed development thereof (the "Permits"), if any;
(4) a schedule ("Personal Property Schedule") listing all Personal
Property which forms a part of the Premises, if any;
(5) to the extent in Sellers' possession, "as-built" drawings of any
underground utilities (including storm sewer, sanitary sewer, water,
gas and telephone and/or electric service cables) located under the
Real Estate, and all other materials reflecting the current status of
the zoning classification applicable to the Premises and the
availability of utilities (including, water, waste water, electricity,
gas and telephone service) to the Premises; and
(6) any and all existing soil studies and reports, any environmental
assessments, studies, tests, reports and analyses, and all other
studies, reports, permits,
-8-
<PAGE>
subdivision and planned unit development plats, approvals and plans,
surveys, zoning information, topographical and engineering studies,
any correspondence related to any of the foregoing, and all other data
and information relating to the Premises, or any portion thereof, or
any proposed development or operation thereof, which Sellers have in
Sellers' possession or which were prepared for or on behalf of
Sellers.
B. Purchaser shall inform Sellers, not less than fifteen (15) days prior
to the date of the Closing, which of the leases, contracts and agreements
delivered to Purchaser pursuant to Paragraph 10A(2) (if any) and which of
the Permits (if any) Purchaser desires to have assigned to it by Sellers.
To the extent assignable, Sellers shall assign to Purchaser all of Sellers'
rights, title and interests in, to and under any and all such contracts and
agreements and any and all Permits so designated by Purchaser, and Sellers
shall obtain any and all required consents to the assignments of such
contracts and agreements and Permits prior to the date of the Closing.
C. Purchaser, its agents, representatives and employees may, during
reasonable business hours, between the Effective Date of this Agreement and
the date of the Closing, inspect the Premises, and any portion thereof, and
conduct studies, tests and analyses with respect thereto. Purchaser shall,
at Purchaser's expense, restore the Premises to pre-inspection condition
and indemnify Sellers with respect to any personal injury, death or
property damage caused by Purchaser's inspections, studies, tests and/or
analyses; and Purchaser shall deliver to Sellers a copy of Purchaser's
certificate(s) of insurance, which certificate(s) will indicate general
insurance coverage(s) of no less than Two Million Dollars ($2,000,000.00)
and list Sellers as additional named insureds.
11. Sellers' Covenants. Between the Effective Date of this Agreement and
the date of the Closing, Sellers shall:
A. Keep and perform all of the obligations to be performed by the Sellers
under each and every lease, agreement, contract and Permits relating to or
affecting the Premises, or any portion thereof;
B. Not enter into, execute, extend or renew any lease, easement, license
or any other agreement or contract relating to or affecting the Premises,
or any portion thereof, or modify, amend or terminate any lease, contract
or agreement to be assigned to Purchaser pursuant to Paragraph 10B,
without, in each case, Purchaser's prior written consent and approval;
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<PAGE>
C. Unless such condition or instrument can be released and/or cancelled by
Sellers' action(s) on or before the date of the Closing, not mortgage,
hypothecate or further encumber the Premises or any portion thereof or permit
any liens on the Premises or any portion thereof to arise by operation of law;
D. Effectuate, at Sellers' own expense, all necessary maintenance, repairs and
replacements required to maintain the Premises in good condition and repair;
E. Not convey or remove from the Premises or any portion thereof any of the
Personal Property located on the Premises;
F. Remedy, at Sellers' own expense, all violations of laws, ordinances, orders
or other requirements relating to the ownership, construction, development and
operation of the Premises which have been or may be imposed by any governmental
authority having jurisdiction over, or affecting, all or any part of the
Premises prior to the date of the Closing; and
G. Cooperate with Purchaser, at Purchaser's expense, in obtaining all
Approvals described in Paragraph 14F hereof, and take all actions that are
necessary or appropriate and which are reasonably requested by Purchaser in
connection therewith.
12. Representations and Warranties.
A. In order to induce Purchaser to enter into this Agreement, the Trusts
hereby represent and covenant, and the Beneficiaries represent and warrant, to
Purchaser that on the Effective Date and on the date of the Closing:
(1) Sellers have all necessary and requisite authority to enter into this
Agreement and to consummate all of the transactions contemplated hereby,
and the persons executing this Agreement and all other documents required
to consummate the transactions contemplated hereby on behalf of Sellers are
duly authorized to execute this Agreement and such other documents on
behalf of Sellers, and are authorized to bind Sellers.
(2) The Trusts are duly formed and validly existing under the laws of the
State of Illinois.
(3) Sellers are "United States persons", as defined by Internal Revenue
Code Section 1445 and Section 7701.
(4) The execution of this Agreement by Sellers does not, and the
performance by Sellers of the transactions contemplated by this Agreement
will not, violate or constitute a breach of the charter and/or other
governing documents of the Trusts, or any contract, permit,
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license, order or decree to which Sellers are a party or by which Sellers
or their assets are bound.
(5) Sellers have good, marketable and indefeasible fee simple title to the
Real Estate, subject only to the matters disclosed in the Commitment.
(6) To Sellers' actual knowledge, the Premises and the operation thereof
are not in violation of any applicable federal or state law, or any
ordinance, order or regulation of any governmental or quasi-governmental
agency having jurisdiction over the Premises, and no proceedings of any
type (including condemnation or similar proceedings) have been instituted
or to the knowledge of the Sellers are pending or contemplated against the
Real Estate or any part thereof or the Premises or any portion thereof.
(7) No party, person or entity is in possession of the Premises or any
portion thereof, and, no party, person or entity has any interest in the
Premises, or any portion thereof, except Sellers.
(8) There are no unrecorded liens or encumbrances, (including, but not
limited to, liens relating to environmental matters) against the Premises
or any portion thereof.
(9) There are not presently pending any special assessments of any nature
with respect to the Real Estate or any portion thereof, nor have the
Sellers received any written notice of nor have the Sellers knowledge of
any such special assessment being contemplated.
(10) There are no agreements, contracts, leases, commitments, Permits or
other documents, together with all amendments thereto and modifications
thereof, relating or pertaining, in any way, to the Premises or any portion
thereof, or to its ownership or operation, which have not been delivered to
Purchaser or will not be delivered to Purchaser, within the time period
provided herein.
(11) There are no outstanding contracts or commitments made by Sellers (or
any of their agents or affiliates) for the work or materials in connection
with the Premises or for any improvements to the Premises which have not
been, or will not be on or before the date of the Closing, fully paid for
on a timely basis and except for any leases, contracts or agreements to be
assigned to Purchaser pursuant to Paragraph 10B, there are no leases,
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contracts, commitments or agreements which will bind Purchaser or the
Premises from and after Closing.
(12) No person or entity has any right or option to acquire all or any
portion of the Premises, other than Purchaser pursuant to this Agreement.
(13) There currently exist no events of default by Sellers, or events which
with passage of time or notice or both would constitute events of default
by Sellers, under the terms and provisions of any leases or any other
contracts or agreements with respect to the Premises to which Sellers are a
party, or to Sellers' best knowledge, by any other party thereto.
(14) Sellers hold, and at all times through the Closing will hold, good,
valid and marketable title to the Personal Property, free and clear of any
liens, encumbrances or adverse claims, and, Sellers have, and, at all times
through the Closing will have, the right and authority to convey or assign
to Purchaser all of the Personal Property.
(15) There are no violations by Sellers or, to the best of Sellers'
knowledge, by any other person or entity, of any restrictive covenants or
other matters affecting the Real Estate.
(16) There does not exist any litigation or governmental proceeding
(including, without limitation, any eminent domain proceeding) affecting
the Premises or any portion thereof, and to Sellers' best knowledge, no
such litigation or proceeding is pending, threatened or contemplated.
(17) To Sellers' actual knowledge, no portion of the Premises contains any
building materials containing or manufactured from asbestos in the
Premises.
(18) To Sellers' actual knowledge: (a) Sellers have not generated, treated,
stored or disposed of Hazardous Materials (as defined below) in, under or
upon the Real Estate (above or below ground), or any portion thereof, or
used any Hazardous Materials in or on the Premises, or any portion thereof,
in violation of any Environmental Laws; (b) no prior owner and no prior or
current occupant generated, treated, stored or disposed of such Hazardous
Materials in, under or upon the Real Estate, or used any Hazardous
Materials in or on the Premises, or any portion thereof, in violation of
any Environmental Laws; (c) no Hazardous Materials are present in, under or
upon the Real Estate, or any portion thereof; (d) the Premises and
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the use and operation of the Premises are not in violation of any
Environmental Laws (as defined below); (e) no portion of the Real Estate
has ever been used as a sanitary landfill or dump; (f) no underground
storage tank or tanks are located on or under the Real Estate; and (g) no
Hazardous Materials or underground storage tanks are present in, under or
upon any parcel of property adjacent to the Real Estate.
(19) If Sellers do not furnish the "disclosure document" described in
Paragraph 14E hereof, then Sellers represent and warrant that the
disclosure is not required in connection with the transactions contemplated
by this Agreement.
(20) No portion of the Premises is a wetland designated by the United
States Army Corp of Engineers or other federal state or local body or
agency having jurisdiction over the Premises or any portion thereof.
B. In the event at any time prior to Closing either party hereto learns that
any of the aforesaid representations and warranties is or are no longer true or
valid, the party acquiring such knowledge shall give written notice to the other
party, within three business days of acquiring such knowledge, and therein
specify the factors rendering or likely to render such representations or
warranties untrue or invalid; and Sellers shall have a period of thirty (30)
days after delivery of such notice by either party to cure such condition(s).
All representations and warranties contained in Paragraph 12 or elsewhere in
this Agreement shall be deemed remade as of the date of Closing and shall
survive the Closing for a period of eighteen (18) months thereafter.
Notwithstanding anything to the contrary in this Agreement, if Purchaser has
actual knowledge prior to the Closing that any of Sellers' aforesaid
representations and warranties is or are no longer true or valid and if
Purchaser elects to close without delivering to Sellers the written notice(s)
contemplated in this Paragraph 12(B) prior to the Closing, Purchaser shall be
deemed to have waived its claim(s) with respect to such condition(s).
C. Each party hereunder represents to the other party that no party has relied
upon any real estate broker or other finder to consummate the transactions
contemplated by this Agreement other than Grubb & Ellis, 10275 West Higgins,
Rosemont, Illinois 60018 ("Broker"). Pursuant to that certain letter agreement
dated February 6, 1997, by and between Sellers and Broker, Sellers shall pay any
and all real estate brokerage commissions, finder fees and similar fees payable
to Broker by reason of the sale or purchase of the Premises or by reason of any
other transaction contemplated by this
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Agreement. Each party hereunder shall indemnify, defend and hold harmless
the other party from and against any and all losses, damages, costs and
claims suffered or incurred by such other party as a result or by reason of
any action(s) by the indemnifying party giving rise to a claim by any
person or entity other than the Broker for a commission or fee pertaining
to this Agreement or the transactions contemplated herein.
13. Environmental Indemnity.
-----------------------
The following provisions shall survive the Closing. For a period of time
that begins on the date of the Closing and ends on that certain date which is
three (3) years after the date of the Closing, Sellers hereby agree to
indemnify, defend and hold the Purchaser harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and claims of any and
every kind whatsoever paid, incurred or suffered by or asserted against
Purchaser for, with respect to, or as a direct or indirect result of Sellers'
action(s) with respect to the Real Estate and in breach of any Environmental
Law, or any of the warranties and representations stated in Paragraphs 12A(6),
12A(17), 12A(18) and 12A(19) hereof (including, without limitation, any such
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Laws). For purposes of this Agreement,
"Hazardous Material" means and includes any waste material or other substance
defined as hazardous in 42 U.S.C. Sec. 9601(14) or any related or applicable
federal, state or local statute, law, regulation or ordinance, pollutants or
contaminants (as defined in 42 U.S.C. Sec. 9601(33), petroleum (including crude
oil or any fraction thereof), any form of natural or synthetic gas, sludge (as
defined in 42 U.S.C. Sec. 6903(26A), radioactive substances, hazardous waste (as
defined in 42 U.S.C. Sec. 6903(27)) and any other hazardous wastes, hazardous
substances, contaminants or pollutants as defined or described in any of the
Environmental Laws. As used in this Agreement, "Environmental Law(s)" means all
federal, state and local environmental laws, and any rule or regulation
promulgated thereunder and any order, standard, interim regulation, moratorium,
policy or guideline of or pertaining to any federal, state or local government,
department or agency, including but not limited to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Marine Protection, Research, and Sanctuaries Act, the
National environmental Policy Act, the Noise Control Act, the Safe Drinking
Water Act, the Resource Conservation and Recovery Act ("RCRA"), as amended, the
Hazardous Material Transportation Act, the Refuse Act, the Uranium Mill Tailings
Radiation Control Act and the Atomic Energy Act and
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regulations of the Nuclear Regulatory Agency, and all state and local
counterparts or related statutes, laws, regulations, and order and treaties of
the United States. The indemnification hereunder shall include and benefit
Purchaser's lender, all subsidiaries, affiliates or corporations connected with
such lender or Purchaser, and their respective agents, representatives,
employees, officers, insurers, directors, stockholders, successors and assigns.
14. Conditions to Purchaser's Obligation to Close. The obligations of
Purchaser to close the transactions contemplated by this Agreement and to pay
the Purchaser Price are conditioned upon and subject to the satisfaction on or
before the date of Closing (or waiver by Purchaser) of each of the following
conditions:
A. Sellers shall have performed and complied with all agreements,
covenants and conditions to be performed or complied with prior to the date
of the Closing.
B. All of Sellers' representations and warranties set forth in this
Agreement shall be true and correct as of the date of the Closing.
C. Sellers shall have complied with all procedures reasonably required by
the Title Company or which are customary or appropriate in transactions
similar to the transactions contemplated hereby in connection with the
consummation of all transactions contemplated hereby.
D. The Title Company shall be prepared to issue the Title Policy in
accordance with this Agreement upon conveyance of the Premises to Purchaser
and payment of the Purchase Price to Sellers.
E. Sellers shall have delivered to Purchaser a copy of any "disclosure
document" required by any applicable state or federal law relating to
environmental matters, together with evidence, reasonably acceptable to
Purchaser, indicating that such document has been properly and timely
filed.
F. The Premises shall have been properly zoned, and Purchaser shall have
received all necessary and appropriate permits and approvals (to the extent
such permits and approvals can be issued based on the state of the
development of the Premises as of the date of the Closing) to permit the
development of a congregate-care and assisted-living senior housing
facility consisting of approximately 235 residential units on the Premises
and the operation thereof as contemplated by Purchaser. Such permits and
approvals shall include, but are not necessarily limited to, zoning
approvals, a resubdivision or other consolidation of the parcels that
comprise the Real Estate in connection with the planned unit
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development to be proposed by Purchaser, approvals of site plans, access
approval and approvals of the proposed curb cuts (collectively, the
"Approvals"). Purchaser shall have a period of one hundred twenty (120)
days following the expiration of the Feasibility Period to obtain the
Approvals, which period of time may be extended in six (6) increments of
thirty (30) days each at the election of the Purchaser (which extensions
will be granted by Sellers so long as Purchaser is diligently pursuing the
issuance of the Approvals); with respect to the first and second of such
extensions, if requested by Purchaser by written notice fifteen (15) days
in advance of each such extension, Purchaser shall not be required to make
any payment to Sellers; with respect to the third and fourth of such
extensions, if requested by Purchaser by written notice fifteen (15) days
in advance of each such extension (which notice shall be accompanied by
Purchaser's check), Purchaser shall pay to Sellers the amount of Ten
Thousand Dollars ($10,000.00) apiece; with respect to the fifth and sixth
of such extensions, if requested by Purchaser by written notice fifteen
(15) days in advance of each such extension (which notice shall be
accompanied by Purchaser's check), Purchaser shall pay to Sellers the
amount of Five Thousand Dollars ($5,000.00) apiece; and Purchaser and
Sellers agree that any of such payments for the third, fourth, fifth and/or
sixth extensions shall be non-refundable but shall be credited against
Purchaser's obligations under Paragraph 15(B) below to deliver the balance
of the Purchase Price to Sellers at the Closing. Failure of the Purchaser
to serve written notice to Sellers with respect to any of the foregoing six
extension periods shall operate to immediately terminate Purchaser's right
to request any remaining extensions contemplated in this Paragraph 14(F).
In the events that (1) Purchaser does not obtain one or more of the
Approvals prior to the expiration of the sixth extension contemplated in this
Paragraph 14(F) and (2) Purchaser and Sellers have not mutually agreed to
further extend the period of time for Purchaser to obtain such Approval(s), then
Purchaser may, within five (5) business days following the expiration of such
sixth extension, give written notice to Sellers specifying Purchaser's failure
to obtain such Approval(s) and expressly terminating this Agreement as a result
thereof (the "Contingency Termination Notice"). In the event Purchaser serves a
Contingency Termination Notice upon Sellers in a timely fashion, this Agreement
shall thereupon terminate and be of no further force or effect, except to
Purchaser's obligations to restore the Premises to pre-inspection condition for
damage(s) that may have been caused by Purchaser during the Feasibility Period;
and Purchaser and Sellers shall promptly direct the Title Company to deliver to
Sellers the Earnest Money, together with all interest and earnings accrued
thereon, and Sellers shall retain any and all payments made by Purchaser to
Sellers pursuant to this Paragraph 14(F). The failure
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of Purchaser to timely serve a Contingency Termination Notice upon Sellers shall
constitute the irrevocable waiver by Purchaser of obtaining such Approval(s) as
a condition to Purchaser's obligation to close as contemplated in this Paragraph
14.
15. Provisions with Respect to Closing.
----------------------------------
A. At the Closing, Sellers shall deliver to Purchaser the following, all
in form and substance reasonably satisfactory to Purchaser:
(1) a trustee's deeds, duly executed and acknowledged by the Trusts,
conveying to Purchaser, or Purchaser's Nominee, good, marketable and
indefeasible fee simple title to the Real Estate, Improvements and any
fixtures located thereon, in proper form for recording and subject only
to the Permitted Title Exceptions;
(2) general warranty assignments or bills of sale, as appropriate,
duly executed and acknowledged by Sellers, conveying to Purchaser title
to the Personal Property, free and clear of all liens, encumbrances,
claims and security interests, with express warranties of good title;
(3) an original executed copy of each contract or agreement that is
assigned to Purchaser;
(4) an affidavit executed by Sellers, stating Sellers' U.S. Taxpayer
identification numbers and that Sellers are not "foreign persons" or
"foreign corporations" (as defined under Internal Revenue Code Section
1445 and Section 7701), and that Purchaser is not required to withhold
any portion of the Purchase Price under the provisions of such Act;
(5) the Title Policy in the form required under Paragraph 8;
(6) a certificate executed by Sellers to the effect that the
representations and warranties made by Sellers to Purchaser are true
and correct in all material respects on and as of the date of the
Closing;
(7) a reciprocal easement and maintenance agreement pertaining to the
storm water management system discussed in Paragraph 30 below;
(8) a temporary restrictive covenant to be placed on the Real Estate
designating the use of the Real Estate for a congregate-care and
assisted-living senior housing
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facility to be built by Purchaser pursuant to the plans previously
reviewed and approved by Sellers (or such other use as may be approved
in writing by Sellers at Sellers' sole discretion), which restrictive
covenant shall be removed and terminated within five (5) business days
after Purchaser builds such facility and receives a certificate of
occupancy from the government authorities having jurisdiction over the
matter;
(9) a letter addressed to Purchaser whereby Sellers agree to indemnify
and hold harmless Purchaser with respect to any taxes or any penalties
or interest thereon pursuant to any governmental law, statute or
regulation for which Purchaser is or will be liable for a withholding
of funds from the Purchase Price pursuant to any so-called "bulk sales"
law or other applicable law, statute or regulation; and
(10) all such further instruments and documents as are normally made
or delivered in connection with the sale of Property similar to the
Premises in the county and state where the Premises is located or as
may be necessary, expedient, proper, or appropriate in the reasonable
opinion of Purchaser or Purchaser's counsel, in order to complete the
transactions contemplated hereby.
B. On the date of the Closing, and provided that all conditions precedent
to Purchaser's obligations under this Agreement are satisfied, Purchaser
shall deliver to the Title Company, as escrowee, the amount of the Purchase
Price (less credits, adjustments and prorations in accordance with this
Agreement) by wire transfer or other immediately available funds.
C. On the date of Closing the Title Company shall disburse the Purchase
Price (as adjusted by prorations and credits and Sellers' closing costs) to
Sellers and disburse any portion of the Earnest Money which has not been
applied to the Purchase Price (together with all interest and earnings
accrued on the Earnest Money from the date on which Purchaser first
deposited funds into the Escrow) to Purchaser, and Sellers shall deliver
possession of the Premises to Purchaser in the same condition as the
Premises exists on the date hereof, ordinary wear and tear excepted.
D. Sellers shall pay: (i) any State or local transfer or stamp taxes or
similar charges; (ii) the cost of recording the instruments of conveyance
and any releases of Removable Liens or other unpermitted exceptions; and
(iii) the cost of issuing the Title Policy. Purchaser shall pay the cost of
recording any instruments securing financing of Purchaser's acquisition.
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The cost of the Escrow and all other closing costs shall be borne one-half by
each of Purchaser and Sellers.
16. Closing Adjustments; Security Deposits.
--------------------------------------
Adjustments shall be made between Sellers and Purchaser for the following items,
prorated on a per diem basis, as of midnight of the day preceding the date of
the Closing:
(1) Rents, residency fees and other charges paid under each lease relating
to the Premises, or any portion thereof, if any.
(2) Real estate, personal property and ad valorem taxes and other state or
city taxes, charges and assessments affecting the Premises, or any portion
thereof, not yet due and payable, shall be prorated on the basis of the
most recent fiscal year for which the same are levied or assessed;
provided, that if the amount of any such taxes, charges or assessments
shall not be fixed or ascertainable before the date of the Closing, the
adjustment thereof on the date of the Closing shall be upon the basis of
one hundred five percent (105%) of most recent ascertainable amount of such
taxes, charges and assessments. In the event any adjustment is made at the
Closing pursuant to the preceding sentence, there shall be a re-proration
of such tax, charge or assessment immediately upon receipt of the actual
bill therefor, and, within ten (10) days of the receipt of such bill,
Sellers shall pay Purchaser or Purchaser shall pay Sellers, as the case may
be, any amount due the other party as a result of such re-proration.
(3) Charges for water, electricity, sewer rental, gas, telephone and other
utilities for the Premises (normally billed to Sellers) will be paid by
Sellers on a per diem basis on the basis of the most recent available bills
(subject to readjustment on receipt of bills covering the period in which
the Closing occurs), provided that Sellers shall use its best efforts to
procure final meter readings of such utilities as of the date of the
Closing (if such reading is obtained, no proration of utilities shall be
necessary) and to have such bills rendered directly to Sellers (and Sellers
will deliver to Purchaser copies of any such bills rendered to Sellers
within five (5) days of Sellers' receipt thereof), if any. To the extent
deposits held on Sellers' behalf by utility companies are transferable to
Purchaser, Sellers shall receive a credit at Closing in the amount of such
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deposits and such deposits shall be transferred and placed in the name of
Purchaser. Otherwise, Sellers shall receive a refund of such deposits and
Purchaser shall have no claim with regard to the same.
(4) Charges under existing service contracts, if any, and other ordinary
costs and expenses for maintenance and protection of the Premises.
(5) Such additional adjustments as are normally made in connection with the
sale of property similar to the Premises in the county and state where the
Premises is located.
17. Condemnation. In the event that between the Effective Date of this
Agreement and the date of the Closing Sellers receive written notice that any
condemnation or eminent domain proceedings are threatened or initiated which
might result in the taking of any part of the Real Estate or any of the
Improvements, Purchaser may:
A. terminate this Agreement, in which event, the Earnest Money, together
with all interest accrued thereon, shall promptly be returned to Purchaser
and all rights and obligations of the parties hereunder shall cease; or
B. consummate the transactions contemplated by this Agreement, in which
event Sellers shall assign to Purchaser all of Sellers' right, title and
interest in and to any award made in connection with such condemnation or
eminent domain proceedings.
Sellers shall immediately notify Purchaser in writing of the threat or the
occurrence of any condemnation or eminent domain proceedings. Purchaser shall
then notify Sellers within fifteen (15) days after the date of Purchaser's
receipt of Sellers' notice of such condemnation or eminent domain proceedings
whether Purchaser elects to exercise its right under Subparagraph A or B of this
Paragraph. In the event Purchaser receives written notice of the threat or
occurrence of such condemnation or eminent domain proceedings within fifteen
(15) days prior to the date of Closing, and Purchaser elects to consummate the
transactions contemplated by this Agreement within the time period provided
above, the date of the Closing shall be adjusted accordingly.
18. Remedies.
--------
A. If Sellers should breach any of their representations, warranties,
covenants or agreements contained in this Agreement or in any other
agreement, instrument, certificate or other document delivered pursuant to
this Agreement or if Sellers should fail to consummate the sale contemplated
herein
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for any reason other than Purchaser's default, Purchaser may avail itself
of any and all rights and remedies at law or in equity, including, but not
limited to, the right to (1) cancel this Agreement and receive the prompt
return of the Earnest Money, together with all interest and earnings
accrued thereon; and/or (2) collect monetary damages from Sellers (which,
in the event that Purchaser pursues this remedy prior to the Closing, shall
be limited to an amount equal to the aggregate amount of the Earnest Money
in the Escrow at the Title Company plus any and all payments made by
Purchaser to Sellers pursuant to Paragraph 14(F) above); and/or (3) enforce
specific performance of this Agreement. The exercise of (or failure to
exercise) any one of Purchaser's rights or remedies under this Agreement
shall not be deemed to be in lieu of, or a waiver of, any other right or
remedy contained herein or available to Purchaser at law or in equity.
B. If all of the conditions to Purchaser's obligations to purchase the
Premises have been satisfied or waived in writing by Purchaser and Sellers
are not in default of or under any of Sellers' agreements, covenants or
obligations hereunder and Purchaser should fail to consummate the purchase
contemplated hereby for any reasons other than Sellers' default, Sellers,
as Sellers' sole and exclusive remedy, may receive the Earnest Money,
together with all interest and earnings accrued thereon, and retain any and
all payments made by Purchaser to Sellers pursuant to Paragraph 14(F)
above, as full and final liquidated damages, Purchaser and Sellers hereby
acknowledging that, in the event of Purchaser's failure to consummate the
sale contemplated hereby, actual damages suffered by Sellers would be
difficult and/or inconvenient to determine or ascertain; and, thereafter,
there shall be no further liability hereunder on the part of either party
or the other party. If, after the Closing, Purchaser should breach any of
its representations, warranties, covenants or agreements set forth in this
Agreement that pertain to the post-Closing period, Sellers may avail
themselves of any and all rights and remedies at law or in equity.
C. If either Purchaser or Sellers bring an action to enforce their rights
under this Agreement, the successful party shall be reimbursed by the
unsuccessful party for all costs of enforcement, including reasonable
attorneys' fees and court costs. Tender of deed or purchase money shall not
be necessary where the other party has defaulted.
19. Modification, Waiver, etc.
--------------------------
A. No waiver of any condition under, and no modification, amendment,
discharge or changes of or to this Agreement shall be valid unless the same
is in writing and signed by the party
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against which the enforcement of such modification, waiver, amendment,
discharge, or change is sought.
B. This Agreement contains the entire agreement between the parties
relating to the transactions contemplated hereby and all prior or
contemporaneous agreements, understandings, representations and statements,
oral or written, are merged herein.
20. Notices. All notices, demands, requests and other communications under
this Agreement shall be in writing and shall be deemed properly served when
delivered, if delivered by hand to the party to whose attention it is directed,
or three (3) Business Days after delivery to a United States Post Office
properly addressed, if mailed postage prepaid or one (1) Business Day after
delivery to the courier if sent by private receipt courier guaranteeing next day
delivery, delivery charges prepaid, or upon transmittal if delivered by
facsimile provided receipt of the notice is confirmed, as the case may be, and
in each case, addressed as follows:
A. If intended for Sellers, to:
Stahelin Properties
800 Roosevelt Road
Building A, Suite 120
Glen Ellyn, Illinois 60137
Attn.: Mr. Michael Stahelin
Facsimile No. (630) 469-3390
with a copy to:
Henry S. Stillwell III, Esq.
Rathje, Woodward, & Burt
300 East Roosevelt Road
Post Office Box 786
Wheaton, Illinois 60189
Facsimile No. (630) 668-7350
B. If intended for Purchaser, to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn.: Mark J. Iuppenlatz
Facsimile No. (312) 917-0460
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with a copy to:
The Prime Group, Inc.
77 W. Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attn.: Mark J. Schulte
Facsimile No. (312) 917-0460
or at such other address or to such other party which any party entitled to
receive notice hereunder designates to the others in writing.
21. Governing Law. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of the State of Illinois,
applicable to contracts made and to be performed in that State.
22. Counterparts. This Agreement may be executed in two or more
counterparts (in the form of an original-signature document or in the form
transmitted by facsimile as contemplated by Paragraph 20 of this Agreement),
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Any such counterpart delivered in the
form transmitted by facsimile shall be promptly replaced with an original-
signature document from the party sending such counterpart by facsimile.
23. Captions. The captions of this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
24. Construction. As used herein, the terms (a) "person" shall mean an
individual, a corporation, a partnership, a trust, an unincorporated
organization or any agency or political subdivision thereof; (b) "including"
shall mean including, without limiting the generality of the foregoing; (c) the
masculine shall include the feminine and the neuter; (d) "the best knowledge" or
any similar phrase shall mean best knowledge with independent investigation; and
(e) "business day" shall mean any calendar day other than Saturday, Sunday,
holiday and any day on which national banks in Chicago, Illinois are authorized
to close.
25. Assignability.
(A) This Agreement and any of the Purchaser's rights hereunder may be assigned
by Purchaser prior to the Closing upon written notice to Sellers and without the
prior consent of the Sellers. Any such assignment may provide that Purchaser's
nominee or assignee assumes all of the provisions of the Agreement to be
performed by Purchaser (including Purchaser's use of the Real Estate as a senior
housing facility or such other use as may be approved in writing by Sellers
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at Sellers' sole discretion), but in such event Purchaser shall not be released
and discharged of all further liability to Sellers under this Agreement. All
references to Purchaser in this Agreement shall be deemed to include references
to Purchaser's nominee.
(B) Sellers may not assign this Agreement or any of Sellers' rights hereunder.
Notwithstanding the foregoing, Sellers shall have the right to assign this
Agreement to a title company or other qualified intermediary in connection with
an exchange of real property pursuant to Section 1031 of the United States
Internal Revenue Code of 1986, as amended. No such assignment shall relieve
Sellers of their obligations to Purchaser under this Agreement.
26. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
27. Partial Invalidity. If any provision or provisions, or any portion of
any provision or provisions, of this Agreement is found by a court of law to be
in violation of any applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if such court should
declare such portion, provision or provisions of this Agreement to be illegal,
invalid, unlawful, void or unenforceable as written, then it is the intent of
Sellers and Purchaser that any portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and enforceable,
that the remainder of this Agreement shall be construed as if such illegal,
invalid, unlawful, void or unenforceable portion, provision or provisions were
not contained herein, and that the rights, obligations and interest of Sellers
and Purchaser under the remainder of this Agreement shall continue in full force
and effect.
28. Time is of the Essence. Time is of the essence of this Agreement.
29. Acceptance of Offer. The offer to purchase the Premises made by
Purchaser by the delivery of a copy of this Agreement as executed on behalf of
Purchaser shall automatically terminate and expire at 5:00 p.m. C.S.T. on
February 21, 1997, unless said offer is accepted earlier by Sellers' execution
of this Agreement, or a counterpart hereof, and by the return to Purchaser of a
fully executed copy of this Agreement on or before the date and time
aforementioned.
30. Post-Closing Co-operation. The following provisions shall survive the
Closing. Following the completion of the transactions otherwise contemplated in
this Agreement pertaining to the Real Estate, Purchaser and Sellers shall
thereafter co-operate with each other in good faith with respect to the
following specific matters, as well as with any additional matters reasonably
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requested by either party that does not cause material expense or inconvenience
to the other party.
(a) Purchaser shall use its best efforts to petition the relevant
government authorities to vacate, abandon and/or terminate the right of way
known as "Milton Avenue" on the Real Estate. In the events that Purchaser's
petition succeeds and that Purchaser subsequently wishes to convey, or grant an
easement pertaining to, the area of the Real Estate currently occupied by Milton
Avenue, then Sellers shall have a right of reverter with respect to the
easterly-half of Milton Avenue on the Real Estate.
(b) Subject to the reciprocal easement and maintenance agreement
mentioned in Paragraphs 3 and 15(A) above, an area of the Real Estate shall be
maintained by Purchaser, without obligating Purchaser to incur any material or
unreasonable expense, to accept storm water that may be generated from time to
time from the adjacent property currently owned by Sellers, consisting of
approximately four (4) acres and legally described on Exhibit C attached hereto
(the "Retained Property"). Any and all costs of site grading, surface and/or
subsurface routes, below-grade piping or other infrastructure necessary on the
Retained Property, and any oversizing or other adaptations of the pipes on the
Real Estate to enable access to, or connections with, the storm water management
system on the Real Estate shall be paid by Sellers. The initial costs of
constructing the detention pond on the Real Estate to manage the water to be
generated by the Real Estate will be paid by Purchaser; any marginal or
incremental increases in such costs that Purchaser may incur in order to
accommodate the water to be generated by the Retained Property shall be paid by
Sellers. The future costs of managing and maintaining, such storm water
detention system on the Real Estate shall be paid by Sellers and by Purchaser on
a pro rata basis determined by the amounts of water, to be estimated by a civil
engineering firm, that will be directed into such system by the Real Estate and
the Retained Property, respectively. All of the matters discussed in this
Paragraph 30(b), as well as those referenced in Paragraphs 30(c) and 30(d)
below, and easements for all related utilities, swales and other items
pertaining to the storm water management system will be governed by the
aforesaid reciprocal easement and maintenance agreement.
Unless Purchaser uses the civil engineering services of Lindley & Sons
to design such storm water management system, Sellers shall have the right to
review and approve the technical specifications of such system, such approval
not to be withheld unreasonably by Sellers.
(c) Subject to the provisions of the reciprocal easement and
maintenance agreement mentioned above, Purchaser shall co-operate with Sellers,
in a non-monetary fashion, with respect to Sellers' desire to develop the
Retained Property as a retail center, and Purchaser agrees that Sellers'
intention to maintain a landscaped buffer on the Retained Property, no fewer
than ten (10)
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feet wide and starting from the boundary between the Real Estate and the
Retained Property, is acceptable to Purchaser.
(d) Purchaser may, at Purchaser's option and expense, improve DuPage
Boulevard west of Nicoll Avenue for vehicular access. If Purchaser elects to
construct such vehicular access, then Purchaser shall cooperate in a non-
monetary fashion with Sellers' desire to construct additional public parking in
the DuPage Boulevard right of way. Subject to the provisions of the reciprocal
easement and maintenance agreement mentioned above, in the event that DuPage
Boulevard is vacated, Purchaser shall: construct a roadway that provides
vehicular access to Sellers' adjacent property; grant a temporary license to
Sellers to allow Sellers to construct parking on a portion of the vacated right
of way; a grant a perpetual, non-exclusive easement with respect to such roadway
and parking.
(e) Purchaser shall install an east-west sidewalk extension on or
from the Real Estate and that will intersect with Nicoll Avenue, unless
prohibited by the Village of Glen Ellyn, Illinois; and, if required by the
Village of Glen Ellyn, Illinois, Purchaser shall install a sidewalk on the Real
Estate along a portion of the Real Estate that is directly adjacent to Nicoll
Avenue.
[Signature pages follow.]
-26-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date the last party signs ("Effective Date").
PURCHASER:
THE PRIME GROUP, INC.
an Illinois corporation
Date: February 19, 1997 By: /s/ Mark J. Schulte
------------------------------------
Mark J. Schulte
Its: Executive Vice President
SEE RIDER ATTACHED HERETO AND MADE A PART THEREOF
SELLERS:
Firstar DuPage Bank (Glen Ellyn,
Illinois) Trust No. 3612 dated
December 4, 1989
By: /s/ Norma J. Haworth
------------------------------------
Norma J. Haworth, Land Trust Officer
Date: February 24, 1997 By: Attest: Mary Figiel
Its: Mary Figiel, Land Trust Officer
-----------------------------------
SEE RIDER ATTACHED HERETO AND MADE A PART THEREOF
Firstar DuPage Bank (Glen Ellyn,
Illinois) Trust No. 3625 dated
February 22, 1990
By: /s/ Norma J. Haworth
------------------------------------
Norma J. Haworth, Land Trust Officer
Date: February 24, 1997 By: Mary Figiel
Its: Mary Figiel, Land Trust Officer
-----------------------------------
West Suburban Bank (Lombard,
Illinois) Trust No. 1975 dated
December 13, 1978
Date: February 24, 1997 By: /s/ Patricia L. Fleischman
-----------------------------------
Its: Trust Officer
-----------------------------------
L/M Development, an Illinois
partnership
Date: February 24, 1997 By: /s/
-----------------------------------
Its: General Partner
<PAGE>
Date: February 24, 1997 /s/ Leland M. Stahelin
------------------------------------
Leland M. Stahelin
Date: February 24, 1997 /s/ Michael Stahelin
------------------------------------
Michael Stahelin
docs\Horn\ellyn
-28-
<PAGE>
REAL ESTATE CONTRACT EXONERATION--SELLER
This Contract is executed by Firstar Bank Illinois, not personally but as
Trustee under Trust No. 3612 and 3625 as aforesaid, in the exercise of power and
authority conferred upon and vested in said Trustee as such, and it is expressly
understood and agreed that nothing in said Contract contained shall be construed
as creating any liability on said Trustee personally to pay any indebtedness
accruing thereunder, or to perform any covenants, either expressed or implied,
in said Contract (all such liability, if any, being expressly waived by said
purchaser and by every person now or hereafter claiming any right or security
thereunder) and that so far as said Trustee is concerned, the owner of any
indebtedness or right accruing under said Contract shall look solely to the
premises described therein for the payment or enforcement thereof, it being
understood that said trustee merely holds legal title to the premises described
therein and has no control over the management thereof or the income therefrom,
and has no knowledge respecting rentals, leases, or other factual matter with
respect to said premises, except as represented to it by the beneficiary or
beneficiaries of said trust.
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
of
the Real Estate
[TO BE SUPPLIED BY SELLERS SUBJECT TO TITLE COMPANY VERIFICATION.]
<PAGE>
EXHIBIT B
---------
Escrow Trust Instructions
EARNEST MONEY ESCROW AGREEMENT
EXHIBIT B - PAGE 1
<PAGE>
CHICAGO TITLE
Refer to: Alan R. Kalas
Phone no.: (630) 871-3534
Fax no.: (630) 871-3588
STRICT JOINT ORDER ESCROW TRUST INSTRUCTIONS
________________________________________________________________________________
ESCROW TRUST NO.: 97008861 DATE: February 24, 1997
________________________________________________________________________________
To: Chicago Title and Trust Company, Escrow Trustee:
Customer Identification:
Seller: Firstar DuPage Bank Trust No. 3612 Purchaser: The Prime Group, Inc.
et.al.
Property address: The southwest corner of the intersection of DuPage Blvd. and
Nicoll Ave., Glen Ellyn, DuPage County, Illinois
Proposed disbursement date: TBA
Deposits:
(Certified) (uncertified) (cashier's) check(s) in the amount of $10,000.00
representing:
1. Earnest money deposit for the sale of the above-referenced property
2. _____________________________________________________________________________
3. _____________________________________________________________________________
Delivery of Deposits:
The above-referenced escrow trust deposits ("deposits") are deposited with the
escrow trustee to be delivered by it only upon the receipt of a joint order of
the undersigned or their respective legal representatives or assigns.
In no case shall the above mentioned deposits be surrendered except upon the
receipt of an order signed by the parties hereto, their respective legal
representatives or assigns, or in obedience to the court order described below.
Billing Instructions:
Escrow trust fee will be billed as follows:
not applicable
________________________________________________________________________________
________________________________________________________________________________
An annual maintenance fee, as determined by the then current rate schedule, will
commence_______________________________________________________________________.
PLEASE NOTE: The escrow trust fee for these joint order escrow trust
instructions is due and payable within 30 days from the projected disbursement
date (which may be amended by joint written direction of the parties hereto).
In the event no projected disbursement date is ascertainable, said escrow trust
fee is to be billed at acceptance and is due and payable within 30 days from the
billing date. Chicago Title and Trust Company, at its sole discretion, may
reduce or waive the escrow trust fee for these joint order escrow trust
instructions in the event the funds on deposit herein are transferred to or
disbursed in connection with sale escrow trust instructions or an agency
closing transaction established at Chicago Title.
Investment:
Deposits made pursuant to these instructions may be invested on behalf of any
party or parties hereto: Provided, that any direction to escrow trustee for such
investment shall be expressed in writing and contain the consent of all other
parties to this escrow, and also provided that you are in receipt of the
taxpayer's identification number and investment forms as required. Escrow
trustee will, upon request, furnish information concerning its procedures and
fee schedules for investment. All "deposits" shall be invested by the escrow
trustee in a money market fund for the benefit of Purchaser.
Page 1
<PAGE>
Escrow trust no.: __________________________
- --------------------------------------------------------------------------------
Except as to deposits of funds for which escrow trustee has received express
written direction concerning investment or other handling, the parties hereto
agree that the escrow trustee shall be under no duty to invest or reinvest any
deposits at any time held by it hereunder; and, further, that escrow trustee may
commingle such deposits with other deposits or with its own funds in the manner
provided for the administration of funds under Section 2-8 of the Corporate
Fiduciary Act (Ill. Rev. Stat. 1989, Ch 17, Par. 1552-8) and may use any part or
all such funds for its own benefit without obligation of any party for interest
or earnings derived thereby, if any. Provided, however, nothing herein shall
diminish escrow trustee's obligation to apply the full amount of the deposits in
accordance with the terms of these escrow trust instructions.
In the event the escrow trustee is requested to invest deposits hereunder,
Chicago Title and Trust Company is not to be held responsible for any loss of
principal or interest which may be incurred as a result of making the
investments or redeeming said investment for the purposes of these escrow trust
instructions.
Compliance With Court Order:
The undersigned authorize and direct the escrow trustee to disregard any and all
notices, warnings or demands given or made by the undersigned (other than
jointly) or by any other person. The said undersigned also hereby authorize and
direct the escrow trustee to accept, comply with, and obey any and all writs,
orders, judgments or decrees entered or issued by any court with or without
jurisdiction; and in case the said escrow trustee obeys or complies with any
such writ, order, judgment or decree of any court, it shall not be liable to any
of the parties hereto or any other person, by reason of such compliance,
notwithstanding any such writ, order, judgment or decree be entered without
jurisdiction or be subsequently reversed, modified, annulled, set aside or
vacated. In case the escrow trustee is made a party defendant to any suit or
proceedings regarding this escrow trust, the undersigned, for themselves, their
heirs, personal representatives, successors, and assigns, jointly and severally,
agree to pay to said escrow trustee, upon written demand, all costs, attorney's
fees, and expenses incurred with respect thereto. The escrow trustee shall have
a lien on the deposit(s) herein for any and all such costs, fees, and expenses.
If said costs, fees, and expenses are not paid, then the escrow trustee shall
have the right to reimburse itself out of the said deposit(s).
Execution:
These escrow trust instructions are governed by and are to be construed under
the laws of the State of Illinois. The escrow trust instructions, amendments or
supplemental instructions hereto, may be executed in counterparts, each of which
shall be deemed an original and all such counterparts together shall constitute
one and the same instrument.
For Seller: For Purchaser:
Firm/Name: Rathje, Woodward, Dyer & Burt Firm/Name: The Prime Group, Inc.
------------------------------- -------------------------
Attn: Henry S. Stillwell, III Attn: Mark J. Iuppenlatz
------------------------------- -------------------------
Address: 300 E. Roosevelt Road, Suite 300 Address: 77 West Wacker Drive,
------------------------------ Suite 3900
-------------------------
City/State: Wheaton, IL 60187 City/State: Chicago, Illinois 60601
------------------------------ -------------------------
Phone no.: (630) 668-8500 Phone no.: 312-917-1500
------------------------------ -------------------------
Signature: /s/ Henry Stillwell Signature: ????
------------------------------ -------------------------
Accepted: Chicago Title and Trust Company, as Escrow Trustee
By: ???? Date: 2/25/97
------------------------------ -------------------------
Page 2
<PAGE>
EXHIBIT C
---------
LEGAL DESCRIPTION
of
the Retained Property
[to be supplied by Sellers]
EXHIBIT C - PAGE 1
<PAGE>
EXHIBIT 10.33
REAL ESTATE PURCHASE AGREEMENT
BY AND BETWEEN
AC PROPERTIES, L.L.C.
AND
THE PRIME GROUP, INC.
<PAGE>
REAL ESTATE PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPHS PAGE
<S> <C>
1. Sale and Purchase...................................................... -1-
2. Purchase Price, Earnest Money.......................................... -2-
3. Feasibility Period..................................................... -3-
4. Infrastructure Improvements and Reciprocal Easement Agreement.......... -4-
5. Conveyance; Permitted Title Exceptions................................. -11-
6. Closing................................................................ -11-
7. Method of Closing...................................................... -12-
8. Commitment and Survey.................................................. -12-
9. Title Policy........................................................... -13-
10. Correction of Defects.................................................. -14-
11. Seller's Deliveries; Inspection........................................ -14-
12. Seller's Covenants..................................................... -15-
13. Representations and Warranties......................................... -16-
14. Environmental Indemnity................................................ -21-
15. Conditions to Purchaser's Obligation to Close.......................... -22-
16. Provisions with Respect to Closing..................................... -24-
17. Closing Adjustments.................................................... -25-
18. Condemnation........................................................... -26-
19. Defaults and Remedies.................................................. -27-
20. Modification, Waiver, etc. ............................................ -27-
21. Notices................................................................ -28-
22. Governing Law.......................................................... -29-
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
23. Counterparts........................................................ -29-
24. Captions............................................................ -29-
25. Construction........................................................ -29-
26. Assignability by Purchaser.......................................... -29-
27. Binding Effect...................................................... -30-
28. Partial Invalidity.................................................. -30-
29. Time is of the Essence.............................................. -30-
30. Confidentiality and Return of Documents............................. -30-
31. Force Majeure....................................................... -31-
32. Acceptance of Offer................................................. -31-
</TABLE>
ii
<PAGE>
REAL ESTATE PURCHASE AGREEMENT
------------------------------
THIS REAL ESTATE PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 14th day of February, 1997, by and between THE PRIME GROUP, INC.,
an Illinois corporation ("Purchaser"), and AC PROPERTIES, L.L.C., a Michigan
limited liability company ("Seller").
In consideration of the mutual covenants, agreements, representations and
warranties set forth in this Agreement, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Sale and Purchase.
Seller agrees to sell, convey and assign to Purchaser, and Purchaser agrees
to purchase and accept under the terms and conditions and for the purchase price
set forth below, the following:
(A) That portion of the land marked "PG" situated in Southfield, Michigan
(the "City"), depicted on the preliminary site plan attached hereto as
EXHIBIT A, consisting of approximately six (6) acres, together with any
improvements located on such land, all of the rights, privileges, easements
and appurtenances belonging or appertaining to such land, including any
right, title and interest in and to streets, alleys and rights-of-way
adjacent to such land (such land and all such rights, privileges, easements
and appurtenances are collectively referred to herein as the "Real
Estate"). Purchaser acknowledges that Seller is in the process of
developing approximately sixty (60) acres of land adjacent to the Real
Estate (the "ACP Development").
(B) All tangible or intangible personal property or interest therein, if
any, now or hereafter owned or held by Seller to the extent used solely in
connection with the Real Estate (or any portion thereof) or solely in
connection with the ownership, operation, management or use thereof
(hereafter the "Personal Property"). Upon reasonable notice and at
reasonable times, Seller shall make all such tangible and intangible
property that is held by Seller and used for the ACP Development available
to Purchaser provided such items relate to the Real Estate. The Personal
Property shall exclude all items that relate to the ACP Development. The
ownership of any and all such tangible and intangible personal property
that relates to both the Real Estate and the ACP Development shall remain
the property of Seller to the extent it relates to the ACP Development and
shall become the
<PAGE>
property of Purchaser to the extent it solely relates to the Real Estate.
The Personal Property includes, but is not necessarily limited to, (i) all
licenses and other permits, approvals, applications, authorizations,
certificates, permissions, no action letters and similar assurances issued
by any private person or persons or by any governmental or quasi-
governmental authority or authorities to the extent relating solely to the
Real Estate, or any portion thereof, or the ownership, operation,
management or use thereof.
The Real Estate and the Personal Property are herein sometimes collectively
called the "Premises".
2. Purchase Price, Earnest Money.
A. The purchase price (the "Purchase Price") for the Premises shall be One
Million Seven Hundred Seventy-Five Thousand and no/100 Dollars
($1,775,000.00) payable at the Closing as provided in this Agreement,
subject to prorations and adjustments as set forth in this Agreement.
B. Within five (5) Business Days following the execution and delivery of
this Agreement by Purchaser and Seller, Purchaser shall deposit the sum of
Ten Thousand and no/100 Dollars ($10,000.00), as initial earnest money (the
"Initial Earnest Money") in an escrow ("Escrow") established with First
American Title Insurance Company (the "Title Company"). Within three (3)
Business Days following the expiration of the Feasibility Period (defined
below) provided this Agreement is not terminated in accordance with its
terms, Purchaser shall deposit in the Escrow the sum of Forty Thousand and
no/100 Dollars ($40,000.00), as additional earnest money (the "Additional
Earnest Money". The Initial Earnest Money, the Additional Earnest Money,
and any other earnest money deposited pursuant to this Agreement, to the
extent deposited in Escrow at the relevant time, and all accrued interest
and other earnings on such amounts, are sometimes referred to herein
together as the "Earnest Money". The Earnest Money shall be held by the
Title Company in accordance with escrow instructions substantially in the
form attached hereto as EXHIBIT B (the "Escrow Instructions"). The Earnest
Money shall be invested in a money market fund or in such other investment
instrument or account designated by Purchaser. At the Closing, the Earnest
Money shall be applied against the Purchase Price. In the event the
Closing does not occur and\or this Agreement is terminated for any reason
other than a Purchaser Default, the Earnest Money shall be returned to
Purchaser.
C. Seller has delivered to Purchaser (i) a copy of a title commitment for
a standard title insurance policy issued by the Title Company dated January
15, 1997 for the Real Estate and
-2-
<PAGE>
the "ACP Development", as hereafter defined (the "Prior Title Commitment"),
(ii) an ALTA Survey for the Real Estate and ACP Development (the "Prior
Survey") and (iii) a preliminary site plan for the Real Estate and the ACP
Development. Within three (3) days after the Effective Date, Seller will
provide Purchaser a computer disk containing information relative to the
regulated wetlands shown on the Property and the ACP Development. Seller
shall provide Purchaser with any information from the City's wetlands
consultant changing the scope of the regulated wetlands on the Real Estate
within three (3) days of Seller's receipt of such information. If any such
change in the configuration of the regulated wetlands has in Purchaser's
reasonable judgment a material adverse affect on development of Purchaser's
proposed project on the Real Estate, then Purchaser shall have the right
upon written notice to Seller to terminate this Agreement in which case the
Earnest Money shall be returned to Seller. Purchaser and Seller agree that
they have approved the preliminary site plan for the Real Estate (the
"Preliminary Site Plan") attached hereto as EXHIBIT A. Seller intends to
use the Preliminary Site Plan along with its site plan for the ACP
Development to develop a master site plan (the "Master Plan") for the
Property and the ACP Development Property.
D. Notwithstanding any other provision of this Agreement, the Earnest
Money shall be non-refundable to Purchaser in the event the Closing does
not occur because of a Purchaser Default after Purchaser has received the
Zoning Approvals specified in Paragraph 15(f) of this Agreement. Purchaser
shall be deemed to have been satisfied with the updated Commitment and
updated Survey unless objected to by Purchaser in writing pursuant to
Paragraph 10 of this Agreement.
3. Feasibility Period. This Agreement shall be contingent upon the
satisfactory inspection of the Premises by Purchaser, in its sole and absolute
discretion and judgment, during the period (the "Feasibility Period") commencing
on the date of Seller's execution and delivery to Purchaser of this Agreement,
and ending on the later of (i) the forty-fifth (45th) day after this Agreement
has been executed by, and a fully executed original copy has been delivered to,
both Seller and Purchaser (the "Effective Date") or (ii) the tenth (10) Business
Day after receipt by Purchaser of the last of the following:
(1) The updated Commitment (as defined below); and
(2) The updated Survey (as defined below).
During the Feasibility Period, Purchaser shall have the right to physically
inspect the condition of the Premises, to conduct various tests with respect to
the Premises, including, but not
-3-
<PAGE>
limited to, soil tests and environmental and hazardous and toxic waste tests and
to otherwise determine the feasibility (economic or otherwise) of the
acquisition, ownership and development of the Premises. Purchaser hereby agrees
to indemnify, protect and hold harmless Seller from and against any and all
claims, demands, losses, costs (including reasonable attorneys' fees), damages,
expenses or liabilities caused by Purchaser's inspection of the Premises or by
tests conducted on the Real Estate by or on behalf of Purchaser. In the event
Purchaser does not purchase the Real Estate, Purchaser agrees to restore the
Real Estate to substantially the same condition as existed prior to any such
testing on the Real Estate by Purchaser or its agents. The foregoing
indemnification and restoration obligations of Purchaser shall survive the
termination of this Agreement until such restoration is complete, and Purchaser
agrees that in the event Purchaser does not purchase the Real Estate, Purchaser
shall complete any such restoration within ten (10) days after written demand
from Seller. At any time during the Feasibility Period, Purchaser, in
Purchaser's sole and absolute discretion, may, upon written notice to Seller,
terminate this Agreement, in which event, all of the rights, duties and
obligations of the parties hereto shall immediately terminate, and this
Agreement shall be null, void and of no further force or effect, and the Earnest
Money shall be returned to Purchaser. If, in Purchaser's sole judgment and
discretion, Purchaser decides that it does not wish to proceed with the
purchase, Purchaser shall give Seller written notice of such fact on or before
the end of the Feasibility Period. Seller, at no expense to Seller except as
provided in this Agreement, shall cooperate fully with Purchaser and Purchaser's
agents, employees and representatives in connection with Purchaser's
inspections, tests, surveys and studies of the Premises.
4. Infrastructure Improvements and Reciprocal Easement Agreement.
A. Seller and Purchaser agree that in connection with the development of
the ACP Development by Seller and the development of the Premises by
Purchaser, Seller shall construct certain infrastructure improvements (the
"Infrastructure Improvements") which will benefit both the ACP Development
and the Premises. The Infrastructure Improvements consist of (i) all road
improvements to that portion of Eleven Mile Road fronting, and in the
vicinity of, the Real Estate and the ACP Development, required by the City
in connection with the approval of Seller's Master Plan, (ii) the
mitigation on the ACP Development of certain regulated wetlands currently
existing on the Premises, (iii) construction of a common storm water
detention system (the "Detention System") on the ACP Development serving
both the Premises and the ACP Development, and (iv) to the extent Purchaser
decides not to, or is unable to, connect to any or all utility services
directly from Eleven Mile Road, the construction of common utility lines
and
-4-
<PAGE>
facilities (the "Utility Lines") over the ACP Development to serve both the
ACP Development and the Premises. Seller may provide for the ongoing
maintenance of the Infrastructure Improvements by forming a site
condominium and a non-profit condominium association affecting the ACP
Development. Purchaser and Seller shall share in the "Shared Costs" (as
defined below) of the installation of the Infrastructure Improvements
referred to in clauses (i), (iii) and (iv) above and not in clause (ii)
above (the "Shared Improvements"), and the Purchaser and Seller shall
equitably share in funding the cost of maintenance of the Shared
Improvements, pursuant to the terms and conditions of a development and
reciprocal easement or similar agreement (the "REA Agreement") as described
below. The term "Shared Costs" shall mean the direct out-of-pocket costs
paid by Seller to JCCI, as hereinafter defined, and to unaffiliated third
parties for (s) hard construction costs incurred in connection with the
physical installation of such Shared Improvements, (t) utility relocation
costs directly related to the Shared Improvements, (u) professional fees
for the design and engineering of the Shared Improvements and "as built"
drawings, (v) the cost of obtaining the applicable building and/or grading
permits, (w) inspection/review and bond fees paid to governmental
authorities, (x) engineering layout and staking fees and (z) quality
control testing fees. Shared Costs specifically do not include legal fees
or expenses, or other soft costs not listed in the foregoing definition of
Shared Costs. Seller shall have the right to use JCCI and any other
affiliate to do the work for any Shared Improvements, provided Seller (a)
notifies Purchaser in advance of the use of such affiliate (except for the
construction management by JCCI), (b) gets a minimum of three (3) bids for
any work under any major contract from independent contractors, (c) if a
bidding process is required, Seller's affiliate matches the lowest bid plus
five percent (5%) and (d) in any event, such contract price to be paid to
Seller's affiliate (including JCCI) is not materially higher than the
prevailing market rates of qualified independent contractors in the
Southfield, Michigan area. Seller and Purchaser acknowledge and agree that
Jonna Construction Company, Inc. ( "JCCI"), an affiliate of Seller, will be
acting as the construction manager for the construction of the Shared
Improvements, and that Seller shall not be required to solicit bids for
such services. However, the fees including general conditions charges as
described on EXHIBIT C attached hereto) payable to JCCI for such services
may not exceed an amount which is normal and customary in the Detroit
metropolitan area. The Shared Costs of the Shared Improvements shall be
shared by Seller and Purchaser on a pro-rata basis, based on the Net Usable
Acres of the Real Estate and the ACP Development. "Net Usable Acres" shall
mean the total gross acreage of a parcel less the area of any (i) roadways
(but not parking areas), (ii) regulated wetlands and
-5-
<PAGE>
(iii) stormwater detention and sedimentation areas. The Net Usable Acres of
the Real Estate shall be based on the final site plan as described in
Paragraph 15(F) below and the Net Usable Acres of the ACP Development will
be based on the final approved Master Plan. The allocation and payment of
costs, and a more detailed definition of the Net Usable Acres, shall be
included in the REA Agreement. If Seller is required to establish a
Completion Escrow (as defined below) for completion of the Shared
Improvements, then Purchaser shall at the same time contribute to the
Completion Escrow Purchaser's share of the anticipated costs, and any
excess contributed by Purchaser shall be returned to Purchaser once the
final Development Costs are known. Seller shall be entitled to draw, with
Purchaser's approval of each draw (or pursuant to another mechanism agreed
to by Purchaser and Seller), on the Completion Escrow for the costs of the
Shared Improvements on a construction loan draw basis. A "construction loan
basis" means that (i) Seller shall be obligated to provide appropriate
sworn owner's and contractors' statements, architect's or engineer's
certificates, and partial (or in the event of the final draw, final)
unconditional lien waivers for the previous draw, (ii) Seller and Purchaser
must first fund their relevant shares of any cost overuns in the
Development Costs prior to drawing on the Completion Escrow (although a
failure by Purchaser to fund shall not prevent a draw by Seller if Seller
has funded its share) and (iii) such draws may not occur more frequently
than monthly. Seller must complete the Shared Improvements lien free and
must immediately obtain the release of, or bond over to Purchaser's and
Purchaser's lender's satisfaction, any mechanics' or materialmens' liens
which are recorded against the Real Estate in connection with Seller's
work. Seller shall not be allowed to draw on the Completion Escrow while
any mechanics' or materialmens' liens are filed against the Real Estate in
connection with Seller's work which have not been released, or insured or
bonded over to Purchaser and Purchaser's lender's satisfaction, except to
the extent Seller has otherwise complied with its obligations under this
Paragraph 4(A) and simultaneously with such draw, any such mechanics' or
materialmens' liens are released or are insured over or bonded over as
described above. Except as agreed to by the parties in the REA Agreement,
Seller agrees that any "notice of commencement" filed by Seller in
connection with the Shared Improvements shall have a legal description
which does not include the Real Estate. Seller may request that Purchaser
include on the Premises any of the Detention System or Utility Lines so
that they are free-standing to support solely the project contemplated for
the Premises, which request shall be subject to Purchaser's approval, which
approval shall not be unreasonably withheld or delayed. In addition,
Purchaser shall have the right (i) unilaterally in Purchaser's sole
discretion, to include on the Premises any of the Utility
-6-
<PAGE>
Lines and (ii) with Seller's consent which shall not be unreasonably
withheld or delayed, to include on the Premises any of the Detention
System, so that such facilities serve solely the project contemplated for
the Premises. In either case, Purchaser shall not be required to pay Seller
for Development Costs relating to any such Detention System or Utility
Lines which are instead, pursuant to the foregoing, placed on the Premises.
In such event, any such Detention System or Utility Lines to be placed on
the Premises shall then be at the sole cost and expense of Purchaser,
without the obligation on the part of Seller to install or pay for same.
Seller and Purchaser agree that instead of providing for an allocation of
the Shared Costs as described above, Seller and Purchaser may decide to
agree on a stipulated sum for, and/or a cap on, Purchaser's share of the
Development Costs, in which case, the parties may agree that the REA
Agreement shall stipulate that certain of the requirements contained in
this Agreement (such as competitive bids, etc...) need not apply.
B. Seller shall prepare and deliver a draft of the REA Agreement to
Purchaser at least five (5) Business Days prior to the expiration of the
Feasibility Period. If the REA Agreement is not delivered by such date, the
Feasibility Period shall automatically be extended to the date which is
five (5) Business Days after the delivery by Seller of the REA Agreement to
Purchaser. Purchaser shall have the right after Purchaser's receipt of the
REA Agreement to negotiate any changes it determines to be appropriate with
Seller in order to finalize the REA Agreement in a form satisfactory to
Seller and Purchaser. Seller agrees to negotiate in good faith with
Purchaser, and promptly prepare revised drafts of the REA Agreement.
Purchaser and Seller agree to diligently work together in good faith and be
reasonable in their negotiations in order to attempt to finalize the REA
Agreement on or before the date which is thirty (30) days after Purchaser's
receipt of the first draft of the REA Agreement. The finalization of the
REA Agreement shall remain a condition precedent to Purchaser's obligation
to purchase the Premises and in the event the REA Agreement has not been
finalized in a form acceptable to both Purchaser and Seller within such
thirty (30) day period, then both Seller and Purchaser shall each have the
right to terminate this Agreement at any time after the expiration of such
thirty (30) day period and prior to the date the form of the REA Agreement
has been finalized and agreed to in writing by Purchaser and Seller.
C. Seller agrees, and the REA Agreement shall further provide, that (i) all
plans and specifications, for the construction of the Shared Improvements,
and all modifications to such plans and specifications, and (ii) all
budgets for the
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Development Costs and any modifications to such budgets, shall be subject
to the advance written approval of Purchaser, which approval shall not be
unreasonably withheld or delayed. Seller agrees to provide to Purchaser
simultaneously with the delivery of the REA Agreement, a line item budget
estimating each major component and the total amount of the Development
Costs for the Shared Improvements (the "Budget"), which budget shall be
subject to Purchaser's written approval as part of the REA Agreement
approval process, which approval shall not unreasonably withheld or
delayed. When the Infrastructure Improvements have been completed and
accepted by and/or properly bonded to ("Accepted") all applicable
governmental authorities and utility companies, Seller shall provide
Purchaser with evidence reasonably acceptable to Purchaser (including but
not necessarily limited to sworn owner's and contractor's statements,
architect's and/or engineer's certificates, and lien waivers) (i)
substantiating the total amount of the Development Costs incurred by Seller
in connection with the construction of such Infrastructure Improvements and
(ii) proving that all such Development Costs have been paid by Seller and
that the Infrastructure Improvements have been completed and Accepted lien
free. If the Infrastructure Improvements are not completed and Accepted
lien free prior to the date of Closing, Purchaser shall have the right at
Closing to escrow a portion of the Purchase Price equal to Seller's share
of the estimated Shared Costs (less any Shared Costs previously paid for by
Seller) pursuant to the Budget in a strict joint order escrow (the
"Completion Escrow") with the Title Company, to secure Seller's obligation
to complete the Infrastructure Improvements. The Project Engineer (as
defined below) shall resolve any disputes between Seller and Purchaser
concerning the percentage completion of the Shared Improvements at any one
time. The "Project Engineer" shall be a licensed third-party engineer
unaffiliated with Seller or JCCI who is certifying the percentage
completion of the Shared Improvements. Purchaser shall contribute its share
of the Shared Costs to the Completion Escrow at the same time as Seller.
The escrow instructions for such Completion Escrow shall be in form and
substance reasonably specified by Purchaser and Seller during the
Feasibility Period. The funds in the Completion Escrow shall be released to
Seller no more than monthly on a construction loan basis. If the Closing
occurs on or before July 1, 1997, Seller shall complete the Infrastructure
Improvements lien free and have them Accepted on or before December 31,
1997. If the Closing occurs after July 1, 1997, Seller shall complete the
Infrastructure Improvements and have them Accepted within six (6) months of
Closing; provided however, that the period from November 15, 1997 to March
15, 1998 shall be excluded in calculating the six (6) months. Funds in the
Completion Escrow in excess of Purchaser's share deposited by Purchaser
shall be returned to Purchaser. If (i)
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the Infrastructure Improvements are not completed lien free and Accepted by
the foregoing dates, (ii) Seller has not commenced the construction of all
of the Shared Improvements in earnest within thirty (30) days after Closing
or (iii) Seller commences construction of the Infrastructure Improvements
in earnest within thirty (30) days after Closing but work on any or all of
the Shared Improvements ceases for more than thirty (30) consecutive days
or is not being diligently pursued by Seller on a schedule necessary in
Purchaser's reasonable discretion to meet the completion deadlines referred
to above, then, upon thirty (30) days prior written notice to Seller,
Purchaser shall have the right to (i) complete, in Purchaser's discretion,
all or any portion of the Infrastructure Improvements and cause them to be
Accepted, and (ii) draw all of the costs of completing such Infrastructure
Improvements from the Completion Escrow. Purchaser shall be entitled to
draw from the Completion Escrow monthly on a construction draw basis as the
Infrastructure Improvements are constructed provided the Purchaser shall
not be obligated as a condition to drawing on the Completion Escrow to (i)
fund any budget shortfall or (ii) obtain the releases of, or insure or bond
over, any liens related to Seller's construction of the Infrastructure
Improvements. Any excess amounts in the Completion Escrow shall be paid to
Seller and/or Purchaser based on their respective shares of the costs of
constructing the Shared Improvements. The REA Agreement shall include
temporary construction easements granting Purchaser access over the ACP
Development for the purpose of constructing the Infrastructure Improvements
if Seller does not. In addition, any mortgagee or other person or entity
holding any lien on the ACP Premises shall, at the Closing, sign the REA
Agreement for the purpose of subordinating its lien to Purchaser's rights
under the REA Agreement. Prior to the recording of the REA Agreement,
Seller agrees that it shall include in any documentation with any future
holder of a lien on all or any portion of the ACP Development a covenant
requiring such holder to so subordinate its lien to the REA Agreement.
D. In addition, the REA Agreement shall contain a restrictive covenant
affecting that portion of the ACP Development adjacent to the Premises
identified as the "Adjacent Property" on the Site Plan (the "Adjacent
Property"). The restrictive covenant shall list certain prohibited uses for
the Adjacent Property, but no such prohibited uses shall include uses
allowed under the current R-C (Regional Center District) zoning, including
those with a special use permit or variance (but not including variances as
to the actual use). The Adjacent Property may not be used for any of the
uses referred to in such restrictive covenant unless Purchaser grants its
prior written consent to Seller. Seller acknowledges that Purchaser intends
to develop the
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Premises as a senior and assisted living facility for elderly residents and
that it is important to Purchaser that the Adjacent Property not be used in
a manner which, in Purchaser's reasonable discretion, is not harmonious (in
an aesthetic and functional sense) with such a senior and assisted living
facility.
E. As a condition precedent to the Closing, (a) Seller must have obtained,
and must deliver copies to Purchaser of (i) wetlands mitigation permits,
(ii) wetlands crossing permits necessary for Purchaser's access road to
Eleven Mile Road and utility wetlands crossing permits for the Real Estate
(which wetlands crossing permits are specifically Seller's obligation to
obtain) and (iii) all permits relating to the stormwater Detention System,
or (b) Seller must have demonstrated to Purchaser's satisfaction that any
such permits and approvals not yet obtained will be obtained in a timely
manner. If Seller has not complied with the requirements of this Paragraph
4E by Closing, Purchaser shall have the right to terminate this Agreement
and all Earnest Money shall be returned to Purchaser.
F. The Real Estate shall be subject to a restrictive covenant to be placed
in the REA Agreement which provides that the initial development of the
Real Estate may only be for a senior and assisted living facility or such
other initial use consented to in writing by the Seller. Such restrictive
covenant shall in no way prohibit Purchaser from changing in the future the
use of the Real Estate after the development and opening of such senior
and/or assisted living facility. Any such change, other than uses permitted
under the current R-C (Regional Center District) Zoning, including those
uses permitted pursuant to a special use permit, shall require the Seller's
consent, which consent shall not be unreasonably withheld or delayed.
G. Purchaser shall not have the right under the REA Agreement to restrict
any future use of the ACP Development, except for a violation of the
restrictive covenant on the Adjacent Property. The foregoing shall in no
way affect Purchaser's rights independent of the REA Agreement. For
example, Purchaser shall have the right to object to a proposed rezoning of
any portion of the ACP Development at a City Board or Zoning Committee
meeting and proceed against a nuisance or illegal use on the ACP
Development. Notwithstanding the foregoing, Purchaser agrees that Purchaser
will not object to any use permitted under the current R-C zoning and any
special use permits or variances (other than a use variance) requested by
Seller under the current R-C (Regional Center District) zoning on any
portions of the ACP Development, other than the Adjacent Property as
described in Paragraph 4(D) above.
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H. If required by the City or any applicable public utility company, and
provided Seller gives written notice to Purchaser of any such required
easements promptly after Seller becomes aware of such requirement but in no
event less than thirty (30) days prior to Closing, Seller shall have the
right to retain easements for utilities on the Real Estate and ingress and
egress easements through (i) the northern portion of the Real Estate in
order for the ACP Development to have emergency access to Eleven Mile Road
from the ACP Development southern border across the service road on the
Real Estate exiting to Eleven Mile Road, (ii) only if Seller is prohibited
from getting a separate curb cut on Eleven Mile Road despite its good faith
reasonable efforts to do, the access drive located at the western border of
the Real Estate to enable the Adjacent Property to have access for ingress
and egress to the access drive to the Real Estate off of Eleven Mile Road,
and (iii) for a new emergency vehicle road if needed for the ACP
Development, but the exact location and terms and conditions of any such
easements shall be subject to the written approval of Purchaser. If any
such easements would materially interfere with the development or operation
of Purchaser's project on the Real Estate, Purchaser and Seller shall
mutually seek alternatives for such easements and in the event that within
thirty (30) days of Seller's request for such easements, Seller or
Purchaser is not reasonably satisfied with any such proposed alternatives,
Purchaser shall have the right to terminate this Agreement and obtain the
return of the Earnest Money. Purchaser shall have the right, subject to
City approval, to erect chains or gated barriers at any such emergency
access points.
5. Conveyance; Permitted Title Exceptions. Conveyance of the Real Estate
shall be by a general warranty deed delivered to Purchaser, or to a person or
entity designated by Purchaser ("Purchaser's Nominee"), in recordable form,
conveying to Purchaser or Purchaser's Nominee good, marketable and indefeasible
fee simple title to the Real Estate, subject only to (a) easements, covenants,
conditions and restrictions of record as revealed in the Commitment (defined
below) and not objected to in writing by Purchaser within the time period
described in Paragraph 10; and (b) general real estate taxes which are not yet
due and payable (hereinafter referred to collectively as the "Permitted Title
Exceptions"). Unless expressly agreed to by Purchaser in writing, in its sole
discretion, any title exceptions pertaining to liens or encumbrances of a
definite or ascertainable amount ("Removable Liens") shall be removed by Seller
by the payment of money on or before the date of Closing and shall not be
Permitted Title Exceptions hereunder.
6. Closing. When used herein the term "Closing" shall mean the
conveyance of the Premises to Purchaser, the payment of the Purchase Price to
Seller and the issuance to Purchaser of the title
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insurance policy described in Paragraph 9. The Closing shall take place on or
before the thirtieth (30th) day after receipt by Purchaser of all of the Zoning
Approvals described in Paragraph 15F hereof; provided, however, that all other
conditions to Purchaser's obligation to close under this Agreement have been
satisfied and provided that in no event shall Purchaser be required to close
prior to the expiration of the Feasibility Period.
7. Method of Closing. The Closing shall be pursuant to "New York style"
closing, pursuant to which the title insurance policy to be delivered to
Purchaser pursuant to this Agreement shall be delivered at the Closing and shall
be dated as of the date of Closing or pursuant to an escrow arrangement under
which the Title Company issues to Purchaser a "marked-up" original of the
Commitment, reflecting that all requirements of the Commitment have been
fulfilled or waived and eliminating the "gap exception", the standard ALTA
exceptions and all other exceptions other than the Permitted Title Exceptions
and extending the effective date of the coverage through the recording of the
deed of conveyance to Purchaser.
8. Commitment and Survey. Within fifteen (15) days after the Effective
Date, Seller, at Seller's sole cost and expense, shall deliver or cause to be
delivered to Purchaser, in form and substance reasonably satisfactory to
Purchaser:
A. An updated title commitment ("Commitment") to issue an ALTA owner's
title insurance policy for the Real Estate for the benefit of Purchaser,
issued by the Title Company in the amount of the Purchase Price covering
title to the Real Estate on or after the date hereof, showing good,
marketable and indefeasible fee simple title to the Real Estate in the
Seller. Seller shall also deliver to Purchaser, together with the
Commitment, a copy of all documents of record and all exceptions to title
to the Real Estate as indicated in the Commitment.
B. Six (6) copies of an updated ALTA-ACSM Class A "boundary" survey
("Survey") (including field notes) with respect to the Real Estate and any
improvements thereon, dated and certified as of a date subsequent to the
date of this Agreement, prepared by a public surveyor registered by the
State of Michigan, setting forth the legal description of the Real Estate,
showing the location of any improvements, and showing the size and location
of all easements, encroachments and encumbrances listed on the Commitment
(identifying each by liber and page reference, if applicable), reciting the
exact area of the Real Estate in acres and square feet, reciting the exact
area of each easement, encroachment and encumbrance, showing no portion of
the Real Estate situated in an area designated by the U.S. Secretary of
Housing and Urban Development (or by any other governmental or
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quasi-governmental agency or authority having jurisdiction over the Real
Estate) as a flood plain, special flood hazard area or general hazard area,
showing all visible utility lines upon the Real Estate, and showing the
location of any and all regulated wetlands on the Real Estate. The Survey
shall meet the accuracy requirements of an ALTA-ACSM Class A survey, and
contain a certificate specifically addressed to Purchaser, the Title
Company and any other party or parties designated by Purchaser reading as
follows:
"The undersigned does hereby certify that (i) this survey was
this day made upon the ground of the property reflected hereon, for
the benefit of and reliance by Seller, Purchaser, the Title Company
and all other parties listed above; (ii) the legal description
contained hereon is correct; (iii) the Real Estate has access to and
from a dedicated roadway as shown hereon; (iv) except as shown hereon,
there are no discrepancies, conflicts, shortages in area,
encroachments, improvements, overlapping of improvements, easements,
or roadways; (v) the total acreage and the gross square footage and
the square footage net of any portion of the property lying within
public roadways shown hereon are correct; (vi) none of the property
lies within the 100-year flood plain or any special flood hazard area
or general hazard area as designated by any governmental agency; and
(vii) this survey satisfies the accuracy requirements of an ALTA/ACSM
Class A "boundary" survey."
The Survey must be satisfactory to the Title Company so as to permit
it to delete the area and boundary exception in the Title Policy except for
"shortages in area."
If such Commitments or Survey are not delivered to Purchaser within the
specified time, then, without limiting other rights available to Purchaser
hereunder or under law, Purchaser may elect to terminate this Agreement by
written notice to Seller and, thereupon, this Agreement shall become null, void
and of no further force or effect, and the Earnest Money, together with all
interest and earnings accrued thereof, shall immediately be returned to
Purchaser. In the alternative, Purchaser may elect to extend the time for
delivery of the above-described items by up to a maximum of an additional thirty
(30) days, and the time for delivery of the above-described items shall be
deemed extended for such period of time specified by Purchaser.
9. Title Policy. Seller, at Seller's sole cost and expense, shall
deliver or cause the Title Company to deliver to Purchaser, prior to the
disbursement by the Title Company of the Purchase Price deposited by Purchaser,
an ALTA owner's title insurance policy (the "Title Policy"), or a "marked-up"
Commitment satisfying the requirements set forth in Paragraph 7 hereof, with
respect to
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the Real Estate, in the amount of the Purchase Price, in a form reasonably
acceptable to Purchaser, issued by the Title Company pursuant to the Commitment
containing no exceptions other than the Permitted Title Exceptions and insuring
fee simple title to the Real Estate in Purchaser or Purchaser's Nominee. The
Title Policy shall provide extended coverage over the general exceptions and
include the following endorsements: (i) zoning, (ii) access, (iii) contiguity,
if appropriate, (iv) location and (v) such other endorsements as reasonably
requested by Purchaser based on Purchaser's review of the Commitment and Survey
and other matters affecting title to the Real Estate of which Purchaser becomes
aware which are not reflected on the Commitment or on the Survey. Seller shall
pay for the costs of such endorsements up to a maximum of One Thousand Dollars
($1,000.00) and Purchaser shall pay for any costs above such amount.
10. Correction of Defects. If the Commitment, the Survey or the Searches
disclose exceptions to title or other matters which are not permitted hereunder
or which are otherwise objectionable to Purchaser, and Purchaser sends written
notice to Seller objecting to such matters within ten (10) Business Days after
the date of Purchaser's receipt of the last of the Commitment and Survey, then
Seller shall have ten (10) Business Days from delivery by Purchaser of such
notice in which to have such exceptions or other matters corrected, removed or
otherwise waived. The Feasibility Periods shall be extended for such period;
provided, however, the Feasibility Period shall not end before the day which is
ten (10) Business Days following the day on which Purchaser receives written
evidence, that such exceptions or other matters have been corrected, removed or
otherwise waived. If Purchaser does not receive written evidence, reasonably
satisfactory to Purchaser, that such unpermitted exceptions or other matters
have been corrected, removed or otherwise waived to Purchaser's reasonable
satisfaction within the permitted time or if Seller notifies Purchaser in
writing that Seller does not intend to or cannot correct or remove such
unpermitted exceptions or other matters, Purchaser may elect, upon written
notice delivered to Seller within fifteen (15) Business Days after the
expiration of the time permitted for curing such defects or after receipt of
such notice to terminate this Agreement, or to extend the time permitted for
such cure. Any extension or extensions of time permitted by this Paragraph
shall not affect any of Purchaser's rights under this Agreement.
11. Seller's Deliveries; Inspection.
A. Seller shall use reasonably diligent efforts to deliver to Purchaser
(i) no later than ten (10) days after the Effective Date with respect to
documents currently in existence, and (ii) within ten (10) days after
receipt by Seller (but in no event later than Closing) with respect to
documents not in existence as of the date hereof:
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(1) a true and correct copy of the real estate tax bill pertaining to
the Real Estate and/or the ACP Development for the most recent year,
including any pending tax protests or appeals, if any;
(2) to the extent any exist which relate to the Premises, true and
correct copies of all permits, licenses, authorizations and other
approvals, if any, issued with respect to the Premises or any proposed
development thereof (the "Permits and Approvals");
(3) to the extent in Seller's possession now or at any time up and
until Closing, "as-built" drawings of any underground utilities
(including storm sewer, sanitary sewer, water, and telephone electric
service cables) located under the Real Estate, and all other material
documents relating to the zoning and availability of utility services
to the Real Estate which would have any material adverse impact on the
Real Estate and/or Purchaser's proposed project; and
(4) any and all (whether existing now or prepared at any time up and
until Closing) (a) soil studies and reports, and any environmental
assessments, studies, tests, reports and analyses, and (b) all other
material data and information relating to the Premises, which Seller
has in Seller's possession or which were or are at any time up and
until Closing prepared for or on behalf of Seller and which would have
any material adverse impact on the Real Estate and/or Purchaser's
proposed project.
B. Purchaser, its agents, representatives and employees may, subject to
Purchaser's indemnification and restoration obligations under Paragraph 3
of this Agreement, during reasonable business hours and upon reasonable
advance notice to Seller, between the date of the Seller's execution of
this Agreement and the date of the Closing, inspect the Premises, and any
portion thereof, and conduct studies, tests and analyses with respect
thereto.
12. Seller's Covenants. Between the date of the execution of this
Agreement and the date of the Closing, Seller shall:
A. Keep and perform all of the material obligations to be performed by the
Seller under each and every agreement, contract and Permits and Approvals
relating to or affecting the Premises, or any portion thereof;
B. Not enter into, execute, extend or renew any lease, easement, license
or any other agreement or contract relating to or affecting the Premises,
or any portion thereof, or
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modify, amend or terminate any lease, contract or agreement to be assigned
to Purchaser pursuant to Paragraph 1B, without, in each case, Purchaser's
prior written consent and approval, which consent and approval will not
unreasonably be withheld, delayed or conditioned if, in the reasonable
judgment of Purchaser, any of the foregoing will not interfere with
Purchaser's intended use of Premises or the contemplated development of the
Real Estate and will not adversely affect the value of the Premises;
C. Not mortgage, hypothecate or further encumber the Premises or any
portion thereof or permit any liens on the Premises or any portion thereof
to arise by operation of law; provided, however that Seller may mortgage
the Real Estate if, under the terms thereof the mortgage will
unconditionally be released upon the payment of an amount not to exceed the
Purchase Price after all prorations and adjustments and less the amount of
any other Removable Liens (in which event the mortgage shall constitute a
Removable Lien);
D. Remedy, at Seller's own expense, all violations caused by Seller or
Seller's employees, officers, agents, contractors, or subcontractors, of
laws, ordinances, orders or other requirements relating to the ownership,
construction, development and operation of the Premises which have been or
may be imposed by any governmental authority having jurisdiction over, or
affecting, all or any part of the Premises prior to the date of the
Closing; and
E. Cooperate with Purchaser, at no expense to Seller, in obtaining all
permits and approvals (excluding building permits) described in Paragraph
15F hereof, and take all actions reasonably requested by Purchaser in
connection therewith; provided the foregoing do not burden the Real Estate
or result in costs to Seller.
13. Representations and Warranties.
A. In order to induce Purchaser to enter into this Agreement, Seller
represents and warrants, and covenants as applicable, to Purchaser that on
the date hereof and on the date of the Closing:
(1) Seller has all necessary and requisite authority to enter into
this Agreement and to consummate all of the transactions contemplated
hereby, and the persons executing this Agreement and all other
documents required to consummate the transactions contemplated hereby
on behalf of Seller are duly authorized to execute this Agreement and
such other documents on behalf of Seller, and are authorized to bind
Seller.
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(2) Seller is a Michigan limited liability company duly formed and
validly existing under the laws of the State of Michigan.
(3) Seller is a "United States person", as defined by Internal Revenue
Code Section 1445 and Section 7701.
(4) The execution of this Agreement by Seller does not, and the
performance by Seller of the transactions contemplated by this
Agreement will not, violate or constitute a breach of the articles of
organization, operating agreement or any shareholders', directors', or
members' resolution of Seller,or any other organizational document
affecting Seller, or any contract, permit, license, order or decree to
which Seller is a party or by which Seller or its assets are bound.
(5) As of the date hereof, Seller has good, marketable and
indefeasible fee simple title to the Real Estate, subject only to the
matters disclosed in the Commitment.
(6) That to the best of Seller's knowledge after due inquiry, the
Premises and the operation thereof are not in violation of any
applicable federal or state law, or any ordinance, order or regulation
of any governmental or quasi-governmental agency having jurisdiction
over the Premises, and no proceedings of any type (including
condemnation or similar proceedings) have been instituted or to the
knowledge of the Seller are pending or contemplated against the Real
Estate or any part thereof or the Premises or any portion thereof.
(7) No party, person or entity is in possession of the Premises or any
portion thereof, and, no party, person or entity has any interest in
the Premises, or any portion thereof, except Seller and except for any
easements and restrictions disclosed in the Title Commitment, and
except for any future encumbrances relating to financing for the
Infrastructure Improvements (which must be released from the Real
Estate at or before Closing).
(8) From and after the Effective Date and through to Closing, there
will be no unrecorded liens or encumbrances, (including, but not
limited to, liens relating to environmental matters) against the
Premises or any portion thereof, other than (i) those arising from the
actions of Purchaser and (ii) those arising from the actions of third
parties unaffiliated with Seller; provided however that as of the date
of this Agreement to the best Seller's knowledge there are no such
unrecorded
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liens or encumbrances arising from the actions of third parties in
existence.
(9) That to the best of Seller's knowledge after due inquiry, there
are not presently pending any special assessments of any nature with
respect to the Real Estate or any portion thereof, nor has the Seller
received any written notice of nor has the Seller any actual knowledge
of any such special assessment being contemplated formally under
discussion or consideration.
(10) Except in connection with infrastructure improvements to be
constructed by Seller pursuant to the REA Agreement, there are no
outstanding contracts or commitments made by Seller (or any of its
agents or affiliates) for the work or materials in connection with the
Premises or for any improvements to the Premises which have not been,
or will not be on or before the date of the Closing, fully paid for on
a timely basis and there are no leases, contracts, commitments or
agreements which will bind Purchaser or the Premises from and after
Closing.
(11) No person or entity has any right or option to acquire all or any
portion of the Premises other than Purchaser pursuant to this
Agreement.
(12) There currently exist no events of default by Seller, or events
which with passage of time or notice or both would constitute events
of default by Seller, under the terms and provisions of any leases or
any other contracts or agreements with respect to the Premises to
which Seller is a party, or to Seller's best knowledge, by any other
party thereto.
(13) From and after the Effective Date and through to Closing, and if
and only to the extent any such Personal Property exists, Seller will
hold, good, valid and marketable title to the Personal Property, if
any, free and clear of any liens, encumbrances or adverse claims, and,
Seller has, and, at all times through the Closing will have, the right
and authority to convey or assign to Purchaser all of the Personal
Property.
(14) There are no violations by Seller or, to the best of Seller's
knowledge, by any other person or entity, of any restrictive covenants
or other matters affecting the Real Estate.
(15) There does not exist any litigation or governmental proceeding
(including, without limitation, any eminent domain proceeding)
affecting the Premises or any portion
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thereof, and to Seller's actual knowledge, no such litigation or
proceeding is pending, threatened or formally under discussion or
consideration.
(16) There are no buildings or other improvements or Personal Property
on the Premises, other than the old farm silos which may or may not be
on the Real Estate.
(17) Seller does not now owe and will not owe any taxes or any
penalties or interest thereon pursuant to any governmental law,
statute or regulation for which Purchaser is or will be obligated to
or liable for a withholding of funds from the Purchase Price pursuant
to any so called "bulk sales" law or other applicable law, statute or
regulation.
(18) (a) Excluding matters disclosed in Seller's Phase I Environmental
Site Assessment American Center Property, Southfield, Michigan
prepared by NTH Consultants, Ltd. and dated November 22, 1996 (the
"Environmental Report"), which Seller shall deliver to Purchaser
within ten (10) days after the Effective Date, Seller has not
generated, treated, stored or disposed of Hazardous Materials (as
defined below) in, under or upon the Real Estate (above or below
ground), or any portion thereof, or used any Hazardous Materials in or
on the Premises, or any portion thereof, in violation of any
Environmental Laws; (b) to the best of Seller's knowledge, except as
disclosed in the Environmental Report, no prior owner and no prior or
current occupant generated, treated, stored or disposed of such
Hazardous Materials in, under or upon the Real Estate, or used any
Hazardous Materials in or on the Premises, or any portion thereof, in
violation of any Environmental Laws; (c) to the best of Seller's
knowledge, except as previously disclosed in the Environmental Report,
no Hazardous Materials are present in, under or upon the Real Estate,
or any portion thereof; (d) to the best of Seller's knowledge, except
as previously disclosed in the Environmental Report, the Premises and
the use and operation of the Premises are not in violation of any
Environmental Laws (as defined below); (e) to the best of Seller's
knowledge, except as previously disclosed in the Environmental Report,
no portion of the Real Estate has ever been used as a sanitary
landfill or dump; (f) to the best of Seller's knowledge, except as
previously disclosed in the Environmental Report, no underground
storage tank or tanks are located on or under the Real Estate; and (g)
to the best of Seller's knowledge, except as previously disclosed in
the Environmental Report, no Hazardous Materials or underground
storage tanks are present in,
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under or upon any parcel of property immediately adjacent to the Real
Estate.
(19) If Seller does not furnish the "disclosure document" described in
Paragraph 15E hereof, then Seller represents and warrants that the
disclosure is not required by Seller in connection with the
transactions contemplated by this Agreement.
(20) Except as indicated on the Survey, no portion of the Premises is
a wetland designated by the United States Army Corp of Engineers or
other federal state or local body or agency having jurisdiction over
the Premises or any portion thereof.
(21) Seller purchased the Premises and the ACP Property "as is" and
did not obtain any environmental representations, warranties or
indemnifications relating to the Premises and/or the ACP Property from
the party who sold such property to Seller.
(22) No leases, contracts and agreements (other than this Agreement)
which would bind or encumber Purchaser or the Premises, have been
entered into by Seller or exist.
B. In the event at any time prior to Closing any of the aforesaid
representations and warranties is no longer true or valid, or any of the
aforesaid covenants have been breached, Seller shall immediately notify
Purchaser in writing and therein specify the factors rendering such
representations or warranties untrue or invalid or causing such covenants
to be breached. All representations and warranties contained in Paragraph
13 or elsewhere in this Agreement shall be deemed remade as of the date of
Closing and shall survive the Closing for fourteen (14) months following
the date of the Closing.
C. Each party hereunder represents to the other party that no party has
relied upon any real estate broker or other finder to consummate the
transactions contemplated by this Agreement other than Dietz Organization,
50 West Big Beaver Road, Suite 290, Bloomfield Hills, Michigan, 48304-3912
("Broker"). Seller shall pay any and all real estate brokerage
commissions, finder fees and similar fees payable to Broker or any other
person or entity claiming through Broker by reason of the sale or purchase
of the Premises or by reason of any other transaction contemplated by this
Agreement. Seller and Purchaser shall indemnify, defend and hold harmless
the other from and against any and all losses, damages, costs and claims
suffered or incurred by the other as a result or by reason of or breach by
Seller or Purchaser, as the case may be, of the representation set forth in
the first sentence of this Paragraph 13C.
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D. Purchaser represents and warrants to Seller as of the date of this
Agreement and at Closing, that Purchaser has all necessary and requisite
authority to enter into this Agreement and to consummate all of the
transactions contemplated hereby, and the persons executing this Agreement
and all other documents required to consummate the transactions
contemplated hereby on behalf of Purchaser are duly authorized to execute
this Agreement and such other documents on behalf of Purchaser, and are
authorized to bind Purchaser.
E. When used in this Agreement, the terms "to the best of Seller's
knowledge" or "to Seller's actual knowledge", or similar terms, shall mean
to the best knowledge of Gary S. Jonna, the current President of Seller,
and Edward L. Ruby of Williams, Williams, Ruby & Plunkett, Seller's
attorney, and any future President and/or future principal attorney (as
opposed to the knowledge of the entire law firm) of Seller as of the date
any representation or warranty is remade.
14. Environmental Indemnity. Seller hereby agrees to indemnify, defend
and hold harmless Purchaser from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims of any and every kind whatsoever
paid, incurred or suffered by or asserted against Purchaser for, with respect
to, or as a direct or indirect result of Seller's breach of any of the
warranties and representations stated in Paragraph 12A(18) hereof (including,
without limitation, any such losses, liabilities, damages, injuries, costs,
expenses or claims asserted or arising under any Environmental Laws). For
purposes of this Agreement, "Hazardous Material" means and includes any waste
material or other substance defined as hazardous in 42 U.S.C. Sec. 9601(14) or
any related or applicable federal, state or local statute, law, regulation or
ordinance, pollutants or contaminants (as defined in 42 U.S.C. Sec. 9601(33),
petroleum (including crude oil or any fraction thereof), any form of natural or
synthetic gas, sludge (as defined in 42 U.S.C. Sec. 6903(26A), radioactive
substances, hazardous waste (as defined in 42 U.S.C. Sec. 6903(27)) and any
other hazardous wastes, hazardous substances, contaminants or pollutants as
defined or described in any of the Environmental Laws. As used in this
Agreement, "Environmental Laws" means all federal, state and local environmental
laws, and any rule or regulation promulgated thereunder and any order, standard,
interim regulation, moratorium, policy or guideline of or pertaining to any
federal, state or local government, department or agency, including but not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), the Clean Water Act, the Clean Air Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Marine Protection, Research, and
Sanctuaries Act, the National environmental Policy Act, the Noise Control Act,
the Safe Drinking Water Act, the
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Resource Conservation and Recovery Act ("RCRA"), as amended, the Hazardous
Material Transportation Act, the Refuse Act, the Uranium Mill Tailings Radiation
Control Act and the Atomic Energy Act and regulations of the Nuclear Regulatory
Agency, and all state and local counterparts or related statutes, laws,
regulations, and order and treaties of the United States. The indemnification
hereunder shall include and benefit Purchaser's lender, all subsidiaries,
affiliates or corporations connected with such lender or Purchaser, and their
respective agents, representatives, employees, officers, insurers, directors,
stockholders, successors and assigns.
15. Conditions to Purchaser's Obligation to Close. The obligations of
Purchaser to close the transactions contemplated by this Agreement and to pay
the Purchase Price are conditioned upon and subject to the satisfaction on or
before the date of Closing (or waiver by Purchaser) of each of the following
conditions:
A. Seller shall have performed and complied with all agreements, covenants
and conditions to be performed or complied with prior to and/or on the date
of the Closing.
B. All of Seller's representations and warranties set forth in this
Agreement shall be true and correct as of the date of the Closing.
C. Seller shall have complied with all procedures reasonably required by
the Title Company or which are customary or appropriate in transactions
similar to the transactions contemplated hereby in connection with the
consummation of all transactions contemplated hereby.
D. The Title Company shall be prepared to issue the Title Policy in
accordance with this Agreement upon conveyance of the Premises to Purchaser
and payment of the Purchase Price to Seller.
E. Seller shall have delivered to Purchaser a copy of any "disclosure
document" required to be delivered by Seller by any applicable state or
federal law relating to environmental matters, together with evidence,
reasonably acceptable to Purchaser, indicating that such document has been
properly and timely filed.
F. The Premises shall have been properly zoned, and Purchaser shall have
received final site plan approval from all applicable governmental
authorities exercising jurisdiction over the site plan for the Real Estate
(not including building permits) to permit the development of a senior and
assisted living facility on the Premises and the operation thereof as
contemplated by Purchaser (collectively, the "Zoning Approvals"). Such
Zoning Approvals shall include
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zoning approvals, approvals of the final site plan, and final approval by
the City and preliminary approvals by the County of the proposed curb cut
for the access road to Eleven Mile Road. The Zoning Approvals received by
Purchaser must be without any material conditions attached or modifications
requested or mandated in order for Purchaser to be bound to proceed to
Closing. In the event that Purchaser has (x) not received the Zoning
Approvals by the "Zoning Deadline" (as defined below) or (y) Seller has not
obtained the final approval by the City of the "Master Plan" (as defined
below) by the date which is two hundred and ten (210) days after the
Effective Date, then both Seller and Purchaser shall each have the right at
any time after the occurrence of such Zoning Deadline and prior to the
receipt of the Zoning Approvals and final approval of the Master Plan, to
terminate this Agreement, in which case the Earnest Money shall be returned
to Purchaser. Notwithstanding the foregoing, the approval of the Master
Plan shall not be a condition to Purchaser's obligation to close and the
parties shall not be able to terminate this Agreement because of the
failure of the Master Plan to be approved if (i) Purchaser is able to
obtain its Zoning Approvals and will be able to develop and operate its
facility notwithstanding the failure of Seller to obtain Master Plan
approval and (ii) if Seller is able to obtain prior to Closing all of the
permits and approvals referred to in Paragraph 4(E) of this Agreement. The
term "Zoning Deadline" shall mean the date which is one hundred and twenty
(120) days after the expiration of the Feasibility Period; provided,
however that Purchaser shall have the right to extend the Zoning Deadline
for up to two (2) additional thirty (30) day periods (for a maximum of up
to sixty (60) days) upon written notice to Seller and the deposit by
Purchaser prior to the then scheduled Zoning Deadline into the escrow of an
additional ten thousand dollars ($10,000.00) of Earnest Money for each such
extension. Purchaser shall have the right, upon written notice to Seller,
to further extend the Zoning Deadline an additional thirty (30) days after
the final expiration date specified by the foregoing sentence, provided
that Purchaser deposits prior to the then scheduled Zoning Deadline an
additional Thirty Thousand and no/100 Dollars ($30,000.00) of Earnest Money
into the Escrow, at which time all of the Earnest Money shall become non-
refundable to Purchaser except in the event of a Seller Default or as
otherwise provided in this Agreement. If Purchaser closes the transaction,
Purchaser shall receive credit of the Earnest Money against the Purchase
Price; however, if Purchaser does not close, except in the event of a
Seller Default or as otherwise provided in this Agreement, then as Seller's
sole and exclusive remedy under this Agreement, at law and in equity, the
Earnest Money shall be paid to Seller as full and final liquidated damages
and in full termination of Purchaser's rights to the Premises, it being
agreed to by the
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<PAGE>
parties that Seller's actual damages would be difficult or impossible to
accurately ascertain.
G. From and after the Effective Date and through to the Closing, there
will be no unrecorded liens or encumbrances (including, but not limited to,
liens relating to environmental matters) against the Premises or any
portion thereof, other than those arising from the actions of Purchaser.
16. Provisions with Respect to Closing. At the Closing, Seller shall
deliver to Purchaser the following, all in form and substance reasonably
satisfactory to Purchaser:
(1) a general warranty deed, duly executed and acknowledged by Seller,
conveying to Purchaser, or Purchaser's Nominee, good, marketable and
indefeasible fee simple title to the Real Estate, improvements and any
fixtures located thereon, in proper form for recording and subject
only to the Permitted Title Exceptions;
(2) general warranty assignments or bills of sale, as appropriate,
duly executed and acknowledged by Seller, conveying to Purchaser title
to the Personal Property, if any, free and clear of all liens,
encumbrances, claims and security interests, with express warranties
of good title;
(3) an affidavit executed by Seller, stating Seller's U.S. Taxpayer
identification number and that Seller is not a "foreign person" or a
"foreign corporation" (as defined under Internal Revenue Code Section
1445 and Section 7701), and that Purchaser is not required to withhold
any portion of the Purchase Price under the provisions of such Act;
(4) the Title Policy in the form required under Paragraph 9;
(5) a certificate executed by Seller to the effect that the
representations and warranties made by Seller to Purchaser are true
and correct in all material respects on and as of the date of the
Closing; and
(6) all such further instruments and documents as are normally made or
delivered in connection with the sale of Property similar to the
Premises in the county and state where the Premises is located or as
may be necessary, expedient, proper, or appropriate in the reasonable
opinion of Purchaser's or Seller's counsel, in order to complete the
transactions contemplated hereby.
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<PAGE>
B. On the date of the Closing, and provided that all conditions precedent
to Purchaser's obligations under this Agreement are satisfied, Purchaser
shall deliver to the Title Company, as escrowee, the amount of the Purchase
Price (less the Earnest Money and credits, adjustments and prorations in
accordance with this Agreement) by wire transfer (sent on or before 1:00
p.m. Detroit time on the date of the Closing) or other immediately
available funds.
C. On the date of Closing the Title Company shall disburse the Purchase
Price (as adjusted by prorations and credits and Seller's closing costs) to
Seller and refund the Earnest Money (together with all interest and
earnings accrued thereon) to Purchaser, and Seller shall deliver possession
of the Premises to Purchaser in the same condition as the Premises exists
on the date hereof, ordinary wear and tear excepted.
D. Seller shall pay: (i) any state or local transfer or stamp taxes or
similar charges; (ii) the cost of recording the REA Agreement and any
releases of Removable Liens or other unpermitted exceptions; (iii) the cost
of issuing the Title Policy and (iv) its legal fees. Purchaser shall pay
the cost of recording any instruments of conveyance or instruments securing
financing of Purchaser's acquisition and its legal fees. The cost of the
Escrow and all other closing costs shall be borne one-half by each of
Purchaser and Seller.
17. Closing Adjustments.
-------------------
A. Adjustments shall be made between Seller and Purchaser for the
following items, prorated on a per diem basis, as of midnight of the day
preceding the date of the Closing:
(1) All taxes and assessments which have become a lien upon the land,
whether recorded or not recorded, at the date of this Agreement shall
be paid by the Seller. Current taxes, if any, shall be prorated and
adjusted as of the date of Closing in accordance with DUE date basis
of the municipality or taxing unit in which the Premises is located
without regard to Public Act 80 or 297 of 1994, as amended. For
purposes of this Agreement, all real property taxes are to be
considered and paid in advance.
(2) To the extent there are any charges for water, electricity, sewer
rental, gas, telephone and other utilities for the Premises or related
assessments for utility capacity (normally billed to Seller, not to
tenants) will be paid by Seller on a per diem basis on the basis of
the most recent available bills (subject to readjustment on receipt of
bills covering the period in
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which the Closing occurs), provided that Seller shall use its best
efforts to procure final meter readings of such utilities as of the
date of the Closing (if such reading is obtained, no proration of
utilities shall be necessary) and to have such bills rendered directly
to Seller (Seller will deliver to Purchaser copies of any such bills
rendered to Seller within five (5) days of Seller's receipt thereof).
To the extent deposits held on Seller's behalf by utility companies
are transferable to Purchaser, Seller shall receive a credit at
Closing in the amount of such deposits and such deposits shall be
transferred and placed in the name of Purchaser. Otherwise, Seller
shall receive a refund of such deposits and Purchaser shall have no
claim with regard to the same.
18. Condemnation. In the event between the date of this Agreement and the
date of the Closing Seller receives written notice that any condemnation or
eminent domain proceedings are threatened or initiated which might result in the
taking of any material part of the Real Estate, Purchaser may within Fifteen
(15) Business Days after notice thereof:
A. terminate this Agreement, in which event, the Earnest Money, together
with all interest accrued thereon, shall promptly be returned to Purchaser
and all rights and obligations of the parties hereunder shall cease; or
B. consummate the transactions contemplated by this Agreement, in which
event Seller shall assign to Purchaser all of Seller's right, title and
interest in and to any award made in connection with such condemnation or
eminent domain proceedings.
Seller shall immediately notify Purchaser in writing of the threat or the
occurrence of any condemnation or eminent domain proceedings. Purchaser shall
then notify Seller within fifteen (15) Business Days after the date of
Purchaser's receipt of Seller's notice of such condemnation or eminent domain
proceedings whether Purchaser elects to exercise its right under Subparagraph A
or B of this Paragraph. In the event Purchaser receives written notice of the
threat or occurrence of such condemnation or eminent domain proceedings within
fifteen (15) Business Days of the date of Closing, and Purchaser elects to
consummate the transactions contemplated by this Agreement within the time
period provided above, the date of the Closing shall be adjusted accordingly.
In the event Purchaser does not make a timely election, Purchaser shall be
deemed to have elected to terminate this Agreement. Notwithstanding the
foregoing, Seller shall be required to proceed under Paragraph 18(B) above in
the event of any condemnation or threatened condemnation relating to the
widening of Eleven Mile
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Road, provided any such taking will not materially adversely affect Purchaser's
ability to develop and operate its facility on the Real Estate.
19. Defaults and Remedies.
A. If Seller should breach any of its representations, warranties,
covenants or agreements contained in this Agreement or in any other
agreement, instrument, certificate or other document delivered pursuant to
this Agreement or if Seller should fail to consummate the sale contemplated
herein for any reason other than Purchaser's Default, (a "Seller Default"),
Purchaser may avail itself of any and all of the following rights and
remedies: (1) cancel this Agreement and receive the prompt return of the
Earnest Money, together with all interest and earnings accrued thereon; (2)
collect monetary damages from Seller not to exceed Fifty Thousand and
no/100 Dollars ($50,000.00); and/or (3) enforce specific performance of
this Agreement. The foregoing rights and remedies shall be Purchaser's sole
rights and remedies at law and in equity.
B. If all of the conditions to Purchaser's obligations to purchase the
Premises have been satisfied or waived in writing by Purchaser and Seller
is not in default of or under any of Seller's agreements, covenants or
obligations hereunder and Purchaser should fail to consummate the purchase
contemplated hereby for any reasons other than Seller's Default, (a
"Purchaser Default"), Seller, as Seller's sole and exclusive remedy, may
receive the Earnest Money, as full and final liquidated damages, Purchaser
and Seller hereby acknowledging that, in the event of Purchaser's failure
to consummate the sale contemplated hereby, actual damages suffered by
Seller would be difficult and/or inconvenient to determine or ascertain;
and, thereafter, there shall be no further liability hereunder on the part
of either party or the other party.
C. If either Purchaser or Seller brings an action to enforce its rights
under this Agreement, the successful party shall be reimbursed by the
unsuccessful party for all costs of enforcement, including reasonable
attorneys' fees and court costs, which amounts shall be, in the case of any
recovery by Purchaser, in excess of, and not subject to, the dollar
limitation referred to in Section 19(A) above. Tender of deed or purchase
money shall not be necessary where the other party has defaulted.
20. Modification, Waiver, etc.
A. No waiver of any condition under, and no modification, amendment,
discharge or changes of or to this Agreement shall
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<PAGE>
be valid unless the same is in writing and signed by the party against
which the enforcement of such modification, waiver, amendment, discharge,
or change is sought.
B. This Agreement contains the entire agreement between the parties
relating to the transactions contemplated hereby and all prior or
contemporaneous agreements, understandings, representations and statements,
oral or written, are merged herein.
21. Notices. All notices, demands, requests and other communications
under this Agreement shall be in writing and shall be deemed properly served
when delivered, if delivered by hand to the party to whose attention it is
directed, or three (3) Business Days after delivery to a United States Post
Office properly addressed, if mailed postage prepaid or one (1) Business Day
after delivery to the courier if sent by private receipt courier guaranteeing
next day delivery, delivery charges prepaid, or upon transmittal if delivered by
facsimile provided receipt of the notice is confirmed in writing, by the
sender's facsimile machine, as the case may be, and in each case, addressed as
follows:
A. If intended for Seller, to:
AC Properties, LLC
533 N. Woodward, Suite 305
Bloomfield Hills, Michigan 48304
Attn.: Gary S. Jonna
With a copy to:
Edward L. Ruby, Esq.
380 N. Woodward
Suite 300
Birmingham, Michigan 48009
B. If intended for Purchaser, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn.: Mark J. Iuppenlatz
Facsimile No. (312) 917-0460
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<PAGE>
with a copy to:
Brookdale Living Communities, Inc.
77 W. Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attn.: Mark J. Schulte
Facsimile No. (312) 917-0460
or at such other address or to such other party which any party entitled to
receive notice hereunder designates to the others in writing.
22. Governing Law. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of the State of Michigan,
applicable to contracts made and to be performed in that State.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. Captions. The captions of this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
25. Construction. As used herein, the terms (a) "person" shall mean an
individual, a corporation, a partnership, a trust, an unincorporated
organization or any agency or political subdivision thereof; (b) "including"
shall mean including, without limiting the generality of the foregoing; (c) the
masculine shall include the feminine and the neuter; (d) "the best knowledge" or
any similar phrase shall mean best knowledge with independent investigation; and
(e) "Business Day" shall mean any calendar day other than Saturday, Sunday,
holiday and any day on which national banks in Chicago, Illinois or Detroit
Michigan are closed.
26. Assignability by Purchaser. This Agreement and any of the Purchaser's
rights hereunder may be, upon written notice to Seller and without the prior
written consent of the Seller, assigned by Purchaser to Brookdale Living
Communities, Inc. ("Brookdale") or any other entity (i) affiliated with or
related to Brookdale or Purchaser, or (ii) created in connection with the
issuance of stock or other ownership interests in Brookdale or Purchaser's
senior housing division. In addition, this Agreement and any of the Purchaser's
rights hereunder may be assigned by Purchaser to any other person or entity upon
written notice to Seller and without the prior consent of the Seller provided
that such assignment must be to a creditworthy and experienced transferee, as
determined by Seller in Seller's reasonable discretion, which determination
shall not be unreasonably withheld
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<PAGE>
or delayed. Any such assignment may provide that Purchaser's nominee or
assignee assumes all of the provisions of the Agreement to be performed by
Purchaser; provided, however, that Purchaser shall not be released and
discharged of its liabilities or obligations under the Agreement without the
prior consent of Seller, which consent shall not unreasonably be withheld. All
references to Purchaser in this Agreement shall be deemed to include references
to Purchaser's nominee.
27. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
28. Partial Invalidity. If any provision or provisions, or any portion of
any provision or provisions, of this Agreement is found by a court of law to be
in violation of any applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if such court should
declare such portion, provision or provisions of this Agreement to be illegal,
invalid, unlawful, void or unenforceable as written, then it is the intent both
of Seller and Purchaser that any portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and enforceable,
that the remainder of this Agreement shall be construed as if such illegal,
invalid, unlawful, void or unenforceable portion, provision or provisions were
not contained herein, and that the rights, obligations and interest of Seller
and Purchaser under the remainder of this Agreement shall continue in full force
and effect.
29. Time is of the Essence. Time is of the essence of this Agreement.
30. Confidentiality and Return of Documents. Seller and Purchaser agree
to keep confidential the information relating to the Property and the ACP
Development prior to Closing. Purchaser agrees to keep the information related
to the ACP Development confidential for a period of three (3) years after
Closing and Seller agrees to keep the information related to the Purchaser's
development of the Property confidential for a period of three (3) years after
Closing. If the Agreement is terminated without Purchaser closing, or Purchaser
fails to close for any reason other than a Seller Default, then Purchaser shall
maintain the confidentiality of all documents relating to the Property and the
ACP Development and shall return to Seller copies of all documents and materials
in its possession related to the Property and ACP Development without cost.
Purchaser's agreement to keep the foregoing information confidential shall not
apply to information which:
(i) is now in or hereafter enters the public domain from sources
other than Purchaser or without Purchaser's violation of this
Paragraph 31;
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<PAGE>
(ii) is compelled to be disclosed through no fault of Purchaser by a
court order or other binding order (an "Order") of a governmental
authority with jurisdiction, provided that Purchaser promptly notifies
Seller after Purchaser becomes aware of the existence, or the
potential of the issuance of, any such Order and provided that
Purchaser cooperates in good faith with Seller, and at no cost to
Purchaser, in Seller's attempts to legally contest, before and/or
after its issuance, any such Order;
(iii) is required to be disclosed to the City or other governmental
authority in connection with the public approval process; or
(iv) is necessary to be disclosed by Purchaser to any lender or
potential lender or any purchaser or potential purchaser relating to
the Real Estate.
In addition, in the event that it is not required or necessary for any such
items to be disclosed to the City, any other governmental authority, or any
lender, purchaser or potential lender or purchaser, but Purchaser desires to do
so, Purchaser may disclose such information with Seller's written consent, which
consent shall not be unreasonably withheld or delayed.
31. Force Majeure. If either party is delayed in the performance of any
work or delayed in the performance of any services required by this Agreement
because of the occurrence of any fire, lightning, earthquake, cyclone, strikes,
moratoriums, extraordinary weather conditions, unanticipated governmental
delays, restrictions, shortages of materials or supplies, or such other acts of
God completely beyond the control of the party required to perform, then the
time for completion of such work or service shall be extended for a period
equivalent to the time lost by reason of any of the aforesaid causes; provided,
however, that the party requesting any such extension must give written notice
to the other party notifying the other party of such Force Majeure within
fifteen (15) days after the commencement of such Force Majeure. If such a
notice is not given within fifteen (15) days of the commencement of such Force
Majeure, then the affected party shall not be entitled to an extension because
of such Force Majeure. An extension of time for completing the work or service
to be performed by such party whose performance is delayed shall be such party's
sole remedy for any and all claims that it might have on account of such delay.
32. Acceptance of Offer. The offer to purchase the Premises made by
Purchaser by the delivery of a copy of this Agreement as executed on behalf of
Purchaser shall automatically terminate and expire at 5:00 p.m. C.S.T. on
February ___, 1997, unless said offer is accepted earlier by Seller's execution
of this Agreement, or a counterpart hereof, and by the return to Purchaser of a
fully
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<PAGE>
executed copy of this Agreement on or before the date and time aforementioned.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PURCHASER:
THE PRIME GROUP, INC., an Illinois corporation
By: /S/ MARK J. SCHULTE
---------------------------------
Name: MARK J. SCHULTE
-------------------------------
Its: EXEC. VICE PRESIDENT
-------------------------------
SELLER:
AC PROPERTIES, LLC.,
a Michigan limited liability company
By:/s/ Gary Steven Jonna
---------------------------------
Name: Gary Steven Jonna
Its: President
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EXHIBIT A
---------
PRELIMINARY SITE PLAN
EXHIBIT A - PAGE 1
<PAGE>
[SITE PLAN APPEARS HERE]
BROOKDALE LIVING COMMUNITIES
SOUTHFIELD, MICHIGAN
<PAGE>
EXHIBIT B
---------
Escrow Trust Instructions
EARNEST MONEY ESCROW AGREEMENT
EXHIBIT B - PAGE 1
<PAGE>
ESCROW AGREEMENT
----------------
TO: FIRST AMERICAN TITLE INSURANCE COMPANY ("Escrow Agent")
1650 W. BIG BEAVER ROAD
TROY, MICHIGAN 48084
Escrow No.______
Seller: AC PROPERTIES, L.L.C.,
a Michigan Limited Liability Company
1533 N. Woodward Avenue, Suite 333
Bloomfield Hills, MI 48304
Purchaser: THE PRIME GROUP, INC.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: James F. Hoffman
Dated: February __, 1997
Dear Sir or Madam:
Purchaser hereby deposits with you, as Escrow Agent, Ten Thousand Dollars
($10,000.00) (including interest thereon is hereafter referred to as the
"Deposit") with respect to real property located in the City of Southfield,
County of Oakland, State of Michigan, more particularly described in a certain
agreement between Purchaser and Seller dated February __, 1997 (the "Purchase
Agreement"). The Deposit shall be placed in an interest bearing account in a
federally insured bank and is to be held by you in escrow for delivery under the
following terms and conditions.
1. Escrow Agent. Escrow Agent shall hold the Deposit in accordance with the
provisions of the Purchase Agreement. The Deposit shall not be released except
pursuant to the written direction of both Seller and Purchaser, or a court
order.
2. Termination of Escrow. Upon Escrow Agent making delivery of the entire
Deposit and performance of any other services as stated above, this Escrow
Agreement shall terminate, the Escrow Agent shall be released from any further
liability, it being expressly understood that Escrow Agent's liability is
limited by the terms and provisions set forth herein.
3. Amendments. Any changes in the terms or conditions herein may only be
made in writing and signed by all of the parties to this Agreement.
4. Escrow Agent and Limitation of Liability. Unless otherwise herein
expressly provided, the Escrow Agent shall:
(a) Be entitled to deem the signatories of any documents, instruments or
checks submitted to it hereunder as being those purported to be authorized to
sign such documents or instruments on behalf of the parties hereto and shall be
entitled to rely upon the genuineness of the signatures of such signatories
without inquiry and without requiring substantiating evidence of any kind;
(b) the Escrow Agent may resign, as such, following the giving of prior
written notice to the other parties hereto. In that event, Successor Escrow
Agent shall be appointed by mutual agreement of the parties. If the parties are
unable to agree upon a successor, or shall fail to appoint a successor prior to
the expiration of ten (10) days following the date of the notice of resignation,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment of a
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Successor Escrow Agent or other appropriate relief; and such resulting
appointment shall be binding upon all the parties hereto. Upon acknowledgment
of any Successor Escrow Agent of the receipt of the escrowed property and
documents, the then acting Escrow Agent shall be fully released and relieved of
all duties, responsibilities and obligations under this Agreement except for
negligence of malfeasance;
(c) Seller and Purchaser each waive all claims and actions, of any
kind or nature, each may have against the Escrow Agent, now or hereafter
existing, arising out of this Escrow, except for the negligence or malfeasance
of the Escrow Agent;
(d) the Escrow Agent shall be paid a fee of $____, to be paid equally
by Seller and Purchaser.;
(e) the Escrow Agent shall be, and hereby is, jointly and severally
indemnified and held harmless, by the Seller and Purchaser, from all losses,
costs, diminution of the collateral, and expenses which may be incurred by the
Escrow Agent as a result of its involvement in any litigation arising from
performance of its duties hereunder, provided that such litigation shall not
result from any action taken or levied by the Escrow Agent for which he shall
have been adjudged negligent.
(f) Have the right at any time to interplead the Deposit and any other
assets held by the Escrow Agent pursuant to this Agreement with an arbitrator or
court of competent jurisdiction for disposition by the arbitrator or court and
upon delivery of the Deposit and other assets to the arbitrator or court, Escrow
Agent shall be relieved of any further liability in connection with this
Agreement. Further, Escrow Agent shall be relieved of any further liability in
connection with this Agreement upon compliance with an order of a court of
competent jurisdiction directing payment of the Deposit.
(g) Implementation of Escrow. Each party shall, and at any time, from
time to time hereafter, take any and all steps and execute, acknowledge and
deliver to the other parties, all instruments and assurances that the other
party may reasonably require for the purposes of giving full force and effect to
this Escrow Agreement, including certifications of the existence and continuing
validity of this Agreement.
5. Binding Effect. This Agreement shall be binding upon, and inure to
the benefit of, the parties and their executors, administrators and successors,
heirs and permitted assigns.
6. Waiver. The failure of either party to enforce any covenant, condition
or right of this Agreement shall not be deemed a waiver thereof or of the right
of either party to enforce each and every covenant, condition or right of this
Agreement. No provision of this Agreement shall be deemed to have been waived
unless such waiver be in writing.
7. Notices. Any notice, demand, waiver or consent required or permitted
hereunder shall be in writing and shall be deemed to have been duly delivered if
delivered personally or mailed by registered mail, certified mail, express mail,
federal express or other overnight guaranteed mail service, postage prepaid, to
the addresses set forth at the beginning of this Agreement or to such other
addresses as any party may request by notifying the other parties in writing.
8. Governing Law. This Agreement made in the State of Michigan and shall
be governed by the laws of said State.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
SELLER:
AC PROPERTIES, L.L.C.
BY:
-------------------------------
GARY STEVEN JONNA
Its: President
PURCHASER:
THE PRIME GROUP, INC.
BY:
-------------------------------
Its:
--------------------------
ACCEPTANCE OF ESCROW
--------------------
First American Title Insurance Company hereby accepts the above Escrow
under the terms and conditions herein set forth and acknowledges receipt of the
Deposit of Ten Thousand Dollars ($10,000.00) from the Purchaser.
ESCROW AGENT:
FIRST AMERICAN TITLE INSURANCE COMPANY
BY:
-------------------------------
Its:
---------------------------
-3-
<PAGE>
EXHIBIT C
---------
GENERAL CONDITIONS
EXHIBIT C - PAGE 1
<PAGE>
DIVISION NO. 1000 DIVISION 1 - GENERAL CONDITIONS
================================================================================
SUBDIVISION TRADE
================================================================================
1000 DIVISION 1 - GENERAL CONDITIONS
1002 EXTRA DRAWINGS
1012 PERMENANT UTILITY FEE
1015 BUILDING PERMIT
1031 FIELD ENGINEERING & LAYOUT
1037 INSURANCE
1050 QUALITY CONTROL & TESTING
1060 FIELD SECRETARY
1062 SUPERVISION
1063 LABORERS
1067 SAFETY
1082 OFFICE TRAILER & FURNITURE
1083 TEMP. STORAGE TRAILER
1089 TEMP. FENCE & PED. PRODUCTS
1090 PROJECT SIGN
1091 TEMP. SIGNS
1092 TELEPHONE
1093 TEMP. ELECTRICITY & LIGHT
1096 WINTER CONDITIONS & TEMP. HEAT
1212 TEMP. WATER
1213 FIELD COMPUTER
1215 FIELD COPY & FAX
1216 TEMP. TOILETS
1219 DUMPSTER
1220 CLEAN-UP LABOR
1221 FINAL CLEAN-UP
1226 TEMP. ELEVATOR
1227 GARBAGE CHUTES
1233 TRAVEL EXPENSE
1234 MISC. GENERAL CONDITIONS
1236 CONTINGENCY
1239 SECURITY/WATCHMAN
1240 HAND TOOLS & EQUIPMENT
1241 PHOTOS
1242 POSTAGE & EXPRESS MAIL
1246 MOBILIZATION
<PAGE>
EXHIBIT 10.34
CONTRACT FOR SALE
-----------------
VG OFFICE PARTNERSHIP '95, LTD., a Texas limited partnership ("Seller"),
and THE PRIME GROUP, INC., an Illinois corporation ("Purchaser"), agree as
follows:
1. Agreement for Sale of the Land. Subject to the terms and conditions
of this Contract For Sale (this "Contract"), Seller agrees to sell and convey to
Purchaser, and Purchaser agrees to purchase from Seller, the following real and
personal property (collectively, the "Property"):
a. That certain real property located in Travis County, Texas,
bounded to the east and to the north by Gaines Ranch Loop and to the south by
MoPac Expressway (Loop 1), and containing not more than four (4) acres of land,
together with any and all improvements located on such land, and all of the
rights, privileges, easements and appurtenances belonging or appertaining to
such land and improvements, including any right, title and interest in and to
streets, alleys and rights-of-way adjacent to such land (all of the foregoing
being collectively referred to herein as the "Real Property"), all of which
shall be subject to the encumbrances, restrictions and other matters which
become Permitted Exceptions pursuant to paragraph 5.b below. The land is
situated generally within the area depicted on the site plan set forth on
Exhibit A attached hereto and incorporated herein by reference (the "Site
Plan"), and shall be more particularly reflected in the survey to be provided in
accordance with paragraph 4 below.
b. All tangible or intangible personal property or interest therein
now or hereafter owned or held by Seller in connection with the Real Property
(or any portion thereof) or the ownership, operation, management or use thereof,
including, but not limited to, (1) the allocation of impervious cover and
buildable area to the extent reasonably necessary to permit the development of
the Facilities (as defined in paragraph 11 below) in accordance with the
provisions of this Contract; (2) the non-exclusive right to use and incorporate
trade style or trade names used by Seller in connection with the Real Property,
including but not limited to the name "Gaines Ranch"; (3) any and all contract
rights and other agreements or leases affecting the Real Property (provided
that, if such contract rights, agreements or leases affect real property other
than the Real Property, Seller shall retain an interest in and the benefit of
all such rights, agreements and leases to the extent applicable to or otherwise
necessary in the operation or development of such other real property); (4) all
plans and specifications or other construction drawings of any type in Seller's
possession or control prepared in connection with the construction of any
improvements or proposed improvements on the Real Property; (5) all current
assignable contracts, guarantees and warranties (including guarantees and
warranties pertaining to the acquisition of the Real Property, or any portion
thereof, by Seller), licenses and other permits, approvals, authorizations,
certificates, permissions, no action letters and similar assurances issued by
any private person or persons or by any governmental or quasi-governmental
authority or authorities to the extent relating to the Real Property, or any
portion thereof, or to the ownership, operation, management or use thereof; (6)
all site plans, surveys, soil and substrata studies, water studies,
environmental studies, architectural renderings, engineering plans, and other
plans, diagrams, or studies of any kind relating to the Real Property, or any
portion thereof; and (7) all other tangible or intangible property on or related
to the Real Property, or used in connection with the ownership and operation of
the Real Property (all of the foregoing being collectively referred to herein as
the "Personal Property").
<PAGE>
2. Total Purchase price. The total purchase price for the Property shall
equal the sum of $13.50 per square foot of building Square Feet (as defined in
paragraph 10.b below). The total purchase price shall be paid by Purchaser to
Seller in the following manner:
a. Escrow Deposit; Title Company. Within five (5) calendar days after
the execution of this Contract by each of the parties hereto, Purchaser shall
deposit the sum of $10,000.00 in cash (the "Escrow Deposit") in escrow with
Heritage Title Company of Austin, Inc. at its offices at 98 San Jacinto
Boulevard, Suite 400, Austin, Texas (the "Title Company"), the release of which
shall require the joint signature of both Seller and Purchaser or the order of a
court having jurisdiction over the subject matter of this Contract. Provided
that this Contract is not terminated by Purchaser in accordance with the
provisions of paragraph 3.b below, Purchaser shall deposit with the Title
Company, on or before the first business day following the expiration of the
Inspection Period (as hereinafter defined), an additional sum of $40,000.00 in
cash, which sum shall become part of the "Escrow Deposit" for the purposes of
this Contract. The Escrow Deposit shall be invested by the Title Company in a
manner reasonably acceptable to Purchaser, and all interest earned on such
deposit shall be considered part of the Escrow Deposit. The Escrow Deposit shall
be paid to Seller at the Closing (defined below) as a part of the total purchase
price; or, if the Closing does not occur, shall be otherwise disbursed in
accordance with this Contract.
b. Cash Payment at Closing. Subject to the adjustments under
paragraph 8 of this Contract, the balance of the total purchase price shall be
paid to Seller at the Closing by cashier's check or in wire transferred funds,
which,in either case, will allow the Title Company to disburse those funds to
Seller at the Closing.
3. Inspection by Purchaser.
-----------------------
a. Inspection Period. Purchaser and Purchaser's representatives
shall have from the Effective Date of this Contract (defined below) until
February 28, 1997 (the "Inspection Period") during which to visit and inspect
(including having engineering tests, soil tests, and other tests and studies
made) the Real Property and to conduct any feasibility, environmental,
engineering and such other studies and assessments as Purchaser may require
within its sole discretion.
b. Termination During Inspection Period. If Purchaser is
dissatisfied with the condition of the Property, or with the results of the
tests, studies or assessments, or for any other reason, then Purchaser shall
have the option to terminate this Contract in Purchaser's sole and absolute
discretion, which option must be exercised by giving written notice to Seller
prior to the expiration of the Inspection Period. Upon Purchaser's exercise of
this option, Seller shall be entitled to $100.00 of the Escrow Deposit as
consideration for such option. In the event of such a termination, but only
after the delivery to Seller of all information referred to in paragraph 3.c
below and repair of the Real Property as required under paragraph 3.d below, the
Escrow Deposit made by Purchaser under paragraph 2.a above (less the $100.00 to
be delivered to Seller pursuant to the terms hereof) shall be returned to
Purchaser and the parties shall have no other or further obligation or liability
to each other, except for Purchaser's confidentiality, restoration and indemnity
obligations set forth elsewhere in this paragraph 3. In the event that no notice
of termination is given within the Inspection Period, then this Contract shall
continue
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<PAGE>
to be binding and in full force and effect against Seller and Purchaser, and the
Escrow Deposit (including additions thereto required under paragraph 2.a) shall
be non-refundable except as expressly provided otherwise under the provisions of
this Contract (including, without limitation, the provisions of paragraph 9.a
below).
c. Confidentiality. Purchaser agrees, that until the Closing,
Purchaser and Purchaser's agents and representatives shall hold all information
obtained with respect to the Property in confidence and further agrees that
until the Closing they will not disclose its content to others except (i) as
reasonably necessary in connection with Purchaser's obtaining of any licenses,
permits and approvals required for the operation or construction of the
Facilities, (ii) as may be reasonably required, based on the advice of
Purchaser's counsel, in order to comply with any applicable law or regulation or
with any requirement imposed by judicial or administrative process, or (iii) to
the extent such information becomes public through no fault of Purchaser or its
agents or representatives. If this Contract is terminated for any reason other
than Purchaser's default under the terms of this Contract, any records and other
information and copies of work sheets and other documents, reports and materials
provided to Purchaser by or on behalf of Seller shall be returned to Seller.
If, however, the Contract is terminated due to Purchaser's default under the
terms of this Contract, copies of any records, documents, reports, plans or
materials obtained by Purchaser (other than items containing confidential
financial analyses prepared by or on behalf of Purchaser in connection with the
transactions contemplated hereunder or that Purchaser otherwise reasonably
believes would provide to its competitors confidential information regarding
Purchasers specific operations) shall be delivered to Seller promptly after
termination. Purchaser may retain copies or reproductions of any such written
information which is required to be returned or delivered to Seller pursuant to
the terms hereof, provided that all of such information shall continue to be
held in confidence by Purchaser. The provisions of this paragraph 3.c shall
survive any termination of this Contract.
d. Purchaser's Duties Regarding Inspection. All visits and
inspections of the Real Property shall be at the sole risk of Purchaser and
Purchaser shall indemnify and hold Seller harmless from and against any and all
claims, demands, injuries, damages, costs, expenses (including reasonable
attorney's fees) or liability incurred by or asserted against Seller as a result
of, or arising out of, any of those visits or inspections. If this Contract is
terminated for any reason other than Seller's default under the terms of this
Contract, Purchaser shall repair any damage caused by any of those visits or
inspections so as to restore the Real Property to substantially the same
condition existing immediately before the damage. The provisions of this
paragraph 3.d shall survive any termination of this Contract.
4. Survey.
-------
a. Seller shall, at its own expense, furnish to Purchaser, within
ten (10) business days of the Effective Date of this contract, four (4) copies
of a current on-the-ground survey (the "Survey") and field notes description of
the Real Property prepared and certified by a licensed surveyor acceptable to
Purchaser and the Title Company. The Survey shall (i) meet the requirements of
an ALTA-ACSM Class A "as-built" survey (and include field notes), (ii) be
certified as of a date subsequent to the date of this Contract, (iii) show the
location of any improvements, and show the size and location of all Permitted
Exceptions and any other
3
<PAGE>
easements, encroachments and encumbrances reflected in the title commitment to
be provided under paragraph 5.b (identifying each by volume and page
reference), (iv) recite the exact area of the Real Property in acres and square
feet, (v) recite the exact area of each easement, encroachment and encumbrance,
(vi) show whether any portion of the Real Property is situated in an area
designated by the U.S. Secretary of Housing and Urban Development (or by any
other governmental or quasi-governmental agency or authority having jurisdiction
over the Real Property) as a flood plain, special flood hazard area or general
hazard area, (vii) show all visible utility lines upon the Real Property, and
(viii) indicate such other information reasonably requested by Purchaser in
writing prior to the expiration of the Inspection Period. The survey shall meet
the accuracy requirements of an ALTA-ACSM Class A survey, and shall contain a
surveyor's certificate substantially in the form of Exhibit B attached hereto
specifically addressed to Seller, Purchaser, the Title Company and any other
party or parties reasonably designated by Purchaser. The Survey must be
otherwise satisfactory to the Title Company so as to permit it to issue an Owner
Policy of Title Insurance meeting the requirements of paragraph 5.a below.
b. Seller and Purchaser agree to execute an amendment to this
Agreement, if requested by either Purchaser or Seller, pursuant to which the
metes and bounds description of the Real Property set forth in the survey shall
be substituted for the description of the Real Property to be acquired by
Purchaser hereunder.
5. Title.
a. Owner Policy of Title Insurance. Seller, at Seller's expense,
shall furnish to Purchaser at the Closing, or within a reasonable time
thereafter, an Owner Policy of Title Insurance (on a form prescribed by the
State Board of Insurance of the State of Texas) issued through the Title
Company, insuring title to the Real Property in Purchaser in the full amount of
the total purchase price, and containing only the following exceptions (the
"Permitted Exceptions"): (a) the standard printed exception for real estate
taxes for the year of the Closing (if not paid before the Closing) and
subsequent years; (b) the standard printed boundary and encroachments exception
and exception for shortages in area (provided, however, that Seller will, at
Purchaser's option and expense, cause the Title Company to delete the "survey
exception" from the Owner Policy of title Insurance without qualification or
condition except as to "any shortages in area"); and (c) any other matters that
become Permitted Exceptions under the provisions of paragraph 5.b.
b. Title Commitment and Review of Title. Seller shall furnish to
Purchaser,within (10) days after the Effective Date of this Contract, a written
title commitment to issue the Owner Policy of title Insurance (the "Title
Commitment discloses any exceptions to Seller's title other than the Permitted
Exceptions ("Additional Exceptions"), or if the Survey discloses any other
matters to which Purchaser object ("Survey Objections"), then Purchaser shall
have ten (10) business days after receipt of both the Title Commitment and the
Survey to obtain and review any documents or other matters pertaining to the
Additional Exceptions and/or the Survey Objection and to deliver written
objection to the Title Company and to Seller which lists the Additional
Exceptions and/or the Survey Objections that are objectionable to Purchaser
(collectively, "Title Objections"). To the extent a written objection
4
<PAGE>
is not delivered to Seller within the applicable time period, objection to the
Additional Exceptions and/or the Survey Objections shall be deemed to have been
waived by Purchaser, and such Additional Exceptions and Survey Objections (other
than those constituting third party liens, security interests or other monetary
encumbrances that would be reflected on Schedule C of the Title Commitment)
shall be deemed to be Permitted Exceptions. Seller shall use good faith,
commercially reasonable efforts to cure the Title Objections, and may use all or
any part of the total purchase price for the purpose of discharging and
releasing at the Closing such Title Objections, in order that the Owner Policy
of Title Insurance will be issued to Purchaser at the Closing without making
exception to the Title Objections. If, however, Seller determines in good faith
that the cost to cure any or all such Title Objections, Seller will be deemed to
have elected to cure such Title Objections. Within ten (10) business days after
such notice is given, Purchaser shall notify Seller in writing of Purchaser's
election either to waive such Title Objections and accept the Real Property
subject thereto or to terminate this Contract, in which latter event the Escrow
Deposit shall be returned to Purchaser and neither party shall have any further
liability hereunder. In the event Purchaser fails to timely notify Seller of its
election, then Purchaser shall be deemed to have waived such Title Objections.
6. Representations, Warranties and Covenants; Indemnities.
------------------------------------------------------
a. Seller's Representations and Warranties. Seller hereby represents
and warrants to Purchaser that, as of the Effective Date and as of the date of
Closing:
(1) Seller has all necessary and requisite authority to enter
into this Contract and to consummate all of the transactions contemplated
hereby, and the persons executing this Contract and all other documents
required to consummate the transactions contemplated hereby on behalf of
Seller, are duly authorized to execute this Contract and such other
documents on behalf of Seller, and are authorized to bind Seller.
(2) Seller and Seller's general partner, Stone C-7, LTD. ("Stone
C-7") are duly formed and validly existing under the laws of the State of
Texas. ORI, Inc. ("ORI"), the general partner of Stone C-7, is a
corporation duly formed and validity existing under the laws of the State
of Texas.
(3) The execution of this Contract by Seller does not, and the
performance by Seller of the transactions contemplated by this Contract
will not, violate or constitute a breach of the partnership, agreements of
seller or Stone C-7 or the articles or incorporation or bylaws of ORI or
other organizational documents of Seller, Stone C-7 or ORI or any
shareholders' or directors' resolution of ORI or any contract, permit,
license, order or decree to which Seller, Stone C-7 or ORI is a party or by
which Seller, Stone C-7 or ORI or any of their assets are bound.
5
<PAGE>
(4) Seller is not a "foreign person" as defined in the federal
Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act,
as amended.
(5) Seller holds fee simple title in and to the Real Property subject
only to those encumbrances, restrictions and other matters referred to in the
Title Commitment, and no person or entity has any legal right or option to
acquire all or any portion of the Property, other than Purchaser pursuant to
this Contract.
(6) Seller holds good and valid title to the Personal Property, free
and clear of any liens, encumbrances or adverse claims other than those
described in the Title Commitment, and, Seller has the right and authority to
convey or assign to Purchaser all of the Personal Property.
(7) To the best of Sellers's current, actual knowledge, the Property
is not in violation of any applicable federal or state law, or any ordinance,
order or regulation of any governmental or quasi-government agency having
jurisdiction over the Property, and, to the best of Seller's current, actual
knowledge, no proceedings of any type (including condemnation or similar
proceedings) have been instituted or are pending or contemplated against the
Real Property or any part thereof or the Property or any portion thereof.
(8) Other than Seller, no party, person or entity is in possession of
the Property or any portion thereof, and no party, person or entity has any
legal or equitable interest in the Property, or any portion thereof, except as
disclosed in the Title Commitment.
(9) To the best of Seller's current, actual knowledge, there are no
unrecorded liens or encumbrances (including, but not limited to, liens relating
to environmental matters) against the Property or any portion thereof, and, to
the best of Seller's current, actual knowledge, there are no user fees or other
charges relating to the Barton Springs/Edwards Aquifer Conservation District
currently payable or contemplated.
(10) To the best of Seller's current, actual knowledge, there are not
presently pending any special assessments of any nature with respect to the
Real Property or any portion thereof, nor has Seller received any written notice
of, nor has Seller any current, actual knowledge of, any such special assessment
being contemplated.
(11) Each agreement, contract, lease, commitment, permit, license,
approval or other document furnished to Purchaser by or on behalf of Seller in
connection with this Contract, or that will be delivered to Purchaser by Seller
pursuant to the terms of this Contract, are true, correct and complete in all
material respects.
(12) There are no outstanding contracts or commitments made by Seller
or its affiliates (or, to the best of Seller's current, actual knowledge, by any
agents of Seller or such affiliates) for any work or materials in connection
with the Real Property or for any improvements to the Real Property which have
not been, or will not be on or
6
<PAGE>
before the date of the Closing, fully paid for on a timely basis and there are
no leases, contracts, commitments or agreements which will bind Purchaser or the
Property from and after Closing.
(13) To the best of Seller's current, actual knowledge, there
currently exist no events of default by Seller, or events which with the
passage of time or notice or both would constitute events of default by Seller,
under the terms and provisions of any contracts or agreements with respect to
the Property to which Seller is a party, or by any other party thereto.
(14) To the best of Seller's current, actual knowledge, there are no
violations by Seller or any other person or entity of any validly existing
restrictive convenants or other matters affecting the Real Property.
(15) Seller has not received notice of any litigation or governmental
proceeding (including, without limitation, any eminent domain proceeding)
affecting the Property or any portion thereof, and, to the best of Seller's
current, actual knowledge, no such litigation or proceeding is pending,
threatened or contemplated.
(16) To the best of Seller's current, actual knowledge, Seller does
not now owe and will not owe any taxes or any penalties or interest thereon
pursuant to any governmental law, statute or regulation regarding so called
"bulk sales" for which Purchaser is or will be obligated to or liable for a
withholding of funds from the Purchase Price.
(17) (a) Seller has not generated, treated, stored or disposed of
Hazardous Materials (as defined below) in, under or upon the Real Property, or
any portion thereof, or used any Hazardous Materials in or on the Real Property,
or any portion thereof, in violation of any Environmental Laws (as defined
below); (b) to the best of Seller's current, actual knowledge, no prior owner
and no prior or current occupant has generated, treated, stored or disposed of
such Hazardous Materials in, under or upon the Real Property, or used any
Hazardous Materials in or on the Real Property, or any portion thereof, in
violation of any Environmental Laws; and (c) to the best of Seller's current,
actual knowledge, the Real Property is not currently in violation of any
Environmental Laws, no portion of the Real Property has ever been used as a
sanitary landfill or dump, no underground storage tank or tanks are located on
or under the Real Property, and no Hazardous Materials or underground storage
tanks are present in, under or upon any parcel of Property adjacent to the Real
Property.
(18) To the best of Seller's current, actual knowledge, no
environmental or other disclosure document is required in connection with the
transactions contemplated by this Contract.
(19) To the best of Seller's current, actual knowledge, no portion of
the Real Property constitutes "wetlands" as designated by the United States Army
Corp of
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<PAGE>
Engineers or other federal, state or local body or agency having jurisdiction
over the Real Property or any portion thereof.
(20) To the best of Seller's current, actual knowledge, no portion of
the Real Property is subject to any restrictions because of the presence of
endangered species on or in the vicinity of the Real Property, and Seller has no
current, actual knowledge that any such restrictions are being contemplated by
any federal, state or local body or agency having jurisdiction over the Real
Property or any portion thereof.
(21) To the best of Seller's current, actual knowledge, the
development of the Facilities on the Real Property in substantial accordance
with the Site Plan will not conflict with, and is not prohibited or adversely
affected by, the fact that the Real Property is situated in the Barton
Springs/Edwards Aquifer Conservation District.
(22) Seller has no current, actual knowledge of any reason or fact
why Seller would be unable to obtain the Resubdivision and the Site Development
Permit (each as defined below) by the original Due Date specified in paragraph
10.c of this Contract.
(23) Seller has no current, actual knowledge of any reason or fact
why Purchaser would be unable to obtain necessary building permits for the
construction the Facilities, provided that Purchaser complies fully with the
rules, regulations, codes and ordinances of the City of Austin applicable to
such construction.
(24) Seller has constructed all offsite stormwater detention
facilities required by the City of Austin with respect to the Real Property and
such detention facilities have sufficient capacity to provide the Real Property
the capacity reasonably required for the operation of the Facilities.
(25) Water and wastewater services are available to the Real Property
from rights-of-way or public utility easements situated adjacent to the Real
Property and, to the best of Seller's current, actual knowledge, such services
have sufficient capacity to provide the Real Property the capacity reasonably
required for the operation of the Facilities. Seller hereby agrees that it
shall, promptly after receiving from Purchaser the requisite information
required, provide Purchaser with written confirmation (unqualified by Seller's
knowledge) that the water and wastewater services available to the Real Property
have the capacity required for the operation of the Facilities.
Without limiting the foregoing, the representations and warranties of
Seller contained in this paragraph 6.a (other than those set forth in paragraphs
6.a(17) and 6.a(18)) shall survive Closing and the delivery of the deed and
other closing documents required under paragraph 7 below for a period of
eighteen (18) months following the Closing; the representations and warranties
of Seller contained in paragraphs 6.a(17) and 6.a(18) shall survive the Closing
and the delivery of the deed and other closing documents required under
paragraph 7 below for a period of thirty-six (36) months following the Closing.
In the event, at any time prior to Closing, Seller learns or has reason to
believe that any of the aforesaid representations and
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warranties are no longer true or valid, Seller shall immediately notify
Purchaser in writing and therein specify the factors rendering or likely to
render such representations or warranties untrue or invalid. Notwithstanding
anything to the contrary herein and without limiting the representations set
forth above, Purchaser hereby acknowledges and agrees that neither of the
representations set forth in paragraphs 6.a(22) and 6.a(23) constitute a
warranty or guaranty that the City of Austin will either approve of, consent to
or issue any approvals, permits or licenses contemplated under this Contract
(including, without limitation, the Resubdivision, the Site Development Permit
or any building permits).
b. Purchaser's Representations and Warranties. Purchaser hereby
represents and warrants to Seller that, as of the Effective Date and as of the
date of Closing:
(1) Purchaser has all necessary and requisite authority to enter
into this Contract and to consummate all of the transactions contemplated
hereby, and the persons executing this Contract and all other documents
required to consummate the transactions contemplated hereby on behalf of
Purchaser are duly authorized to execute this Contract and such other
documents on behalf of Purchaser, and are authorized to bind Purchaser.
(2) Purchaser is a corporation duly formed and validly existing
under the laws of the State of Illinois, and is authorized to transact
business in the State of Texas as a foreign corporation.
(3) The execution of this Contract by Purchaser does not, and the
performance by Purchaser of the transactions contemplated by this Contract
will not; violate or constitute a breach of the articles of incorporation
or bylaws of Purchaser or other organizational documents of Purchaser, or
any shareholders' or directors' resolution of Purchaser or any contract,
permit, license, order or decree to which Purchaser is a party or by which
Purchaser or any of its assets are bound.
Without limiting the foregoing, the representations and warranties of
Purchaser contained in this paragraph 6.b shall survive Closing and the delivery
of the deed and other closing documents required under paragraph 7 below for a
period of one (1) year following the Closing. In the event, at any time prior
to Closing, Purchaser learns or has reason to believe that any of the aforesaid
representations and warranties are no longer true or valid, Purchaser shall
immediately notify Seller in writing and therein specify the factors rendering
or likely to render such representations or warranties untrue or invalid.
c. Seller's Covenants. During the period commencing on the Effective Date
and ending on the date of Closing, Seller hereby agrees that it shall:
(1) Keep and perform all of the obligations to be performed by
Seller under each and every agreement, contract, permit, license and
approval relating to or affecting the Property, or any portion thereof;
(2) Not enter into, execute, extend or renew any easement,
license or any other agreement or contract relating to or affecting the
Property, or any portion thereof,
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or modify, amend or terminate any contract or agreement to be assigned to
Purchaser pursuant to the terms of this Contract, without, in each case,
Purchaser's prior written consent and approval;
(3) Not mortgage, hypothecate or further encumber the Property
or any portion thereof or permit any liens on the Property or any portion
thereof to arise by operation of law and remain unpaid or unsatisfied as of
the date of Closing;
(4) Maintain the Property in as good of condition as it existed
immediately before the Effective Date;
(5) Not violate any laws, ordinances, orders or other
requirements relating to the ownership of the Property that have been or
may be imposed prior to the date of the Closing by any governmental
authority having jurisdiction over, or affecting, all or any part of the
Property, and shall remedy, at Seller's sole expense, any such violations
that are in contravention of this covenant; and
(6) Proceed diligently to obtain the permits, licenses and
approvals for which Seller is responsible to obtain under the terms of this
Contract and cooperate with Purchaser in Purchaser's obtaining of all other
permits, licenses and approvals relating to the construction and operation
of the Facilities on the Real Property.
d. Environmental Indemnities. For a period of three (3) years after
the date of Closing, Seller shall indemnify, defend and hold the Purchaser
harmless from and against any and all losses, liabilities, damages, injuries,
costs, expenses and claims of any and every kind whatsoever paid, incurred or
suffered by or asserted against Purchaser (including, without limitation, any
such losses, liabilities, damages, injuries, costs, expenses or claims asserted
or arising under any Environmental Laws) for, with respect to, or as a direct or
indirect result of Seller's breach, during its ownership of the Real Property,
of any Environmental Law with respect to the Real Property or Seller's breach of
any of the warranties and representations stated in paragraphs 6.a(17) and
6.a(18) hereof; provided, however, in no event shall Seller be liable to or
required to indemnify Purchaser hereunder for any consequential or exemplary
damages (except those claimed or asserted against Purchaser by third parties).
For purposes of this Contract, "Hazardous Materials" means and includes any
waste materials or other substances defined as hazardous in 42 U.S.C. Sec.
9601(14) or any related or applicable federal, state or local statute, law,
regulation or ordinance, pollutants or contaminants (as defined in 42 U.S.C.
Sec. 9601(33), petroleum (including crude oil or any fraction thereof), any form
of natural or synthetic gas, sludge (as defined in 42 U.S.C. Sec. 6903(26A)),
radioactive substances, hazardous waste (as defined in 42 U.S.C. Sec. 6903(27))
and any other hazardous wastes, hazardous substances, contaminants or pollutants
as defined or described in any of the Environmental Laws. As used in this
Contract, "Environmental Laws" means all federal, state and local environmental
laws, and any rule or regulation promulgated thereunder and any order, standard,
interim regulation, moratorium, policy or guideline of or pertaining to any
federal, state or local government, department or agency, including but not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of
1986, the Clean Water Act, Clean Air Act, the
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Toxic Substances Control Act, the Occupational Safety and Health Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Marine Protection,
Research, and Sanctuaries Act, the National Environmental Policy Act, the Noise
Control Act, the Safe Drinking Water Act, the Resource Conservation and Recovery
Act, as amended, the Hazardous Material Transportation Act, the Refuse Act, the
Uranium Mill Tailings Radiation Control Act and the Atomic Energy Act and
regulations of the Nuclear Regulatory Agency, and all state and local
counterparts or related statues, laws, regulations, and order and treaties of
the United States, all as amended. The indemnifications hereunder shall include
and benefit, as appropriate, Purchaser, Purchaser's lender, all subsidiaries,
affiliates or corporations connected with such lender or Purchaser and their
respective agents, representatives, employees, officers, insurers, directors,
stockholders, successors and assigns.
7. Possession to Purchaser; Closing; Closing Documents.
a. Possession and Closing. Possession of the Property shall be
delivered by Seller to Purchaser at the Closing. The Closing shall take place at
the offices of the Title Company (the "Closing") on the first business day after
the expiration of thirty (30) days after the Resubdivision and Seller's
acquisition of the Site Development Permit (each as hereinafter defined);
provided, however, that Purchaser shall have the right to extend the Closing for
up to thirty (30) days upon delivery to Seller, not less than three (3) business
days prior to the scheduled date of the Closing, of written notice stating
Purchaser's election to extend the Closing, together with the payment of
$50,000.00 in immediately available funds, which amount shall constitute and
become part of the "Escrow" Deposit" for the purposes of this Contract. Time is
of the essence with respect to the Closing date and the delivery at the Closing
of the total purchase price.
b. Seller's Closing Documents. At the Closing, Seller, at Seller's
expense, shall deliver or cause to be delivered to Purchaser each of the
following:
(1) Deed of Conveyance. A duly executed and acknowledged
special warranty deed, in the proper form for recording, containing a
description of the Real Property and conveying title to the Real Property
to Purchaser, free and clear of any and all liens, reservations,
restrictions, easements, security agreements, pledges and other
encumbrances, except the Permitted Exceptions, to which this sale and the
conveyance of the Real Property shall be made and accepted subject.
(2) Bill of Sale. A duly executed assignment, bill of sale and
blanket conveyance assigning and conveying to Purchaser the Personal
Property, subject only to the Permitted Exceptions.
(3) Tax Certificates. Tax certificates shall be available at
the Title Company from appropriate authorities showing that all taxes then
due on the Real Property have been paid, or amounts sufficient to pay those
taxes shall be withheld by the Title Company from the total purchase price
for that purpose.
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(4) Evidence of Authority. Evidence of authority reasonably
acceptable to Purchaser and the Title Company, reflecting that the person
who has signed this Contract on behalf of Seller has been duly authorized
to execute this Contract and identifying the person or persons who are
authorized to execute all of Seller's closing documents on Seller's behalf
and showing approval of the sale of the Property to Purchaser under the
terms and provisions of this Contract.
(5) Non-Foreign Certificate. A certificate stating that Seller
is not a "foreign person" as defined in the federal Foreign Investment in
Real Property Tax Act of 1980 and the 1984 Tax Reform Act, as amended.
(6) Other Documents. Any other documents required by this
Contract to be delivered by Seller at the Closing or reasonably necessary
or requested by Purchaser or the Title Company to carry out the terms and
conditions hereof.
c. Purchaser's Closing Documents. At the Closing Purchaser, at
Purchaser's expense, shall deliver to Seller the following;
(1) Cash Payment. Subject to the credits and adjustments
specified in paragraph 2 above, the cash payment of the total purchase
price as provided for in paragraph 2 above, and any additional sums
provided for in this Contract.
(2) Other Documents. Any other documents or instruments
required by this Contract to be delivered by Purchaser at the Closing or
reasonably necessary or requested by Seller or the Title Company to carry
out the terms and conditions hereof.
8. Adjustments at Closing. The following prorations and adjustments shall
be made at the Closing and, as the case may be, deducted from or added to the
amount Purchaser is required to pay at the Closing under paragraph 2.b of this
Contract:
a. Taxes. Ad valorem real estate taxes for the year of Closing shall
be prorated at the date of Closing and shall be assumed by Purchaser. If the tax
rate has not been fixed for that year, the apportionment of taxes shall be upon
the basis of the tax rate for the next preceding year applied to the latest
assessed valuation. Taxes attributable to the tax year of the Closing shall be
assumed by Purchaser. Notwithstanding the foregoing, if the Real Property has
not been subdivided from the real property of Seller constituting the tax parcel
of which the Real Property is a part (the "Tax Parcel") as of January 1 of the
year in which the Closing occurs, and Seller is unable to obtain separate tax
statements for that year as to the Real Property alone, then Purchaser and
Seller shall each pay their respective proportionate shares (on the basis of
land square footage) of the ad valorem taxes for the year in which the Closing
occurs with respect to the Tax Parcel (including Purchaser's payment of the
amount of the credit applied at the Closing on account of the proration of such
taxes) directly to the appropriate taxing authorities prior to delinquency;
provided, however, if any portion of the Tax Parcel contains any improvements
thereon, the party owning the real property on which any such improvements are
situated shall be responsible for the payment of the ad valorem taxes
attributable to such improvements. Seller and Purchaser agree to indemnify and
hold the other harmless from and
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against any liability or liens in connection with any ad valorem taxes
applicable to the Tax Parcel and not timely paid by the indemnifying party
pursuant to the foregoing. In the event either party fails to pay its
proportionate share of any ad valorem taxes levied against the Tax Parcel and a
tax lien is asserted against the Tax Parcel on account of such failure to pay
those taxes, the other party shall have the right (but not the obligation) to
pay and discharge such taxes and tax liens (including any penalties and
interest), and the non-paying party shall reimburse the other party for all
amounts so paid by the non-paying party upon the non-paying party's written
confirmation of such payment.
b. Title Insurance and Other Closing Expenses. Except as is
otherwise provided herein, each party shall pay its own customary closing
expenses and its own attorney's fees. Seller shall pay the premium for the
Owner Policy of Title Insurance Seller agrees to provide under paragraph 5
above, one-half of the escrow fee charged by the Title Company and all recording
fees (other than for liens created by Purchaser at Closing). Purchaser shall
pay one-half of the escrow fee charged by the Title Company and the recording
fees for any liens created by Purchaser at Closing.
9. Remedies Upon Default.
---------------------
a. Seller's Default. If, for any reason except Purchaser's default
under the terms of this Contract or an express condition to Seller's obligations
hereunder, Seller either (i) fails to complete this sale in accordance with the
terms and provisions of this Contract or (ii) fails to perform timely any of its
obligations under this Contract and such failure continues for period of ten
(10) days after being provided written notice from Purchaser of such failure,
then, in either case, Purchaser shall have, as Purchaser's sole and exclusive
remedy against Seller under this Contract, at law and in equity, the option of
either (i) terminating this Contract by giving written notice to Seller at or
prior to the Closing, whereupon the Escrow Deposit shall be returned to
Purchaser by the Title Company and Seller shall pay Purchaser, as full and
final liquidated damages (it being agreed that Purchaser's actual damages would
be substantial but would be difficult or impossible to accurately ascertain),
(a) $100,000.00 plus (b) an additional amount, not to exceed $100,000.00, equal
to those out-of-pocket expenses and costs incurred by Purchaser in connection
with the subject matter of this Contract which exceed $100,000.00 (provided that
Purchaser can verify, with written documentation, such expenses and costs),
after which Purchaser and Seller shall have no other or further liability or
obligation to each other except those obligations that expressly survive the
termination of this Contract, or (ii) enforcing specific performance of this
Contract.
b. Purchaser's Default. If Purchaser fails to complete this sale in
accordance with the terms and provisions of this Contract for any reason except
Seller's default under the terms of this Contract or an express condition to
Purchaser's obligations hereunder, Seller shall have the right, as its sole and
exclusive remedy against Purchaser under this Contract, at law and in equity, to
terminate this Contract by giving notice to Purchaser and to the Title Company,
whereupon the Escrow Deposit shall immediately be delivered by the Title Company
to Seller and Purchaser shall pay immediately to Seller, as full and final
liquidated damages (it being agreed that it would be extremely difficult, if not
impossible, to calculate the actual damages to Seller), (a) the amount equal to
$100,000.00 minus the Escrow Deposit that is to be delivered to Seller
hereunder, plus (b) an additional amount, not to exceed $100,000.00, equal to
those
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out-of-pocket expenses and costs incurred by Seller in connection with the
subject matter of this Contract which exceed $100,000.00 (provided that Seller
can verify, with written documentation, such expenses and costs), after which
Purchaser and Seller shall have no other or further liability or obligation to
each other hereunder, except those obligations that expressly survive the
termination of this Contract.
c. Waiver; Attorneys' Fees. The requirements imposed upon Seller in
this Contract are for the Purchaser's benefit, and those requirements or other
provisions for the Purchaser's benefit may be waived in writing by Purchaser.
Likewise, the requirements imposed upon Purchaser in this Contract are for the
Seller's benefit, and those requirements or other provisions for the Seller's
benefit may be waived in writing by Seller. If it shall be necessary for either
Purchaser or Seller to employ an attorney to enforce its rights pursuant to this
Contract (or defend any such enforcement action), the prevailing party shall
reimburse the non-prevailing party for court costs and reasonable attorneys'
fees (which amounts shall be in addition to the liquidated damages provided
under paragraphs 9.a and 9.b).
10. Subdivision and Site Development Permit.
a. Seller shall, at Seller's sole cost and expense, use good faith
and diligent efforts to obtain: (i) from the City of Austin, the Texas Natural
Resources Conservation Commission and any other applicable governmental
authorities (collectively, the "Authorities"), as may be applicable, (a) final
approval for the resubdivision and platting of the Real Property as a single
legal lot (the "Resubdivision") and (b) the issuance of a site development
permit and all other necessary approvals and permits (other than building
permits) (collectively, the "Site Development Permit") for the construction of
the Facilities and related improvements more particularly described in paragraph
11 below; and (ii) from any "Declarant" under that certain Declaration of
Covenants, Conditions, and Restrictions for Gains Ranch PUD dated May 8, 1995,
recorded at Volume 12433, Page 31 of the Real Property Records of Travis County,
Texas (the "Declaration"), and from any architectural control committee or
property owners association created, existing or appointed pursuant to the terms
of the Declaration, any and all approvals or consents that may be required under
the terms and provisions of the Declaration with respect to the construction and
operation of the Facilities and its related improvements. On or before the
expiration of the Inspection Period, Purchaser shall provide to Seller (a) a
site plan for the land reflecting the footprint for the Facilities and
containing the estimated gross building area and number of residential units
intended to be constructed on the Real Property by Purchaser and (b) such other
information reasonably requested by Seller. Utilizing such site plan and other
information, Seller shall cause the preparation of all engineering plans and
specifications and other relevant documentation required for the submittal to
the applicable Governmental Authorities of an application for the Site
Development Permit (such engineering plans and specifications, together with the
site plan provided by Purchaser and other relevant documentation prepared by
Seller hereunder, the "Plans") and shall, within forty-five (45) days after
Seller's receipt from Purchaser of the site plan and other information, provide
a copy of the Plans to Purchaser for its approval, which approval shall not be
unreasonably withheld (it being understood that Purchaser is the party who will
be ultimately constructing, owning and operating the Facilities and,
accordingly, that Purchaser's good faith determination of the contents of the
Plans shall be dispositive if not in violation of rules, regulations, codes or
ordinances applicable to the development of the Real Property). Purchaser shall,
within twenty
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(20) days of its receipt of the Plans from Seller, approve the Plans or make
reasonable modifications thereto and return them to Seller. If Purchaser fails
to respond within such 20-day period, Seller shall provide written notice to
Purchaser requesting a written response to the Plans within five (5) business
days after Purchaser's receipt of such written notice. If Purchaser fails to
respond timely to such written notice, Purchaser's approval shall be deemed
given. If Purchaser's response requests reasonable modifications to the Plans
that do not violate applicable governmental codes or ordinances, Seller shall,
within ten (10) days of its receipt of such request, modify the Plans to
incorporate such requested modifications and provide Purchaser a copy of the
Plans so modified. Purchaser shall promptly review such modified Plans and
either approve them or provide Seller with additional modifications and the
specific reasons therefor. If Purchaser requests additional modifications to the
Plans, Seller and Purchaser shall thereafter diligently and in good faith work
with one another until the Plans are approved by Purchaser; provided, however,
if the parties are unable to arrive at mutually acceptable Plans within thirty
(30) days after Seller's receipt of Purchaser's initial requested modifications,
Seller or Purchaser may terminate this Contract on written notice to the other,
whereupon the Escrow Deposit shall be returned to Purchaser and the parties
shall have no further obligation or liability to one another hereunder (except
for those obligations or liabilities which expressly survive the termination of
this Contract). Once the Plans are finally approved by the parties, Seller
shall, within ten (10) days after such final approval, submit to the applicable
Governmental Authorities an application for the issuance of the Site Development
Permit based on the Plans. Seller's obligations hereunder to acquire the
Resubdivision and the Site Development Permit shall be satisfied only upon
Seller's receipt of the Resubdivision and a Site Development Permit subject only
to those conditions or restrictions reasonably acceptable to Purchaser.
b. For purposes of paragraph 2 above, the aggregate gross building
area permitted to be constructed on the Real Property pursuant to the Site
Development Permit issued by the City of Austin (excluding any building area
constituting basement) shall be the "Building Square Feet."
c. If Seller is unable to obtain the Resubdivision (including final
execution and recording of the plat therefor) or Site Development Permit within
sixty (60) days after the last date that Seller has submitted an application
therefor (such resulting date, the "Due Date"), then Seller shall, within three
(3) business days after the expiration of such Due Date, notify Purchaser in
writing of such failure, which notice shall contain (i) Seller's determination
as to why such Resubdivision and/or Site Development Permit have not been
obtained and (ii) the estimated additional time necessary (if any) for Seller to
obtain such Resubdivision and/or Site Development Permit. Purchaser shall have
five (5) business days after its receipt of such notice to elect, at its option
and by written notice to Seller, to (x) grant Seller an additional ninety (90)
days, measured from the date of the expiration of the original Due Date, to
obtain such Resubdivision and/or Site Development Permit (such additional time
period, a "Seller Extension"), (y) exercise self-help and attempt to obtain such
Resubdivision and/or Site Development Permit itself, in which case Seller shall
immediately deliver all relevant documentation relating to such Resubdivision
and Site Development Permit to Purchaser and Purchaser shall have ninety (90)
days from the expiration of such original Due Date to obtain such Resubdivision
and/or Site Development Permit (such additional time period, a "Purchaser
Extension"), or (z) terminate this Contract upon fifteen (15) days' written
notice to Seller, after which time this Contract shall terminate and the Escrow
Deposit shall be returned to Purchaser.
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If Purchaser fails to timely exercise any of the foregoing elections, Purchaser
shall be deemed to have elected the option set forth in clause (x) above.
(1) Seller Extension. In the event Purchaser elects to grant to
Seller a Seller Extension pursuant to clause (x) of paragraph 10.c above,
and Seller does not obtain such Resubdivision and/or Site Development
Permit by such Due Date, as extended, then Seller shall provide Purchaser,
within three (3) business days after the expiration of such extended Due
Date, written notice thereof containing the same information referred to
above. Purchaser shall have five (5) business days after its receipt of
such second notice to elect, at its option and by written notice to Seller,
to (a) grant Seller an additional thirty (30) day extension, measured from
the expiration of the prior Seller Extension, to obtain such Resubdivision
and/or Site Development Permit, (b) exercise self-help and attempt to
obtain such Resubdivision and/or Site Development Permit itself, in which
case Seller shall immediately deliver all relevant documentation relating
to such Resubdivision and Site Development Permit to Purchaser and
Purchaser shall have thirty (30) days from the expiration of such Due Date,
extended, to obtain such Resubdivision and/or Site Development Permit, or
(c) terminate this Contract by written notice to Seller, whereupon this
Contract shall terminate and the Escrow Deposit shall be returned to
Purchaser. If Purchaser fails to timely exercise any of the foregoing
elections, Purchaser shall be deemed to have elected the option set forth
in clause (a) hereof.
(2) Purchaser Extension. In the event Purchaser elects to grant
to a Purchaser Extension pursuant to clause (y) of paragraph 10.c above,
and Purchaser does not obtain such Resubdivision and/or Site Development
Permit by such Due Date, as extended, then Purchaser shall provide Seller,
within three (3) business days after the expiration of such extended Due
Date, written notice thereof which shall contain (i) the same information
required of Seller above and (ii) notice of Purchaser's election to either
(a) continue exercising self-help for an additional thirty (30) day period,
measured from the expiration of the prior Purchaser Extension, to obtain
such Resubdivision and/or Site Development Permit, or (b) terminate this
Contract, whereupon this Contract shall terminate and the Escrow Deposit
shall be returned to Purchaser. If Purchaser fails to timely exercise any
of the foregoing elections, Purchaser shall be deemed to have elected the
option set forth in clause (a) hereof.
(3) Termination. In the event Purchaser elects to terminate this
Contract pursuant to clause (z) of paragraph 10.c above, this Contract
shall terminate upon the expiration of such fifteen (15) days notice and
the parties shall have no further liability or obligation to one another
hereunder (except for those obligations or liabilities that expressly
survive the termination of this Contract); provided, however, if Seller
obtains both the Resubdivision and the Site Development Permit within such
15-day period, Purchaser's termination notice shall be rendered void, and
the Contract shall continue in full force and effect.
In the event Resubdivision and/or the Site Development Permit has been
pursued by either party pursuant to the granting of a 30-day extension under
either subparagraphs (1) or (2) of this paragraph 10.c, as may be appropriate,
if either Resubdivision or the Site
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Development Permit is not obtained by such party prior to the expiration of such
30-day extension, then either party may thereafter (but prior to the date the
Resubdivision and the Site Development Permit are obtained) elect to terminate
this Contract upon written notice to the other, whereupon the Escrow Deposit
shall be returned to Purchaser and the parties shall have no further liability
or obligation to one another hereunder (except for those obligations or
liabilities that expressly survive the termination of this Contract).
d. Notwithstanding anything to the contrary in this paragraph 10,
Purchaser shall have the right, at any time by written notice to Seller, to
waive Seller's obligation to obtain Resubdivision and/or the Site Development
Permit as a condition to Closing, in which case, subject to the other terms and
conditions of this Contract, the parties shall proceed to close on the
transactions contemplated under this Contract within fifteen (15) business days
after the date of Purchaser's notice to Seller waiving such conditions.
e. Purchaser and Seller agree that, subject to the terms and
conditions of this Contract, they shall cooperate in good faith with one another
in connection with the application and acquisition of any approvals, licenses or
permits contemplated hereunder and shall provide to one another, upon request
therefor, such information as may be reasonably requested with respect to the
status of the Resubdivision, the Site Development Permit and any other
approvals, licenses or permits contemplated under this Contract.
11. Nature of Facilities. The "Facilities" (herein so called) shall
consist of a congregate care facility, not to exceed sixty (60) feet in height,
containing approximately 194,000 to 210,000 gross square feet of building area
and approximately 11,000 gross square feet or less of basement area, and other
related site improvements, all conforming substantially to the Site Plan.
12. Reciprocal Easements and Restrictive Covenants. At the Closing, Seller
and Purchaser shall enter into one or more agreements, each in form and
substance mutually agreed upon by Purchaser and Seller in their reasonable
discretion, granting (i) any reciprocal drainage and detention easements and
utility easements as may be reasonably necessary in the development of the Real
Property or of the Tax Parcel (including, without limitation, such easements
across and under the balance of the Tax Parcel or other properties owned by
Seller as may be reasonably required to permit Purchaser to tie into the
stormwater detention facilities described in paragraph 6.a(24) above), and (ii)
to the extent mutually desired by Purchaser and Seller or otherwise required by
applicable Governmental Authorities, any reciprocal access easements over and
across portions of the Tax Parcel for the purpose of ingress and egress to (and
from) the Tax Parcel from (and to) MoPac Expressway South (Loop 1) and Gaines
Ranch Loop. Seller and Purchaser further agree that they shall enter into (and
Seller agrees to cause all other necessary persons or entities to execute), at
or immediately after the Closing, one or more agreements, amendments or other
instruments mutually acceptable to Purchaser and Seller providing for the
amendment of the Declaration to the extent necessary to identify the Real
Property and the balance of the Tax Parcel as separate "Lots" under the
Declaration and to permit the Real Property and the balance of the Tax Parcel to
have separate, individual voting rights thereunder.
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13. Condemnation. If, prior to the Closing, all or any part of the Real
Property is condemned or is the subject of a threat of condemnation, Purchaser
shall have the option of either (i) proceeding to close this transaction and
accepting an assignment of any condemnation award or (ii) terminating this
Contract. Purchaser shall exercise either election by the delivery of written
notice to Seller within ten (10) days of the date Seller notifies Purchaser in
writing of such condemnation, and, if Purchaser shall fail to timely make such
election, Purchaser shall be deemed to have elected the option specified at
clause (ii) hereof. In the event of the termination of this Contract under the
provisions of this paragraph 13, the Escrow Deposit shall be returned to
Purchaser and the parties shall have no further obligation or liability to one
another hereunder (except for those obligations expressly surviving the
termination of this Contract).
14. Real Estate Commissions. Seller and Purchaser represent and warrant
to each other that they have dealt with no broker, finder or similar agent in
connection with the transaction provided for in this Contract, except Steve T.
Matthews Co. and Dick Matz Agency, Inc. (collectively called the "Brokers") to
which Seller agrees to pay a commission of six percent (6%) of the total
purchase price (to be divided equally between the Brokers) in the event and only
in the event this sale is closed in accordance with the terms and provisions of
this Contract and Seller receives the total purchase price provided for in
paragraph 2 herein. This commission will be full payment to the Brokers and to
any persons claiming through or under the Brokers, for all services rendered,
commissions earned, or expenses incurred in connection with the negotiations,
transfer, sale and/or conveyance of the Property; and, if requested by Seller,
the Brokers agree to execute and deliver to Seller at the Closing a full and
complete release of any claims and demands which may arise from any such
negotiations, transfer, sale and/or conveyance. Furthermore, the Brokers agree
to indemnify and hold Seller and Purchaser harmless from and against any claims
for commission or other fees made by any person if that person is claiming to
have dealt with the Brokers in connection with this transaction, including
reasonable attorney's fees incurred in connection with the defense of such a
claim. Seller agrees to hold Purchaser harmless from and against any claim made
by any person claiming to have dealt with Seller in connection with this
transaction, including reasonable attorney's fees incurred in the defense of
such a claim. Purchaser agrees to hold Seller harmless from and against any
claim made by any person claiming to have dealt with Purchaser in connection
with this transaction, including reasonable attorney's fees incurred in the
defense of such a claim. Purchaser acknowledges that it has been advised by the
Brokers that it should have an abstract covering the Real Property examined by
an attorney of its selection, or should be furnished with or obtain a policy of
title insurance.
15. Notices. Any notices required or permitted to be given under this
Contract shall be in writing and shall be deemed to be given (i) when actually
received by that person; (ii) on the third (3rd) business day after being
deposited in the United States mail, postage prepaid, registered or certified
mail, return receipt requested, addressed to Seller or Purchaser, as the case
may be, at the address indicated herein, or to a different address as previously
given in a notice to the other party; (iii) one (1) business day after timely
delivery to a nationally or regionally recognized overnight courier service
guaranteeing next business day delivery; or (iv) on the day transmitted by
facsimile, provided that the sender retains the written confirmation of the
delivery thereof and sends, mails or otherwise delivers a "hard copy" of such
notice to the recipient one (1) business day thereafter by means of delivery in
accordance with either clause
18
<PAGE>
(ii) or (iii) hereof. A copy of any notice given to Seller shall be given at the
same time and in the same manner as the notice to Seller to:
Nick von Kreisler
Drenner & Stuart, L.L.P.
301 Congress Avenue, Suite 2100
Austin, Texas 78701
Telecopy: (512) 404-2244
A copy of any notice given to Purchaser shall be given at the same time and in
the same manner as the notice to Purchaser to:
The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: Mark J. Iuppenlatz
Telecopy: (312) 917-0460
with a copy to:
The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: Robert J. Rudnik
Telecopy: (312) 917-1684
16. Miscellaneous
a. Assignment; Binding Effect; Authority. Purchaser cannot assign
this Contract to any other person or entity without the prior written consent of
Seller, except to (i) an entity controlling, controlled by or in common control
with Purchaser or (ii) the successor-in-interest to Purchaser's senior housing
division, if such division is spun off into a separate entity. Without Seller's
prior written consent, no assignment hereunder shall operate to release
Purchaser of its liabilities or obligations under this Contract. Subject to this
restriction on assignment, this Contract and all of its terms and provisions
shall be binding upon and inure to the benefit of Seller, and the successors and
assigns of Seller, and Purchaser, and the successors and assigns of Purchaser.
Seller and Purchaser represent that they are duly organized, validly existing
and in good standing under the laws of the state of their organization, that
they have the legal power to enter into this Contract and to perform all the
terms of this Contract, and that the persons signing this Contract on their
behalf are fully authorized to sign for and to bind them.
b. Complete Agreement; Headings; Waiver. This Contract contains the
complete agreement of the parties and, except as expressly set forth in this
Contract, Seller has made no representations or warranties of any kind with
respect to the Property. This Contract cannot be amended or modified except by
written agreement signed by Seller and Purchaser. The paragraph headings herein
are for reference purposes only and are not intended in any way to describe,
interpret, define or limit the scope, content or extent of this Contract or any
part
19
<PAGE>
of it. If any portion of this Contract is held by a court of proper jurisdiction
to be invalid or inoperative, then so far as is reasonable and possible the
remainder of the Contract shall be deemed valid and operative, and effect shall
be given to the intent manifested by the portion held invalid or inoperative.
The failure by either party to enforce against the other any term or provisions
of this Contract shall not be deemed to be a waiver of that party's right to
enforce against the other party the same or any other term or provision. The
terms and provisions of this Contract shall not merge with, or be extinguished
or otherwise affected by, any subsequent conveyance or instrument between the
parties, unless the instrument specifically so states and is signed by both
parties.
c. Governing Law. This Contract and the obligations under this
Contract shall be construed in accordance with, governed by, and shall be
subject to, the laws of the State of Texas.
d. Execution in Counterparts. The Contract can be executed in
counterparts, each of which shall be an original and, upon the delivery to the
Title Company of one or more of the Contracts signed by all parties, together
will constitute a fully executed and binding Contract. As soon as possible, the
parties agree to exchange Contracts so that each party will have a fully
executed Contract.
e. Date of Contract. For purposes of this Contract it is agreed that
the Effective Date of this Contract shall be the date on which a fully executed
copy of this Contract, signed by both Seller and Purchaser, is deposited with
the Title Company along with the Escrow Deposit provided for herein. The Escrow
Deposit receipt issued by the Title Company shall be conclusive evidence of the
Effective Date of this Contract.
f. Offer. The execution of this Contract by one party (the
"Offeror") shall constitute an offer to the other party (the "Offeree") for the
purchase and sale of the Property pursuant to the terms, provisions and
conditions set forth in this Contract. In the event this offer, unless sooner
withdrawn, is not accepted by the Offeree by delivering (either by means of
overnight delivery or telecopy) an executed counterpart signature page hereof to
the Offeror on or before 5:00 p.m., C.S.T., Monday, February 17, 1997, this
offer shall become null and void, notwithstanding the Offeree's subsequent
execution thereof. For purposes hereof, the execution of this Contract by the
Brokers (or the failure thereof) shall not be determinative of compliance with
this provision.
IN WITNESS WHEREOF, the parties have caused this Contract to be duly
executed on the dates set forth below to be effective as of the Effective Date.
20
<PAGE>
SELLER:
------
VG OFFICE PARTNERSHIP '95, LTD., a Texas limited
partnership
By: Stone C-7, Ltd., a Texas limited partnership,
its general partner
By: ORI, Inc., a Texas corporation, its
general partner
By: /s/ Ron Greene
-------------------------------------
Ron Greene, Chief Financial Officer
Address: 301 Congress, Suite 1390
Austin, Texas 78701
Attention: Sanford L. Gottesman
Dated signed by Seller: ________________, 1997
PURCHASER:
---------
THE PRIME GROUP, INC., an Illinois corporation
By: /s/ Mark J. Schulte
---------------------------------------------
Name: Mark J. Schulte
---------------------------------------------
Title: Executive Vice President
---------------------------------------------
Address: 77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: Mark J. Iuppenlatz
Dated signed by Purchaser: February 14, 1997
21
<PAGE>
BROKERS:
-------
STEVE T. MATTHEWS CO.
By: /s/ Steve T. Matthews
------------------------------------------
Name: Steve T. Matthews
------------------------------------------
Title: Principal
------------------------------------------
DICK MATZ AGENCY, INC.
By: /s/ Richard L. Matz
------------------------------------------
Name: Richard L. Matz
------------------------------------------
Title: President
------------------------------------------
The undersigned, Heritage Title Company of Austin, Inc., hereby
acknowledges receipt of a fully executed copy of this Contract and the Escrow
Deposit required thereunder in the amount of $10,000.00, and agrees to perform
the duties of Title Company, including disbursement of the Escrow Deposit,
strictly in accordance with the terms of the Contract.
TITLE COMPANY:
-------------
HERITAGE TITLE COMPANY OF AUSTIN, INC.,
a Texas corporation
By: /s/ Brenda K. Hindsman
-----------------------------------
Name: Brenda K. Hindsman
-----------------------------------
Title: Vice President
-----------------------------------
Date: 2-21
------------------, 1997
22
<PAGE>
EXHIBIT A
Description of Real Property
----------------------------
A-1
<PAGE>
[ART DESCRIPTION OF REAL PROPERTY]
<PAGE>
EXHIBIT B
Surveyor's Certificate
----------------------
"The undersigned does hereby certify that (i) this survey was this day made
upon the ground of the property reflected hereon, for the benefit of and
reliance by Seller, Purchaser, the Title Company and all other parties listed
above; (ii) the description contained hereon is correct; (iii) the property has
access to and from a dedicated roadway as shown hereon; (iv) except as shown
hereon, there are no discrepancies, conflicts, shortages in area, encroachments,
improvements, overlapping of improvements, setback lines, easements, or
roadways; (v) the total acreage and the gross square footage and the square
footage net of any portion of the property lying within public roadways shown
hereon are correct; (vi) none of the property lies within the 100-year flood
plain or any special flood hazard area or general hazard area as designated by
any governmental agency; and (vii) this survey satisfies the accuracy
requirements of an ALTA/ACSM Class A "as built" survey."
B-1
<PAGE>
Exhibit 10.35
FIRST AMENDMENT TO CONTRACT
THIS FIRST AMENDMENT TO CONTRACT (this "Amendment") is made as of February
21, 1997, by and between VG OFFICE PARTNERSHIP '95, LTD., a Texas limited
partnership ("Seller"), and THE PRIME GROUP, INC., an Illinois corporation
("Purchaser") (Seller and Purchaser sometimes collectively referred to herein as
the "Parties").
WITNESSETH:
WHEREAS, the Parties previously entered into that certain Contract for Sale
dated February 21, 1996 (the "Contract") regarding the sale and purchase of
certain real property located in Travis County, Texas, such property being more
particularly described therein;
WHEREAS, clause (ii) of paragraph 10.a of the Contract provides that Seller
is to use good faith and diligent efforts to obtain certain approvals and
consents (the "Approvals") from any "Declarant" under the Declaration therein
described and from any architectural control committee or property owners
association created, existing or appointed pursuant to the terms of such
Declaration; and
WHEREAS, the parties now desire to amend the Contract as hereinafter
provided to clarify that Seller's acquisition of the Approvals is a condition
precedent to Purchaser's obligation to close on the transactions contemplated
under the Contract.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter made, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Purchaser hereby agree as follows:
1. Amendment of Terms. The Parties hereby agree that, for purposes of the
Contract, the term "Site Development Permit" shall encompass the Approvals.
2. Miscellaneous.
a. All terms and conditions of the Contract not expressly modified by this
Amendment shall remain in full force and effect, and, in the event of any
consistencies between this Amendment and the terms of the Contract, the terms
set forth in this Amendment shall govern and control. Except as expressly
amended hereby, the contract shall remain in full force and effect as of the
date thereof.
b. This Amendment may be executed in one or more counterparts which shall
be construed together as one document.
c. Captions used herein are for convenience only and are not to be
utilized to ascribe any meaning to the contents thereof.
d. Unless defined differently herein or the context clearly requires
otherwise, all terms used in this Amendment shall have the meanings ascribed to
them under the Contract.
<PAGE>
e. This Amendment (i) shall be binding upon and shall inure to the
benefit of each of the Parties and their respective successors, assigns,
receivers and trustees; (ii) may be modified or amended only by a written
agreement executed by each of the Parties; and (iii) shall be governed by and
construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed
to be effective as of the date first above set forth.
SELLER:
------
VG OFFICE PARTNERSHIP '95, LTD., A Texas limited
partnership
By: Stone C-7, Ltd., a Texas limited
partnership, its general partner
By: ORI, Inc., a Texas corporation, its
general partner
By: /s/ Ron Greene
-----------------------------------
Ron Greene, Chief Financial Officer
PURCHASER:
---------
THE PRIME GROUP, INC., an Illinois corporation
By: /s/ Mark J. Schulte
-----------------------
Name: Mark J. Schulte
---------------------
Title: EXEC. V.P.
-------------------
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated February 18, 1997 with respect to the balance
sheet of Brookdale Living Communities, Inc., the combined financial statements
of Original Facilities, the combined financial statements of Activelife
Facilities, the financial statements of Gables at Brighton Associates, the
combined financial statements of Park Place Facilities and the consolidated
financial statements of BLC Property, Inc. and Subsidiaries in Amendment No. 3
to the Registration Statement (Form S-1) and related Prospectus of Brookdale
Living Communities, Inc. for the registration of 5,750,000 shares of its
common stock.
ERNST & YOUNG LLP
Chicago, Illinois
March 3, 1997
<PAGE>
EXHIBIT 23.3.1
CONSENT TO BE NAMED AS A DIRECTOR OR EXECUTIVE OFFICER
Do you consent to being named as director or executive officer in the
Registration Statement to be filed with the Securities and Exchange Commission
on behalf of Brookdale Living Communities, Inc.?
YES X NO
------- -------
/s/ Darryl W. Copeland, Jr.
- ---------------------------
Signature
Darryl W. Copeland, Jr.
- --------------------------
Name
Dated: February 27, 1997
<PAGE>
Exhibit 23.3.2
CONSENT TO BE NAMED AS A DIRECTOR OR EXECUTIVE OFFICER
Do you consent to being named as director or executive officer in the
Registration Statement to be filed with the Securities and Exchange Commission
on behalf of Brookdale Living Communities, Inc.?
YES X NO
------- --------
/s/ Wayne D. Boberg
- ----------------------
Signature
Wayne D. Boberg
- ----------------------
Name
Dated: February 27, 1997
<PAGE>
EXHIBIT 23.3.3
CONSENT TO BE NAMED AS A DIRECTOR OR EXECUTIVE OFFICER
Do you consent to being named as director or executive officer in the
Registration Statement to be filed with the Securities and Exchange
Commission on behalf of Brookdale Living Communities, Inc.?
YES X NO
----------------- -----------------
/s/ Bruce L. Gewertz
- --------------------
Signature
Bruce L. Gewertz
- ----------------
Name
Dated: February 27, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,580,000<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,581,000
<CURRENT-LIABILITIES> 2,580,000<F2>
<BONDS> 0
<COMMON> 1
0
0
<OTHER-SE> 999<F3>
<TOTAL-LIABILITY-AND-EQUITY> 2,581,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Amount consists of $2,580,000 in deferred costs related to offering.
<F2> Amount consists of $2,580,000 due to an affiliate of Brookdale Living
Communities, Inc.
<F3> Amount represents additional paid-in capital on common stock
</FN>
</TABLE>
