<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BALANCED CARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 8361 25-1761898
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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5021 LOUISE DRIVE, SUITE 200
MECHANICSBURG, PENNSYLVANIA 17055
(717) 796-6100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
BRAD E. HOLLINGER
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BALANCED CARE CORPORATION
5021 LOUISE DRIVE, SUITE 200
MECHANICSBURG, PENNSYLVANIA 17055
(717) 796-6100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
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RONALD D. WEST MARK KESSEL
KIRKPATRICK & LOCKHART LLP SHEARMAN & STERLING
1500 OLIVER BUILDING 599 LEXINGTON AVENUE
PITTSBURGH, PENNSYLVANIA 15222-2312 NEW YORK, NEW YORK 10022-6069
(412) 355-6500 (212) 848-4000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share..... 8,005,000 shares $11.00 $88,055,000 $26,684
================================================================================================================
</TABLE>
(1) Includes up to 1,044,000 shares that may be issued upon the exercise of an
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee; based
on a bona fide estimate of the maximum offering price of the securities
being registered in accordance with Rule 457(a).
-----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
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 OCTOBER 14, 1997
BALANCED CARE CORP LOGO
LOGO
6,961,000 SHARES
COMMON STOCK
All of the shares of Common Stock offered hereby (the "Offering") will be
issued and are being sold by Balanced Care Corporation (the "Company"). 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 $9.00
and $11.00 per share. See "Underwriting" for the method of determining the
initial public offering price.
---------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
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Per Share............................. $ $ $
- --------------------------------------------------------------------------------------------------------
Total (2)............................. $ $ $
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(1) Before deducting expenses payable by the Company, estimated at $ .
(2) The Company has granted the Underwriters a 30-day option to purchase up to
1,044,000 additional shares of Common Stock solely to cover over-allotments,
if any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively.
---------------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1997.
BANCAMERICA ROBERTSON STEPHENS SMITH BARNEY INC.
The date of this Prospectus is , 1997.
<PAGE> 3
TEXT
[logo of Company]
TEXT
[logo of Company]
[Map of eastern half of United States, separately identifying,
as of September 30, 1997, the headquarters of the Company,
current operations, pending acquisitions and facilities in
development or under construction]
[pictures of residents of Company facilities]
[pictures of residents of Company facilities]
TEXT
TEXT
[logo of Company]
[pictures of residents of Company facilities]
TEXT
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION
OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE ""UNDERWRITING.''
<PAGE> 4
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING 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 UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
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TABLE OF CONTENTS PAGE
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Summary............................................................................... 4
Risk Factors.......................................................................... 8
Use of Proceeds....................................................................... 15
Dividend Policy....................................................................... 15
Capitalization........................................................................ 16
Dilution.............................................................................. 17
Selected Consolidated Financial and Operating Data.................................... 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 20
Unaudited Pro Forma Financial Information............................................. 27
Business.............................................................................. 42
Management............................................................................ 64
Certain Transactions.................................................................. 72
Principal Stockholders................................................................ 74
Description of Capital Stock.......................................................... 77
Shares Eligible For Future Sale....................................................... 78
Underwriting.......................................................................... 80
Legal Matters......................................................................... 82
Experts............................................................................... 82
Additional Information................................................................ 84
Index to Financial Statements......................................................... F-1
</TABLE>
---------------------
The Company intends to furnish to its stockholders annual reports
containing audited financial statements and an opinion thereon expressed by
independent certified public accountants and quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.
Pursuant to Rule 406 of the Securities Act of 1933, as amended, the Company
has filed a request for confidential treatment with the Securities and Exchange
Commission. Pursuant to this request, certain portions of this Registration
Statement have been omitted and filed separately. If material has been omitted,
it has been replaced with the legend "[Confidential Treatment Requested]."
3
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including that appearing in "Risk Factors" and the financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
Except where otherwise indicated, all share and per share data in this
Prospectus have been adjusted to reflect: (i) a three-for-four reverse split of
the Common Stock effected on October 14, 1997 and (ii) the conversion of all
outstanding shares of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock of the Company (together, the "Outstanding Preferred
Stock") into an aggregate of 4,620,531 shares of Common Stock effective upon
completion of the Offering. See "Description of Capital Stock" and "Principal
Stockholders." In addition, unless otherwise indicated, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option.
References herein to fiscal years are references to the fiscal year of the
Company ended June 30 of the year specified.
THE COMPANY
The Company was formed in April 1995 to develop senior care continuums
which meet the needs of upper middle, middle and moderate income populations in
non-urban, secondary markets. The Company intends to utilize assisted living
facilities in selected markets as the primary entry point and service platform
to develop a care continuum (the "Balanced Care Continuum") in which various
hospitality and health care services are offered that enable residents to age in
place. The Company believes that non-urban, secondary markets are underserved,
highly fragmented and less prone to intense competition from larger providers.
The Company believes that these factors will enable it to establish a leading
position as a provider of a market differentiated, consumer preferred continuum
of senior care services in such markets. To achieve its goals, the Company
intends to: (i) provide a range of high quality, individualized senior care
services and programs, (ii) develop the Balanced Care Continuum, (iii) focus on
non-urban, secondary markets, (iv) continue developing the Company's signature
assisted living facilities, (v) pursue growth through selective acquisitions,
(vi) achieve the benefits of regional density by clustering, and (vii) expand
referral networks and strategic alliances.
Since its inception, the Company has grown primarily through acquisitions.
The Company has also leased two facilities and has designed, developed and
opened five of its signature assisted living facilities. As of September 30,
1997, the Company operated a total of 21 assisted living facilities, 12 skilled
nursing facilities and four independent living facilities in Pennsylvania,
Missouri, Arkansas and Wisconsin, as well as a home health care agency in
Missouri and a rehabilitation therapy operation in Pennsylvania. After giving
effect to the acquisition of Feltrop's Personal Care Home ("Feltrop") in October
1997, and assuming completion of the Pending Acquisitions (as defined below),
the Pharmacy Divestiture (as defined below), the planned divestiture of the
Company's assisted living facilities in Wisconsin and the additional assisted
living facilities opened since September 30, 1997, the Company will own, lease
or manage a total of 40 senior living and health care facilities in
Pennsylvania, Missouri, Arkansas and North Carolina with a capacity for 1,260
assisted living residents, 1,362 skilled nursing patients and 154 independent
living residents. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Pending Acquisitions and Planned
Divestiture" and "Unaudited Pro Forma Financial Information." In addition to the
five signature assisted living facilities opened to date by the Company, the
Company anticipates opening an additional four signature assisted living
facilities, all of which are currently under construction, during the remainder
of calendar year 1997.
The Company recently completed acquisitions of Foster Health Care
Affiliates ("Foster"), Keystone Affiliates ("Keystone"), Heavenly Health Care,
Inc. d/b/a Joe Clark Residential Care Homes ("Clark") and Feltrop (collectively,
the "Recent Acquisitions"). The Company has executed a definitive agreement with
respect to the pending acquisition of Butler Senior Care ("Butler") and letters
of intent with respect to the pending acquisitions of Senior Living Center, Inc.
d/b/a Saxony Health Center ("Saxony"), [Confidential Treatment Requested] and
Gethsemane Affiliates ("Geth-
4
<PAGE> 6
semane") (collectively, the "Pending Acquisitions"). The Company also plans to
divest (the "Pharmacy Divestiture") Long-Term Care Pharmaceutical, Inc. (the
"Pharmacy").
The Balanced Care Continuum is being developed to deliver consumer-focused
hospitality and health care services that balance seniors' desire for
independence with their evolving health care needs. The Company's philosophy
includes the belief that wellness and preventative therapy will strengthen
residents, improve their health and forestall the deterioration that generally
accompanies aging, thus extending their lives and lengths of stay in assisted
living facilities. The Company's wellness-oriented program, Balanced Gold(SM),
has been developed to predict and proactively address resident care needs,
including stabilizing and improving residents' cognitive, emotional and physical
well being. The Balanced Gold(SM) program is included in the Company's core
services package at each of its newly-developed signature assisted living
facilities, and the Company intends to implement all or part of the program at
its other assisted living facilities as appropriate. Preventative, restorative
and rehabilitative services are also expected to be made available to residents
through outpatient medical rehabilitation, home health care, programs for
residents with Alzheimer's and other services provided by the Company or by an
alliance partner or other third-party. By offering services and programs that
are intended to enable residents to stay healthier longer and prolong their stay
at assisted living facilities, the Company believes that its services and
programs will address the preferences and needs of seniors, while at the same
time forestalling the need for residents to move to a more costly long-term care
setting, such as a skilled nursing facility. As resident needs mandate migration
into a skilled nursing or subacute program, the Company believes that its
skilled nursing facilities will provide a transition for the resident with a
focus on demonstrated outcomes and cost effective care. The Company believes
that its approach to senior care will enable it to be a leading provider of a
continuum of senior care services in targeted non-urban, secondary markets.
The senior care industry is characterized by a wide range of living
accommodations and health care services. For those who are able to live in a
home setting, home health care and other limited services can be provided.
Community housing or retirement centers, which are commonly referred to as
independent living facilities, are also available to persons who need limited
assistance, such as with meal preparation, housekeeping and laundry. Assisted
living facilities are typically for those persons whose physical or cognitive
frailties have reached a stage where other living accommodations can no longer
provide the level of care required, but who do not yet need the continuous
medical attention provided in a skilled nursing facility. Generally, assisted
living facilities provide a combination of housing and 24-hour personal support
services designed to assist seniors with activities of daily living ("ADLs"),
which include bathing, eating, personal hygiene, grooming, ambulating and
dressing. Certain assisted living facilities also offer higher levels of
personal assistance for residents with Alzheimer's disease or other forms of
dementia. Skilled nursing facilities provide care for those who need a minimum
of three hours of nursing per day.
The Company believes that the assisted living industry is evolving as the
preferred alternative to meet the growing demand for a cost effective setting
for those seniors who cannot live independently due to physical or cognitive
frailties but who do not require the more intensive medical attention provided
by a skilled nursing facility. According to the United States Bureau of the
Census, the portion of the United States population aged 75 and older is
expected to increase by approximately 29%, from approximately 13.0 million in
1990 to approximately 16.8 million by the year 2000, and the number of persons
aged 85 and older, as a segment of the United States population, is expected to
increase by approximately 43%, from approximately 3.0 million in 1990 to over
4.3 million by the year 2000. The United States Bureau of the Census data shows
that approximately 45% of persons aged 85 years and older, approximately 24% of
persons aged 80 to 84 and approximately 20% of persons aged 75 to 79 need
assistance with ADLs. In 1996, according to industry estimates, the assisted and
independent living industries generated approximately $12 to $14 billion in
revenues.
The Company believes that a number of factors will contribute to the
continued growth of the assisted living industry, including (i) consumer
preference, (ii) cost effectiveness, (iii) changing income and family dynamics,
(iv) demographics, and (v) supply/demand imbalance.
5
<PAGE> 7
THE OFFERING
Common Stock Offered by the
Company............................. 6,961,000 shares
Common Stock to be Outstanding
after the Offering................ 15,606,343 shares(1)
Use of Proceeds..................... To repay outstanding long-term
indebtedness of $8,123,000,
indebtedness of $5,842,000 incurred to
fund the purchase of one completed
acquisition and indebtedness of
$9,104,000 to be incurred to fund the
purchase of a pending acquisition, and
to fund the aggregate purchase price of
$23,007,000 for three other pending
acquisitions; the balance will be used
for general corporate purposes,
including working capital and possible
future acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market
Symbol.............................. BCCX
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(1) Based on shares outstanding as of September 30, 1997. Excludes (i) 937,867
shares issuable upon the exercise of warrants to purchase Common Stock
outstanding as of such date at a weighted average exercise price of $0.62
per share, (ii) 987,175 shares issuable upon the exercise of outstanding
options to purchase shares of Common Stock granted under the Company's stock
option plan as of such date at a weighted average exercise price of $4.15
per share and (iii) 1,037,825 shares reserved for issuance upon the grant of
options under the Company's stock option plan as of such date. See
"Management -- Stock Incentive Plan."
6
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
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YEAR ENDED JUNE 30,
---------------------------------------------------------
PRO FORMA
AS
PRO FORMA ADJUSTED
1995(1) 1996 1997(2) 1997(3) 1997(4)
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STATEMENT OF OPERATIONS DATA:
Revenues:
Patient services.................... $ -- $ -- $41,616 $49,729 $56,549
Resident services................... -- 737 6,778 15,089 17,612
Other revenues...................... -- 74 1,086 974 996
----- ----- ------- ------- -------
Total revenues.............. -- 811 49,480 65,792 75,157
Loss from operations.................. (10) (814) (3,787) (2,772) (872)
Net loss.............................. $ (10) $(909) $(4,492) $(3,036) $ (465)
Net loss per share(5)................. $ -- $(0.29) $ (0.56) $ (0.38) $ (0.03)
Weighted average common and common
equivalent shares outstanding(5).... 2,939 3,088 7,954 7,954 15,778
SELECTED OPERATING DATA:
Facilities operated at end of period:
Assisted living..................... -- 8 18 23 26
Skilled nursing..................... -- -- 12 12 13
Independent living.................. -- -- 4 4 4
Resident capacity at end of period:
Assisted living..................... -- 213 707 976 1,207
Skilled nursing..................... -- -- 1,228 1,228 1,362
Independent living.................. -- -- 120 140 140
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JUNE 30,
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PRO FORMA
PRO AS
1995 1996 1997 FORMA(3) ADJUSTED(4)
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BALANCE SHEET DATA:
Working capital...................... $ 16 $ 727 $15,675 $ 1,964 $34,529
Total assets......................... 17 7,292 33,842 50,023 90,649
Long-term debt, net of current
portion............................ -- 5,043 8,177 8,177 54
Redeemable preferred stock........... -- -- 13,249 13,249 --
Stockholders' equity................. 17 1,124 (1,444) (209) 76,735
</TABLE>
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(1) From inception at April 17, 1995.
(2) Includes results of operations of Foster beginning September 1, 1996, the
results of operations of Keystone beginning February 1, 1997, and the
results of operations of Clark beginning May 16, 1997.
(3) Gives effect to the acquisitions of Foster, Keystone, Clark and Feltrop, the
Pharmacy Divestiture and the pending acquisition of Butler as if such
transactions had occurred on July 1, 1996 with respect to statement of
operations data for the fiscal year ended June 30, 1997 and as of June 30,
1997 with respect to balance sheet data. Such data are not necessarily
indicative of the results of operations that would have been achieved had
such transactions occurred on the dates indicated or that may be expected to
occur in the future as a result of such transactions. There can be no
assurance that the pending acquisition of Butler or the Pharmacy Divestiture
will be consummated.
(4) Gives effect to: (i) the pending acquisitions of Saxony, [Confidential
Treatment Requested] and Gethsemane, (ii) the sale by the Company of
6,961,000 shares of Common Stock in the Offering (at an assumed initial
public offering price of $10.00 per share and after deducting estimated
underwriting discounts and commissions and offering expenses) and the
anticipated application of the net proceeds therefrom and (iii) the
conversion of all Outstanding Preferred Stock into an aggregate of 4,620,531
shares of Common Stock, as if such transactions had occurred on July 1, 1996
with respect to statement of operations data for the fiscal year ended June
30, 1997 and as of June 30, 1997 with respect to balance sheet and selected
operating data. There can be no assurance that the pending acquisitions of
Saxony, [Confidential Treatment Requested] or Gethsemane will be
consummated.
(5) See Note 1(q) to the Consolidated Financial Statements of the Company.
7
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby.
LIMITED OPERATING HISTORY; LOSSES
The Company was formed in April 1995 and has a limited operating history.
The Company incurred losses of $10,000, $909,000 and $4,492,000 for its fiscal
years ended June 30, 1995 (from inception at April 17, 1995), 1996 and 1997,
respectively, and had an accumulated deficit of $5,411,000 as of June 30, 1997.
The Company would have had a net loss for the year ended June 30, 1997 of
$465,000 on a pro forma basis after giving effect to the Recent Acquisitions,
the Pending Acquisitions and the Pharmacy Divestiture as if such transactions
had occurred on July 1, 1996 and assuming completion of the Offering. There can
be no assurance that the Pending Acquisitions will be consummated. The Company's
newly developed assisted living facilities are expected to incur operating
losses until they achieve targeted occupancy levels. In addition, the Company's
acquired operations, even if profitable when acquired, may incur operating
losses pending their integration into the Company's business. Several of the
facilities that have been acquired by the Company experienced operating losses
in fiscal 1997. See "Selected Consolidated Financial and Operating Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Unaudited Pro Forma Financial Information." Accordingly, there
can be no assurance that the Company will not continue to incur losses. Failure
to achieve profitability could have a material adverse effect on the Company's
business, results of operations and financial condition.
IMPLEMENTATION OF STRATEGIES
To date, the Company's growth has been primarily attributable to
acquisitions of assisted living and skilled nursing facilities. The Company's
first signature assisted living facility opened in May 1997. The Company has
opened four additional signature assisted living facilities in September and
October 1997. The Company intends to develop a "Balanced Care Continuum" through
the development and selective acquisition of additional assisted living
facilities and, where appropriate, skilled nursing facilities, as well as the
provision of medical rehabilitation, home health care and skilled nursing
services. The Company expects that the number and types of facilities and
business operations that it owns, operates or manages will increase
substantially if the Company is successful in implementing its strategies.
Implementation of the Company's strategies will place a significant burden on
the Company's management resources and require the development, implementation
and continual enhancement of sufficient operational, resident care, financial
and management information systems. Successful implementation of the Company's
strategies will also depend on its ability to carry out its development plans
and to effect acquisitions and alliances and to attract, motivate and retain
management, professional, marketing and other key personnel. There can be no
assurance that its strategies can be implemented successfully or that sufficient
management resources and operational, resident or patient care, financial and
management information systems will be available. If the Company is unable to
effectively implement its strategies or to manage its growth, its business,
results of operations and financial condition could be materially and adversely
affected.
NEED FOR ADDITIONAL CAPITAL
The Company will need to obtain substantial additional capital resources to
fund its development and acquisition strategy. The estimated cost to complete
pending acquisitions and the facilities planned for development over the next
three years substantially exceeds the financial resources currently available to
the Company and the estimated net proceeds of the Offering. Accordingly, the
Company's future growth will depend on its ability to obtain additional
financing on acceptable terms. The Company may seek additional financing through
public or private financing sources, including equity, debt or lease financing.
Financings effected through the issuance of securities could result in
8
<PAGE> 10
substantial dilution to holders of Common Stock. There can be no assurance that
adequate funding will be available as needed or on terms acceptable to the
Company. Insufficient financial resources could result in the Company delaying
or eliminating all or some of its development projects and acquisition plans,
which could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
ASSISTED LIVING FACILITY DEVELOPMENT, CONSTRUCTION AND OCCUPANCY RISKS
To date, the Company has developed, built and opened five of its signature
assisted living facilities. The Company plans to develop approximately 75
Company-designed assisted living facilities with an aggregate capacity of
approximately 6,000 residents over the next three years. Achievement of these
development goals will depend upon a number of factors, including the Company's
ability to acquire suitable development sites at acceptable prices, to obtain
adequate financing on acceptable terms, to obtain zoning, land use, building,
occupancy, licensing and other required governmental permits on a timely basis,
and to control construction costs and project completion schedules. In addition,
numerous factors outside the Company's control will impact the successful
implementation of its development plans, including competition for site
acquisitions, shortages of, or the inability to obtain, labor or materials,
changes in applicable laws or regulations or in the method of applying such laws
and regulations, the failure of general contractors or subcontractors to perform
under their contracts, strikes and adverse weather. There can be no assurance
that the Company will not encounter delays in its development program or that it
will be successful in developing and constructing planned or additional assisted
living facilities or that completed facilities will achieve targeted occupancy
rates or otherwise be economically successful. The Company's inability to
achieve its development plans or the delay of those plans could have a material
adverse effect on its business, results of operations and financial condition.
ACQUISITION RISKS; DIFFICULTIES OF INTEGRATION
To date, the Company's growth has been primarily attributable to
acquisitions, and it is currently a party to one asset purchase agreement and
three letters of intent relating to the Pending Acquisitions. The Company plans
to continue to expand its business through acquisitions. Pursuit of an
acquisition strategy entails the risks inherent in assessing the value,
strengths, weaknesses, contingent or other liabilities and potential
profitability of acquisition candidates and in integrating the operations of
acquired businesses. The Company's success in effecting acquisitions will depend
on numerous factors, including its ability to identify suitable acquisition
candidates and negotiate acceptable purchase terms, the competition for
acquisitions, the Company's ability to finance acquisitions, and the
availability of appropriate government licenses and approvals. Successful
integration of acquired businesses will depend on the Company's ability to
effect any required changes in operations or personnel, and may require
renovation or other capital expenditures or the funding of unforeseen
liabilities. There can be no assurance that the Company will consummate any or
all of its Pending Acquisitions or future acquisitions, that operations of
acquired facilities can be successfully integrated or that acquired operations
will be profitable.
SUBSTANTIAL FIXED CHARGES
The Company leases most of its facilities under long-term operating leases.
Lease and debt service obligations of the Company for fiscal 1997 aggregated
approximately $6,300,000. On a pro forma basis after giving effect to the Recent
Acquisitions and the Pending Acquisitions as if such transactions had occurred
on July 1, 1996, the Company would have had aggregate lease and debt service
obligations for fiscal 1997 of approximately $8,800,000. Leases generally
provide for rent increases and require the Company to pay taxes, utilities and
insurance obligations. The Company intends to continue to finance the
development of its properties through a combination of operating leases and
mortgage financing and thus expects that the amount of its lease-related and
debt service obligations will increase as the
9
<PAGE> 11
Company pursues its growth strategy. As a result, an increasing portion of the
Company's cash flow will be devoted to lease payments and debt service, which
will reduce the amount of cash flow otherwise available to support the Company's
growth. There can be no assurance that the Company will generate sufficient cash
flow from operations to cover required lease and debt service payments. Any
payment or other default could cause a lender to foreclose upon any collateral
securing the indebtedness or, in the case of an operating lease, could terminate
the lease, resulting in a loss of revenue and asset value to the Company. In
certain cases, indebtedness secured by real estate of a facility is also secured
by a pledge of the Company's operating interest in the facility. Since most of
the Company's leases and credit agreements contain cross-default and
cross-collateralization provisions, a default by the Company on one of its
payment obligations could adversely affect a significant number of the Company's
other obligations and properties. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
GOVERNMENT REGULATION
The health care industry is subject to extensive federal and state
regulation and frequent regulatory change. Federal, state and local laws
governing long-term care and other services provided to seniors address, among
other things, adequacy of medical care, distribution of pharmaceuticals,
operating policies, licensing and certificate of need requirements. Long-term
care facilities are also periodically inspected to assure continued compliance
with various standards and licensing requirements under state law. There are
currently no federal laws or regulations specifically defining or regulating
assisted living facilities. However, while many states have not yet enacted
specific assisted living laws or regulations, the Company's assisted living
facilities are subject to state regulation, licensing, approvals by state and
local health, welfare and social service agencies and other regulatory
authorities and compliance with building codes and environmental laws. In
addition, in several states, including Arkansas, Missouri, New Jersey and North
Carolina, certificate of need laws apply to assisted living facilities.
Certificate of need or similar laws require that a state agency approve certain
acquisitions and determine that a need exists for certain services, the addition
of beds and capital expenditure or other changes. North Carolina also recently
imposed a moratorium on the addition of adult care home beds, subject to certain
exceptions where binding commitments have been made to establish or expand an
adult care home facility. When the issuance or renewal of certificates of need
or other similar government approvals are required, changes in existing laws or
adoption of new laws could adversely affect the Company's development or
acquisition strategy and/or its operations if it is unable to obtain such
certificates of need approvals or renewals thereof. Also, health care providers
have been subjected to increasing scrutiny under anti-trust laws as the
integration and consolidation of the health care industry increases and affects
competition. Regulation of the assisted living industry is evolving. The Company
cannot predict the content of new regulations and their effect on its business.
There can be no assurance that regulatory or other legal developments will not
affect adversely the Company's business, results of operations and financial
condition.
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements (including employment
or service contracts) between health care providers and others who may be in a
position to refer or recommend patients or services to such providers. These
laws prohibit, among other things, certain direct and indirect payments that are
intended to induce the referral of patients to, the arranging for services by,
or the recommending of a particular provider of health care items or services.
The Medicare/Medicaid anti-kickback law has been broadly interpreted to apply to
certain contractual relationships between health care providers and sources of
patient referral. A number of similar state laws exist which often have not been
interpreted by courts or regulatory agencies. The Department of Health and Human
Services periodically issues "special fraud alerts" which address specific areas
of concern, including a June 1995 alert that related to fraudulent practices in
the provision of home health care. The alert identified fraudulent home health
care practices such as cost report fraud, billing for excessive services or
services not rendered, use of unlicensed or untrained staff and kickbacks.
Additionally, federal "Stark" legislation prohibits, with limited exceptions,
the referral of patients for certain services, including
10
<PAGE> 12
home health care services, physical therapy and occupational therapy, by a
physician to entities in which they have an ownership or financial interest.
Violation of these laws can result in loss of licensure, civil and criminal
penalties, and exclusion of health care providers or suppliers from
participating in the Medicare and Medicaid programs. Additionally, the Balanced
Budget Act of 1997 (the "Budget Act"), signed into law on August 5, 1997,
contains a number of anti-fraud provisions designed to further fight abuse and
enhance program integrity. Furthermore, some states restrict certain business or
fee relationships between physicians and other providers of health care
services. The Company believes that its operations are in substantial compliance
with the laws applicable to Medicare and Medicaid providers, including
anti-fraud and abuse provisions; however, there can be no assurance that the
administrative or judicial interpretation of such laws or the regulations
promulgated thereunder will not in the future have a material adverse impact on
the Company's operations or that the Company will not be subject to an
investigation which would require a significant investment of time and manpower
by the Company. Assisted living facilities may be eligible to participate as
Medicaid providers and receive reimbursement through Medicaid waiver programs
and managed care plans. If the Company elects to become a Medicaid provider with
respect to its assisted living facilities, such entities would become subject to
all of the requirements applicable to Medicaid providers, including the
anti-fraud and abuse legislation. Although the Company believes that it complies
with federal and state anti-remuneration statutes at all times, there can be no
assurance that such laws will be interpreted in a manner consistent with the
practices of the Company.
The Americans with Disabilities Act of 1990 requires all places of public
accommodation to meet certain federal requirements related to access and use by
disabled persons. A number of additional federal, state and local laws exist
which also may require modifications to existing and planned properties to
create access to the properties by disabled persons. While the Company believes
that its properties comply with present requirements or are exempt therefrom, if
required changes involve a greater expenditure than anticipated or must be made
more quickly than anticipated, additional costs will be incurred by the Company.
Further legislation may impose additional burdens or restrictions relating to
access by disabled persons. The costs of complying with any new legislation
could be substantial.
HEALTH CARE REFORM
In addition to extensive existing government health care regulation, there
are many initiatives on the federal and state levels for comprehensive reforms
affecting the payment for and availability of health care services. It is not
clear what proposals, if any, will be adopted, or what effect such proposals
would have on the Company's business. Various aspects of these health care
proposals, such as reductions in funding of the Medicare and Medicaid programs,
potential changes in reimbursement regulations by the Health Care Financing
Administration ("HCFA"), enhanced pressure to contain health care costs by
Medicare, Medicaid and other payors and permitting greater state flexibility in
the administration of Medicaid, could adversely affect the Company's business,
results of operations and financial condition. The Company's skilled nursing
facilities that participate in applicable state Medicaid programs are subject to
the risk of changes in Medicaid reimbursement and payment delays resulting from
budgetary shortfalls of state Medicaid programs. The Company's current
concentration of skilled nursing facilities in Missouri and Pennsylvania exposes
it to the risk of changes in Medicaid reimbursement programs in those states.
Medicare and Medicaid certification is a critical factor contributing to the
revenues and profitability of long-term care facilities. Changes in
certification and participation requirements of the Medicare and Medicaid
programs have restricted, and are likely to further restrict, eligibility for
reimbursement under those programs. Failure to obtain and maintain Medicare and
Medicaid certification at the Company's long-term care facilities could result
in a significant loss of revenue. In addition, private payors, including managed
care payors, increasingly are demanding that providers accept discounted fees or
assume all or a portion of the financial risk for delivery of health care
services, including capitated payments where the provider is responsible, for a
fixed fee, for providing all services needed by certain patients. Capitated
payments can result in significant losses when patients require expensive
treatments not adequately covered by the capitated
11
<PAGE> 13
rate. Efforts to impose reduced payments, greater discounts and more stringent
cost controls by government and other payors are expected to continue. The
Company cannot predict what reform proposals or reimbursement limitations will
be adopted in the future or the effect any such changes will have on its
operations. There can be no assurance that currently proposed legislation,
future health care legislation, reforms or changes in the administration or
interpretation of governmental health care programs or regulations will not have
a material adverse effect on the Company's business, results of operations and
financial condition. Concern about the potential effect of various proposed
health care reforms has contributed to volatility of prices of securities of
health care companies and could similarly affect the price of the Common Stock
in the future.
GEOGRAPHIC CONCENTRATION OF BUSINESS
Currently, a substantial portion of the Company's facilities, including
facilities under construction and development and those comprising the Pending
Acquisitions are located in Pennsylvania and Missouri. Operating revenues
attributable to the Company's business in those states accounted for
approximately 95% of the Company's total operating revenues for the year ended
June 30, 1997 and, after giving effect to the Pending Acquisitions and the
Pharmacy Divestiture, 94% of pro forma total operating revenues for the fiscal
year ended June 30, 1997. As part of its strategy, the Company intends to
continue to develop and acquire facilities in Pennsylvania and Missouri, as well
as other states. Until the Company's operations become more geographically
dispersed, the Company will be more susceptible to downturns in local and
regional economies and changes in state or local regulation because such
conditions and events could affect a relatively high percentage of the total
number of facilities currently in operation and under development. As a result
of such factors, there can be no assurance that such geographic concentration
will not have a material adverse effect on the Company's business, results of
operations or financial condition.
LIABILITY AND INSURANCE
Providing health care services involves an inherent risk of liability.
Participants in the senior living and health care industry are subject to
lawsuits alleging negligence or related legal theories, many of which may
involve large claims and significant legal costs. The Company currently
maintains liability insurance intended to cover medical malpractice, wrongful
death and other claims which management believes is in keeping with industry
practice. However, claims in excess of the Company's insurance coverage or
claims not covered by the Company's insurance (e.g., claims for punitive
damages) may arise. A successful claim against the Company not covered by or in
excess of the Company's insurance coverage could have a material adverse effect
on the Company's business, results of operations and financial condition. Claims
against the Company, regardless of their merit or eventual outcome, may also
have a material adverse effect upon the Company's reputation and its ability to
attract residents or expand its business. The Company's insurance policies
generally must be renewed annually, and there can be no assurance that the
Company will be able to obtain liability insurance coverage in the future on
acceptable terms, if at all. See "Business -- Liability and Insurance."
COMPETITION
The senior living and health care industry is highly competitive and the
Company believes that competition in its current and targeted markets will
continue to increase. The Company faces current and prospective competition for
residents and patients and for employees from numerous local, regional and
national providers of facility-based assisted living and long-term care, as well
as rehabilitation therapy and home-based health care providers. Many of the
Company's current and potential competitors are significantly larger and have
greater financial and marketing resources than the Company. There are currently
few regulatory and other barriers to entry into the assisted living industry. If
the development of new assisted living facilities surpasses the demand for such
facilities in particular markets, such markets could become saturated. The
Company also expects to compete for acquisitions of additional assisted living
and long-term care facilities and other senior health care
12
<PAGE> 14
operations. Competition could limit the Company's ability to attract residents
and patients and expand its business and could have a material adverse effect on
the Company's business, results of operations and financial condition.
ENVIRONMENTAL RISKS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
held liable for the cost of removal or remediation of certain hazardous or toxic
substances that may be located on, in or under the property. These laws and
regulations may impose liability regardless of whether the owner or operator was
responsible for, or knew of, the presence of the hazardous or toxic substances.
The liability of the owner or operator and the cost of any required remediation
or removal of hazardous or toxic substances could be substantial and is
generally not limited. The presence of hazardous or toxic substances in or under
such properties could also subject the Company to lawsuits by or liability to
adjacent property owners, residents of the facilities or employees who are
injured by contamination. The presence of hazardous or toxic substances at any
property held or operated by the Company in the future could have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, if contamination is found, it could adversely affect the
Company's ability to continue to operate, to lease or to sell the contaminated
property or to use that property as collateral for future loans.
CONTROL BY CURRENT STOCKHOLDERS
Upon completion of the Offering, current stockholders and holders of
options or warrants to acquire Common Stock, including the Company's executive
officers and directors and their affiliates, will own beneficially approximately
55.4% of the outstanding shares of Common Stock and the rights to purchase an
additional 6.8% of the outstanding Common Stock through the exercise of
currently exercisable options and warrants (51.9% and 6.4%, respectively, if the
Underwriter's over-allotment option is exercised in full). As a result, these
stockholders, acting together, would be able to exert substantial influence over
the Company and matters requiring approval by the Company's stockholders,
including the election of the directors. The voting power of these stockholders
under certain circumstances could have the effect of delaying or preventing a
change in control of the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's success to date has been significantly dependent on the
contributions of Brad E. Hollinger, the Company's Chairman of the Board,
President and Chief Executive Officer and one of its founders, and the loss of
his services could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Management" for a discussion
of a Securities and Exchange Commission proceeding with respect to Mr.
Hollinger. The Company's success also depends to a significant extent upon a
number of other key employees of the Company. The loss of the services of one or
more other key employees also could have a material adverse effect on the
Company. In addition, the Company believes that its future success will depend
in part upon its ability to attract and retain additional highly-skilled
professional, managerial, sales and marketing personnel. Competition for such
personnel is intense. There can be no assurance that the Company will be
successful in attracting and retaining the personnel that it requires for its
business and planned growth.
LABOR COSTS
The Company competes with various health care providers and other employers
for limited qualified and skilled personnel in the markets that it serves. The
Company expects that its labor costs will increase over time. Currently, none of
the Company's employees is represented by a labor union. If employees of the
Company were to unionize, the Company could incur labor costs higher than those
of competitors with non-union employees. The Company's business, results of
operations and financial condition could be adversely affected if the Company is
unable to control its labor costs.
13
<PAGE> 15
NO PRIOR TRADING MARKET; POTENTIAL 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 for the
Common Stock will develop or, if one does develop, that it will be maintained.
The initial public offering price, which will be established by negotiations
between the Company and the representatives of the Underwriters, does not
reflect book value per share and may not be indicative of prices that will
prevail in the trading market for the Common Stock. The stock market has
experienced extreme price and volume fluctuations which have particularly
affected the market price for many health care companies and which have often
been unrelated to the operating performance of these companies. The trading
price of the Common Stock could also be subject to significant fluctuations in
response to variations in periodic operating results, changes in management,
future announcements concerning the Company, legislative or regulatory changes,
general trends in the industry and other events or factors. See
"Business -- Competition," "Business -- Government Regulation" and
"Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
15,606,343 shares of Common Stock (16,650,343 shares outstanding if the
Underwriters' over-allotment option is exercised in full) including 9,823,492
shares of Common Stock owned beneficially by existing stockholders. The
6,961,000 shares of Common Stock to be sold pursuant to the Offering will be
eligible for sale without restriction under the Securities Act in the public
market after the completion of the Offering. Pursuant to an agreement with the
Company, the Company and certain existing stockholders of the Company owning
shares of Common Stock have agreed with the Underwriters that they will not
offer, sell or otherwise dispose of any shares of Common Stock (other than, in
the case of the Company, pursuant to its existing employee stock option plan)
for a period of 180 days after the date of this Prospectus without the prior
written consent of the representatives of the Underwriters. To the extent not
subject to the restrictions set forth above, 50,906 shares of Common Stock owned
by existing stockholders and, following the expiration or waiver of the
restrictions set forth above, 9,772,586 additional shares of Common Stock will
be immediately available for sale into the open market pursuant to Rule 144
under the Securities Act (including the volume and other limitations set forth
therein) and could impair the Company's future ability to raise capital through
an offering of its equity securities. In addition, certain of the Company's
existing stockholders have rights to demand registration of their shares under
the Securities Act, which registration would permit such stockholders to sell
their shares without being subject to the restrictions of Rule 144. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."
DILUTION
The initial public offering price of the Common Stock is substantially more
than the net tangible book value per share of the Common Stock. Accordingly, the
purchasers of shares of Common Stock pursuant to the Offering will experience
immediate and substantial dilution in the net tangible book value per share of
Common Stock from the initial public offering price. The net tangible book value
dilution to new investors in the Offering will be $5.30 per share at an assumed
initial public offering price of $10.00 per share. See "Dilution."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and
By-laws and Delaware law could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock. Certain of such provisions allow the Company to issue
preferred stock with rights senior to those of the Common Stock and impose
various procedural and other requirements which could make it more difficult for
stockholders to effect certain corporate actions. See "Description of Capital
Stock."
14
<PAGE> 16
USE OF PROCEEDS
Based on an assumed initial public offering price of $10.00 per share (the
midpoint of the estimated range of initial public offering prices), the Company
will receive approximately $63,737,300 from the sale of shares of Common Stock
in the Offering after deduction of estimated underwriting discounts and
commissions and estimated expenses (approximately $73,446,500 if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the net proceeds from the Offering to repay outstanding long-term
indebtedness of $8,123,000, indebtedness of $5,842,000 incurred to fund the
purchase of one completed acquisition and indebtedness of $9,104,000 to be
incurred to fund the purchase of a pending acquisition, and to fund the
aggregate purchase price of $23,007,000 for three other pending acquisitions;
the balance will be used for general corporate purposes, including working
capital and possible future acquisitions. The long-term indebtedness is secured
by mortgages amortized over 30 years, of which $5,000,000 is due in May 2006 and
bears interest at 10.6% per annum, and the remainder is due in September 2008
and bears interest at 10.7% per annum. The acquisition indebtedness to be repaid
is due not later than March 31, 1998 and bears interest at prime rate plus 2.0%.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Pending Acquisitions and Planned Divestiture." If any of the
Pending Acquisitions are not completed, the net proceeds to the Company of the
Offering not used for such acquisition will be available for the foregoing
general corporate purposes. Pending their application, the net proceeds of the
Offering will be invested in short-term, interest bearing securities.
DIVIDEND POLICY
The Company has not paid or declared any dividends on its capital stock
since its inception. The Company anticipates that, following the completion of
the Offering, earnings will be retained for development of its business and will
not be distributed to stockholders as dividends. The declaration and payment by
the Company of any future dividends and the amount thereof will depend upon the
Company's results of operations, financial condition, cash requirements, future
prospects, limitations imposed by credit agreements or senior securities and
other factors deemed relevant by the Board of Directors. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 7 of the Notes to
Consolidated Financial Statements of the Company.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth as of June 30, 1997: (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
giving effect to the acquisition of Feltrop and Butler and the Pharmacy
Divestiture and the borrowing of $14,946,000 under a bridge financing
arrangement with a health care real estate investment trust ("REIT") to fund the
aggregate purchase price of such acquisitions and estimated transaction costs,
and (iii) the pro forma capitalization of the Company as adjusted to reflect (a)
the sale by the Company of 6,961,000 shares of Common Stock in the Offering at
an assumed initial public offering price of $10.00 per share (the midpoint of
the estimated range of initial public offering prices) after deducting estimated
underwriting discounts and commissions and estimated offering expenses, and the
application of the net proceeds therefrom, and (b) the conversion of all
Outstanding Preferred Stock into an aggregate of 4,620,531 shares of Common
Stock.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term borrowings.................................... $ -- $14,946 $ --
======= ======= ===
Long-term debt, net of current portion................... $ 8,177 $ 8,177 $ 54
------- ------- ---
Redeemable preferred stock:
Series B Convertible Preferred Stock, par value $.001
per share; 5,009,750 shares authorized and
outstanding;
none outstanding on a pro forma as adjusted basis... 13,249 13,249 --
------- ------- ---
Stockholders' equity:
Preferred Stock, par value $.001 per share;
5,000,000 authorized; none outstanding.............. -- -- --
Series A Convertible Preferred Stock, par value $.001
per share; 1,150,958 shares authorized and
outstanding;
none outstanding on a pro forma as adjusted basis... 1 1 --
Common Stock, par value $.001 per share; 50,000,000
shares authorized; 4,024,812 shares outstanding;
4,024,812 shares outstanding on a pro forma basis;
15,606,343 shares outstanding on a pro forma as
adjusted basis(1)................................... 5 5 16
Additional paid-in capital............................. 3,961 3,961 80,895
Accumulated deficit.................................... (5,411) (4,176) (4,176)
------- ------- ---
Total stockholders' equity.......................... (1,444) (209) 76,735
------- ------- ---
Total capitalization........................... $19,982 $21,217 $76,789
======= ======= ===
</TABLE>
- ------------
(1) Excludes as of June 30, 1997 (i) 937,867 shares issuable upon the exercise
of warrants to purchase Common Stock outstanding as of such date at a
weighted average exercise price of $0.62 per share, (ii) 987,175 shares
issuable upon the exercise of outstanding options to purchase shares of
Common Stock granted under the Company's stock option plan as of such date
at a weighted average exercise price of $4.15 per share and (iii) 1,037,825
shares reserved for issuance upon the grant of options under the Company's
stock option plan as of such date.
16
<PAGE> 18
DILUTION
The pro forma net tangible book value of the Company at June 30, 1997 was
$9,586,000 or $1.11 per share of Common Stock. Pro forma net tangible book value
per share represents the amount of the Company's total net tangible assets less
total liabilities, divided by the pro forma number of shares of Common Stock
issued and outstanding at that date after giving effect to the conversion of the
Outstanding Preferred Stock upon the completion of the Offering. After giving
effect to the sale of the shares of Common Stock in the Offering (at an assumed
initial offering price of $10.00 per share) and before deducting anticipated
offering expenses and underwriting discounts and commissions, the adjusted pro
forma net tangible book value of the Company at June 30, 1997 would have been
$73,323,000 or $4.70 per share, representing an immediate $5.30 per share
dilution to new investors purchasing shares at the initial public offering
price. The following table illustrates such per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $10.00
Pro forma net tangible book value prior to the Offering (1)...... $ 1.11
Increase per share attributable to new investors................. 3.59
Adjusted pro forma net tangible book value per share after the Offering.... 4.70
Dilution per share to new investors (2).................................... $ 5.30
=======
</TABLE>
- ------------
(1) Gives pro forma effect to the increase per share attributable to the
conversion of the outstanding Preferred Stock.
(2) Dilution is determined by subtracting pro forma net tangible book value per
share after giving effect to the Offering from the initial public offering
price paid by a new investor for a share of Common Stock. The foregoing
calculation assumes no exercise of any outstanding warrants or options to
purchase shares of Common Stock. As of September 30, 1997, there were
outstanding warrants to purchase 937,867 shares of Common Stock at a
weighted average exercise price of $0.62 per share and options to purchase
987,175 shares of Common Stock at a weighted average exercise price of $4.15
per share. See "Management -- Stock Incentive Plan." If all the warrants and
options outstanding as of such date were to be exercised immediately,
dilution per share to new investors would be $4.28.
The following table sets forth, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing stockholders
and by new investors (assuming the sale by the Company of 6,961,000 shares in
the Offering at an assumed initial public offering price of $10.00 per share),
before deduction of underwriting discounts and commissions and offering
expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------------- -----------------------------
PERCENT AFTER PERCENT AFTER AVERAGE PRICE
NUMBER OFFERING AMOUNT OFFERING PER SHARE
---------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 8,645,343 55.4% $14,668,000 17.4% $ 1.70
New investors........ 6,961,000 44.6 69,610,000 82.6 10.00
---------- ----- ----------- -----
Total.............. 15,606,343 100.0% $84,278,000 100.0%
========== ===== =========== =====
</TABLE>
17
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The selected consolidated "Statement of Operations Data" and "Balance Sheet
Data" presented below as of June 30, 1997 and 1996 and for the years then ended
and the period April 17, 1995 (date of inception) to June 30, 1995, have been
derived from the consolidated financial statements of the Company, which have
been audited by KPMG Peat Marwick LLP, independent certified public accountants
and which are included elsewhere in the Prospectus. The "Balance Sheet Data" as
of June 30, 1995 are derived from audited financial statements not included in
this Prospectus. The selected financial data set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company and the
unaudited pro forma financial information, together with the respective notes
thereto, included elsewhere in this Prospectus. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Unaudited Pro
Forma Financial Information."
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------
PRO FORMA
AS
PRO FORMA ADJUSTED
1995(1) 1996 1997(2) 1997(3) 1997(4)
------- ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Patient services........................ $ -- $ -- $41,616 $49,729 $56,549
Resident services....................... -- 737 6,778 15,089 17,612
Other revenues.......................... -- 74 1,086 974 996
----- ------ ------- ------- -------
Total revenues.................. -- 811 49,480 65,792 75,157
----- ------ ------- ------- -------
Operating Expenses:
Facility operating expenses:
Salaries, wages and benefits......... -- 320 19,186 26,126 30,248
Other operating expenses............. -- 179 20,727 26,194 28,808
Development and pre-opening expenses.... -- -- 740 740 740
General and administrative expense...... 10 1,000 4,913 4,913 4,913
Lease expense........................... -- 77 5,417 7,803 7,803
Depreciation and amortization expense... -- 49 693 1,197 1,926
Write-down of long-lived assets......... -- -- 1,591 1,591 1,591
----- ------ ------- ------- -------
Total operating expenses........ 10 1,625 53,267 68,564 76,029
----- ------ ------- ------- -------
Loss from operations...................... (10) (814) (3,787) (2,772) (872)
Other income (expense):
Interest income......................... -- 13 265 266 266
Interest expense........................ -- (102) (917) (2,554) (171)
----- ------ ------- ------- -------
Loss before income taxes.................. (10) (903) (4,439) (5,060) (777)
Provision (benefit) for income taxes...... -- 6 53 (2,024) (312)
----- ------ ------- ------- -------
Net loss.................................. $ (10) $ (909) $(4,492) $(3,036) $ (465)
===== ====== ======= ======= =======
Net loss per share(5)..................... -- $(0.29) $ (0.56) $ (0.38) $ (0.03)
===== ====== ======= ======= =======
Weighted average common and common
equivalent shares outstanding(5)........ 2,939 3,088 7,954 7,954 15,778
===== ====== ======= ======= =======
</TABLE>
18
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA -- CONTINUED
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
PRO FORMA
AS
PRO FORMA ADJUSTED
1995(1) 1996 1997(2) 1997(3) 1997(4)
----- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Facilities operated at end of period:
Assisted living......................... -- 8 18 23 26
Skilled nursing......................... -- -- 12 12 13
Independent living...................... -- -- 4 4 4
Resident capacity at end of period:
Assisted living......................... -- 213 707 976 1,207
Skilled nursing......................... -- -- 1,228 1,228 1,362
Independent living...................... -- -- 120 140 140
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------------------------
PRO FORMA
AS
PRO FORMA ADJUSTED
1995 1996 1997 1997(3) 1997(4)
---- ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $16 $ 727 $15,675 $ 1,964 $34,529
Total assets................................ 17 7,292 33,842 50,023 90,649
Long-term debt, net of current portion...... -- 5,043 8,177 8,177 54
Redeemable preferred stock.................. -- -- 13,249 13,249 --
Stockholders' equity........................ 17 1,124 (1,444) (209) 76,735
</TABLE>
- ------------
(1) From inception at April 17, 1995.
(2) Includes results of operations of Foster beginning September 1, 1996, the
results of operations of Keystone beginning February 1, 1997, and the
results of operations of Clark beginning May 16, 1997.
(3) Gives effect to the acquisitions of Foster, Keystone, Clark and Feltrop, the
Pharmacy Divestiture and the pending acquisition of Butler as if such
transactions had occurred on July 1, 1996 with respect to statement of
operations data for the fiscal year ended June 30, 1997 and as of June 30,
1997 with respect to balance sheet data. Such data is not necessarily
indicative of the results of operations that would have been achieved had
such transactions occurred on the dates indicated or that may be expected to
occur in the future as a result of such transactions. There can be no
assurance that the pending acquisition of Butler or the Pharmacy Divestiture
will be consummated.
(4) Gives effect to (i) the pending acquisitions of Saxony, [Confidential
Treatment Requested] and Gethsemane, (ii) the sale by the Company of
6,961,000 shares of Common Stock in the Offering (at an assumed initial
public offering price of $10.00 per share and after deducting estimated
underwriting discounts and commissions and offering expenses) and the
anticipated application of the net proceeds therefrom and (iii) the
conversion of all outstanding Preferred Stock into an aggregate of 4,620,531
shares of Common Stock, as if such transactions had occurred on July 1, 1996
with respect to statement of operations data for the fiscal year ended June
30, 1997 and as of June 30, 1997 with respect to balance sheet data. There
can be no assurance that the pending acquisitions of Saxony, [Confidential
Treatment Requested] or Gethsemane will be consummated.
(5) See Note 1(q) to the Notes to Consolidated Financial Statements of the
Company.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
of the Company and related Notes thereto included elsewhere in the Prospectus.
This Prospectus contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors"
as well as those discussed elsewhere in this Prospectus.
COMPANY OVERVIEW
The Company was formed in April 1995 to develop senior care continuums
which meet the needs of upper middle, middle and moderate income populations in
non-urban, secondary markets. The Company intends to utilize assisted living
facilities in selected markets as the primary entry point and service platform
to develop a care continuum in which various hospitality and health care
services are offered that enable residents to age in place.
Since its inception, the Company has grown primarily through acquisitions.
The Company has also leased two facilities and has designed, developed and
opened five of its signature assisted living facilities. As of September 30,
1997, the Company operated a total of 21 assisted living facilities, 12 skilled
nursing facilities and four independent living facilities in Pennsylvania,
Missouri, Arkansas and Wisconsin, as well as a home health care agency in
Missouri and a rehabilitation therapy operation in Pennsylvania. After giving
effect to the acquisition of Feltrop in October 1997 and assuming completion of
the Pending Acquisitions, the Pharmacy Divestiture, the planned divestiture of
the Company's assisted living facilities in Wisconsin and the additional
assisted living facilities opened since September 30, 1997, the Company will
own, lease or manage a total of 40 senior living and health care facilities in
Pennsylvania, Missouri, Arkansas and North Carolina with a capacity for 1,260
assisted living residents, 1,362 skilled nursing patients and 154 independent
living residents. See "-- Recent Acquisitions" and "-- Pending Acquisitions and
Planned Divestiture" and "Unaudited Pro Forma Financial Information." In
addition to the five signature assisted living facilities opened to date by the
Company, the Company anticipates opening an additional four assisted living
facilities, all of which are currently under construction, during the remainder
of calendar year 1997.
Over the next three years, the Company plans to develop approximately 75 of
its signature assisted living facilities in targeted secondary markets creating
additional capacity of approximately 6,000 residents. The Company estimates that
the cost to complete these signature assisted living facilities will be between
$500,000,000 and $600,000,000. In addition, the Company expects that its need
for financing to fund future acquisitions will be significant, although the
timing and size of any future acquisitions cannot be predicted.
In order to achieve its growth plans, the Company will be required to
obtain substantial additional financing. The Company anticipates that it will
use a combination of the net proceeds to the Company from the Offering, existing
lease financing commitments and other arrangements with health care REITs, a
working capital line of credit, future equity and debt financing and cash
generated from operations to fund its development and acquisition activities.
The estimated costs over the next three years of the Company's planned
development and expansion are significantly in excess of estimated future cash
flows from operations, expected proceeds from the Offering and existing REIT and
other financing arrangements. The Company currently estimates that the net
proceeds from the Offering, together with its existing financing arrangements,
will be sufficient to fund its development and acquisition program for the next
12 to 18 months. There can be no assurance that any additional financing needed
to fund the Company's growth plans will be available or that the Company will
not require or seek additional financing prior to 12 months after the completion
of the Offering. See "-- Liquidity and Capital Resources" and "Risk
Factors -- Need for Additional Capital."
20
<PAGE> 22
Historically, the Company has generated revenues from three primary
sources: patient services, resident services and other revenues. Patient
services revenues include charges for room and board, rehabilitation therapies,
pharmacy, medical supplies, subacute care and other programs provided to
patients in skilled nursing facilities as well as rehabilitation services
provided to assisted living facility residents. Revenues from Medicare, Medicaid
and private pay and other sources represented 38%, 38% and 24%, respectively, of
patient services revenues for the fiscal year ended June 30, 1997. Resident
services include all revenues earned from services provided to assisted living
facility residents except for therapies and home health care services provided
by the Company's licensed agencies which are included in patient services
revenues. Other revenues include development fees, management fees and
miscellaneous other revenues. Development fees are earned for developing
assisted living facilities for REITs.
The Company classifies its operating expenses into the following
categories: (i) facility operating expenses which include labor, food,
marketing, rehabilitation therapy costs, and other direct facility expenses;
(ii) facility development and pre-opening expenses, which include development
expenses and pre-opening advertising and marketing expenses; (iii) general and
administrative expenses, which primarily include corporate office expenses,
regional office expenses and other overhead costs; (iv) lease expense, which
includes rent for the facilities operated by the Company as well as corporate
office and other rent; and (v) depreciation and amortization. In anticipation of
its planned growth, the Company has made significant investments in its
infrastructure during fiscal 1997 and early fiscal 1998. These investments
include attracting management and regional personnel and installing information
systems to support and manage growth.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain data as
a percentage of total revenue:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1996 1997
------ -----
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue(1)........................................................ 100.0% 100.0%
Operating expenses:
Facility operating expenses........................................... 61.5 80.8
Development and pre-opening expenses.................................. -- 1.5
General and administrative expense.................................... 123.4 9.9
Lease expense......................................................... 9.5 10.9
Depreciation and amortization expense................................. 6.0 1.4
Write-down of long-lived assets....................................... -- 3.2
------ -----
Loss from operations.................................................... (100.4) (7.7)
Other income (expense):
Interest income....................................................... 1.6 0.5
Interest expense...................................................... (12.5) (1.8)
------ -----
Loss before income taxes................................................ (111.3) (9.0)
Provision for income taxes.............................................. (0.8) (0.1)
------ -----
Net loss................................................................ (112.1) (9.1)
====== =====
</TABLE>
- ------------
(1) The Company had no revenues for the period from April 17, 1995 (date of
inception) through June 30, 1995.
21
<PAGE> 23
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
Total Revenue. Total revenue for fiscal 1997 increased by $48,669,000 to
$49,480,000 from $811,000 in fiscal 1996 due mainly to the significant
acquisitions made during fiscal 1997. Patient service revenues were $41,616,000
in fiscal 1997 due to the increase in skilled nursing bed capacity from zero to
1,228 resulting from the Foster and Keystone acquisitions. Resident services
revenue increased by $6,041,000 due to the increase in assisted and independent
living resident capacity from 213 to 827 at June 30, 1996 and 1997,
respectively. Other revenues grew from $74,000 in fiscal 1996 to $1,086,000 in
fiscal 1997 due primarily to development fees of $1,015,000 earned on 14
facilities under construction for health care REITs.
Operating Expenses. Total operating expenses for fiscal 1997 increased by
$51,642,000 to $53,267,000 from $1,625,000 in fiscal 1996. As a percentage of
total revenue, total operating expenses decreased to 107.7% in fiscal 1997 from
200.4% in fiscal 1996. The increase in total operating expenses in fiscal 1997
is attributable primarily to the growth in facility operating expenses, the
administrative expenditures related to building the Company's infrastructure to
support and manage its growth, lease expense, depreciation and the write-down of
long-lived assets.
Facility operating expenses for fiscal 1997 increased by $39,414,000 to
$39,913,000 (including $19,186,000 of salaries, wages and benefits) from
$499,000 in fiscal 1996. As a percentage of total revenue, facility operating
expenses increased to 80.8% in fiscal 1997 from 61.5% in fiscal 1996. Facility
operating expenses related to existing operations increased by $2,708,000 as
these operations were owned by the Company for a full year in fiscal 1997. The
remainder of the facility operating expense increase was attributable to the
operations acquired during fiscal 1997.
Development and pre-opening expenses for fiscal 1997 increased to $740,000
from zero in fiscal 1996 due to the increase in staffing related to the
Company's expanded development and acquisition efforts. These expenses increased
to 1.5% of total revenue in fiscal 1997 from 0% in fiscal 1996. Labor and travel
costs increased by $565,000 while other direct development and acquisition costs
and pre-opening expenses increased by $175,000.
General and administrative expenses for fiscal 1997 increased by $3,913,000
to $4,913,000 from $1,000,000 in fiscal 1996. As a percentage of total revenue,
these expenses decreased to 9.9% in fiscal 1997 from 123.4% in fiscal 1996 as a
result of the Company's minimal total revenues in fiscal 1996. Of the $3,913,000
increase in general and administrative expenses in fiscal 1997, approximately
$2,599,000 resulted from labor costs relating to the addition of new corporate
and regional office staff to plan and manage the Company's actual and
anticipated growth and $1,314,000 was attributable to marketing, consulting,
accounting and rent due to expansion of existing corporate office space and
other general expenses related to the Company's growth.
Lease expense for fiscal 1997 increased by $5,340,000 to $5,417,000 from
$77,000 in fiscal 1996. As a percentage of total revenue, these expenses
increased to 10.9% in fiscal 1997 from 9.5% in fiscal 1996 as a result of the
facility operating leases related to the acquisitions made during fiscal 1997.
The Company's lease arrangements are generally for initial terms of 10 to 15
years with aggregate renewal option periods ranging from 15 to 25 years. The
leases generally provide for contractually fixed rent plus additional rent,
which are contingent upon increases in gross revenues of the facility or the
consumer price index, subject to certain limits. The Company's lease
arrangements contain a fair market value purchase option at the end of the
initial lease term and each renewal term. Certain of the Company's lease
arrangements limit the Company's right to operate other senior care facilities
within a limited geographic area adjacent to the leased facility during the term
of the lease and for a period of up to five years thereafter.
Depreciation and amortization expense for fiscal 1997 increased by $644,000
to $693,000 from $49,000 in fiscal 1996. Of this increase, $428,000 resulted
from a full year of depreciation on the seven owned Wisconsin assisted living
facilities acquired in May 1996 and the two owned Missouri skilled nursing
facilities acquired in August 1996 while $216,000 was due to goodwill
amortization and
22
<PAGE> 24
deferred financing and leasing cost amortization relating primarily to the
Foster and Keystone acquisitions.
In June 1997, the Company committed to a plan for the disposal of its
Wisconsin assisted living facilities. As a result, a non-cash charge of
$1,591,000 has been recorded to write these assets down to their estimated fair
value based on the present value of expected discounted future cash flows less
estimated costs of disposal. For the year ended June 30, 1997, the Wisconsin
operations experienced a pretax loss of $381,000 before the asset write-down.
Other Income (Expense). Interest income for fiscal 1997 increased by
$252,000 to $265,000 from $13,000 in fiscal 1996. The increase is attributable
to the higher level of invested funds due to receipt of proceeds from the sale
of shares of Series B Convertible Preferred Stock in September 1996 and April
1997. Interest expense for fiscal 1997 increased by $815,000 to $917,000 from
$102,000 in fiscal 1996 due primarily to mortgage financing of $5,046,000
incurred in connection with the acquisition of assisted living facilities in
Wisconsin and $3,115,000 incurred in connection with the acquisition of two
skilled nursing facilities in Missouri.
Provision for Income Taxes. Income tax expense in fiscal 1997 of $53,000
resulted from taxable income reported on individual state corporate tax returns
in states that do not permit consolidated filings.
Net Loss. Net loss for fiscal 1997 increased by $3,583,000 to $4,492,000
from $909,000 in fiscal 1996. This increase is primarily attributable to the
write-down of long-lived assets of $1,591,000 in respect of the Company's
Wisconsin assisted living facilities and the increased general and
administrative expenses incurred to plan and manage the Company's actual and
anticipated growth.
LIQUIDITY AND CAPITAL RESOURCES
General
The Company has signed a letter of intent for the sale of the assets of the
Pharmacy for net proceeds of approximately $4,700,000 in cash. This sale is
expected to be completed in October 1997. Due to the Company's NOL carryforwards
and other book/tax timing differences, no federal taxes are expected to be paid
on the gain realized.
The Company has an unused financing commitment from a health care REIT of
approximately $78,000,000 and has entered into terms sheets with two other REITs
for up to $95,000,000 of additional financing to fund development projects and
acquisitions. Initial lease rates under these arrangements range from 3.2% to
3.4% over the 10-year Treasury rate. Specific development projects and
acquisitions require approval of the REITs prior to the financing of a
transaction.
The Company leases most of its facilities under long-term operating leases.
Lease obligations for fiscal 1998 are approximately $8,200,000. The Company's
financing documents contain financial covenants and other restrictions which:
(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 and
certain of its subsidiaries to borrow additional funds, dispose of assets and
engage in mergers or other business combinations, (iii) prohibit the Company
from operating competing facilities within certain distances of the leased or
mortgaged facilities.
The Company has obtained a commitment from a bank for a $10,000,000 line of
credit to be secured by the accounts receivable of its skilled nursing
operations. The line of credit will be for a term of three years and outstanding
borrowings will bear interest at LIBOR plus 2.75% or prime rate plus 0.5%. The
Company will be able to draw on this line of credit to the extent of its
eligible receivables, which were approximately $3,500,000 at September 30, 1997.
Borrowings under the line of credit are expected to be made available in
November 1997.
The Company plans to use the net proceeds from the Offering to repay
$8,123,000 of outstanding long-term debt, indebtedness of $5,842,000 incurred to
fund the purchase of Feltrop and indebtedness
23
<PAGE> 25
of $9,104,000 to be incurred to fund the purchase of Butler and to fund the
aggregate purchase price of $23,007,000 for the acquisitions of Saxony,
[Confidential Treatment Requested] and Gethsemane. The remainder of the net
proceeds will be used for working capital and other general corporate purposes.
The estimated cost to complete and achieve stabilized occupancy of the
approximately 75 new signature assisted living facilities targeted for
completion over the next three years, is between $500,000,000 and $600,000,000
which substantially exceeds the net proceeds of the Offering (after the
repayment of indebtedness and funding of the Pending Acquisitions) and existing
working capital and financing arrangements. The Company currently estimates that
the net proceeds of the Offering, together with its existing financing
commitments, will be sufficient to fund its development and acquisition programs
for the next 12 to 18 months. There can be no assurance that any additional
financing needed to fund the Company's growth plans will be available or that
the Company will not require or seek additional financing prior to 12 months
after the completion of the Offering. See "Risk Factors -- Need for Additional
Capital."
Operating Activities
In fiscal 1997, operating activities used cash of $36,000. Cash was used
primarily for the $4,492,000 net loss, the $3,066,000 increase in accounts
receivable from health care operations due to increased per diem reimbursements
and rehabilitation therapy volume after the Foster acquisition, the $1,396,000
increase in deferred costs resulting from the Company's substantial development
operations and acquisition activities and the $1,564,000 increase in other
current assets. Cash was provided primarily from $693,000 of depreciation and
amortization, $1,454,000 of non-cash lease expense resulting from straight-line
recognition of certain facility rents, the $1,591,000 of non-cash write-down of
long-lived assets, $1,404,000 increase in deferred revenues, and $5,340,000
increase in current liabilities resulting from increased therapy volumes in
health care operations, increased corporate office staff and the Company's
significant growth in general.
In fiscal 1996, operating activities used cash of $564,000. Cash was used
primarily for the $909,000 in net losses and the $666,000 of deferred
development and acquisition costs. Cash was provided by the $1,052,000 increase
in current liabilities resulting from growth in corporate office staffing and
the related accounts payable and accrued expenses.
Financing Activities
The Company has historically financed its development program and
acquisitions through a combination of lease and mortgage financing with health
care REIT and private convertible equity funding.
In September 1995, the Company raised its initial private equity funding
through the sale of $2,000,000 of Series A Convertible Preferred Stock to an
individual private investor. The funding of this investment was staged over a
one year period through September 1996. In March 1996, the Company obtained a
$91,000,000 financing commitment from Meditrust, a health care REIT, for
acquisitions ($60,000,000) and development projects ($31,000,000). The Company
also realized net proceeds of $11,982,000 through a private sale of Series B
Convertible Preferred Stock to a group of venture capital investors. Half of
this investment was funded in September and October of 1996. Investment of the
remainder of the funds was contingent on the Company achieving certain
performance milestones such as meeting or exceeding the operating budget and the
project development timetable. In April 1997, the remaining funds were invested
in the Company. Notes payable of $1,476,000, issued in connection with the
Foster acquisition, were repaid during 1997.
In connection with the lease or debt financing of the Company's
acquisitions, the REIT lease and debt financings included required lease
deposits or debt service reserves which range from three to six months' rent or
debt service. These lease deposits or debt service reserves are recorded as
restricted investments. For leasing transactions, the Company owns the
restricted investment, pays rent on funds
24
<PAGE> 26
advanced by the REIT and amortizes the lease liability as a corresponding
reduction of rent expense in the period when the related rent is expensed.
Investing Activities
In fiscal 1997, investing activities used $7,199,000. Of these funds,
$1,822,000 was used for purchases of property and equipment, $1,546,000 for debt
service reserves and lease deposits, $1,882,000 of goodwill related to the
Keystone and Foster acquisitions, $1,462,000 relating to increases in other
assets for deferred financing costs, project costs and pre-opening costs and
$487,000 relating to acquisitions. In fiscal 1996, investing activities used
$5,481,000 of which $4,701,000 was used for the acquisition of assisted living
facilities in Wisconsin.
COMPLETED ACQUISITIONS
In March 1996, the Company acquired the operations of a 68-bed assisted
living facility in Pennsylvania for cash of approximately $318,000 which has
been recorded as goodwill. Health Care Property Investors, Inc., a health care
REIT, acquired the facility for $2,350,000 and leased it to the Company pursuant
to a 15-year lease agreement with three five-year renewal options. In May 1996,
the Company acquired seven assisted living facilities in Wisconsin with 158
licensed beds for $5,046,000 including transaction costs, which was funded with
mortgage financing provided by Meditrust.
In August 1996, the Company completed the Foster acquisition of 10 skilled
nursing operations, a facility-based home health agency and the Pharmacy, all in
Missouri. In this transaction, the Company exchanged 1,200,000 shares of Common
Stock for all of the outstanding common stock of two skilled nursing companies
and incurred additional indebtedness of $3,115,000 which was funded with
mortgage financing from Meditrust. The Company also purchased the stock of the
Pharmacy, another skilled nursing company which leases its facility from a
third-party owner, and the non-real estate assets and operations of seven
skilled nursing facilities for short-term notes payable of approximately
$1,476,000. Goodwill of approximately $3,401,000 relating to the Pharmacy was
recorded for this acquisition. The Pharmacy has been reclassified as an asset
held for sale at June 30, 1997. The real estate assets of these seven skilled
nursing facilities were purchased by Hawthorn Health Properties, Inc. ("HHP")
for approximately $39,100,000. The Company has leased these seven facilities
from HHP pursuant to a 12-year lease agreement with four 6-year renewal options.
In February 1997, the Company leased two assisted living facilities in Missouri
from the same seller. The facilities have a capacity for 61 residents. The
initial lease term is for three years with two one-year renewal options. See
"Management -- Certain Relationships and Related Transactions."
In January 1997, the Company consummated the Keystone acquisition of the
operations of five assisted living facilities with 317 beds and two skilled
nursing facilities with 103 beds located in Pennsylvania. Capstone Capital
Corporation ("Capstone"), a health care REIT, acquired the facilities for
approximately $21,600,000 including transaction costs and leased them to the
Company pursuant to an 11-year lease agreement with three five-year renewal
options. The Company paid approximately $1,800,000 and issued 187,500 shares of
Common Stock for the non-real estate assets, operations and the rights to seven
early stage development projects. Goodwill of approximately $1,800,000 was
recorded for this acquisition and is being amortized over 25 years.
In May 1997, the Company completed the Clark acquisition of three assisted
living facilities with 77 operating beds in and around Nevada, Missouri. In
August 1997, the Company acquired a fourth assisted living operation with a
capacity for 25 residents. The facilities were acquired by Capstone for
approximately $5,335,000 including transaction costs and the Company entered
into a 10-year lease of the facilities with three five-year renewal options.
In October 1997, the Company purchased Feltrop, a 92-bed assisted living
facility in Pennsylvania for approximately $5,842,000 including transaction
costs. This acquisition has been accounted for using the purchase method and the
estimated goodwill of approximately $1,600,000 will be amortized over 40
25
<PAGE> 27
years. This acquisition was financed through a bridge financing arrangement with
a health care REIT which will be repaid with proceeds from the Offering.
PENDING ACQUISITIONS AND PLANNED DIVESTITURE
The Company has executed a definitive agreement with respect to the pending
acquisition of Butler, and letters of intent with respect to the pending
acquisitions of Saxony, [Confidential Treatment Requested] and Gethsemane. The
Pending Acquisitions collectively consist of seven facilities with an aggregate
capacity for 383 assisted living residents, 134 skilled nursing patients and 20
independent living residents. The aggregate purchase price for these four
pending acquisitions is approximately $32,000,000, including estimated
transaction costs plus contingent consideration of up to approximately
$4,300,000 based on achieving certain future targeted operating results. All of
these acquisitions will be accounted for using the purchase method. The Butler
acquisition is expected to be completed prior to the closing of the Offering.
The Company has arranged approximately $9,104,000 of bridge financing from a
health care REIT at a prime rate plus 2.0% to fund the cash purchase price of
this acquisition. The bridge financing will be repaid with proceeds from the
Offering. The Company intends to fund the purchase of the other three pending
acquisitions with net proceeds from the Offering. The contingent portions of the
purchase prices will not be recorded until the targeted operating results have
been achieved. See "Unaudited Pro Forma Financial Information."
In June 1997, the Company committed to a plan for the disposal of its seven
Wisconsin assisted living facilities. As a result, a non-cash charge of
$1,591,000 has been recorded to write these assets down to their estimated fair
value based on the present value of expected future cash flows less estimated
costs of disposal. For the year ended June 30, 1997, the Wisconsin operations
experienced a pretax loss of $381,000 before the asset write-down. See
"Business -- Operating Facilities."
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, Earnings Per Share ("SFAS No. 128"). The statement replaces the
presentation of primary earnings per share ("EPS") with a presentation of basic
EPS. Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. SFAS No. 128 also requires dual presentation of basic and
diluted EPS on the face of the income statement and other reconciliations and
disclosures. The Company is required to adopt SFAS No. 128 in its fiscal year
ending June 30, 1998. Accordingly, the EPS presentation herein does not reflect
the presentation requirements of SFAS No. 128. Basic EPS is expected to be
higher than primary EPS would be in future periods as primary EPS includes
common stock equivalents while basic EPS will not. There is no difference
between the loss per share calculated under SFAS No. 128 and the loss per share
presented in the Company's consolidated financial statements.
IMPACT OF INFLATION
The senior living and health care industry is labor intensive. Wages and
labor costs are especially sensitive to inflation and marketplace labor
shortages. To date, the Company has offset its increased operating costs by
increasing charges for its services and expanding its services. Inflation could,
however, affect the Company's future revenues and results of operations due to
the Company's dependence on its senior resident population, most of whom rely on
relatively fixed incomes to pay for the Company's services. As a result, the
Company may not be able to raise resident service fees to fully account for
increased operating expenses. In structuring its fees, the Company attempts to
anticipate inflation levels, but there can be no assurance that the Company will
be able to anticipate fully or otherwise respond to any future inflationary
pressures.
26
<PAGE> 28
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma financial information gives effect to
(i) the acquisition of Foster which was completed on August 31, 1996, (ii) the
acquisition of Keystone which was completed on January 31, 1997, (iii) the
acquisition of Clark which was completed on May 15, 1997 and August 18, 1997,
(iv) the acquisition of Feltrop which was completed on October 9, 1997, (v) the
Pending Acquisitions of Saxony, Butler, [Confidential Treatment Requested] and
Gethsemane and (vi) the divestiture of Long Term Pharmaceutical Care, Inc.
("Pharmacy") as if such acquisitions and the Pharmacy Divestiture had been
consummated as of June 30, 1997 in the case of pro forma balance sheet data and
July 1, 1996 in the case of pro forma statement of operations data. The pro
forma balance sheet data combines the historical balance sheet data of the
Company, Saxony, Feltrop, Butler, [Confidential Treatment Requested] and
Gethsemane as of June 30, 1997 and excludes the Pharmacy balance sheet data as
of June 30, 1997. The pro forma statement of operations data for the fiscal year
ended June 30, 1997 combines the actual statement of operations data of the
Company, Saxony, Feltrop, Butler, [Confidential Treatment Requested] and
Gethsemane for the year ended June 30, 1997, the actual statement of operations
data for Foster, Keystone and Clark for the period from July 1, 1996 through the
respective acquisition dates and excludes the income statement data of the
Pharmacy for the year ended June 30, 1997.
The column captioned "Pro Forma As Adjusted" reflects the aforementioned
completed and pending acquisitions and the Pharmacy divestiture and gives effect
to (i) the sale by the Company of 6,961,000 shares of Common Stock in the
Offering at an assumed initial public offering price of $10.00 per share after
deducting estimated underwriting discounts and commissions and estimated
offering expenses and the anticipated application of the net proceeds therefrom
and (ii) the conversion of all Outstanding Preferred Stock into an aggregate of
4,620,531 shares of Common Stock. See "Use of Proceeds" and "Capitalization."
The pro forma data is based on the historical financial statements of the
Company, Foster, Keystone, Clark, Butler, Gethsemane, Feltrop, Saxony,
[Confidential Treatment Requested] and Pharmacy and gives effect to the
acquisitions under the purchase method of accounting, to the Pharmacy
Divestiture and to the assumptions and adjustments (which the Company believes
to be reasonable) described in the accompanying Notes to Unaudited Pro Forma
Financial Information. Under the purchase method of accounting, assets acquired
and liabilities assumed are recorded at their estimated fair values as of the
date of acquisition. The pro forma adjustments reflected in the following data
(with regard to pending acquisitions) are estimated and may differ from the
actual adjustments when they become known. The unaudited pro forma financial
information should be read in conjunction with the audited financial statements
of the Company, Foster, Keystone, Clark, Saxony, Feltrop, Butler, [Confidential
Treatment Requested] and Gethsemane and the related notes thereto included
elsewhere in this Prospectus. See "Index to Financial Statements."
RECENT ACQUISITIONS
Foster
The Foster acquisition was consummated on August 31, 1996 and has been
accounted for as a purchase. This transaction involved the acquisition of two
skilled nursing facilities, a home health operation and a pharmacy company as
well as the non-real estate assets and operations of eight skilled nursing
facilities. The purchase price was comprised of 1,200,000 shares of Common
Stock, the issuance of notes payable aggregating $1,476,000, mortgage financing
of $3,115,000, liabilities assumed of approximately $1,800,000 and transaction
costs of approximately $700,000. Goodwill of approximately $3,401,000 related to
the Pharmacy was recorded for this acquisition. The Pharmacy has been
reclassified as an asset held for sale at June 30, 1997. The real estate assets
of seven skilled nursing facilities were acquired by a third-party for
approximately $39,100,000 and are leased to the Company. The remaining skilled
nursing facility is also leased from another third party.
27
<PAGE> 29
Keystone
The Keystone acquisition occurred on January 31, 1997 and involved the
operations of five assisted living facilities and two skilled nursing
facilities, the non-real estate assets of those seven facilities and the rights
to seven early stage development projects. This acquisition has been accounted
for as a purchase. The purchase price was comprised of approximately $1,800,000
in cash and 187,500 shares of Common Stock. Goodwill of approximately $1,800,000
was recorded and is being amortized over 25 years. The real estate assets were
acquired by a health care REIT for $21,600,000 and are leased to the Company.
Clark
The Clark acquisition occurred on May 15, 1997 with respect to three
assisted living operations and on August 18, 1997 with respect to a fourth
assisted living operation. These facilities have an aggregate capacity of 102
residents. The real estate assets were acquired by a health care REIT for
$5,335,000 and are leased to the Company. The transaction was accounted for as a
purchase and no goodwill was recorded.
Feltrop
The Feltrop acquisition involved the purchase of a 92-bed assisted living
facility which will be accounted for as a purchase. The purchase price of
approximately $5,842,000, including transaction costs, was paid in cash. The
Company estimates that goodwill of approximately $1,550,000 will be recorded for
this acquisition and amortized over 40 years.
PENDING ACQUISITIONS
Butler
The Butler acquisition involves the purchase of three assisted living
facilities with an aggregate capacity of 172 residents which is to be accounted
for as a purchase. The purchase price of approximately $9,104,000, including
transaction costs, is to be paid in cash. The asset purchase agreement provides
for additional purchase price payments of up to $3,100,000 contingent upon
achieving certain future targeted operating results. The contingent portion of
the purchase price will not be recorded until the targeted operating results
have been achieved. The Company estimates that goodwill of approximately
$2,085,000 will be recorded for this acquisition and amortized over 40 years.
Saxony
The Saxony acquisition involves the purchase of a facility with a capacity
for 63 assisted living residents and 68 skilled nursing patients which is to be
accounted for as a purchase. The purchase price of approximately $8,930,000,
including transaction costs, is to be paid in cash. The Company estimates that
goodwill of approximately $1,436,000 will be recorded for this acquisition and
amortized over 40 years.
[Confidential Treatment Requested]
The [Confidential Treatment Requested] acquisition involves the purchase of
a 117-bed assisted living facility which is to be accounted for as a purchase.
The purchase price of approximately $8,549,000, including transaction costs, is
to be paid in cash. The Company estimates that goodwill of approximately
$2,191,000 will be recorded for this acquisition and amortized over 40 years.
Gethsemane
The Gethsemane acquisition involves the purchase of the assets of a 66-bed
skilled nursing facility and a 51-bed assisted living facility which are to be
accounted for as a purchase. The purchase price of approximately $5,528,000,
including transaction costs, is to be paid in cash. The asset purchase
28
<PAGE> 30
agreement provides for additional purchase price payments of approximately
$1,200,000 contingent upon achieving certain future targeted operating results.
The contingent portion of the purchase price will not be recorded until the
targeted operating results have been achieved. The Company estimates that
goodwill of approximately $1,028,000 will be recorded for this acquisition and
amortized over 40 years.
PHARMACY DIVESTITURE
The Company has signed a letter of intent for the sale of the furniture and
equipment, certain prepaid assets and the operations of the Pharmacy for
approximately $4,700,000, net of estimated transaction costs. This sale is
expected to occur during October 1997.
29
<PAGE> 31
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
RECENT PHARMACY
ACQUISITIONS DIVESTITURE
THE COMPANY AND BUTLER PRO FORMA PRO FORMA
ACTUAL PRO FORMA ADJUSTMENTS CONSOLIDATED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Patient services..................................................... $41,616 $ 10,418 $(2,305)(a) $ 49,729
Resident services.................................................... 6,778 8,311 0 15,089
Other revenues....................................................... 1,086 39 (151)(a) 974
------- ------- ------- -------
Total revenues................................................. 49,480 18,768 (2,456) 65,792
------- ------- ------- -------
Operating Expenses:
Facility operating expenses:
Salaries, wages and benefits....................................... 19,186 7,235 (295)(a) 26,126
Other operating expenses........................................... 20,727 7,134 (1,667)(a) 26,194
Development and pre-opening expenses................................. 740 0 0 740
General and administrative expense................................... 4,913 0 0 4,913
Lease expense........................................................ 5,417 2,474 (88)(a) 7,803
Depreciation and amortization expense................................ 693 499 5(a) 1,197
Write-down of long-lived assets...................................... 1,591 0 0 1,591
------- ------- ------- -------
Total expenses................................................. 53,267 17,342 (2,045) 68,564
------- ------- ------- -------
Income (loss) from operations.......................................... (3,787) 1,426 (411) (2,772)
Other income (expense):
Interest income...................................................... 265 1 0 266
Interest expense..................................................... (917) (1,637) 0 (2,554)
------- ------- ------- -------
Income (loss) before taxes............................................. (4,439) (210) (411) (5,060)
Provision (benefit) for income taxes................................... 53 (85) (164)(a) (2,024)(b)
------- ------- ------- -------
Net income (loss)...................................................... $(4,492) $ (125) $ (247) $ (3,036)
======= ======= ======= =======
Pro forma net loss per share........................................... $ (0.56) $ (0.38)
======= =======
Shares used in computing pro forma loss per share...................... 7,954 7,954
======= =======
<CAPTION>
PENDING
ACQUISITIONS
WITHOUT CONSOLIDATED
BUTLER OFFERING PRO FORMA AS
PRO FORMA ADJUSTMENTS ADJUSTED
------------ ----------- ------------
<S> <C<C> <C> <C>
Revenues:
Patient services..................................................... $ 6,820 $ 0 $ 56,549
Resident services.................................................... 2,523 0 17,612
Other revenues....................................................... 22 0 996
------- ---- -------
Total revenues................................................. 9,365 0 75,157
------- ---- -------
Operating Expenses:
Facility operating expenses:
Salaries, wages and benefits....................................... 4,122 0 30,248
Other operating expenses........................................... 2,614 0 28,808
Development and pre-opening expenses................................. 0 0 740
General and administrative expense................................... 0 0 4,913
Lease expense........................................................ 0 0 7,803
Depreciation and amortization expense................................ 729 0 1,926
Write-down of long-lived assets...................................... 0 0 1,591
------- ---- -------
Total expenses................................................. 7,465 0 76,029
------- ---- -------
Income (loss) from operations.......................................... 1,900 0 (872)
Other income (expense):
Interest income...................................................... 0 0 266
Interest expense..................................................... 0 2,383(c) (171)
------- ---- -------
Income (loss) before taxes............................................. 1,900 2,383 (777)
Provision (benefit) for income taxes................................... 759 953(d) (312)
------- ---- -------
Net income (loss)...................................................... $ 1,141 $ 1,430 $ (465)
======= ==== =======
Pro forma net loss per share........................................... $ (0.03)
=======
Shares used in computing pro forma loss per share...................... 7,824 15,778
==== =======
</TABLE>
30
<PAGE> 32
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
RECENT ACQUISITIONS AND BUTLER
FOR THE YEAR ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOSTER KEYSTONE CLARK
------------------------------ ------------------------------ -------------------------------
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS SUBTOTAL ACTUAL ADJUSTMENTS SUBTOTAL ACTUAL ADJUSTMENTS SUBTOTAL
------ ----------- --------- ------ ----------- --------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Patient services............. $6,707 $ 0 $ 6,707 $3,711 $ 0 $ 3,711 $ 0 $ 0 $ 0
Resident services............ 211 0 211 2,331 0 2,331 1,172 0 1,172
Other revenues............... 270 (254)(e) 16 0 0 0 0 0 0
------ ----- ------ ------ ------ ------ ------ ----- ------
Total revenues......... 7,188 (254) 6,934 6,042 0 6,042 1,172 0 1,172
------ ----- ------ ------ ------ ------ ------ ----- ------
Operating Expenses:
Facility operating expenses:
Salaries, wages and
benefits................. 2,872 0 2,872 2,203 0 2,203 365 0 365
Other operating expenses... 3,027 148(f) 3,175 2,731 (34)(l) 2,697 211 0 211
Development and pre-opening
expenses................... 0 0 0 0 0 0 0 0 0
General and administrative
expense.................... 0 0 0 0 0 0 0 0 0
Lease expense................ 68 740(g) 808 0 1,195(m) 1,195 153 318(q) 471
Depreciation and amortization
expense.................... 181 (130)(h) 51 381 (338)(n) 43 0 0 0
Write-down of long-lived
assets..................... 0 0 0 0 0 0 0 0 0
------ ----- ------ ------ ------ ------ ------ ----- ------
Total expenses......... 6,148 758 6,906 5,315 823 6,138 729 318 1,047
------ ----- ------ ------ ------ ------ ------ ----- ------
Income (loss) from
operations................... 1,040 (1,012) 28 727 (823) (96) 443 (318) 125
Other income (expense):
Interest income.............. 46 (46)(i) 0 0 0 0 0 0 0
Interest expense............. (255) 187(j) (68) (490) 490(o) 0 0 0....... 0
------ ----- ------ ------ ------ ------ ------ ----- ------
Income (loss) before taxes.... 831 (871) (40) 237 (333) (96) 443 (318) 125
Provision (benefit) for income
taxes........................ 26 (43)(k) (17) 0 (39)(p) (39) 0 50(r) 50
------ ----- ------ ------ ------ ------ ------ ----- ------
Net income (loss)............. $ 805 $ (828) $ (23) $ 237 $ (294) $ (57) $ 443 $(368) $ 75
====== ===== ====== ====== ====== ====== ====== ===== ======
<CAPTION>
FELTROP BUTLER RECENT
--------------------------------- ------------------------------ ACQUISITIONS
PRO FORMA PRO FORMA PRO FORMA PRO FORMA AND BUTLER
ACTUAL ADJUSTMENTS SUBTOTAL ACTUAL ADJUSTMENTS SUBTOTAL PRO FORMA
------- ----------- --------- ------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Patient services.............$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 10,418
Resident services............ 1,980 0 1,980 2,617 0 2,617 8,311
Other revenues............... 0 0 0 182 (159)(w) 23 39
------ ----- ------ ------ ------ ------ ------
Total revenues......... 1,980 0 1,980 2,799 (159) 2,640 18,768
------ ----- ------ ------ ------ ------ ------
Operating Expenses:
Facility operating expenses:
Salaries, wages and
benefits................. 1,041 (263)(s) 778 1,017 0 1,017 7,235
Other operating expenses... 491 (122)(s) 369 774 (92)(x) 682 7,134
Development and pre-opening
expenses................... 0 0 0 0 0 0 0
General and administrative
expense.................... 0 0 0 0 0 0 0
Lease expense................ 0 0 0 0 0 0 2,474
Depreciation and amortization
expense.................... 73 111(t) 184 135 86(y) 221 499
Write-down of long-lived
assets..................... 0 0 0 0 0 0 0
------ ----- ------ ------ ------ ------ ------
Total expenses......... 1,605 (274) 1,331 1,926 (6) 1,920 17,342
------ ----- ------ ------ ------ ------ ------
Income (loss) from
operations................... 375 274 649 873 (153) 720 1,426
Other income (expense):
Interest income.............. 1 0 1 17 (17)(z) 0 1
Interest expense............. (119) (494)(u) (613) (183) (773)(z) (956) (1,637)
------ ----- ------ ------ ------ ------ ------
Income (loss) before taxes.... 257 (220) 37 707 (943) (236) (210)
Provision (benefit) for income
taxes........................ 0 15(v) 15 0 (94)(aa) (94) (85)
------ ----- ------ ------ ------ ------ ------
Net income (loss).............$ 257 $(205) $ 22 $ 707 $(849) $ (142) $ (125)
====== ===== ====== ====== ====== ====== ======
</TABLE>
31
<PAGE> 33
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PENDING ACQUISITIONS WITHOUT BUTLER
FOR THE YEAR ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
[CONFIDENTIAL TREATMENT
REQUESTED]
SAXONY ------------------------------
-------------------------------- PRO
PRO FORMA PRO FORMA FORMA PRO FORMA
ACTUAL ADJUSTMENTS SUBTOTAL ACTUAL ADJUSTMENTS SUBTOTAL
------ ---------- --------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Patient services...................... $4,353 $ (409) (bb) $ 3,944 $ 0 $ 0 $ 0
Resident services..................... 0 0 0 2,523 0 2,523
Other revenues........................ 4 0 4 17 0 17
------ ------ ------ ------ ----- ------
Total revenues.................. 4,357 (409) 3,948 2,540 0 2,540
------ ------ ------ ------ ----- ------
Operating Expenses:
Facility operating expenses:
Salaries, wages and benefits........ 1,760 (74) (bb) 1,686 1,209 0 1,209
Other operating expenses............ 2,188 (1,101) (bb) 1,087 473 0 473
Development and pre-opening
expenses............................ 0 0 0 0 0 0
General and administrative expense.... 0 0 0 0 0 0
Lease expense......................... 0 0 0 0 0 0
Depreciation and amortization
expense............................. 135 139 (cc) 274 142 112 (ff) 254
Write-down of long-lived assets....... 0 0 0 0 0 0
------ ------ ------ ------ ----- ------
Total expenses.................. 4,083 (1,036) 3,047 1,824 112 1,936
------ ------ ------ ------ ----- ------
Income (loss) from operations........... 274 627 901 716 (112) 604
Other income (expense):
Interest income....................... 20 (20) (dd) 0 17 (17) (gg) 0
Interest expense...................... (133) 133 (dd) 0 (265) 265 (gg) 0
------ ------ ------ ------ ----- ------
Income (loss) before taxes.............. 161 740 901 468 136 604
Provision (benefit) for income taxes.... 0 360 (ee) 360 0 241 (hh) 241
------ ------ ------ ------ ----- ------
Net income (loss)....................... $ 161 $ 380 $ 541 $ 468 $(105) $ 363
====== ====== ====== ====== ===== ======
<CAPTION>
GETHSEMANE PENDING
-------------------------------- ACQUISITIONS
PRO WITHOUT
FORMA PRO FORMA BUTLER
ACTUAL ADJUSTMENTS SUBTOTAL PRO FORMA
------- -------- --------- ------------
<S> <C> <C> <C> <C>
Revenues:
Patient services......................$2,876 $ 0 $ 2,876 $6,820
Resident services..................... 0 0 0 2,523
Other revenues........................ 1 0 1 22
------ ----- ------ ------
Total revenues.................. 2,877 0 2,877 9,365
------ ----- ------ ------
Operating Expenses:
Facility operating expenses:
Salaries, wages and benefits........ 1,227 0 1,227 4,122
Other operating expenses............ 1,054 0 1,054 2,614
Development and pre-opening
expenses............................ 0 0 0 0
General and administrative expense.... 0 0 0 0
Lease expense......................... 0 0 0 0
Depreciation and amortization
expense............................. 120 81 (ii) 201 729
Write-down of long-lived assets....... 0 0 0 0
------ ----- ------ ------
Total expenses.................. 2,401 81 2,482 7,465
------ ----- ------ ------
Income (loss) from operations........... 476 (81) 395 1,900
Other income (expense):
Interest income....................... 0 0 0 0
Interest expense...................... (191) 191 (jj) 0 0
------ ----- ------ ------
Income (loss) before taxes.............. 285 110 395 1,900
Provision (benefit) for income taxes.... 0 158 (kk) 158 759
------ ----- ------ ------
Net income (loss).......................$ 285 $ (48) $ 237 $1,141
====== ===== ====== ======
</TABLE>
32
<PAGE> 34
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
PHARMACY DIVESTITURE
The Pharmacy Divestiture column represents the income statement of the Pharmacy
operations for the year ended June 30, 1997.
(a) Represents the elimination of the results of the Pharmacy from the pro
forma statement of operations.
CONSOLIDATED TAX PROVISION ADJUSTMENT
(b) Represents the tax provision on the adjusted pro forma consolidated
income before taxes at the Company's estimated consolidated effective
tax rate of 40%.
OFFERING ADJUSTMENTS
The increase in shares used in computing pro forma loss per share
represents (i) the 6,961,000 shares to be issued in the Offering and (ii) the
863,218 shares issued upon conversion of the Series A Preferred Stock.
(c) Represents the elimination of interest expense on the Company's
outstanding mortgage loans from assumed debt repayment with Offering
proceeds and the repayment of short-term debt incurred for the Feltrop
and Butler acquisitions.
(d) Represents the tax effect of the interest expense savings from the
assumed repayment of debt at an estimated effective tax rate of 40%.
FOSTER
The Foster actual column represents the combined income statement of the Foster
companies for the period from July 1, 1996 through August 31, 1996, the date of
acquisition.
(e) Represents (i) a $60,000 non-recurring Medicaid reimbursement; (ii)
miscellaneous revenue of $6,000 from operations not acquired; and (iii)
a non-recurring $188,000 gain on the sale of assets.
(f) Represents the net result of eliminating non-recurring operating
expenses of the seller and the addition of a $167,000 management fee
paid by the Company to the seller.
(g) Represents the net effect of the elimination of $68,000 of
non-recurring expenses of the seller for operations not acquired and
the addition of lease expense under the Company's financing structure.
(h) Represents the net of (i) elimination of historical depreciation and
amortization of the seller; (ii) the addition of the Company's
depreciation; (iii) the amortization of the excess of the purchase
price over the fair value of the assets acquired of $3,401,000 over 25
years and (iv) the amortization of deferred financing costs of $598,000
over 12 years, calculated as follows (dollars in thousands):
<TABLE>
<S> <C>
Depreciation and amortization of seller.............................. $(181)
Depreciation on facilities acquired.................................. 20
Goodwill amortization................................................ 23
Amortization of deferred financing costs............................. 8
-----
$(130)
=====
</TABLE>
(i) Represents the elimination of interest income of the seller.
33
<PAGE> 35
(j) Represents the net effect of eliminating interest expense on
capital-related financing of the seller and the addition of interest
expense on the Company's $3,115,000 financing at 10.7%.
(k) Represents the net tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
KEYSTONE
The Keystone actual column represents the combined income statement of the
Keystone companies for the period from July 1, 1996 through January 31, 1997,
the date of acquisition.
(l) Represents adjustments to eliminate management fees charged by the
previous owners and to include the Company's cost of managing Keystone,
calculated as follows (dollars in thousands):
<TABLE>
<S> <C>
Management fees to seller............................................ $(229)
Costs of regional office............................................. 195
-----
$ (34)
=====
</TABLE>
(m) Represents adjustments to reflect the Company's rent expense based on
the REIT's costs of $21,600,000 at 10% lease rate.
(n) Represents the net effect of (i) eliminating the prior owners'
depreciation and (ii) the amortization of the excess of the purchase
price over the fair value of the assets acquired of $1,840,000 over 25
years (dollars in thousands):
<TABLE>
<S> <C>
Seller's depreciation................................................ $(381)
Goodwill amortization................................................ 43
-----
$(338)
=====
</TABLE>
(o) Represents elimination of seller's interest expense on long-term debt.
(p) Represents the tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
CLARK
The Clark actual column represents the income statements for three of the Clark
operations for the period from July 1, 1996 through May 15, 1997 (the date of
acquisition) combined with the income statement for the fourth Clark operation
for the period from July 1, 1996 through June 30, 1997. This facility was
acquired on August 18, 1997.
(q) Represents adjustments to reflect the Company's lease expense based on
the REIT's costs of $5,335,000 at 10% lease rate.
(r) Represents the tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
FELTROP
The Feltrop actual column represents the income statement of Feltrop for the
year ended June 30, 1997.
(s) Represents the net adjustment to eliminate costs of the seller which
the Company will not incur including: salaries paid to the owners of
$313,000 and other non-recurring operating expenses of $139,000,
replaced with additional salaries of $50,000 and operating costs of
$17,000 expected to be incurred by the Company.
34
<PAGE> 36
(t) Represents the net adjustment of (i) depreciation expense to equal the
Company's estimated depreciation and (ii) the amortization of the
excess of the purchase price over the fair value of the net assets
acquired. Adjustment is calculated as follows (dollars in thousands):
<TABLE>
<S> <C>
Annual depreciation................................................. $144
Seller's depreciation............................................... (73)
-----
71
Annual goodwill amortization ($1,550/40 years)...................... 40
-----
Net adjustment...................................................... $111
=====
</TABLE>
(u) Represents the elimination of (i) seller's interest income, (ii)
interest expense on the debt of the seller not assumed by the Company,
and (iii) interest expense on the Company's $5,842,000 financing at
10.5%.
(v) Represents the tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
BUTLER
The Butler actual column represents the income statement of Butler for the year
ended June 30, 1997.
(w) Represents the elimination of seller's office rental income for office
space which is being renovated for the addition of a 26-bed unit and
will not be available as office space.
(x) Represents the net adjustment to eliminate certain non-recurring costs
related to the office rental property and management fee and directors
fee costs of the seller which will not be incurred by the Company and
the addition of $16,000 annual consulting fees which the Company will
pay to the former owners.
(y) Represents the net adjustment of (i) depreciation expense to equal the
Company's estimated depreciation and (ii) the amortization of the
excess of the purchase price over the fair value of the net assets
acquired. Adjustment is calculated as follows (dollars in thousands):
<TABLE>
<S> <C>
Annual depreciation................................................. $169
Seller's depreciation............................................... (135)
-----
34
Annual goodwill amortization ($2,084/40 years)...................... 52
-----
Net adjustment...................................................... $ 86
=====
</TABLE>
(z) Represents the elimination of (i) seller's historical interest income,
(ii) interest expense on debt of the seller not assumed by the
Company, and (iii) interest expense on the Company's $9,104,000
financing at 10.5%.
(aa) Represents the tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
SAXONY
The Saxony actual column represents the income statement of Saxony for the year
ended June 30, 1997.
(bb) Represents adjustments to eliminate revenues and expenses of the
seller for operations which the Company is not acquiring and including
compensation paid to the seller.
(cc) Represents the net adjustment of (i) depreciation expense to equal the
Company's estimated depreciation and the (ii) amortization of the
excess of the purchase price over the
35
<PAGE> 37
fair value of the net assets acquired. Adjustment is calculated as follows
(dollars in thousands):
<TABLE>
<S> <C>
Annual depreciation................................................. $238
Seller's depreciation............................................... (135)
-----
103
Annual goodwill amortization ($1,436/40 years) 36
-----
Net adjustment...................................................... $139
=====
</TABLE>
(dd) Represents the elimination of seller's historical interest income and
interest expense on debt of the seller not assumed by the Company.
(ee) Represents the tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
[CONFIDENTIAL TREATMENT REQUESTED]
The [Confidential Treatment Requested] actual column represents the income
statement of [Confidential Treatment Requested] for the year ended June 30,
1997.
(ff) Represents the net adjustment of (i) depreciation expense to equal
the Company's estimated depreciation and (ii) the amortization of the
excess of the purchase price over the fair value of the net assets
acquired. Adjustment is calculated as follows (dollars in thousands):
<TABLE>
<S> <C>
Annual depreciation................................................. $200
Seller's depreciation............................................... (142)
-----
58
Annual goodwill depreciation ($2,191/40 years)...................... 54
-----
Net adjustment...................................................... $112
=====
</TABLE>
(gg) Represents the elimination of seller's interest income on investments
and interest expense on the debt of the seller not assumed by the
Company.
(hh) Represents the tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
GETHSEMANE
The actual Gethsemane column represents the combined income statement of
Gethsemane for the year ended June 30, 1997.
(ii) Represents the net adjustment of (i) depreciation expense to equal
the Company's estimated depreciation and (ii) the amortization of the
excess of the purchase price over the fair value of the net assets
acquired. Adjustment is calculated as follows (dollars in thousands):
<TABLE>
<S> <C>
Annual depreciation................................................. $175
Seller's depreciation............................................... (120)
-----
55
Annual goodwill amortization ($1,028/40 years)...................... 26
-----
Net adjustment...................................................... $ 81
=====
</TABLE>
(jj) Represents the elimination of interest expense on debt of the seller
not assumed by the Company.
(kk) Represents the tax provision on the adjusted pro forma income at an
estimated effective tax rate of 40%.
36
<PAGE> 38
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PENDING
RECENT PHARMACY ACQUISITIONS
ACQUISITIONS DIVESTITURE WITHOUT
THE COMPANY AND BUTLER PRO FORMA PRO FORMA BUTLER
ACTUAL PRO FORMA ADJUSTMENTS CONSOLIDATED PRO FORMA
----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 7,908 $ 0 $ 4,700(a) $ 12,608 $ 0
Accounts receivable............................. 6,679 0 0 6,679 0
Deferred costs.................................. 2,062 0 0 2,062 0
Prepaid expenses and other current assets....... 1,770 0 (2)(a) 1,768 0
Assets held for sale............................ 6,351 0 (3,463) 2,888 0
------- ------ ------- ------ -------
Total current assets........................ 24,770 0 1,235 26,005 0
Due to/from affiliates............................ 0 0 0 0 0
Investments in subsidiaries....................... 0 0 0 0 0
Restricted investments............................ 1,825 0 0 1,825 0
Property and equipment, net....................... 2,565 11,311 0 13,876 18,352
Goodwill, net..................................... 2,219 3,635 0 5,854 4,655
Other assets...................................... 2,463 0 0 2,463 0
------- ------ ------- ------ -------
Total assets $33,842 $ 14,946 $ 1,235 $ 50,023 $ 23,007
======= ====== ======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and short-term
borrowings.................................... $ 97 $ 14,946 $ 0 $ 15,043 $ 0
Accounts payable................................ 5,929 0 0 5,929 0
Accrued payroll................................. 1,818 0 0 1,818 0
Accrued expenses................................ 1,251 0 0 1,251 0
------- ------ ------- ------ -------
Total current liabilities................... 9,095 14,946 0 24,041 0
Long-term debt.................................... 8,177 0 0 8,177 0
Straight-line lease liability..................... 3,133 0 0 3,133 0
Deferred revenues................................. 1,404 0 0 1,404 0
Other liabilities................................. 228 0 0 228 0
------- ------ ------- ------ -------
Total liabilities........................... 22,037 14,946 0 36,983 0
------- ------ ------- ------ -------
REDEEMABLE STOCK
Series B.......................................... 13,249 0 0 13,249 0
------- ------ ------- ------ -------
STOCKHOLDERS' EQUITY
Preferred A stock................................. 1 0 0 1 0
Common stock...................................... 5 0 0 5 0
Additional paid-in capital........................ 3,961 0 0 3,961 23,007
Accumulated earnings (deficit).................... (5,411) 0 1,235(a) (4,176) 0
------- ------ ------- ------ -------
Total stockholders' equity...................... (1,444) 0 1,235 (209) 23,007
------- ------ ------- ------ -------
Total liabilities and stockholders'
equity.................................... $33,842 $ 14,946 $ 1,235 $ 50,023 $ 23,007
======= ====== ======= ====== =======
<CAPTION>
CONSOLIDATED
OFFERING PRO FORMA
ADJUSTMENTS ELIMINATIONS AS ADJUSTED
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 17,619(b) $ 0 $ 30,227
Accounts receivable............................. 0 0 6,679
Deferred costs.................................. 0 0 2,062
Prepaid expenses and other current assets....... 0 0 1,768
Assets held for sale............................ 0 0 2,888
-------- -------- -------
Total current assets........................ 17,619 0 43,624
Due to/from affiliates............................ 0 0 0
Investments in subsidiaries....................... 37,953(b) (37,953) 0
Restricted investments............................ 0 0 1,825
Property and equipment, net....................... 0 0 32,228
Goodwill, net..................................... 0 0 10,509
Other assets...................................... 0 0 2,463
-------- -------- -------
Total assets $ 55,572 $(37,953) $ 90,649
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and short-term
borrowings.................................... $ (14,946) $ 0 $ 97
Accounts payable................................ 0 0 5,929
Accrued payroll................................. 0 0 1,818
Accrued expenses................................ 0 0 1,251
-------- -------- -------
Total current liabilities................... (14,946) 0 9,095
Long-term debt.................................... (8,123)(b) 0 54
Straight-line lease liability..................... 0 0 3,133
Deferred revenues................................. 0 0 1,404
Other liabilities................................. 0 0 228
-------- -------- -------
Total liabilities........................... (23,069) 0 13,914
-------- -------- -------
REDEEMABLE STOCK
Series B.......................................... (13,249) 0 0
-------- -------- -------
STOCKHOLDERS' EQUITY
Preferred A stock................................. (1)(b) 0 0
Common stock...................................... 11(b) 0 16
Additional paid-in capital........................ 91,880(b) (37,953) 80,895
Accumulated earnings (deficit).................... 0 0 (4,176)
-------- -------- -------
Total stockholders' equity...................... 91,890 (37,953) 76,735
-------- -------- -------
Total liabilities and stockholders'
equity.................................... $ 55,572 $(37,953) $ 90,649
======== ======== =======
</TABLE>
37
<PAGE> 39
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
RECENT ACQUISITIONS AND BUTLER
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FELTROP BUTLER RECENT
---------------------------------- ---------------------------------- ACQUISITIONS
PRO FORMA PRO FORMA PRO FORMA PRO FORMA AND BUTLER
ACTUAL ADJUSTMENTS SUBTOTAL ACTUAL ADJUSTMENTS SUBTOTAL PRO FORMA
------ ----------- --------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............. $ 24 $ (24)(c) $ 0 $ 125 $ (125)(e) $ 0 $ 0
Accounts receivable....... 7 (7)(c) 0 17 (17)(e) 0 0
Deferred costs............ 0 0 0 0 0 0 0
Prepaid expenses and other
current assets.......... 17 (17)(c) 0 24 (24)(e) 0 0
Assets held for sale...... 0 0 0 0 0 0 0
------ ------ ------ ------ ------- ------ -------
Total current
assets.............. 48 (48) 0 166 (166) 0 0
Due to/from affiliates...... 0 0 0 0 0 0 0
Investments in
subsidiaries.............. 0 0 0 0 0 0 0
Restricted investments...... 0 0 0 0 0 0 0
Property and equipment,
net....................... 1,245 3,047(d) 4,292 3,655 3,364(f) 7,019 11,311
Goodwill, net............... 0 1,550(d) 1,550 0 2,085(f) 2,085 3,635
Other assets................ 0 0 0 8 (8)(e) 0 0
------ ------ ------ ------ ------- ------ -------
Total assets.......... $1,293 $ 4,549 $ 5,842 $3,829 $ 5,275 $ 9,104 $14,946
====== ====== ====== ====== ======= ====== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of
long-term debt and
short-term borrowings... $ 117 $ 5,725(c) $ 5,842 $ 279 $ 8,825(e) $ 9,104 $14,946
Accounts payable.......... 47 (47)(c) 0 63 (63)(e) 0 0
Accrued payroll........... 0 0 0 52 (52)(e) 0 0
Accrued expenses.......... 114 (114)(c) 0 57 (57)(e) 0 0
------ ------ ------ ------ ------- ------ -------
Total current
liabilities......... 278 5,564 5,842 451 8,653 9,104 14,946
Long-term debt.............. 976 (976)(c) 0 2,323 (2,323)(e) 0 0
Straight-line lease
liability................. 0 0 0 0 0 0 0
Deferred revenues........... 0 0 0 0 0 0 0
Other liabilities........... 0 0 0 0 0 0 0
------ ------ ------ ------ ------- ------ -------
Total liabilities..... 1,254 4,588 5,842 2,774 6,330 9,104 14,946
------ ------ ------ ------ ------- ------ -------
REDEEMABLE STOCK
Series B.................... 0 0 0 0 0 0 0
------ ------ ------ ------ ------- ------ -------
STOCKHOLDERS' EQUITY
Preferred A stock........... 0 0 0 0 0 0 0
Common stock................ 0 0 0 22 (22)(f) 0 0
Additional paid-in
capital................... 0 0 0 844 (844)(f) 0 0
Accumulated earnings
(deficit)................. 39 (39)(d) 0 189 (189)(f) 0 0
------ ------ ------ ------ ------- ------ -------
Total stockholders'
equity.................. 39 (39) 0 1,055 (1,055) 0 0
------ ------ ------ ------ ------- ------ -------
Total liabilities and
stockholders'
equity.............. $1,293 $ 4,549 $ 5,842 $3,829 $ 5,275 $ 9,104 $14,946
====== ====== ====== ====== ======= ====== =======
</TABLE>
38
<PAGE> 40
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
PENDING ACQUISITIONS WITHOUT BULTER
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
[CONFIDENTIAL TREATMENT REQUESTED]
SAXONY
---------------------------------- ----------------------------------
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS SUBTOTAL ACTUAL ADJUSTMENTS SUBTOTAL
------ ----------- --------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............. $ 261 $ (261)(g) $ 0 $ 196 $ (196)(i) $ 0
Accounts receivable....... 477 (477)(g) 0 6 (6)(i) 0
Deferred costs............ 0 0 0 0 0 0
Prepaid expenses and other
current assets.......... 251 (251)(g) 0 249 (249)(i) 0
Assets held for sale...... 0 0 0 0 0 0
------ ------- ------ ------ ------ -------
Total current
assets.............. 989 (989) 0 451 (451) 0
Due to/from affiliates...... 25 (25)(g) 0 0 0 0
Investments in
subsidiaries.............. 0 0 0 0 0 0
Restricted investments...... 0 0 0 0 0 0
Property and equipment,
net....................... 2,395 5,099(h) 7,494 3,097 3,261(j) 6,358
Goodwill, net............... 0 1,436(h) 1,436 0 2,191(j) 2,191
Other assets................ 80 (80)(g) 0 190 (190)(i) 0
------ ------- ------ ------ ------ -------
Total assets.......... $3,489 $ 5,441 $ 8,930 $3,738 $ 4,811 $ 8,549
====== ======= ====== ====== ====== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of
long-term debt and
short-term borrowings... $ 85 $ (85)(g) $ 0 $ 185 $ (185)(i) $ 0
Accounts payable.......... 141 (141)(g) 0 26 (26)(i) 0
Accrued payroll........... 117 (117)(g) 0 49 (49)(i) 0
Accrued expenses.......... 3 (3)(g) 0 47 (47)(i) 0
------ ------- ------ ------ ------ -------
Total current
liabilities......... 346 (346) 0 307 (307) 0
Long-term debt.............. 1,433 (1,433)(g) 0 2,902 (2,902)(i) 0
Straight-line lease
liability................. 0 0 0 0 0 0
Deferred revenues........... 0 0 0 0 0 0
Other liabilities........... 2 (2)(g) 0 0 0 0
------ ------- ------ ------ ------ -------
Total liabilities..... 1,781 (1,781) 0 3,209 (3,209) 0
------ ------- ------ ------ ------ -------
Redeemable stock
Series B.................... 0 0 0 0 0 0
------ ------- ------ ------ ------ -------
Stockholders' Equity
Preferred A stock........... 0 0 0 0 0 0
Common stock................ 90 (90)(h) 0 3 (3)(j) 0
Additional paid-in
capital................... 203 8,727(h) 8,930 50 8,499(j) 8,549
Accumulated earnings
(deficit)................. 1,415 (1,415)(h) 0 476 (476)(j) 0
------ ------- ------ ------ ------ -------
Total stockholders'
equity.................. 1,708 7,222 8,930 529 8,020 8,549
------ ------- ------ ------ ------ -------
Total liabilities and
stockholders'
equity.............. $3,489 $ 5,441 $ 8,930 $3,738 $ 4,811 $ 8,549
====== ======= ====== ====== ====== =======
<CAPTION>
PENDING
GETHSEMANE ACQUISITIONS
------------------------------------- WITHOUT
PRO FORMA PRO FORMA BUTLER
ACTUAL ADJUSTMENTS SUBTOTAL PRO FORMA
------- ----------- --------- ------------
<S> <C<C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents.............$ 3 $ (3)(k) $ 0 $ 0
Accounts receivable....... 306 (306)(k) 0 0
Deferred costs............ 0 0 0 0
Prepaid expenses and other
current assets.......... 53 (53)(k) 0 0
Assets held for sale...... 0 0 0 0
------ ------- ------ -------
Total current
assets.............. 362 (362) 0 0
Due to/from affiliates...... 0 0 0 0
Investments in
subsidiaries.............. 0 0 0 0
Restricted investments...... 0 0 0 0
Property and equipment,
net....................... 3,924 576(l) 4,500 18,352
Goodwill, net............... 0 1,028(l) 1,028 4,655
Other assets................ 11 (11)(k) 0 0
------ ------- ------ -------
Total assets..........$4,297 $ 1,231 $ 5,528 $ 23,007
====== ======= ====== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of
long-term debt and
short-term borrowings...$ 496 $ (496)(k) $ 0 $ 0
Accounts payable.......... 382 (382)(k) 0 0
Accrued payroll........... 115 (115)(k) 0 0
Accrued expenses.......... 37 (37)(k) 0 0
------ ------- ------ -------
Total current
liabilities......... 1,030 (1,030) 0 0
Long-term debt.............. 2,293 (2,293)(k) 0 0
Straight-line lease
liability................. 0 0 0 0
Deferred revenues........... 0 0 0 0
Other liabilities........... 390 (390)(k) 0 0
------ ------- ------ -------
Total liabilities..... 3,713 (3,713) 0 0
------ ------- ------ -------
Redeemable stock
Series B.................... 0 0 0 0
------ ------- ------ -------
Stockholders' Equity
Preferred A stock........... 0 0 0 0
Common stock................ 10 (10)(l) 0 0
Additional paid-in
capital................... 240 5,288(l) 5,528 23,007
Accumulated earnings
(deficit)................. 334 (334)(l) 0 0
------ ------- ------ -------
Total stockholders'
equity.................. 584 4,944 5,528 23,007
------ ------- ------ -------
Total liabilities and
stockholders'
equity..............$4,297 $ 1,231 $ 5,528 $ 23,007
====== ======= ====== =======
</TABLE>
39
<PAGE> 41
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997
PHARMACY DIVESTITURE
(a) Represents the sale of the Pharmacy's operations, furniture and
equipment and certain prepaid expenses for net proceeds of $4,700,000.
OFFERING ADJUSTMENTS
(b) Assumes net proceeds from the Offering of $63,737,000 from the sale of
6,961,000 shares of common stock at $10 per share less assumed offering
expenses of $5,873,000. The assumed use of proceeds is to repay
long-term debt of $8,123,000, to repay indebtedness of $14,946,000 to
be incurred to fund the purchase price of two acquisitions and to fund
the purchase price of $23,007,000 other pending acquisitions with the
balance of the proceeds retained for working capital and other general
corporate purposes. Simultaneous with the offering, the Series A and
Series B Preferred Stock will be converted into Common Stock.
FELTROP
(c) To eliminate certain assets and liabilities of the seller which were
not purchased or assumed by the Company. The current portion of
long-term debt and short-term borrowings represents the net of (i)
elimination of seller's debt of $117,000 and (ii) short-term debt of
$5,842,000 incurred to finance the acquisition.
(d) Purchase accounting adjustments to: (i) record property and equipment
at estimated fair value, (ii) record goodwill for the excess of the
purchase price over the fair value of the net assets acquired, (iii)
eliminate seller's accumulated deficit (dollars in thousands):
<TABLE>
<S> <C>
Net fixed assets of seller at June 30, 1997........................ $(1,245)
Estimated fair value of assets at acquisition date................. 4,292
------
Property and equipment............................................. $ 3,047
======
Goodwill........................................................... $ 1,550
======
Stockholders' equity............................................... $ (39)
======
</TABLE>
BUTLER
(e) To eliminate certain assets and liabilities of the seller which will
not be purchased or assumed by the Company. The current portion of
long-term debt and short-term borrowings represents the net of (i)
elimination of seller's debt of $279,000 and (ii) short-term debt of
$9,104,000 incurred to finance the acquisition.
(f) Purchase accounting adjustments to: (i) record property and equipment
at estimated fair value, (ii) record goodwill for the excess of the
purchase price over the fair value of the net assets acquired and (iii)
eliminate the seller's historical stockholders' equity (dollars in
thousands):
<TABLE>
<S> <C>
Net fixed assets of seller at June 30, 1997........................ $(3,655)
Estimated fair value of assets at acquisition date................. 7,019
-------
Property and equipment............................................. $ 3,364
=======
Goodwill........................................................... $ 2,085
=======
Stockholders' equity............................................... $(1,055)
=======
</TABLE>
40
<PAGE> 42
SAXONY
(g) To eliminate certain assets and liabilities of the seller which will
not be purchased or assumed by the Company.
(h) Purchase accounting adjustments include the following (dollars in
thousands):
<TABLE>
<S> <C>
Net fixed assets of seller at June 30, 1997........................ $(2,395)
Estimated fair value of assets at acquisition date................. 7,494
-------
Property and equipment............................................. $ 5,099
=======
Goodwill........................................................... $ 1,436
=======
Stockholders' equity............................................... $ 7,222
=======
</TABLE>
[CONFIDENTIAL TREATMENT REQUESTED]
(i) To eliminate certain assets and liabilities of the seller which will
not be purchased or assumed by the Company.
(j) Purchase accounting adjustments (i) record property and equipment at
estimated fair value, (ii) record goodwill for the excess of the
purchase price over the fair value of the net assets acquired and (iii)
eliminate the seller's historical stockholders' equity (dollars in
thousands):
<TABLE>
<S> <C>
Net fixed assets of seller at June 30, 1997........................ $(3,097)
Estimated fair value of assets at acquisition date................. 6,358
-------
Property and equipment............................................. $ 3,261
=======
Goodwill........................................................... $ 2,191
=======
Stockholders' equity............................................... $ 8,020
=======
</TABLE>
GETHSEMANE
(k) To eliminate certain assets and liabilities of the seller which will
not be purchased or assumed by the Company.
(l) Purchase accounting adjustments (i) record property and equipment at
estimated fair value, (ii) record goodwill for the excess of the
purchase price over the fair value of the net assets acquired and (iii)
eliminate the seller's historical stockholders' equity (dollars in
thousands):
<TABLE>
<S> <C>
Net fixed assets of seller at June 30, 1997........................ $(3,924)
Estimated fair value of assets at acquisition date................. 4,500
-------
Property and equipment............................................. $ 576
=======
Goodwill........................................................... $ 1,028
=======
Stockholders' equity............................................... $ 4,944
=======
</TABLE>
41
<PAGE> 43
BUSINESS
OVERVIEW
The Company was formed in April 1995 to develop senior care continuums
which meet the needs of upper middle, middle and moderate income populations in
non-urban, secondary markets. The Company intends to utilize assisted living
facilities in selected markets as the primary entry point and service platform
to develop the Balanced Care Continuum in which various hospitality and health
care services are offered that enable residents to age in place. The Company
believes that non-urban, secondary markets are underserved, highly fragmented
and less prone to intense competition from larger providers. The Company
believes that these factors will enable it to establish a leading position as a
provider of a market differentiated, consumer preferred continuum of senior care
services in such markets. To achieve its goals, the Company intends to: (i)
provide a range of high quality, individualized senior care services and
programs, (ii) develop the Balanced Care Continuum, (iii) focus on non-urban,
secondary markets, (iv) continue developing the Company's signature assisted
living facilities, (v) pursue growth through selective acquisitions, (vi)
achieve the benefits of regional density by clustering, and (vii) expand
referral networks and strategic alliances.
Since its inception, the Company has grown primarily through acquisitions.
The Company has also leased two facilities and has designed, developed and
opened five of its signature assisted living facilities. As of September 30,
1997, the Company operated a total of 21 assisted living facilities, 12 skilled
nursing facilities and four independent living facilities in Pennsylvania,
Missouri, Arkansas and Wisconsin, as well as a home health care agency in
Missouri and a rehabilitation therapy operation in Pennsylvania. After giving
effect to the acquisition of Feltrop in October 1997 and assuming completion of
the Pending Acquisitions, the Pharmacy Divestiture, the planned divestiture of
the Company's assisted living facilities in Wisconsin, and the additional
assisted living facilities opened since September 30, 1997, the Company will
own, lease or manage a total of 40 senior living and health care facilities in
Pennsylvania, Missouri, Arkansas and North Carolina with a capacity for 1,260
assisted living residents, 1,362 skilled nursing patients and 154 independent
living residents. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Pending Acquisitions and Planned
Divestiture" and "Unaudited Pro Forma Financial Information." In addition to the
five signature assisted living facilities opened to date by the Company, the
Company anticipates opening an additional four signature assisted living
facilities, all of which are currently under construction, during the remainder
of calendar year 1997.
The Balanced Care Continuum is being developed to deliver consumer-focused
hospitality and health care services that balance seniors' desire for
independence with their evolving health care needs. The Company's philosophy
includes the belief that wellness and preventative therapy will strengthen
residents, improve their health and forestall the deterioration that generally
accompanies aging, thus extending their lives and lengths of stay in assisted
living facilities. The Company's wellness-oriented program, Balanced Gold(SM),
has been developed to predict and proactively address resident care needs,
including stabilizing and improving residents' cognitive, emotional and physical
well being. The Balanced Gold(SM) program is included in the Company's core
services package at each of its newly-developed signature assisted living
facilities, and the Company intends to implement all or part of the program at
its other assisted living facilities as appropriate. Preventative, restorative
and rehabilitative services are also expected to be made available to residents
through outpatient medical rehabilitation, home health care, programs for
residents with Alzheimer's and other services provided by the Company or by an
alliance partner or other third party. By offering services and programs that
are intended to enable residents to stay healthier longer and prolong their stay
at assisted living facilities, the Company believes that its services and
programs will address the preferences and needs of seniors, while at the same
time forestalling the need for residents to move to a more costly long-term care
setting, such as a skilled nursing facility. As resident needs mandate migration
into a skilled nursing or subacute program, the Company believes that its
skilled nursing facilities will provide a transition for the resident with a
focus on demonstrated outcomes and cost effective care. The
42
<PAGE> 44
Company believes that its approach to senior care will enable it to be a leading
provider of a continuum of senior care services in targeted non-urban, secondary
markets.
THE SENIOR CARE INDUSTRY
The senior care industry is characterized by a wide range of living
accommodations and health care services. For those who are able to live in a
home setting, home health care and other limited services can be provided.
Community housing or retirement centers, which are commonly referred to as
independent living facilities, are also available to persons who need limited
assistance, such as with meal preparation, housekeeping and laundry. Assisted
living facilities are typically for those persons whose physical or cognitive
frailties have reached a stage where other living accommodations can no longer
provide the level of care required but who do not yet need the continuous
medical attention provided in a skilled nursing facility. Generally, assisted
living facilities provide a combination of housing and 24-hour personal support
services designed to assist seniors with activities of daily living ("ADLs"),
which include bathing, eating, personal hygiene, grooming, ambulating and
dressing. Certain assisted living facilities also offer higher levels of
personal assistance for residents with Alzheimer's disease or other forms of
dementia. Skilled nursing facilities provide care for those who need a minimum
of three hours of nursing per day.
The senior care industry, including assisted living, is highly fragmented
and characterized by numerous providers whose services, experience and capital
resources vary widely. The Company believes that few operators of assisted
living facilities, particularly those in secondary markets, focus on providing a
range of senior living and health care services that have been designed to
enable residents to stay in a preferred setting longer.
The Company believes that the assisted living industry is evolving as the
preferred alternative to meet the growing demand for a cost effective setting
for those seniors who cannot live independently due to physical or cognitive
frailties, but who do not require the more intensive medical attention provided
by a skilled nursing facility. According to the United States Bureau of the
Census, approximately 45% of persons aged 85 years and older, approximately 24%
of persons aged 80 to 84 and approximately 20% of persons aged 75 to 79 need
assistance with ADLs. In 1996, according to industry estimates, the assisted and
independent living industries generated approximately $12 to $14 billion in
revenues.
The Company believes that a number of factors will contribute to the
continued growth of the assisted living industry, including:
Consumer Preference
The Company believes that assisted living is increasingly becoming the
setting preferred by prospective residents as well as their families, who are
often the decision makers for seniors. Assisted living is generally a more
attractive, service oriented and lower cost alternative to other types of senior
care facilities, offering seniors greater independence and allowing them to age
in place in a residential setting.
Cost Effectiveness
Assisted living facilities provide a cost effective alternative to other
types of facilities that may provide more care than a senior needs. The average
annual cost for a patient in a skilled nursing facility approaches $40,000 and,
in the case of a private pay patient, can exceed $75,000 per year in certain
markets. In contrast, the average annual cost for a resident of an assisted
living facility is generally 30% to 50% lower than skilled nursing facilities
located in the same region. Additionally, the Company also believes that the
cost of assisted living services compares favorably with home health care,
particularly when costs associated with housing, meals and personal care
assistance are taken into account.
43
<PAGE> 45
Changing Income and Family Dynamics
The Company believes that the increasing income of seniors, as well as
changing family dynamics, will increase the demand for assisted living and
health care services. According to the United States Bureau of the Census, the
median income of the elderly population has been increasing. Accordingly, the
Company believes that the number of seniors who are able to afford high-quality
senior residential services such as those offered by the Company will also
increase. Additionally, the number of two-income households has increased over
the last decade and the geographical separation of senior family members from
their adult children has risen. As a result, many families that traditionally
would have provided the care and services offered by the Company to senior
family members are less able to do so. The Company believes that assisted living
facilities represent an attractive and independent environment for senior family
members.
Demographics
The target market for the Company's services are persons generally 75 years
and older, one of the fastest growing segments of the United States population.
According to the United States Bureau of the Census, the portion of the United
States population aged 75 and older is expected to increase by approximately
29%, from approximately 13.0 million in 1990 to approximately 16.8 million by
the year 2000, and the number of persons aged 85 and older, as a segment of the
United States population, is expected to increase by approximately 43%, from
approximately 3.0 million in 1990 to over 4.3 million by the year 2000.
Furthermore, the number of persons afflicted with Alzheimer's disease is also
expected to increase in the coming years. According to data published by the
American Psychiatric Association, Alzheimer's disease affects approximately 5%
to 8% of individuals over the age 65, 15% to 20% of individuals over the age of
75 and 25% to 50% of individuals over the age of 85.
Supply/Demand Imbalance
The Company believes that non-urban secondary, markets are often
underserved with respect to assisted living facilities. Based on bed need
analyses performed by the Company in connection with the prospective development
of its assisted living facilities, the need for the Company's services in its
target markets is typically three times the number of beds sought to be
developed. When combined with its market differentiated services package, the
Company believes that it is well positioned to be the preferred provider of
senior care services in its targeted markets.
While the senior population is growing significantly, the supply of skilled
nursing beds per thousand is declining. This imbalance may be attributed to a
number of factors in addition to the aging of the population. Many states, in an
effort to maintain controls of Medicaid expenditures on long-term care, have
implemented more restrictive certificate-of-need regulations or similar
legislation that restricts the supply of licensed skilled nursing facility beds.
Additionally, acuity-based reimbursement systems have encouraged skilled nursing
facilities to focus on higher acuity patients. The Company also believes that
high construction costs and limits on government reimbursement for the full cost
of construction and start-up expenses will also contain the growth and supply of
traditional skilled nursing beds. These factors, taken in combination, result in
relatively fewer skilled nursing beds available for the increasing number of
seniors who require assistance with ADLs but do not require 24-hour medical
attention.
THE BALANCED CARE PHILOSOPHY
The Company's philosophy for addressing seniors' living and care needs
includes the belief that wellness and preventative therapy will strengthen
residents, improve their health and forestall the deterioration that generally
accompanies aging, thus extending their lives and lengths of stay in assisted
living facilities. As a result, elements of the Balanced Care Continuum include
the Company's Balanced Gold(SM) program and the provision of medical
rehabilitation, home health, skilled nursing and subacute care services.
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<PAGE> 46
BALANCED CARE STRATEGY
The Company's objective is to be a leading provider of continuums of senior
living and health care services in selected non-urban, secondary markets. In
order to achieve this goal, the Company intends to:
Provide a Range of High Quality, Individualized Senior Care Services and
Programs
The Company's individualized care and living programs are designed to
enable the Company to provide a range of services and programs that maximize
resident satisfaction, strengthen residents, improve their overall health and
forestall the deterioration that generally accompanies aging. The Company's
admission process is designed to identify the unique needs of each resident and
to work with the resident, the resident's family, physicians and Company staff
in developing an individualized living program which meets the care needs,
living preferences and income level of the resident. The individualized care
program is periodically reviewed and updated to ensure that the residents' needs
are being met as they evolve.
Develop the Balanced Care Continuum
The Balanced Care Continuum is being developed to provide consumer-focused
health care and hospitality services delivered in an attractive and appropriate
setting that balances seniors' desire for independence with their evolving
health care needs, thus enabling the Company to retain residents longer as they
age in place. The Company intends to develop the Balanced Care Continuum
utilizing assisted living facilities in selected markets as the primary entry
point into, and service platform from which to build, comprehensive senior care
and living services, including medical rehabilitation, home health care, skilled
nursing and subacute care. Depending on the characteristics of a particular
market, the Company may offer all or a portion of the Balanced Care Continuum to
seniors in that market. Elements of the Balanced Care Continuum include the
following programs and services (See "-- Care and Services Programs"):
Balanced Gold(SM) Program. The key factors leading to the discharge of a
resident from an assisted living facility into a more costly, less home-like
setting include falls, incontinence and cognitive impairment. The Company has
developed its Balanced Gold(SM) wellness-oriented program to specifically
address a variety of factors that can affect adversely the health of assisted
living residents, including balance and gait difficulties, incontinence,
cognitive impairment, stress due to pain and chronic conditions and grieving due
to multiple losses in the residents' life. The Balanced Gold(SM) program
includes tai chi exercise to improve balance and gait problems; individually
designed exercise programs, including incontinence and pelvic exercises and diet
guidelines; "Wisdom Keeper" programs to challenge and stimulate mental
capabilities; "Relaxation and Vitality" programs of deep breathing, stretching
exercises and sitting and walking meditation; "Golden Living" programs to assist
with grief and loss; gardening to encourage nurturing and independence; and
walking programs to promote health and fitness. Company staff, in consultation
with the resident as well as his or her family and medical consultants,
determine which of the Balanced Gold(SM) activities are appropriate and best
suited to the resident's needs, interests and capabilities. The Balanced
Gold(SM) program is included as an integral and differentiating element of the
Company's core services package at each of its newly-developed signature
assisted living facilities, and the Company intends to implement all or part of
the program at its other assisted living facilities as appropriate. See "-- Care
and Services Programs -- Balanced Gold(SM)."
Medical Rehabilitation. The Company believes that rehabilitation and
strengthening significantly improve the health of residents and prevent
injuries. Rehabilitation services include preventative therapies designed to
forestall the development of further frailties, and restorative therapies for
residents who have a specific illness, injury, condition or disease but do not
require many of the services provided in a skilled nursing facility or an acute
care hospital. These services may be provided through a Company-owned skilled
nursing facility or medical rehabilitation operation or through
45
<PAGE> 47
alliances with other providers. The Company's signature assisted living
facilities have been specifically designed to accommodate medical rehabilitation
services and to include fully-equipped therapy gyms. See "-- Care and Services
Programs -- Medical Rehabilitation."
Home Health Care. The Balanced Care Continuum includes home health care
services offered to seniors in their homes as well as to residents of the
Company's assisted living or independent living facilities. Home health care
services include specialty nursing to individuals with long-term chronic health
conditions, disabilities or post-procedural needs, as well as respiratory,
monitoring and other medical equipment and supplies. In addition to expanding
the range of services offered, the provision of home care to at-home residents
is also expected to enable the Company to identify and establish relationships
with potential new residents for its assisted living facilities. See "-- Care
and Services Programs -- Home Health Care."
Skilled Nursing and Subacute Care. When the condition of an assisted
living resident has deteriorated such that it is no longer appropriate for the
resident to remain in an assisted living facility, the Company will discharge
the resident to a skilled nursing or subacute care facility. To ensure that
residents receive cost effective care in the appropriate care setting, the
Company has identified specific discharge criteria which indicate that a
resident requires the continuous attention of a skilled nurse or physician. As
assisted living industry regulations become more restrictive, discharge criteria
such as those that the Company has identified will become increasingly important
in determining which residents are appropriate for the Company's assisted living
facilities. The Balanced Care Continuum encompasses owned and operated or
strategically aligned relationships with skilled nursing and subacute care
facilities in the Company's markets. See "-- Care and Services
Programs -- Skilled Nursing and Subacute Care."
Focus on Non-Urban, Secondary Markets
The Company intends to continue to focus on providing a continuum of senior
living and health care services to upper middle, middle and moderate income
populations in non-urban, secondary markets. These markets are believed to be
underserved, highly fragmented, less prone to intense competition from larger
providers, and otherwise have characteristics that the Company believes will
enable it to establish a leading position within a targeted market. The Company
generally considers a non-urban market with a population of between 10,000 and
200,000 to be a "secondary market."
Continue Developing the Balanced Care Signature Assisted Living Facilities
The Company has designed three signature assisted living facility models to
attract the upper middle, middle and moderate upward income populations in its
target markets. The Company's signature assisted living facilities range in size
from 48 units to 106 units and are designed to accommodate the full range of
assisted living services offered by the Company, including the Company's core
services Balanced Gold(SM) program, as well as a special program for residents
with Alzheimer's and other forms of dementia. In addition, the Company's
signature facilities are each designed to include a fully-equipped medical
rehabilitation therapy gym and treatment rooms. Medical rehabilitation services
are provided by certified physical, occupational and speech therapists and
psychologists, with physician oversight. By providing a consistent level of high
quality services in an easily recognized signature facility, the Company
anticipates creating brand-name awareness within a market for a range of care
and income levels. In addition to the five signature assisted living facilities
opened to date, the Company anticipates opening an additional four facilities,
currently under development, during the remainder of 1997. During the next three
years, the Company plans to develop approximately 75 of these signature
facilities in its targeted markets.
Pursue Growth Through Selective Acquisitions
Since its inception, the Company's growth has been primarily attributable
to acquisitions. The Company has acquired or leased 12 assisted living
facilities with a capacity for 625 residents, 12 skilled
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<PAGE> 48
nursing facilities with a capacity for 1,228 patients, and four independent
living facilities with a capacity for 120 residents, as well as a home health
care agency (excluding the Company's seven Wisconsin assisted living facilities
and the Pharmacy). In addition, the Company has four Pending Acquisitions which
collectively consist of seven facilities with an aggregate capacity for 383
assisted living residents, 134 skilled nursing patients and 20 independent
living residents. The Company intends to pursue selective acquisitions to enter
new markets, to enable the Company to develop and provide one or more components
of the Balanced Care Continuum in its markets, to create clusters of assisted
living facilities in selected markets, to benefit from operating efficiencies
and to develop a leading market position. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Pending
Acquisitions and Planned Divestiture" and "Unaudited Pro Forma Financial
Information."
Achieve the Benefits of Regional Density by Clustering
The Company's development and acquisition strategies focus on clustering
facilities to achieve maximum regional density and to provide residents with a
seamless range of services, prices and settings along a continuum of care and
cost. The Company believes that this strategy will enable it to achieve
operational and management efficiencies while delivering high quality care and
services within its target markets. In addition, clustering will enable the
Company to coordinate the marketing of Balanced Care Continuum components
including assisted living, medical rehabilitation, home health care, skilled
nursing and subacute care. Regional density will also allow the Company to
benefit from community familiarity with assisted living generally, and with the
Company's signature assisted living models in particular.
Expand Referral Networks and Strategic Alliances
The Company believes that strategic alliances can be a cost effective means
of providing the Balanced Care Continuum and a means of easing an individual's
transition from one setting to another. Accordingly, the Company will consider
entering into joint ventures or other alliances with local and regional hospital
systems, skilled nursing facilities, medical rehabilitation providers, home
health care and other senior health care providers and physicians, as well as
managed care organizations. The Company believes that such arrangements or
alliances, which could range from joint marketing arrangements to joint venture
arrangements, will enable it to be strategically positioned within its targeted
markets.
CARE AND SERVICES PROGRAMS
The Company offers a continuum of services to seniors that include assisted
living, medical rehabilitation, home health care, skilled nursing, subacute care
and independent living services.
Assisted Living Services
Admission; Resident Care Plan. The Company intends that its assisted
living facilities be the principal entry point into the Balanced Care Continuum.
As a result, the assisted living admission process is crucial to the proper
placement of residents and in the development of tailored resident care plans.
Upon admission to one of the Company's assisted living facilities, a physician
assesses the resident's health status and determines his or her care needs. A
lifestyle assessment is also conducted in consultation with the resident, as
well as his or her family and medical consultants, to determine the resident's
care and services preferences. From this assessment, each resident's
individualized care plan is developed to ensure that all staff members rendering
services meet the resident's specific needs and preferences whenever possible.
Each resident's care plan is reviewed periodically to determine when a change in
services is needed. The Company seeks to provide assisted living services that
allow a resident to maintain a dignified, independent lifestyle. Residents and
their families are encouraged to be partners in their care and to take as much
responsibility as possible for their well being.
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<PAGE> 49
Care and Services. The Company offers a range of assisted living care and
services which are available 24 hours per day at each of its assisted living
facilities. The core services package offered by the Company includes personal
care, support and certain supplemental services. Personal care services include
assistance with ADLs, such as ambulating, bathing, dressing, eating, grooming,
personal hygiene, monitoring or assistance with medications and confusion
management. Support services include meal preparation, assistance with social
and recreational activities, laundry services, general housekeeping, maintenance
services and transportation services. Supplemental services, which are offered
at an extra charge, include extra transportation services, beauty and barber
services, extra laundry services and non-routine care services. The Balanced
Gold(SM) program is included in the Company's core services package at each of
its newly-developed signature assisted living facilities, and the Company
intends to implement all or part of the program at its other assisted living
facilities as appropriate. The Company's facilities have been designed to
accommodate special programs including those for residents with Alzheimer's and
other forms of dementia, as well as medical rehabilitation and home health care
services. Medical rehabilitation services are provided by certified physical,
occupational and speech therapists and psychologists, with physician oversight.
Home health care services are provided through the Company's licensed home
health agency in Missouri or by a third party.
Balanced Gold(SM). The Company's Balanced Gold(SM) program is a
wellness-oriented program which assists residents in remaining independent and
involved with their families, other residents and the local community. The
Balanced Gold(SM) program is included in the Company's core services package at
each of its newly-developed signature assisted living facilities, and the
Company intends to implement all or part of the program at its other assisted
living facilities as appropriate. Balanced Gold(SM) is designed to address a
variety of factors that may affect adversely the health of assisted living
residents, including balance and gait difficulties, incontinence, cognitive
impairment, stress due to pain and chronic conditions and grieving due to
multiple losses in the resident's life. The Balanced Gold(SM) program includes
tai chi exercise to improve balance and gait problems; individually designed
exercise programs, including incontinence and pelvic exercises and diet
guidelines; "Wisdom Keeper" programs to challenge and stimulate mental
capabilities; "Relaxation and Vitality" programs of deep breathing, stretching
exercises and sitting and walking meditation; "Golden Living" programs to assist
with grief and loss; gardening to encourage nurturing and independence; and
walking programs to promote health and fitness. Company staff, in consultation
with the resident, as well as his or her family and medical consultants,
determine which of the Balanced Gold(SM) activities are appropriate and best
suited to the resident's needs, interests and capabilities.
Alzheimer's Program. The Company is developing, with the assistance of its
Health Care Advisory Board, an approach to Alzheimer's and other forms of
dementia that includes specialized assessments and clinical approaches for early
and accurate detection, placement and intervention. To meet the needs of
residents with Alzheimer's disease and other related forms of dementia, the
Company is developing specially designed programs to maintain familiarity,
reduce confusion, and still provide a pleasant and appropriate living
environment for these residents. The Company's approach to Alzheimer's also
calls for support groups to be organized in conjunction with the local chapter
of the Alzheimer's Association to provide a safe and supportive community
through which caregivers can share their thoughts and concerns. The Company's
signature assisted living facilities are designed to enable these specialized
services to be provided at all future locations.
The Company currently operates an Alzheimer's program at one of its
assisted living facilities and at three dedicated units in its skilled nursing
facilities. These units feature areas specifically designed to provide
attention, care and services needed to help residents with Alzheimer's maintain
a higher quality of life. The Alzheimer's team members are specially trained to
understand behavior, maximize function, promote safety and encourage resident
independence.
Medication Management. Each assisted living facility contracts with a
pharmacy to provide prescription drugs to those residents who desire to utilize
the pharmacy. Residents are free to use a pharmacy of their choice.
Additionally, subject to state regulatory requirements, at the resident's
request, and based on the facility's assessment of the resident's needs, the
assisted living facility may
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<PAGE> 50
manage a resident's medications by storing prescription drugs within the
facility, delivering the drugs to the resident and reminding the resident when
the medications need to be taken.
Assisted Living Charges. Monthly assisted living resident charges are
based, in part, on the type of assisted living suite selected and are set at
rates designed to be within the means of seniors in the secondary markets served
by the Company. In addition to its core services package, the Company offers
three additional levels of services to residents whose frailties or medical
condition are more acute. These additional levels of services are currently
offered at prices equal to 4%, 8%, and 12% above the price of the Company's core
assisted living services package. As of June 30, 1997, approximately 25%, 20%
and 10% of the Company's assisted living residents received services at the
first, second and third levels of additional services, respectively.
Substantially all of the Company's current revenues from the provision of
assisted living services are attributable to private payors.
Medical Rehabilitation Services
The Company's philosophy for addressing seniors' living and care needs
includes the belief that preventative therapy will strengthen residents, improve
their overall health and forestall the deterioration that generally accompanies
aging, thus extending their lives and lengths of stay in assisted living
facilities. The Company has developed specialized medical rehabilitation
programs to address the needs of seniors, including programs to specifically
address balance and gait difficulties, incontinence, lymphodema, pain and
osteoarthritis, as well as specific preventative therapy programs for seniors.
For residents in the Company's signature assisted living facilities, each
rehabilitation program is followed up with specialized regimens offered as part
of the Balanced Gold(SM) program. Should a resident's condition warrant
additional rehabilitation, on-staff and contracted therapists are available.
The Company currently provides medical rehabilitation services, including
physical and occupational therapy, on an outpatient basis to residents at two of
its assisted living facilities as well as to patients in a surrounding
community. These outpatient services are provided through the Company's licensed
rehabilitation agency in Pennsylvania or certain of its skilled nursing
facilities. Rehabilitation services are provided at the Company's other
facilities through contract services, outpatient rehabilitation facilities or
home health agencies.
The Company intends to establish or acquire additional licensed
rehabilitation agencies in those states where it is developing assisted living
facilities. These agencies will enable the Company to provide medical
rehabilitation services to its assisted living residents and the surrounding
communities. Additionally, the Company may enter into strategic joint venture
relationships with rehabilitation providers to provide medical rehabilitation in
certain markets.
Substantially all of the Company's current revenues from provision of
medical rehabilitation services are attributable to federal government
reimbursement programs.
Home Health Care Services
The Company provides home health care services through its licensed home
health agency in Missouri to residents at five of its assisted and independent
living facilities and patients from the surrounding areas. The services the
Company provides include: (i) general and specialty nursing services to
individuals with acute illness, long-term chronic health conditions, permanent
disabilities, terminal illnesses or post-procedural needs; (ii) therapy services
consisting of, among other things, physical, occupational, speech, and medical
social services; (iii) personal care services and assistance with ADLs; (iv)
hospice care for persons in the final phases of incurable disease; (v)
respiratory, monitoring, medical equipment and supplies; and (vi) a
comprehensive range of home infusion and enteral therapies. The Company intends
to develop, acquire or manage home health care service businesses in order to
provide home health care services at other facilities and to seniors living in
surrounding areas. Assisted living residents receiving home health care services
may require skilled nursing services as their medical conditions warrant.
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<PAGE> 51
Substantially all of the Company's current revenues from provision of home
health care services are attributable to federal government reimbursement
programs.
Skilled Nursing and Subacute Services
The Company currently provides skilled nursing services at two facilities
in northeast Pennsylvania (103 licensed beds) and ten facilities (1,125 licensed
beds) in southwest Missouri. The Company's skilled nursing facilities provide
traditional long-term care through 24-hour per day skilled nursing care by
registered nurses, licensed practical nurses and certified nursing aides. The
Company also offers a range of subacute care services at its skilled nursing
facilities including specialized programs for pulmonary care, medical
rehabilitation, wound care and dialysis. Subacute care is generally short-term,
goal-oriented care intended for individuals who have a specific illness, injury
or disease, but who do not require many of the services provided in an acute
care hospital. Board certified physicians direct the subacute programs offered
at these facilities.
For fiscal 1997, approximately 76% of the Company's skilled nursing
revenues were attributable to federal and state government reimbursement
programs.
Independent Living Services
The Company operates four independent living facilities in Missouri located
adjacent to skilled nursing facilities operated by the Company. Services
provided at such facilities include: meal preparation, housekeeping, laundry and
transportation. These facilities are licensed as assisted living facilities and
may be converted from independent living facilities at the option of the
Company.
All of the Company's current revenues from the provision of independent
living services are attributable to private payors.
THE BALANCED CARE SIGNATURE ASSISTED LIVING FACILITY MODEL
The architectural and interior design concept of the Company's signature
assisted living facility models incorporates the Company's operating philosophy
of protecting resident privacy, enabling freedom of choice, encouraging
independence and fostering individuality in a home-like setting. The buildings
are residential in appearance, designed as "neighborhoods" within a "community,"
and offer a home-like environment, while being constructed to institutional
health care facility standards. The building designs incorporate the Company's
mission and dedication to providing a new outlook for seniors, encouraging
choice, wellness, and vitality. The Company believes that its signature
facilities achieve its mission and goals to meet the needs and expectations of
its residents and their families, providing a secure environment and care in a
home-like setting where the Company is responsive to each individual's special
needs and the universal desire for independence, dignity and purpose. The
Company believes that its residential environment also accomplishes several
other objectives, including: (i) lessening the trauma of change for residents
and their families; (ii) achieving operational efficiencies; (iii) facilitating
resident mobility and ease of access by caregivers; and (iv) differentiating the
Company from other assisted living and long-term care operators.
The models are freestanding buildings that range in size from 48 units to
106 units and are designed to accommodate the full range of assisted living
services offered by the Company, including the Company's Balanced Gold(SM) and
Alzheimer's programs. The buildings are usually single story and of
incombustible construction, and are designed to accommodate future expansion.
The interior layout is designed to promote efficient delivery of resident care
as well as resident independence. The design of the facilities allows
specialized grouping of residents and a central core for resident interaction.
In addition, the buildings are designed with a fully-equipped therapy gym and
treatment rooms for provision of medical rehabilitation services. The buildings
range in size from 27,000 square feet to 68,000 square feet and are adaptable to
construction on sites ranging from two to five acres. Approximately 38% of a
building is devoted to common areas and contains resident amenities including a
parlor, living room, dining room, club room, library, activity room,
beauty/barber shop, spa, laundry,
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<PAGE> 52
wellness (therapy) center and neighborhood lounges with pantries. The support
areas include administrative offices, resident services offices, a kitchen,
common laundry and housekeeping/ maintenance areas. Resident units, including
studio, privacy, companion and one bedroom suites, are functionally grouped as
"neighborhoods" within a "community" and are configured internally to provide
private bath, living area and sleeping area with emergency call systems and
cable television service. Porches, terraces, gardens and activity areas are
designed to fulfill outdoor interests of residents.
The Company has three basic building plan design prototypes which provide
it with flexibility in adapting the model to a particular site and to
accommodate the various income and care levels demanded in a particular market.
Daily rates at the Prototype A facilities are currently expected to range from
$78.00 to $105.00 and Prototype B from $68.00 to $82.00. Daily rates for a
Prototype C facility, the design of which has not been finalized, are currently
expected to range from $58.00 to $68.00.
OPERATING FACILITIES
The following table sets forth certain information with respect to the
senior living and care facilities (other than its Wisconsin assisted living
facilities which the Company plans to sell) currently operated by the Company
and those comprising the Pending Acquisitions.
<TABLE>
<CAPTION>
RESIDENT CAPACITY
BY CARE LEVEL(1) OCCUPANCY
OWNED (O)/ --------------------- RATE AS OF
FACILITY LOCATION LEASED (L) ALF SNF ILF SEPTEMBER 30, 1997
- --------------------------------------------------------- ---------- ----- ----- --- ------------------
<S> <C> <C> <C> <C> <C>
CURRENTLY OPERATED:
MISSOURI
Dixon
Balanced Care, Dixon(2).............................. L -- 60 -- 92%
Hermitage
Balanced Care, Hermitage(2).......................... L -- 120 -- 87%
Lebanon
Balanced Care, Lebanon North(2)...................... L -- 180 -- 84%
Balanced Care, Lebanon South(2)...................... L 12 106 -- 95%
The Terraces at Lebanon South(2)..................... L -- -- 31 70%
Nixa
Balanced Care, Nixa(2)............................... L -- 82 -- 94%
The Terraces at Nixa(2).............................. L -- -- 30 89%
Republic
Balanced Care, Republic(2)........................... O -- 127 -- 85%
Springfield
Balanced Care, Springfield East(2)................... L -- 120 -- 89%
The Terraces at Springfield East(2).................. L -- -- 31 90%
Balanced Care, Springfield West I(2)................. L -- 180 -- 89%
Balanced Care, Springfield West II(2)................ L -- 90 -- 80%
The Terraces at Springfield(2)....................... L 34 -- -- 71%
Nevada
Balanced Care, Nevada(2)............................. O -- 60 -- 91%
The Terraces at Nevada(2)............................ L -- -- 28 66%
The Terraces of Balanced Care(3)..................... L 27 -- -- 88%
The Terraces of Balanced Care(3)..................... L 25 -- -- 77%
Butler
The Terraces of Balanced Care(3)..................... L 25 -- -- 70%
Lamar
The Terraces of Balanced Care(4)..................... L 25 -- -- 85%
--- ----- ---
Subtotal:........................................ 148 1,125 120
--- ----- ---
</TABLE>
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<PAGE> 53
<TABLE>
<CAPTION>
RESIDENT CAPACITY
BY CARE LEVEL(1) OCCUPANCY
OWNED (O)/ --------------------- RATE AS OF
FACILITY LOCATION LEASED (L) ALF SNF ILF SEPTEMBER 30, 1997
- --------------------------------------------------------- ---------- ----- ----- --- ------------------
<S> <C> <C> <C> <C> <C>
PENNSYLVANIA
Allison Park
Outlook Pointe(TM) at Allison Park(5)................ L 52 -- -- 100%
State College
Outlook Pointe(TM) at State College(6)............... L 54 -- -- 40%
Bloomsburg
Bloomsburg Manor(7).................................. L 69 -- -- 96%
Darlington
Feltrop's Personal Care Home(8)...................... O 92 -- -- 96%
Kingston
Kingston Manor(7).................................... L 78 -- -- 94%
Kingston Health Care Center(7)....................... L -- 65 -- 98%
Peckville
Mid Valley Manor(7).................................. L 71 -- -- 98%
Blakely Pine Health Care Center(7)................... L -- 38 -- 100%
Old Forge
Old Forge Manor(7)................................... L 49 -- -- 97%
Wyoming
West View Manor(7)................................... L 50 -- -- 97%
----- ----- ---
Subtotal:........................................ 515 103 0
----- ----- ---
ARKANSAS
Sherwood
Outlook Pointe(TM) at Sherwood(9).................... L 50 -- 7 --
Mountain Home
Outlook Pointe(TM) at Mountain Home(9)............... L 57 -- -- --
Maumelle
Outlook Pointe(TM) at Maumelle(9).................... L 50 -- 7 --
Pocohontas
Outlook Pointe(TM) at Pocohontas(9).................. L 60 -- -- --
----- ----- ---
Subtotal:........................................ 217 0 14
----- ----- ---
PENDING ACQUISITIONS:
Butler:
Silver Haven Summit,
Butler, PA........................................... O 36 -- -- 94%
Sterling Care of Sarver,
Sarver, PA........................................... O 37 -- 4 93%
Sterling Care of Saxonburg,
Saxonburg, PA........................................ O 79 -- 16 99%
----- ----- ---
Subtotal:........................................ 152 0 20
----- ----- ---
Gethsemane:
Gethsemane Retirement Community and Rehabilitation
Center,
Bloomsburg, PA....................................... O -- 66 -- 99%
Gethsemane Assisted Living Community,
Millville, PA(10).................................... O 51 -- -- 49%
----- ----- ---
Subtotal:........................................ 51 66 0
----- ----- ---
[Confidential Treatment Requested]:...................... O 117 -- -- 100%
----- ----- ---
Saxony:
Saxony Health Center, Saxonburg, PA.................... O 63 68 -- 96%
----- ----- ---
Total.......................................... 1,260 1,362 154
===== ===== ====
</TABLE>
- ---------------
(1) "ALF" means assisted living facility, "SNF" means skilled nursing facility
and "ILF" means independent living facility. The Company's ILFs in Missouri
are licensed as ALFs and may be converted to ALFs as the needs of its
residents so require.
(2) Acquired August 1996.
(3) Acquired May 1997.
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<PAGE> 54
(4) Acquired August 1997.
(5) Acquired March 1996; facility has 16 beds closed during the construction of
a 36 bed addition; capacity will be 104 beds when this addition is
completed in October 1997.
(6) Opened in May 1997.
(7) Acquired January 1997.
(8) Acquired October 1997.
(9) The occupancy rate is not meaningful as the facility opened in September or
October 1997.
(10) Facility opened in March 1997. The occupancy rate reflects such recent
opening.
The above table excludes the Company's seven Wisconsin assisted living
facilities which the Company intends to sell. The Wisconsin facilities consist
of seven owned assisted living facilities located in Beloit (23 resident
capacity), Mauston (15 resident capacity), Monroe (23 resident capacity),
Pardeville (nine resident capacity), Portage (30 resident capacity), Tomah (30
resident capacity) and Waupun (15 resident capacity). See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Pending Acquisitions and Planned Divestiture."
DEVELOPMENT
An integral element of the Company's growth is the design, development and
opening of its signature assisted living facilities. The Company believes that
its signature assisted living facilities meet the needs of the upper middle,
middle and moderate income populations in its target markets and are designed to
provide the broad range of services contemplated by its Balanced Care Continuum
strategy over a range of pricing options. In addition to the five signature
assisted living facilities opened to date by the Company, the Company
anticipates opening an additional four assisted living facilities, all of which
are currently under construction, during the remainder of calendar year 1997.
The Company currently plans to develop approximately 75 of its signature
assisted living facilities with a capacity of approximately 6,000 residents over
the next three years.
In evaluating a potential market, the Company utilizes an in-house
developed model and a market analysis which considers such factors as bed need,
population, income and age demographics, target site visibility, probability of
obtaining zoning approvals, estimated level of market demand, the opportunity
for the Company to offer a range of services comprising the senior living and
health care continuum and the ability to maximize management resources in a
specific market by clustering its development and operating activities.
The primary milestones in the Company's development process are: (i) site
selection and signing of a land purchase option agreement, (ii) obtaining
permits and approvals necessary to commence construction, (iii) completion of
construction and (iv) operational set-up and training prior to opening. Once a
market has been identified, site selection and signing of a land purchase option
agreement typically take approximately 30 to 90 days and obtaining permits and
approvals takes approximately 60 to 90 days. Architectural design is done
in-house by a Company architect, while hands-on construction functions are
contracted to outside contractors. Construction of an assisted living facility
normally takes six to nine months, depending on geographic location and weather
conditions. Pre-opening operational activities begin approximately one month
after construction begins. After a facility receives a certificate of occupancy,
residents usually begin to move in immediately. The Company generally expects
occupancy of newly developed assisted living facilities to reach a stabilized
level in 10 to 12 months in the 66 unit facilities and 14 to 18 months in the
106 unit facilities.
The Company believes that it differentiates itself from many of its
competitors by its senior management's expertise in the development of
rehabilitation hospitals and other health care facilities and operations as well
as its in-house market research and development capabilities. The development
staff is currently comprised of eight professionals with over 100 years of
collective experience in real estate and health care facility development,
including analysts who target potential markets through the use of an in-house
developed bed need model and developers who conduct market analysis to identify
market bed needs, select appropriate building sites, and coordinate all local
and state
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governmental license and permit approvals. In addition, the design and
construction group is responsible for adapting prototypical facility design to
the selected site, making adjustments to the prototype plans to comply with
local building codes and awarding and monitoring contracts with third-party
architects and general contractors. The Company's design and construction group
also conducts field inspections and construction draw approvals during the
construction life of the project. Project managers and the in-house licensed
architect in the design and construction group collectively have 110 years of
construction management experience.
The Company's financial analysts generate five year projections for each
anticipated project. These projections are based on all costs associated with a
particular prototype facility chosen for that locale. All projects are subject
to predetermined hurdle rates for return on investment and minimum margins for
net operating income and pretax income. The senior management team and Board of
Directors approve all development projects. The capitalized costs to develop and
construct one of the Company's signature assisted living facilities is generally
projected to range between $44,000 and $85,000 per bed.
To date, the Company has entered into agreements to develop assisted living
facilities for health care REITs. The Company has leased the facilities from the
REITs when construction has been completed. The Company's recent and future
development projects involve or are expected to involve entering into
development agreements with third-party owners, which are or are expected to be
health care REITs. An independent third-party company (the "Operator/Lessee")
will lease the assisted living facility from the REIT when construction has been
completed. The Company expects to manage the assisted living facility pursuant
to a management agreement with the Operator/Lessee. Each management agreement
provides or is generally expected to provide for a ten-year period with annual
fees approximating 6.0% of net revenues of the facility. It is anticipated that
the Company will have the option to purchase the stock of the Operator/Lessee
for fair market value at any time during the term of the management agreement.
The following table sets forth certain information regarding the Company's
signature assisted living facilities for which the zoning, permitting or
construction process has commenced and which the Company is developing. For each
of the locations, the Company or the prospective third-party owner has, at a
minimum, an option to purchase the real estate on which the facility is to be,
or is
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<PAGE> 56
being, developed. In addition to facilities listed below, the Company is also
engaged in preliminary development activities with respect to other possible
sites for future facilities.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
CONSTRUCTION COMPLETION
ASSISTED LIVING FACILITY RESIDENT START DATE DATE
LOCATION CAPACITY OWNERSHIP (QUARTER END) (QUARTER END)
-------------------------- -------- ---------- ------------- ---------------
<S> <C> <C> <C> <C>
ARKANSAS
Blytheville................................... 57 Lease Commenced Dec. 1997
-----
MISSOURI
Chesterfield.................................. 59 Lease Dec. 1997 Dec. 1998
-----
NORTH CAROLINA
Greensboro.................................... 50 Lease Commenced June 1998
-----
OHIO
Ravenna....................................... 60 Lease Commenced Mar. 1998
Lima.......................................... 66 Manage(1) Dec. 1997 Sept. 1998
Xenia......................................... 106 Manage(1) Dec. 1997 Dec. 1998
Medina........................................ 80 Manage(1) Mar. 1998 Mar. 1999
Westerville................................... 106 Manage(1) June 1998 Mar. 1999
Steubenville.................................. 80 Manage(1) Sept. 1998 Mar. 1999
-----
Subtotal: 498
-----
PENNSYLVANIA
Altoona....................................... 48 Lease Commenced Dec. 1997
Reading....................................... 64 Lease Commenced Dec. 1997
Harrisburg.................................... 57 Lease Commenced Dec. 1997
Dillsburg..................................... 66 Manage(1) Dec. 1997 Sept. 1998
Hampden....................................... 106 Manage(1) Dec. 1997 Sept. 1998
Scranton...................................... 72 Lease Dec. 1997 June 1998
Chippewa...................................... 66 Manage(1) Dec. 1997 Dec. 1998
Lewistown..................................... 72 Manage(1) Dec. 1997 June 1998
Mid-Valley.................................... 40 Manage(1) Dec. 1997 Sept. 1998
Lewisburg..................................... 72 Manage(1) Mar. 1998 Sept. 1998
Hazelton...................................... 72 Manage(1) Mar. 1998 Sept. 1998
Bridgeville................................... 106 Manage(1) Mar. 1998 Dec. 1998
Shippensburg.................................. 66 Manage(1) Mar. 1998 Dec. 1998
-----
Subtotal: 907
-----
TENNESSEE
Jackson....................................... 66 Manage(1) Mar. 1998 Dec. 1998
-----
VIRGINIA
Harrisonburg.................................. 60 Manage(1) Commenced Mar. 1998
Roanoke....................................... 60 Manage(1) Commenced Mar. 1998
Danville...................................... 66 Manage(1) Commenced June 1998
Chesterfield.................................. 80 Manage(1) June 1998 June 1999
-----
Subtotal: 266
-----
WEST VIRGINIA
Martinsburg................................. 66 Manage(1) Mar. 1998 Dec. 1998
-----
Total: 1,969
=====
</TABLE>
- ------------
(1) The Company is expected to manage the facility upon completion for the
Operator-Lessee and is expected to have the option to acquire the stock of
the Operator-Lessee.
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<PAGE> 57
ACQUISITIONS AND STRATEGIC ALLIANCES
Since its inception, the Company's growth has been substantially
attributable to the acquisition of 12 assisted living facilities with a capacity
for 625 residents, 12 skilled nursing facilities with a capacity for 1,228
patients, and four independent living facilities with a capacity for 120
residents, as well as a home health care agency (excluding the Company's seven
Wisconsin assisted living facilities and the Pharmacy). See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Pending Acquisitions and Planned Divestiture." The Company intends
to continue to pursue selective acquisitions to enter new markets, to enable the
Company to develop and provide one or more components of the Balanced Care
Continuum in its markets, to create clusters of assisted living facilities in
selected markets, to benefit from operating efficiencies and to develop a
leading market position. In addition, the Company will consider entering into
joint ventures or other alliances with skilled nursing, medical rehabilitation,
home health care and other senior health care providers as a cost effective
means of providing a full range of care to residents of the Company's facilities
and a senior care continuum that eases an individual's transition from one
setting to another.
In evaluating a potential acquisition, the Company considers, among other
factors: (i) location, construction quality, condition and design of the
facility, (ii) current and projected facility cash flow, (iii) the ability to
increase revenue, occupancy and cash flows by providing a full range of
services, (iv) cost of facility repositioning (including renovations, if any),
(v) the reputation of the facility in the local market, and (vi) the extent to
which the acquisition will complement the Company's development plans and
strategy. The Company's senior management and its acquisition team have
extensive experience in the acquisition of assisted living and other health care
facilities, including market assessment, identification of targets, due
diligence, negotiating, pricing, structuring, closing and integrating
acquisitions. Additionally, the Company's senior management team has extensive
acquisition experience as well as contacts with a large number of assisted
living, medical rehabilitation, home health care and skilled nursing and
subacute facility owners and operators.
The Company believes that the current fragmentation of the assisted living
industry will continue to create potential acquisition candidates for the
Company and that the competitive nature of the market will increase selling
activity as smaller, less well-capitalized providers face increasing competition
from larger competitors who can offer a broader range of services at more
attractive prices. The Company believes that through the reputation of its
management and the quality of the assisted living facilities it owns, operates
and is currently developing, it will become an attractive acquiror for assisted
living facilities. The Company intends to pursue both strategic and single
portfolio acquisitions that meet its quality standards and present the
opportunity to increase its profitability.
OPERATIONS
Centralized Corporate Management
The Company's corporate and other administrative functions are centralized
so that the facility-based management and staff can focus on resident care. The
Company's corporate office, located in Mechanicsburg, Pennsylvania, is generally
responsible for: (i) establishing Company-wide policies and procedures relating
to, among other things, resident care and operations, (ii) performing accounting
and finance functions, (iii) developing and implementing employee training
programs and materials, (iv) coordinating human resources and food services
functions, (v) coordinating marketing functions, and (vi) providing strategic
direction. In addition, financing, development, construction and acquisition
activities, including feasibility and market studies, facility design,
development and construction management are conducted by the Company's corporate
development and acquisition teams.
The Company manages the operations of each of its facilities through
standardized management reporting and centralized control of capital
expenditures and the purchase of larger and more frequently used supplies.
Facility expenditures are monitored by regional operations teams headed by one
of the Company's Regional Vice Presidents who are responsible for the financial
performance of the facilities in their region. The operational activities of the
Company's assisted living facilities are
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<PAGE> 58
directed by the Company's Vice President of Operations who is responsible, with
the regional Vice Presidents, for the opening and operation of these facilities.
Community-Based Management
An assisted living Community Director or skilled nursing Facility
Administrator manages the operations at each assisted living or skilled nursing
facility, including oversight of the quality of care, delivery of resident
services, and monitoring of financial performance, and is responsible for all
personnel, including assisted living, food service, maintenance, activities,
security, housekeeping, and, where applicable, nursing. Directors and
Administrators are compensated based on attaining certain quality service goals
and on the financial goals of the facility. In most cases, each facility also
has department managers that direct nursing or care services, dining services,
activities, transportation, environmental, housekeeping and marketing functions.
In its assisted living communities, the Company has adopted the concept of
a multi-task work environment whereby each employee's responsibilities span a
number of traditional job descriptions. For example, an employee may, during the
course of a day, provide housekeeping, food delivery service, activities, and
assistance with ADLs to residents. On-site care managers and residents'
assistants provide most of the actual resident care in conjunction with a small
support team consisting of a nurse, a housekeeper, a maintenance helper, an
administrative coordinator and a small dining service team.
The Company actively recruits personnel to maintain adequate staffing
levels at its existing facilities, as well as additional staff for new or
acquired facilities, prior to opening. The Company has adopted comprehensive
recruiting and screening programs for management for positions that utilize
personnel profiling and corporate office interviews, and background checks. The
Company offers system-wide training and orientation for its resident care
employees, department level managers, and executive staff at the facility level
through Company-sponsored programs.
Quality Assurance and Training
The Company's quality assurance program is designed to achieve and maintain
a high degree of resident and family satisfaction with the Company's care and
services. Corporate office staff coordinate the implementation of the quality
assurance program at each of the Company's facilities. The Company encourages
resident and family participation and seeks feedback from families and residents
through surveys, focus groups, resident councils and discussions with family
members. The Company provides training programs to ensure that its quality
standards are achieved by its employees at each assisted living facility. In
addition, inspections of each facility are conducted regularly by corporate
staff. These periodic inspections involve the review of all aspects of
operations, care, and services provided, as well as the overall appearance and
cleanliness of the facility.
Integration of Acquired Facilities
The Company has developed a plan and organization structure to begin a
complete integration of each acquired facility immediately following its
acquisition. An interdisciplinary integration team begins conversion of
financial and information systems at closing, with operations, marketing and
human resource policies and procedures converted during the first six months of
operation.
Marketing
The Company's marketing program has been developed by the corporate
marketing staff under the direction of the Company's Vice President of Sales and
Marketing and is modified in accordance with the needs of each region in which
the Company operates. Marketing focuses on creating awareness of the Company and
its services among prospective residents, their families, professional referral
sources and other key decision makers. Marketing efforts are implemented on a
regional and local level under the supervision of the corporate marketing staff.
Corporate office personnel develop
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<PAGE> 59
the overall marketing strategies for each facility, produce all marketing
materials, maintain marketing databases, oversee direct mailings, place all
media advertising and assist facility personnel in the initial development and
continuing refinement of marketing plans. The Company conducts pre-construction
surveys of age- and income-qualified prospective residents and their families
living within a certain radius of the proposed assisted living construction site
to ensure that the Company understands the needs and demands of a particular
marketplace. Focus groups are organized during the pre-opening phase to collect
data from key community representatives about seniors' needs and to inform them
of the Company's approach to senior care.
Before opening a new assisted living facility, the Company contacts
referral sources and conducts marketing programs that generate public awareness
beginning with the start of construction and intensify several months prior to
opening of the facility. An on-site Marketing Coordinator and Community Director
are at the residence approximately eight months prior to the opening of the
facility and are supported by the Company's corporate marketing department. The
Company generally expects occupancy to reach a stabilized level in 10 to 12
months in the 66 unit facilities and 14 to 18 months in the 106 unit facilities.
Once a facility opens, the Company believes that satisfied residents and
their families are its most important referral sources. The Company's emphasis
on high quality services and resident satisfaction create a strong referral base
in the surrounding community. In addition, the Company focuses on developing the
reputation of the facilities for quality care and its Balanced Gold(SM) program
among potential referral sources.
In markets where the Company offers multiple components of the Balanced
Care Continuum, such as assisted living, outpatient rehabilitation services,
skilled nursing, subacute care, home care and hospice services, a network
approach to sales and marketing is utilized. A community-based sales force that
understands the health care environment of each market, including competitor
positioning, referral patterns and the maturity of managed care, facilitates
cross selling of the Company's services. Direct sales efforts increase referrals
for all services through the account management of professional referral sources
such as physicians, hospitals, and managed care plans.
Management Information Systems
The Company's information systems department, under the direction of the
Company's Vice President of Corporate Services, develops, implements and
maintains management and financial systems which enable the Company to closely
monitor operating costs and quickly distribute financial and operating
information to appropriate levels of management in a cost efficient manner. The
Company uses flexible input methods and communications to allow for distributed
data collection and analysis.
The Company uses high quality hardware and operating systems from current
and proven technologies to ensure reliability and optimum system performance.
All software systems are commercially licensed with appropriate support and
upgrade options. For its skilled nursing operations, the Company has established
on-line electronic billing with Medicare and state Medicaid programs. In
addition, the facility-based system generates computer-assisted medical records
that allow for the creation of individualized care plans, physician orders and
administrative and observation records. All of the Company's facilities use
electronic systems throughout the marketing, admission and patient management
process. Acquired properties are converted to the Company's information systems
after acquisition.
COMPETITION
The health care industry is highly competitive and the Company believes
that competition in its current and targeted markets will continue to increase.
There are currently few regulatory and other barriers to entry in the assisted
living industry. The Company faces competition for residents from numerous
local, regional and national providers of facility-based assisted living and
long-term care,
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<PAGE> 60
including skilled nursing facilities, as well as medical rehabilitation and home
health care providers. Many of the Company's present and potential competitors
are significantly larger or have greater financial resources than those of the
Company. The Company believes the primary competitive factors in the senior care
industry are: (i) reputation for, and commitment to, high quality care; (ii)
quality of support services offered (such as home health care and food
services); (iii) price of services; (iv) physical appearance and amenities
associated with the facilities; and (v) location. Because seniors tend to choose
senior living facilities near their homes, the Company's principal competitors
are other senior living and long-term care facilities in the same geographic
areas as the Company's facilities. The Company also competes with other health
care businesses with respect to attracting and retaining nurses, technicians,
aides, and other high quality professional and non-professional employees and
managers. Additionally, in implementing its growth strategy the Company will
face competition for the development and acquisition of assisted living, skilled
nursing and related senior care facilities.
GOVERNMENT REGULATION
The health care industry is subject to extensive federal, state and local
regulation. The various layers of governmental regulation affect the Company's
business by controlling its growth, requiring licensure or certification of its
facilities, regulating the use of its facilities and controlling reimbursement
to the Company for services provided. Licensing, certification and other
applicable governmental regulations vary from jurisdiction to jurisdiction and
are revised periodically. It is not possible to predict the content or impact of
future legislation and regulations affecting the health care industry.
Laws and regulations governing skilled nursing facilities are particularly
extensive and establish minimum standards in a variety of areas, including
physical plant specifications; personnel training and education; the level of
nursing, physician, rehabilitation, social, dietary and recreational services to
be provided; and safety and evacuation plans. The Omnibus Reconciliation Act of
1987 ("OBRA") significantly redefined the scope and nature of federal
regulations governing skilled nursing facilities certified to participate in the
Medicare and Medicaid programs, with an emphasis on resident rights and quality
of care. Skilled nursing facilities are also generally subject to and must
comply with state and/or local building and fire codes. In addition, some
states, including Missouri, have certificate of need laws applicable to skilled
nursing facilities. Certificate of need laws require that a state agency
determine that a sufficient need exists for a facility before it may be opened.
These laws may also regulate permitted capital expenditures and expansion of
services and beds.
Skilled nursing facilities, like other health care providers, are
periodically inspected by governmental agencies with authority over licensing
and certification for participation in the Medicare and Medicaid programs. New
survey and certification requirements under OBRA for participation in the
Medicare and Medicaid programs became effective in 1995, significantly changing
the process of surveying long term care facilities. These requirements
established a graduated system of penalties and remedies to match the severity
of the deficiency. Facility deficiencies may result in the imposition of fines
and penalties, a need to undertake corrective actions, a temporary moratorium on
admissions pending correction of deficiencies, and could result in
decertification from the Medicare and Medicaid programs or loss of licensure and
closure of the facility. To date, these regulations have not had a material
adverse effect on the Company's operations.
The federal government, through its Department of Health and Human
Services, has recently proposed revisions to the conditions for participation in
the Medicare program applicable to home health care providers. These revised
conditions, as proposed, focus on matters such as patient rights, outcomes of
care, patient assessment, care planning, and quality assessment. The Company is
not able to predict at this time what the content of the final revised
conditions will be or the impact the final conditions may have on the Company's
home health care services. In addition, on September 15, 1997, President Clinton
imposed a six-month moratorium, effective immediately, on the entry of new home
health care providers into the Medicare program. During the moratorium, the
Department of Health and Human Services is expected to implement changes to
Medicare conditions of participation that are applicable to home health care
providers, including re-certification as a Medicare provider every three
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years, submission of an independent audit, demonstration of expertise and
experience by serving a minimum number of patients, posting of a $50,000 surety
bond prior to certification and providing information to HCFA concerning
ownership of certain related businesses.
The Company's assisted living facilities are subject to regulation by
various state and local agencies. There are currently no federal laws or
regulations specifically governing assisted living facilities. State
requirements relating to the licensing and operation of assisted living
facilities vary from state to state; however, most states regulate many aspects
of a facility's operations, including physical plant requirements; resident
rights; personnel training and education; requisite levels of resident
independence; administration of medications; safety and evacuation plans; and
the level and nature of services to be provided, including dietary and
housekeeping. In most states, assisted living facilities must also comply with
state and local building and fire codes and certain other licenses or
certifications, such as a food service license, may be required. In addition, in
several states, including Arkansas, Missouri and New Jersey, certificate of need
laws apply to assisted living facilities. North Carolina imposed a 12-month
moratorium, effective August 28, 1997, on the addition of adult care home beds
in the state, subject to certain exceptions. The exceptions include, among
others, an exception for certain development or expansion plans submitted to the
state prior to the date of the moratorium. The Company's development project in
Greensboro, North Carolina is not subject to the moratorium since it meets the
requirements of this exception. Assisted living facilities are subject to
periodic survey by governmental agencies with licensing authority. In certain
circumstances, failure to satisfy survey standards could result in a loss of
licensure and closure of a facility.
Because assisted living facilities historically have not been considered as
traditional health care entities, they have not been subject to the degree of
regulation which governs nursing homes and other health care providers. As
assisted living care emerges as a cost-effective alternative to nursing facility
care, it is anticipated that assisted living facilities could become subject to
more extensive regulation, particularly in the areas of licensure and
reimbursement. The content of such regulations, the extent of any increased
regulation and the impact of any such regulation on the Company cannot be
predicted at this time and there can be no assurance that such regulations will
not adversely affect the Company's business.
As a Medicare and Medicaid provider with respect to its skilled nursing
facilities and rehabilitation and home health care operations, the Company is
subject to a variety of laws regulating relationships among health care
facilities, providers and physicians. Among these laws is the federal "Stark
Act" legislation which prohibits, with some exceptions, a physician from
referring patients for certain designated health care services, including home
health care and certain rehabilitation services, to entities in which the
physician or a member of his or her family has a financial interest. The
Company, as a Medicare and Medicaid provider, is also subject to federal
anti-kickback laws which prohibit the payment or receipt of any remuneration in
return for, or to induce, the referral of patients for items or services that
are paid for, in whole or in part, by Medicare or Medicaid. Violation of these
provisions could result in civil or criminal penalties, as well as exclusion
from participation in the Medicare and Medicaid programs. There are currently a
number of federal initiatives being undertaken to increase enforcement of the
federal anti-kickback law and other antifraud and abuse provisions.
Additionally, the Balanced Budget Act of 1997 (the "Budget Act"), signed into
law on August 5, 1997, contains a number of anti-fraud provisions designed to
further fight abuse and enhance program integrity. Certain states have also
enacted anti-kickback laws patterned on the federal law. The Company believes
that its operations are in substantial compliance with the laws applicable to
Medicare and Medicaid providers, including antifraud and abuse provisions;
however, there can be no assurance that the administrative or judicial
interpretation of such laws or the regulations promulgated thereunder will not
in the future have a material adverse impact on the Company's operations or that
the Company will not be subject to an investigation which would require a
significant investment of time and manpower by the Company. Assisted living
facilities may be eligible to participate as Medicaid providers and receive
reimbursement through Medicaid waiver programs and managed care plans. If the
Company elects to become a Medicaid provider with respect to its assisted living
facilities, such
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entities would become subject to all of the requirements applicable to Medicaid
providers, including the anti-fraud and abuse legislation.
The Company derives a significant portion of its revenues from federal and
state reimbursement programs. All of the skilled nursing facilities operated by
the Company are certified to receive benefits under Medicare and Medicaid, and
the Company's home health care agency is certified under Medicare. Medicare
currently utilizes a cost-based reimbursement system for skilled nursing
facilities and home health care agencies which, subject to limits fixed for a
particular geographic area, reimburse skilled nursing facilities and home health
agencies for reasonable direct and indirect allowable costs incurred in
providing routine services (including nursing, room and board and administrative
overhead), as well as ancillary costs (such as physical, occupational and speech
therapy, drugs, supplies and equipment) and capital-related costs.
The reimbursement methodology for a variety of health care providers will
be significantly changed as a result of provisions contained in the Budget Act,
which provisions could materially impact the Company's operations and financial
condition. The Budget Act provides for the establishment of a prospective
payment system ("PPS") for skilled nursing services (rather than the
retrospective cost-based methodology used currently). The PPS for skilled
nursing facilities will be phased in over three cost reporting periods,
commencing on or after July 1, 1998. During the transition period, the payment
rate will be based on a percentage blend of a facility-specific rate and a
federal per diem rate. Once the PPS is fully implemented, skilled nursing
facilities will be paid a federal per diem rate for covered services, which
include routine and ancillary services and most capital-related costs. The
Budget Act additionally establishes a PPS for home health care services pursuant
to which all services which are currently paid on a reasonable cost basis will
be paid on a prospective basis. The PPS for home health care services is to
begin October 1, 1999, with a transition period not to exceed four years. Until
such time as there is full implementation of the PPS for home health care
services, the Budget Act imposes a number of interim modifications on
reimbursement, including a reduction in per visit cost limits. The Budget Act
also modifies reimbursement rates for rehabilitation agencies and outpatient
therapy providers. It is not possible to predict at this time the impact that
any or all these changes in reimbursement methodology may have on the business,
results of operations or financial condition of the Company.
Medicaid programs currently exist in all of the states in which the Company
has skilled nursing facilities and also apply in some of the states where the
Company has assisted living facilities. While these programs differ in certain
aspects from state to state, they are all subject to requirements imposed by the
federal government, which provides approximately 50% of the funds available
under these programs. In the states in which the Company operates skilled
nursing facilities, payments are based upon specific cost reimbursement formulas
established by that state, which are generally based on historical costs with
adjustment for inflation.
For the year ended June 30, 1997, the Company derived approximately 38% of
its patient services revenues from Medicare and approximately 38% of its patient
services revenues from Medicaid. The Company had no revenues from Medicare or
Medicaid in the periods ended June 30, 1995 and 1996.
Both governmental and private-payor sources have instituted cost
containment measures designed to limit payments made to long-term health which
adversely affect reimbursements to the Company. Furthermore, although federal
regulations do not recognize state budget deficiencies as a legitimate ground to
curtail funding of their Medicaid cost reimbursement programs, states have
nevertheless curtailed such funding in the past. No assurance can be given that
states will not do so in the future or that the future funding of Medicaid
programs will remain at levels comparable to present levels.
Government reimbursement programs are also subject to statutory and
regulatory changes, administrative rulings and interpretations, determinations
by reimbursement intermediaries, and governmental funding restrictions, all of
which may materially increase or decrease the rate of program payments to health
care providers operated by the Company. In addition, there can be no
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assurance that facilities or other providers owned, leased or managed by the
Company, now or in the future, will initially meet or continue to meet the
requirements for participation in such programs.
The Company believes the structure and composition of government regulation
of health care will continue to change and, as a result, it regularly monitors
developments in the law. The Company expects to modify its agreements and
operations from time to time as the business and regulatory environment changes.
While the Company believes it will be able to structure all its agreements and
operations in accordance with applicable law, there can be no assurance that its
arrangements will not be successfully challenged.
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 by disabled persons. While the Company believes that
its properties are substantially in compliance with present requirements or are
exempt therefrom, if required changes involve a greater expenditure than
anticipated or must be made on a more accelerated basis than anticipated,
additional costs would be incurred by the Company. Further, legislation may
impose additional burdens or restrictions with respect to access by disabled
persons, the costs of compliance with which could be substantial.
The Company is subject to various federal, state and local environmental
laws and regulations. Such laws and regulations often impose liability whether
or not the owner or operator knew of, or was responsible for, the presence of
hazardous or toxic substances. 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 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. The presence of these substances, or failure to remediate
such contamination properly, may also affect adversely the owner's ability to
sell or rent the property, or to borrow using the property as collateral. Under
these laws and regulations, an owner, operator or an entity that arranges for
the disposal of hazardous or toxic substances, such as asbestos-containing
materials, at the disposal site, may also be liable for the costs of any
required remediation or removal of the hazardous or toxic substances at the
disposal site. In connection with the ownership or operation of its properties,
the Company could be liable for these costs, as well as certain other costs,
including governmental fines and injuries to persons or properties.
LIABILITY AND INSURANCE
Providing health care services involves an inherent risk of liability.
Participants in the senior living and health care services industry are subject
to lawsuits alleging negligence or related legal theories, many of which may
involve large claims and result in the incurrence of significant defense costs.
The Company currently maintains property, liability and professional medical
malpractice insurance policies for the Company's owned and leased facilities
with such coverages and deductibles which management believes are prudent,
adequate and in keeping with industry practice. The Company also has an umbrella
excess liability protection policy in the amount of $5.0 million to $10.0
million per location. In addition, the Company maintains policies for employee
practices and officers and directors liability in the amounts of $1.0 million
and $3.0 million respectively. There can be no assurance that a claim in excess
of the Company's insurance will not be asserted. A claim against the Company not
covered by, or in excess of, the Company's insurance, could have a material
adverse effect on the Company. The Company's insurance policies are reviewed
annually. There can be no assurance that the Company will be able to obtain
liability insurance in the future or that, if such insurance is available, it
will be available on acceptable terms.
EMPLOYEES
As of September 30, 1997, the Company had approximately 2,000 employees,
including approximately 1,700 full-time equivalent employees. None of the
Company's employees is represented by a
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<PAGE> 64
union. The Company considers its employee relations to be good. Although the
Company believes it is able to employ sufficient skilled personnel to staff the
facilities it operates or manages, a shortage of skilled personnel in any of the
geographic areas in which it operates could affect adversely the Company's
ability to recruit and retain qualified employees and its operating expenses.
LEGAL PROCEEDINGS
The Company may become involved from time to time in legal proceedings in
the ordinary course of its business. The Company is not currently a party to any
legal proceeding that it believes would have a material adverse effect on its
business, financial condition or results of operations.
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<PAGE> 65
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning each of the
executive officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------
<S> <C> <C>
Brad E. Hollinger............................ 43 Chairman of the Board, President and Chief
Executive Officer and a Director
Mark S. Moore................................ 36 Vice President -- Finance and Treasurer
William T. McCarthy.......................... 45 Vice President
Russell A. DiGilio........................... 41 Vice President -- Assisted Living Group
Kurt A. Meyer................................ 50 Vice President -- Health Care Group
John D. Foster............................... 47 Vice President -- Long Term Care
Brian L. Barth............................... 37 Vice President -- Acquisitions
Roger A. Breed............................... 48 Vice President -- Development
David K. Barber.............................. 43 Vice President -- Construction and Design
Robert J. Sutton............................. 48 Vice President -- Corporate Services and
Secretary
Kenneth F. Barber............................ 67 Director
John M. Brennan.............................. 41 Director
Bill R. Foster, Sr........................... 70 Director
David L. Goldsmith........................... 49 Director
Edward R. Stolman............................ 71 Director
George H. Strong............................. 71 Director
</TABLE>
Brad E. Hollinger has served as a director and as Chairman of the Board,
President and Chief Executive Officer of the Company since its founding in April
1995. Previously he served as Executive Vice President of the Contract Service
Group of Continental Medical Systems ("CMS"), a national provider of medical
rehabilitation services and contract therapy services from 1990 to 1994. During
his eight years with CMS, Mr. Hollinger also served as Senior Vice
President/Development from 1987 to 1990, leading the development and financing
of eighteen medical rehabilitation hospitals in seven states. From 1985 to 1987,
Mr. Hollinger was Vice President of Development of Rehab Hospital Service
Corporation.
Mr. Hollinger, without admitting or denying the allegations, has agreed to
settle a proposed civil action by the Securities and Exchange Commission (the
"Commission") contending that he violated certain federal securities laws in
connection with trading in the common stock of Continental Medical Systems, Inc.
prior to its merger with Horizon Healthcare, Inc. in 1995. Mr. Hollinger's
agreement contemplates his consenting to the entry of an order enjoining him
from future violations of such securities laws. In addition, Mr. Hollinger has
agreed to pay the amount of $21,625, representing profits allegedly realized by
him and a family member, plus interest, and to pay a civil money penalty in an
amount equal to such payment, plus interest. The proposed settlement is subject
to approval by the Commission, and the Commission staff has advised that it will
recommend that the Commission approve the settlement.
Mark S. Moore has served as Vice President -- Finance and Treasurer of the
Company since July 1997 and as Vice President -- Financial Operations from
January 1997 to June 1997. Prior to joining the Company, he served in various
capacities during eight years with CMS, including Vice President -- Rehab
Hospital Group Controller from September 1996 to December 1996, as Vice
President -- Eastern Division Controller from January 1995 to August 1996 and as
Regional Controller from August 1988 to December 1994.
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<PAGE> 66
William T. McCarthy has been Vice President of the Company since April
1996, and was Vice President and Chief Financial Officer of the Company from
April 1996 until September 1997. From September 1994 until February 1996, he
served as Chief Accounting Officer of Concord Health Group, Inc., an owner and
operator of long-term care facilities. From 1988 to 1994, he was a partner of
Coopers & Lybrand, an independent public accounting firm.
Russell A. DiGilio has served as Vice President -- Assisted Living Group of
the Company since April 1996. Prior to joining the Company, he served as
Regional Director and as Executive Director of Operations for the Forum Group, a
company engaged in providing assisted living and retirement services, from 1987
to 1995.
Kurt A. Meyer has served as Vice President -- Health Care Group of the
Company since August 1995. From 1994 to 1995, he provided consulting services to
hospitals and skilled nursing facilities in the areas of rehabilitation and
sub-acute care, through Atlantic Rehab, Inc., a company he co-founded. From 1989
to 1994 he was Vice President of Operations for CMS. He was the Chief Executive
Officer of Mechanicsburg Rehabilitation System from 1986 to 1989.
John D. Foster has served as Vice President -- Long Term Care of the
Company since July 1997. From September 1996 to June 1997, Mr. Foster served as
President of Foster Health Care Group ("FHCG"). From 1985 to September 1996, Mr.
Foster served as Vice President of Operations for FHCG. For 14 years prior to
that, he worked in the areas of facility administration and project development
in the long-term care field. Mr. Foster is the son of Bill R. Foster, Sr., a
director of the Company.
Brian L. Barth has been Vice President -- Acquisitions of the Company since
its founding in April 1995. He served as Director of Medical Specialty Unit
Development for Integrated Health Services, Inc. ("IHS"), a post-acute care
services company, from 1994 to 1995. Mr. Barth's duties included oversight of
the sub-acute program development for the Northern Division. Prior to joining
IHS, Mr. Barth was Director of Development for CMS from 1987 to 1994.
Roger A. Breed has served as Vice President -- Development of the Company
since January 1997. Mr. Breed's background in health care includes eight years
with CMS, where he served as Vice President of Corporate Communications from
1991 to 1993 and Vice President of Public Affairs from 1993 to 1996.
David K. Barber has served as Vice President -- Construction and Design of
the Company since June 1996. He previously worked in the health care
construction field as Chief Financial Officer of CCI Construction Company from
1986 to 1995. Mr. Barber is the son of Kenneth F. Barber, a director of the
Company.
Robert J. Sutton has served as Vice President -- Corporate Services and
Secretary of the Company since its founding in April 1995. From 1993 to 1995, he
was Vice President, Finance and Strategy, of CMS. Mr. Sutton served in a variety
of managerial positions at Marriott Corporation from 1987 to 1993, including
Vice President of Finance and Strategic Planning for Marriott Management
Services and Director of Finance of the Courtyard Hotel Division.
Kenneth F. Barber has served on the Board of Directors of the Company since
August 1995. He served as a director and as Senior Executive Vice President of
CMS from 1987 to 1994. From 1980 to 1987 , Mr. Barber served as Chief
Development Officer of Rehab Hospital Services Corporation. Mr. Barber is the
father of David K. Barber.
John M. Brennan has been a director of the Company since September 1995. In
1990, Mr. Brennan co-founded Golden Care, Inc., a respiratory therapy company,
and served as its President and a director from 1990 to 1995. From 1987 to 1990,
Mr. Brennan served as Chief Operating Officer of a private respiratory therapy
company headquartered in Indiana. From 1984 to 1987, he operated a chain of
private home care companies in the states of Texas, New Mexico, Illinois and
Indiana. From 1982 to
65
<PAGE> 67
1984, Mr. Brennan was the Technical Director for two hospital-based respiratory
therapy departments in Texas.
Bill R. Foster, Sr., has served as a director of the Company since 1996. He
is the founder and was Chief Executive Officer of Foster Health Care Group. He
has been involved in the development and operation of skilled nursing,
independent living and assisted living facilities for four decades. Mr. Foster
serves on the State of Missouri Governor's Advisory Council on Aging, has served
as its President for two terms and has been a Delegate to the White House
Conference on Aging. He serves on the Board of Directors of the Missouri Health
Care Association. In February 1997, Mr. Foster was appointed as a Senator to the
Silver-Haired Congress, representing the state of Missouri. Mr. Foster is the
father of John D. Foster.
David L. Goldsmith has been a director since 1996. He has been associated
with BancAmerica Robertson Stephens since 1981 and is currently Managing
Director, Health Care. Mr. Goldsmith is also a member of the Boards of Directors
of Apria Healthcare Group Inc. and Matria Healthcare Inc. and selected private
companies.
Edward R. Stolman became a member of the Board of Directors of the Company
in 1997. Since 1982, he has owned and operated Stolman Investments, specializing
in real estate and health care investments and consulting. He co-founded
Hospital Affiliates International in 1968 and served as Chairman of Affiliated
Health Corporation from 1984 to 1990. Mr. Stolman was an original investor in
and a member of the Board of Directors of Dovebar International, Inc.
George H. Strong has served as a member of the Board of Directors of the
Company since 1996. He is a private investor with many years of experience in
both director and executive positions in health care enterprises. Mr. Strong was
a Senior Vice President and founding director of Universal Health Services, Inc.
for six years and was with American Medicorp for four years prior to that. He
also serves as a director for Integrated Health Services, HealthSouth
Rehabilitation Corporation, Clinical Partners, Managed Care USA, AmeriSource,
Corefunds Group and Pocantico Development Associates.
The Board of Directors of the Company is divided into three classes, each
class to be as nearly equal in number of directors as possible. At each annual
meeting of stockholders, directors in each class will be elected for three year
terms to succeed the directors of that class whose terms are expiring. Messrs.
Brennan, Foster and Stolman are Class I directors with their terms of office
expiring in 1998, Messrs. Barber and Strong will be Class II directors whose
terms will expire in 1999, and Messrs. Goldsmith and Hollinger are Class III
directors whose terms will expire in 2000.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The Audit Committee currently consists of David L.
Goldsmith, Kenneth F. Barber and George H. Strong. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting.
Compensation Committee. The members of the Compensation Committee are
currently John M. Brennan, Edward R. Stolman and David L. Goldsmith. The
Compensation Committee establishes a general compensation policy for the Company
and approves increases both in directors' fees and in salaries paid to officers
and senior employees of the Company. The Compensation Committee determines,
subject to the provisions of the Company's plans, the directors, officers and
employees of the Company eligible to participate in any of the plans, the extent
of such participation and terms and conditions under which benefits may be
vested, received or exercised.
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<PAGE> 68
HEALTH SERVICES ADVISORY BOARD
The Company has formed a Health Services Advisory Board comprised of
professionals with specialized expertise in the delivery of senior living and
health care services. The Advisory Board meets three times per year to review
the Company's service delivery system and makes recommendations with respect
thereto to the Company's management. The Health Services Advisory Board,
however, has no authority to act on behalf of the Company. Each advisory
director receives $1,000 for each meeting attended and is reimbursed for
expenses incurred in connection therewith. The Company estimates that each
advisory director devotes approximately 40 hours per year on the Company's
affairs. The following table sets forth certain information regarding the
current members of the Health Services Advisory Board.
<TABLE>
<CAPTION>
NAME SPECIALTY POSITION
- ----------------------------------- ------------------------- ----------------------------
<S> <C> <C>
Michael Blackwood.................. Managed Care President of The Pilot
Group, a managed care
consulting firm,
Pittsburgh, Pennsylvania
Richard J. Carroll, M.D............ Preventative Cardiology Medical Director at the
Center for Clinical
Effectiveness at Loyola
University Medical Center,
Chicago, Illinois
Dennis L. Kodner, Ph.D............. Applied Gerontology Vice President of Research
and Innovation at
Metropolitan Jewish Health
System, Brooklyn, New York
Walter Leutz, Ph.D., MSW........... Health Delivery Systems Associate Research Professor
of Brandeis University
Institute for Health
Policy, Waltham,
Massachusetts
Michael F. Lupinacci, M.D.......... Physical Medicine and Medical Director at
Rehabilitation HealthSouth Rehabilitation
Hospital, Mechanicsburg,
Pennsylvania
Jeffrey A. Miller.................. Hospitality Chairman, Department of
Hotel, Restaurant and
Institutional Management,
Indiana University of
Pennsylvania
Karen A. Powers, M.D............... Geriatric Medicine Associate Medical Director
and Director of the
Geriatric Fellowship
Program, St. Margaret's
Hospital, Pittsburgh,
Pennsylvania
Kenneth M. Sakauye, M.D............ Geriatric Psychiatry Professor of Clinical
Psychiatry of Louisiana
State University Medical
Center, New Orleans,
Louisiana
Rebecca Trella, RN, MSN............ Care Management Director of Care Management
of Advocate Health
Partners, Chicago,
Illinois
</TABLE>
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<PAGE> 69
EXECUTIVE COMPENSATION
The following table sets forth a summary of compensation for services
rendered in all capacities to the Company by the Chief Executive Officer and the
four most highly compensated executive officers of the Company other than the
Chief Executive Officer for the fiscal year ended June 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
-------------------- ------------
STOCK OPTION ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY BONUS AWARDS COMPENSATION
- ----------------------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Brad E. Hollinger........................ $152,500 $58,000 75,000 --
Chairman of the Board, President and
CEO
William T. McCarthy...................... 119,495 -- 18,750 $3,600(1)
Vice President
Russell A. DiGilio....................... 89,667 3,683 18,750 1,708(2)
Vice President -- Assisted Living Group
Robert J. Sutton......................... 87,333 20,000 25,500 --
Vice President -- Corporate Services
and Secretary
Kurt A. Meyer............................ 83,333 12,000 14,250 --
Vice President -- Health Care Group
</TABLE>
- ------------
(1) Represents travel and lodging reimbursement.
(2) Represents the value received by Mr. DiGilio in connection with personal
usage of a company-owned vehicle.
EMPLOYMENT AGREEMENTS
The Company is party to an employment agreement with Mr. Hollinger that
became effective as of August 1, 1996 and is to expire on July 31, 2001, subject
to extension annually thereafter. Pursuant to the employment agreement, for the
period beginning August 1, 1996 and ending June 30, 1997, Mr. Hollinger was
entitled to receive an annual salary of $150,000; for the period beginning July
1, 1997 and ending June 30, 1998, Mr. Hollinger is to receive an annual salary
of $200,000; for the period beginning July 1, 1998 and for the duration of the
agreement, Mr. Hollinger is to receive an annual salary of $225,000. For each
fiscal year of the Company throughout the term of the agreement, Mr. Hollinger
is also entitled to receive an annual bonus in an amount not less than 75% of
his base salary upon achievement by the Company of certain levels of pre-tax
earnings to be determined by the Board of Directors. If the level of earnings
exceeds the level determined by the Board for a fiscal year, the Board may award
Mr. Hollinger additional bonus compensation. Pursuant to the employment
agreement, the Company granted to Mr. Hollinger as of August 1, 1996 the right
to purchase 37,500 shares of Common Stock at a purchase price of $2.00 per share
and, as of June 30, 1997, the right to purchase an additional 37,500 shares of
Common Stock at a per share purchase price equal to the fair market value of a
share of Common Stock on June 30, 1997. These options are generally to vest in
accordance with the Company's 1996 Stock Incentive Plan (including the Change of
Control acceleration provision contained in such plan), provided that if Mr.
Hollinger terminates his employment for Good Reason (as defined in the
employment agreement, which includes the occurrence of a Change in Control as
Good Reason), the options are to become fully vested and exercisable as of the
date of such termination and may be exercised within one year following such
termination. In addition, if Mr. Hollinger terminates his employment for Good
Reason, he will be entitled to receive a cash payment within 10 days of such
termination equal to three times his annual compensation plus the amount of any
bonus for that year.
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<PAGE> 70
The Company is party to an employment agreement with Mr. McCarthy that
became effective as of May 1, 1996 and is to expire on April 30, 1998, subject
to automatic annual renewal unless one party provides written notice to the
other not later than 60 days prior to the next extension date of his or its
intention not to renew. The employment agreement provides that Mr. McCarthy is
to receive an annual salary of $100,000, subject to increase by the Board of
Directors. Mr. McCarthy is also entitled to receive an annual bonus of up to 40%
of his base salary subject to the terms and conditions as may be determined by
Mr. Hollinger and approved by the Board. Pursuant to the employment agreement,
the Company granted to Mr. McCarthy an option to purchase up to 75,000 shares of
Common Stock at a per share exercise price of $2.00 vesting in equal
installments over two years. In the event of a termination following a Change of
Control (as defined in the employment agreement), Mr. McCarthy is entitled to
receive his base salary at a rate then in effect for the period equal to one
year.
The Company is party to an employment agreement with Mr. Sutton that became
effective as of September 20, 1995 and is to expire on August 31, 1998, subject
to annual extension. The employment agreement provides that Mr. Sutton is to
receive an annual salary of $80,000 subject to increase by the Board of
Directors in its sole discretion. Mr. Sutton is also entitled to receive an
annual bonus of not less than 40% of his base salary upon achievement of the
annual operating budget as approved by the Board of Directors. In the event of a
termination following a Change of Control (as defined in the employment
agreement), Mr. Sutton will be entitled to a lump sum cash payment equal to his
total cash and bonus compensation for the proceeding three years.
STOCK INCENTIVE PLAN
Pursuant to the Company's 1996 Stock Incentive Plan, as amended (the
"Incentive Plan"), the Company may issue up to 2,025,000 shares of Common Stock
to employees of the Company, its affiliates and its subsidiaries for any purpose
or any type of benefit under the Incentive Plan. The number of shares which may
be issued under the Incentive Plan is subject to adjustment by the Board and
will be adjusted in proportion to any increase or decrease in the number of
issued shares of Common Stock resulting from a stock dividend, split or other
capital adjustment.
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors the members of which are each a "disinterested person,"
within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the regulations promulgated thereunder. The
actions of the Compensation Committee are subject to Board review. The
Compensation Committee is authorized to: (i) select employees for participation
in the Incentive Plan; (ii) make decisions regarding timing, pricing and amounts
of grants or awards under the Incentive Plan, subject to the terms of the
Incentive Plan; (iii) interpret and construe the Incentive Plan; (iv) adopt,
amend or rescind rules and regulations relating to the Incentive Plan; and (v)
make all other determinations necessary or advisable for the administration of
the Incentive Plan.
Each non-employee director is to be granted non-qualified stock options to
purchase 11,250 shares of Common Stock upon election to the Board and additional
non-qualified stock options to purchase 3,750 shares of Common Stock upon
re-election to the Board. Each such non-qualified stock option is exercisable at
a price equal to the fair market value of the underlying Common Stock on the
date of the grant, is fully vested on grant, has a duration for the shorter of
ten years or the director's term as a director and will no longer be exercisable
following the 91st day after the director's term ends. The Compensation
Committee has no authority to amend or vary the terms of these options.
If an incentive stock option, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), is granted to a stockholder
owning more than 10% of the total combined voting power of all classes of stock
issued by the Company as of the date an option is granted, the exercise price of
an option granted under the Incentive Plan is to be not less than 110% of the
fair market value of the Common Stock on the date of grant. For all other
options, the price is to be not less than the fair market value of the Common
Stock at the date of grant.
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<PAGE> 71
The Compensation Committee may also grant SARs to participants in the
Incentive Plan who have been granted options. A SAR is to expire no later than
the expiration date of the underlying option, and may be for no more than 100%
of the difference between the exercise price of the option and the fair market
value of the Common Stock subject to the option.
The Incentive Plan also provides for awards of restricted stock, including
restricted stock awarded in connection with specified performance targets.
Recipients of such awards are to be determined by the Compensation Committee.
The Incentive Plan provides that in the event of a Change of Control (as defined
in the 1996 Stock Incentive Plan): (1) any and all Options and SARs, whether
vested or not, will become immediately exercisable; (2) any restrictions imposed
on Restricted Stock will lapse and within 10 days after the occurrence of a
Change in Control will be delivered to the participant and (3) the target values
attainable under all Performance Shares and Units will be deemed to have been
fully earned for the entire award period as of the effective date of the Change
in Control.
The following table sets forth certain information with respect to the
grant of stock options by the Company to the executive officers named in the
Summary Compensation Table to whom stock options were granted for the fiscal
year ended June 30, 1997.
OPTION GRANTS IN YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION
GRANTED TO FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE OR ---------------------
NAME GRANTED FISCAL YEAR BASE PRICE EXPIRATION DATE 5% 10%
- ---------------------- ------- ------------- ----------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Brad E. Hollinger..... 37,500 5.60% $2.00 08/01/01 $376,221 $467,519
37,500 5.57 6.67 06/25/02 222,338 344,374
William T. McCarthy... 3,750 0.56 2.00 08/01/01 37,622 46,752
15,000 2.23 6.67 06/25/02 88,935 137,750
Russell A. DiGilio.... 3,750 0.85 2.00 08/01/01 37,622 46,752
15,000 2.23 6.67 06/25/02 88,935 137,750
Robert J. Sutton...... 15,000 2.23 2.00 08/01/01 150,488 187,008
10,500 1.56 6.67 06/25/02 62,255 96,425
Kurt A. Meyer......... 3,750 0.56 2.00 08/01/01 37,622 46,752
10,500 1.56 6.67 06/25/02 62,255 96,425
</TABLE>
- ------------
(1) Based on an assumed initial public offering price of $10.00 per share, and
assuming that all such options are currently exercisable.
The following table sets forth certain information with respect to the
value of options held at June 30, 1997 by the executive officers named in the
Summary Compensation Table who held options during fiscal 1997. Such executive
officers did not exercise any options to purchase Common Stock for the fiscal
year ended June 30, 1997.
70
<PAGE> 72
AGGREGATED OPTION EXERCISES IN YEAR ENDED JUNE 30, 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
HELD AT FISCAL YEAR-END YEAR-END(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Brad E. Hollinger................... -- 75,000 $ -- $ 175,000
William T. McCarthy................. 37,500 56,250 175,000 192,500
Russell A. DiGilio.................. 37,500 56,250 175,000 192,500
Robert J. Sutton.................... -- 25,500 -- 70,000
Kurt A. Meyer....................... 23,438 84,563 109,375 345,625
</TABLE>
- ------------
(1) Represents the difference between the fair market value (as estimated by the
Company) of the Common Stock underlying the options of $6.67 per share as of
June 30, 1997 and the exercise price of the options.
COMPENSATION OF DIRECTORS
Members of the Board of Directors do not receive compensation for serving
as directors. Each non-employee director is granted a non-qualified option to
acquire 11,250 shares of Common Stock upon election to the Board and an option
to acquire 3,750 shares of Common Stock upon re-election to the Board. See
"-- Stock Incentive Plan." All directors receive reimbursement of reasonable
expenses incurred in connection with attending Board and committee meetings and
otherwise carrying out their duties.
71
<PAGE> 73
CERTAIN TRANSACTIONS
Kenneth F. Barber, a director of the Company, is party to a consulting
agreement with the Company to provide financial, development and other
consulting services at the rate of $100 per hour not to exceed 20 hours per week
for 52 weeks. During fiscal 1997, Mr. Barber received $66,000 under such
arrangement. David Barber, Mr. Barber's son, has been employed by the Company as
Vice President of Construction and Design since 1996. For the fiscal year ended
June 30, 1997, David Barber received an annual salary of $75,000. Robin Barber,
Mr. Barber's daughter, has been employed by the Company as Director of Legal
Services since 1996 and as Vice President and Senior Counsel since September
1997. For the fiscal year ended June 30, 1997, Ms. Barber received an annual
salary of $67,500 and a bonus of $10,000.
John M. Brennan, a director of the Company, is President of Respiratory
Resources, Inc. ("RRI"), a corporation that manages respiratory therapy services
in four skilled nursing facilities owned or leased by the Company. The Company's
payments to RRI for such services were $156,000 for the fiscal year ended June
30, 1997. Mr. Brennan received a warrant in August 1996 to purchase 138,000
shares of Common Stock of the Company at a purchase price of $3.00 per share.
The warrant has a 10 year term and may be exercised at any time.
Bill R. Foster, Sr., a director of the Company, is the majority stockholder
of Foster Health Care Group, a corporation that provided management services to
10 skilled nursing facilities, a pharmacy, a home health operation, and three
assisted living facilities and four independent living facilities operated by
the Company for which it received $1,076,000 during fiscal 1997. On July 1,
1997, the Company purchased the assets and operations of Foster Health Care
Group for approximately $120,000. For the fiscal year ended June 30, 1997, Mr.
Foster also leased two assisted living facilities in Springfield and Nevada,
Missouri to the Company at an annual rental of $186,000 and $132,000,
respectively. Mr. Foster is negotiating with the Company to enter a construction
agreement to build an assisted living facility in Springfield, Missouri. The
amount of the contract is not expected to exceed $3,600,000. John Foster, Mr.
Foster's son, became an officer of the Company effective July 1, 1997 and
receives an annual salary of $110,000, with an annual bonus of up to 40% of his
base salary. Susan Foster, Mr. Foster's daughter-in-law, became an officer of
the Company effective July 1, 1997 and receives an annual salary of $80,000,
with an annual bonus of up to 35% of her base salary.
Scott J. Hollinger, brother of Brad E. Hollinger, Chairman, President and
Chief Executive Officer and a director of the Company, has been employed by the
Company as a Construction Project Manager since 1996. For the fiscal year ended
June 30, 1997, Mr. Hollinger received an annual salary of $55,000.
Deborah Myers Welsh, spouse of Brad E. Hollinger, entered into a consulting
agreement with the Company on February 3, 1997 to provide legal services at the
rate of $90 per hour not to exceed 30 hours per week for 50 weeks. Ms. Welsh
received $32,000 under such arrangement during fiscal 1997.
George H. Strong, a director of the Company, provided financial consulting
services to the Company for the fiscal year ending June 30, 1997 for fees
aggregating $40,000. Mr. Strong also received a warrant to purchase 26,250
shares of Common Stock of the Company at a purchase price of $3.33 per share,
which was exercised in March 1997.
F. David Carr is a general partner of SAE Partners ("SAE"), a shareholder
of Hawthorn Health Partners, Inc. (formerly known as Medi-Cap Partners) ("HHP"),
a managing general partner of HCO Partners IV-BCC ("HCO"), a shareholder of
Hawthorn Health Properties, Inc. ("Hawthorn"), and Executive Vice President of
Hakman & Company Incorporated., an investment banking firm ("Hakman"). James A.
Diebold is a general partner of SAE, a shareholder of HHP, a general partner of
HCO and a shareholder of Hawthorn. Prior to the Offering, SAE owns 3.8% of the
Common Stock of the Company. Prior to the Offering, HCO owns 9.6% of the
Company's Series B Convertible Preferred Stock. Hakman has entered a broker's
agreement with the Company to find suitable acquisition properties for the
Company. Hakman receives a finder's fee for such acquisitions, based upon the
72
<PAGE> 74
purchase price, in an amount equal to 2% of the first $1,000,000 and 1% for any
amount in excess of $1,000,000. Hawthorn leases seven skilled nursing facilities
to the Company for annual rentals aggregating $4,501,000. For the year ended
June 30, 1997, Hawthorn received $3,877,000 in rental payments from the Company.
The facility leases provide for an initial term of 12 years, with four six-year
renewal options and a fair market value purchase option. In August 1996,
Hawthorn also received a warrant to purchase 37,500 shares of Common Stock of
the Company at a purchase price of $3.33 per share. The warrant has a 10 year
term and may be exercised at any time. Hakman received a fee of $250,000 for its
assistance in raising $12,500,000 in a Series B Convertible Preferred Stock
Offering in October 1996 and April 1997. Hakman also assisted the Company in
arranging a $10,000,000 line of credit, which is expected to become available in
November 1997, and for which Hakman will receive a fee of up to $62,500.
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<PAGE> 75
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of Common Stock as of September 30,
1997 (after giving effect to the conversion of all Outstanding Preferred Stock
into an aggregate of 4,620,531 shares of Common Stock upon consummation of the
Offering) and as adjusted to reflect the sale of the Common Stock in the
Offering by (i) each person known by the Company to beneficially own more than
five percent of outstanding Common Stock, (ii) each of the Company's directors,
(iii) each executive officer named in the Summary Compensation Table, and (iv)
all directors and officers of the Company as a group. Unless otherwise
indicated, the person or persons named have sole voting and investment power.
<TABLE>
<CAPTION>
PERCENT OWNED
BENEFICIALLY
-----------------------
NUMBER OF PRIOR TO AFTER
NAME SHARES OWNED BENEFICIALLY OFFERING OFFERING
- ----------------------------------------- ------------------------- -------- --------
<S> <C> <C> <C>
Henry L. Hillman, Elsie Hilliard......... 682,500(1) 7.9% 4.4%
Hillman and C.G. Grefenstette,
Trustees(1)
2000 Grant Building
Pittsburgh, PA 15219
Omega Ventures II, L.P................... 503,845(2) 5.8% 3.2%
Omega Ventures II Cayman, L.P............ 130,008(2) 1.5% *
Crossover Fund II, L.P................... 416,051(2) 4.8% 2.7%
Crossover Fund IIA, L.P.................. 122,774(2) 1.4% *
R.S. Pacific Venture, L.P................ 300,000(2) 3.5% 1.9%
555 California Street
San Francisco, CA 94104
KD Investments........................... 640,537 7.4% 4.1%
1540 Fox Hollow Circle
Mechanicsburg, PA 17055
Inter Vivos Trust of Billy Ray Foster.... 767,412 8.9% 4.9%
426 S. Jefferson
Springfield, MO 65806-2351
Meditrust................................ 1,086,179(3) 11.6% 6.6%
197 First Avenue
Needham, MA 02194
SAE Partners............................. 331,312 3.8% 2.1%
32 Willow Avenue
Camp Hill, PA 17011
HCO Partners IV-BCC...................... 360,000 4.2% 2.3%
c/o F. David Carr,
Hakman & Company, Inc.
1350 Bayshore Highway
Suite 300
Burlingame, CA 94010
F. David Carr............................ 728,812(4) 8.4% 4.7%
Brad E. Hollinger........................ 787,687(5) 9.1% 5.0%
John M. Brennan.......................... 1,270,801(6) 14.4% 8.1%
Kenneth F. Barber........................ 63,750(7) * *
William R. Foster, Sr.................... 778,662(8) 9.0% 5.0%
George H. Strong......................... 37,500 * *
David L. Goldsmith....................... 41,250(9) * *
Edward R. Stolman........................ 11,250(10) * *
</TABLE>
74
<PAGE> 76
<TABLE>
<CAPTION>
PERCENT OWNED
BENEFICIALLY
-----------------------
NUMBER OF PRIOR TO AFTER
NAME SHARES OWNED BENEFICIALLY OFFERING OFFERING
- ----------------------------------------- ------------------------- -------- --------
<S> <C> <C> <C>
William T. McCarthy...................... 38,437(11) * *
Robert J. Sutton......................... 437,587(12) 5.1% 2.8%
Russell A. DiGilio....................... 38,437(13) * *
Kurt A. Meyer............................ 55,312(14) * *
David K. Barber.......................... 648,037(15) 7.5% 4.2%
Directors and officers of the Company as
a
group (16 persons)..................... 4,681,735(16) 52.1% 29.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares.
(1) Consists of 157,500 shares held by a trust for the benefit of Henry L.
Hillman (the "HLH Trust") and 525,000 shares owned by Juliet Challenger,
Inc., an indirect, wholly-owned subsidiary of The Hillman Company ("THC").
THC is a private company engaged in diversified investments and operations
which is controlled by the HLH Trust. The Trustees of the HLH Trust are
Henry L. Hillman, Elsie Hilliard Hillman and C.G. Grefenstette (the "HLH
Trustees"). The HLH Trustees share voting and investment power with respect
to the shares held of record by the HLH Trust and the assets of THC. Does
not include an aggregate of 210,000 shares held by four trusts for the
benefit of members of the Hillman family, as to which shares the HLH
Trustees (other than Mr. Grefenstette, who is one of the trustees of such
family trusts) disclaim beneficial ownership. Also does not include 157,500
shares held by DBH Sec IV, L.P., as to which shares the HLH Trustees
disclaim beneficial ownership. Howard B. Hillman and Tatnall L. Hillman,
the general partners of DBH Sec IV, L.P., are step-brothers of Henry L.
Hillman.
(2) Omega Ventures II, L.P., Omega Ventures II Cayman, L.P., Crossover Fund II,
L.P., Crossover Fund IIA, L.P. and R.S. Pacific Venture, L.P. are funds
managed by, but not beneficially owned by, BancAmerica Robertson Stephens
and all have the same address.
(3) 465,124 shares held subject to warrants are owned by Meditrust Mortgage
Investments, Inc. and 289,743 shares held subject to warrants are owned by
Meditrust Acquisition Corporation II, wholly owned subsidiaries of
Meditrust.
(4) Mr. Carr is a general partner of SAE Partners, a shareholder of HHP, a
managing general partner of HCO Partners IV-BCC ("HCO") and a shareholder
of Hawthorn Health Properties, Inc., a California corporation ("Hawthorn")
that owns 37,500 shares held subject to warrants and may be deemed to have
an indirect pecuniary interest in an indeterminate portion of the shares
beneficially owned by such entities. Mr. Carr disclaims beneficial
ownership of such shares.
(5) Mr. Hollinger is a general partner of HCO and may be deemed to have an
indirect pecuniary interest in 5,250 shares owned by such entity. Mr.
Hollinger disclaims beneficial ownership of such shares. Also includes
9,375 shares held subject to stock options.
(6) Includes 138,000 shares held subject to warrants and 11,250 shares held
subject to stock options.
(7) Kenneth Barber, a director of the Company, is a general partner of HCO and
may be deemed to have an indirect pecuniary interest in 52,500 shares owned
by such entity. Mr. Barber disclaims beneficial ownership of such shares.
Also includes 11,250 shares held subject to stock options. Does not include
640,537 shares owned by KD Investments, a Pennsylvania general partnership,
of which the stockholder's spouse and children are general partners. Mr.
Barber disclaims any beneficial interest in shares owned by KD Investments.
(8) Includes 767,412 shares owned by the Inter Vivos Trust of Billy Ray Foster.
As the trustee, Mr. Foster has voting and investment power with respect to
the shares held by the trust and may be deemed to have indirect beneficial
ownership of them. Mr. Foster disclaims beneficial ownership of such
shares. Also includes 11,250 shares held subject to stock options.
75
<PAGE> 77
(9) Includes 30,000 shares owned by the Goldsmith Family Trust. As the
co-trustee, Mr. Goldsmith has voting and investment power with respect to
the shares held by the trust and may be deemed to have indirect beneficial
ownership of them. Mr. Goldsmith disclaims beneficial ownership of such
shares. Also includes 11,250 shares held subject to stock options.
(10) Includes 11,250 shares held subject to stock options.
(11) Includes 38,437 shares held subject to stock options.
(12) Includes 3,750 shares held subject to stock options.
(13) Includes 38,437 shares held subject to stock options.
(14) Mr. Meyer is a general partner of HCO and may be deemed to have an indirect
pecuniary interest in 7,500 shares owned by such entity. Mr. Meyer
disclaims beneficial ownership of such shares. Also includes 47,812 shares
held subject to stock options.
(15) David Barber is a general partner of HCO and may be deemed to have an
indirect pecuniary interest in 7,500 shares owned by such entity. Mr.
Barber disclaims beneficial ownership of such shares. Also includes 640,537
shares owned by KD Investments, a Pennsylvania general partnership ("KD").
Mr. Barber is a general partner of KD, and as such, may be deemed to have
an indirect pecuniary interest in an indeterminate portion of the shares
beneficially owned by KD. Mr. Barber disclaims beneficial ownership of such
shares.
(16) Includes 138,000 shares held subject to warrants and 196,873 shares held
subject to stock options.
76
<PAGE> 78
DESCRIPTION OF CAPITAL STOCK
The Amended and Restated Certificate of Incorporation of the Company (the
"Certificate"), provides that the authorized capital of the Company consists of
50,000,000 shares of Common Stock, par value $.001 per share, and 11,160,708
shares of Preferred Stock, par value $.001 per share, including 1,150,958 shares
of Series A Convertible Preferred Stock and 5,009,750 shares of Series B
Convertible Preferred Stock.
COMMON STOCK
Based upon shares of Common Stock outstanding as of September 30, 1997 and
after giving effect to the conversion of all Outstanding Preferred Stock into
shares of Common Stock, there will be 15,606,343 shares of Common Stock
outstanding upon completion of the Offering. As of September 30, 1997, warrants
and options to purchase an aggregate of 1,925,042 shares of Common Stock were
outstanding.
Each share of Common Stock entitles its holder of record to one vote for
the election of directors and all other matters to be voted on by the
stockholders. Holders of Common Stock do not have cumulative voting rights, and
therefore the holders of a majority of the shares of Common Stock voting for the
election of directors may elect all of the Company's directors. Subject to the
rights of holders of Preferred Stock, holders of Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Company's Board of Directors in its discretion from funds legally available for
that use. Subject to the rights of holders of Preferred Stock, holders of Common
Stock are entitled to share on a pro rata basis in any distribution to
stockholders upon liquidation, dissolution or winding up of the Company. All of
the outstanding shares of Common Stock are, and the shares of Common Stock to be
sold in the Offering will be, fully paid and nonassessable. No holder of Common
Stock has any preemptive right to subscribe for any stock or other security of
the Company.
PREFERRED STOCK
All Outstanding Preferred Stock will automatically be converted into an
aggregate of 4,620,531 shares of Common Stock effective upon consummation of the
Offering. The Board of Directors, without further action by the stockholders,
may from time to time authorize the issuance of other shares of Preferred Stock
in one or more series and, within certain limitations, fix the powers,
preferences and rights and the qualifications, limitations or restrictions
thereof and the number of shares constituting any series or designations of such
series. Satisfaction of any dividend preferences of outstanding Preferred Stock
would reduce the amount of funds available for the payment of dividends on
Common Stock. Holders of Preferred Stock would normally be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding up of
the Company before any payment is made to the holders of the Common Stock. In
addition, under certain circumstances, the issuance of such Preferred Stock may
render more difficult or tend to discourage a change in control of the Company.
Although the Company currently has no plans to issue additional shares of
Preferred Stock, the Board of Directors, without stockholder approval, may issue
Preferred Stock with voting and conversion rights which could adversely affect
the rights of holders of Common Shares.
CERTAIN PROVISIONS OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Certificate provides that liability of directors of the Company is
eliminated to the fullest extent permitted under Section 102(b)(7) of the
Delaware General Corporation Law. As a result, no director of the Company will
be liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for any willful or negligent payment of an unlawful
dividend, stock purchase or redemption, or (iv) for any transaction from which
the director derived an improper personal benefit.
77
<PAGE> 79
The Certificate divides the Board of Directors of the Company into three
classes, each class to be as nearly equal in number of directors as possible. At
each annual meeting of stockholders, directors in each class will be elected for
three year terms to succeed the directors of that class whose terms are
expiring. Messrs. Brennan, Foster and Stolman are Class I directors with their
terms of office expiring in 1998, Messrs. Barber and Strong are Class II
directors whose terms will expire in 1999, and Messrs. Goldsmith and Hollinger
are Class III directors whose terms will expire in 2000. In accordance with the
Delaware General Corporation Law, directors serving on classified boards of
directors may only be removed from office for cause. The Certificate provides
that stockholders may not take action by written consent, and that a special
meeting of stockholders may be called only by the Board of Directors. The Bylaws
of the Company provide that stockholders must follow an advance notification
procedure for certain stockholder nominations of candidates for the Board of
Directors and for certain other stockholder business to be conducted at an
annual meeting. These provisions could, under certain circumstances, operate to
delay, defer or prevent a change in control of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be .
REGISTRATION RIGHTS
Pursuant to a Registration Rights Agreement, dated as of September 20,
1996, holders of 2,583,333 shares of Common Stock and warrants or options to
acquire 892,867 shares of Common Stock, together with the holders of Outstanding
Preferred Stock that will be converted upon consummation of the Offering into an
aggregate of 462,053 shares of Common Stock have the right to have shares of
Common Stock registered under the Securities Act. See "Principal Stockholders."
Under the Registration Rights Agreement, such stockholders can, beginning six
months after the Registration Statement of which this Prospectus forms a part is
declared effective and subject to certain limitations, require the Company to
file up to two registration statements and an unlimited number of registration
statements on Form S-3 covering the sale of all or any portion of their Common
Stock. The Company must pay registration expenses but not such stockholders'
underwriting commissions or discounts in connection with such registrations. In
addition, whenever the Company proposes to register any of its securities under
the Securities Act, other than pursuant to registrations pursuant to
registration statements on Form S-4 or S-8, any such stockholder may require the
Company, subject to certain limitations, to include all or any portion of its
Common Stock in such registration (a "piggyback registration") and to pay
registration expenses but not such stockholders' underwriting commissions or
discounts in connection with such registrations. All of the stockholder parties
to the Registration Rights Agreement have waived their piggyback registration
rights in connection with the Offering. See "Shares Eligible for Future Sale."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
15,606,343 shares of Common Stock (16,650,343 shares outstanding if the
Underwriters' over-allotment option is exercised in full) including shares of
Common Stock beneficially owned by existing stockholders. The 6,961,000 shares
of Common Stock to be sold pursuant to the Offering (8,005,000 if the
Underwriters' over-allotment option is exercised in full) will be eligible for
sale without restriction under the Securities Act in the public market after the
completion of the Offering. Pursuant to an agreement with the Company and
certain existing stockholders of the Company owning 9,772,586 shares of Common
Stock or securities convertible into or exercisable for shares of Common Stock
have agreed that they will not effect any public sale or distribution of equity
securities of the Company for a period of 180 days after the date of this
Prospectus (other than, in the case of the Company, pursuant to existing
employee stock option plans) without the prior written consent of the
representatives of the Underwriters. To the extent not subject to the
restrictions set forth above, 50,906 shares of Common Stock owned by existing
stockholders and, following the expiration or waiver of the restrictions set
forth above,
78
<PAGE> 80
9,772,586 additional shares of Common Stock will be immediately available for
sale into the open market pursuant to Rule 144 under the Securities Act
(including the volume and other limitations set forth therein) and could impair
the Company's future ability to raise capital through an offering of its equity
securities.
In general, under Rule 144 as presently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least one year has elapsed since
the later of the date shares of Common Stock that are "restricted securities"
(as that term is defined in Rule 144) were acquired from the Company or the date
they were acquired from an "affiliate" (as that term is defined in Rule 144) of
the Company, as applicable, then the holder of such restricted securities
(including an affiliate) is entitled to sell a number of shares within any
three-month period that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 156,063 shares immediately
after the consummation of the Offering, assuming that the Underwriters'
over-allotment option is not exercised) 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
requirements pertaining to the manner of such sales, notices of such sales and
the availability of current public information concerning the Company.
Affiliates may sell shares not constituting restricted securities in accordance
with the foregoing volume limitations and other requirements but without regard
to the holding period requirement.
Under Rule 144(k), if a period of at least two years has elapsed since the
later of the date restricted shares were acquired from the Company or the date
they were acquired from an affiliate of the Company, as applicable, then a
holder of such restricted shares who is not an affiliate of the Company at the
time of the sale and who has not been an affiliate of the Company for at least
three months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
The Company is party to an agreement pursuant to which certain stockholders
have the right to have shares of Common Stock registered under the Securities
Act. See "Description of Capital Stock -- Registration Rights."
The Company currently has 2,025,000 shares of Common Stock reserved for
issuance upon exercise of stock options granted under its stock option plan,
including 987,175 shares reserved for issuance upon exercise of stock options
outstanding as of September 30, 1997. The Company intends to file a registration
statement on Form S-8 under the Securities Act to register the shares of Common
Stock reserved for issuance upon the exercise of options under its stock option
plan. Such registration is expected to become effective as soon as practicable
following the Offering. Shares registered and issued pursuant to such
registration statements will be tradable except to the extent that the holders
thereof are deemed to be "affiliates" of the Company, in which case the
transferability of such shares will be subject to the volume limitations set
forth in Rule 144.
Each officer and director and certain other holders of the Company's Common
Stock have agreed, for a period of 180 days after the date of this Prospectus
(the "Lock-Up Period") not to offer to sell, contract to sell, or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock, or
any securities convertible into or exchangeable for shares of Common Stock owned
as of the date of this Prospectus or thereafter acquired directly by such
holders or with respect to which they have or hereinafter acquire the power of
disposition, without the prior written consent of BancAmerica Robertson
Stephens.
Prior to the Offering there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on market
prices prevailing from time to time. Nevertheless, sales of substantial amounts
of the Common Stock of the Company in the public market, or the prospect of such
sales, could adversely affect the market price of the Common Stock.
79
<PAGE> 81
UNDERWRITING
The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens and Smith Barney Inc. (the "Representatives"),
have severally agreed subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company the number of shares of Common Stock set
forth opposite their names below. The Underwriters are committed to purchase and
pay for all such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------------- ---------
<S> <C>
BancAmerica Robertson Stephens...........................................
Smith Barney Inc. .......................................................
-------
Total............................................................... 6,961,000
=======
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer shares of the Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not more than $ per share, of which
$ may be reallowed to other dealers. After the initial public offering,
the public offering price, concession and reallowance to dealers may be reduced
by the Representatives. No such reduction shall change the amount of proceeds to
be received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 1,044,000
additional shares of Common Stock at the same price per share as the Company
will receive for the 6,961,000 shares that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of Common Stock
to be purchased by it shown in the above table represents as a percentage of the
6,961,000 shares offered hereby. If purchased, such additional shares will be
sold by the Underwriters on the same terms as those on which the 6,961,000
shares are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Underwriting Agreement.
Each officer and director and certain other holders of the Company's Common
Stock have agreed with the Representatives, for a period of 180 days after the
date of this Prospectus (the "Lock-Up Period") not to offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of Common Stock, any options or warrants to purchase any
shares of Common Stock, or any securities convertible into or exchangeable for
shares of Common Stock owned as of the date of this Prospectus or thereafter
acquired directly by such holders or with respect to which they have or
hereinafter acquire the power of disposition, without the prior written consent
of BancAmerica Robertson Stephens. However, BancAmerica Robertson Stephens may,
in its sole discretion at any time from time to time, without notice, release
all or any portion of the securities
80
<PAGE> 82
subject to the lock-up agreements. There are no agreements between the
Representatives and any of the Company's stockholders providing consent by the
Representatives to the sale of shares prior to the expiration of the Lock-Up
Period. The Company has agreed that during the Lock-Up Period, it will not,
without the prior written consent of BancAmerica Robertson Stephens, issue,
sell, contract to sell or otherwise dispose of any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock or any securities
convertible into, exercisable or exchangeable for shares of Common Stock other
than the Company's sale of shares in the Offering, the issuance of Common Stock
upon the exercise of outstanding warrants and options and under the existing
employee stock purchase plans and the Company's issuance of options under
existing stock option plans. See "Shares Eligible for Future Sale."
The Representatives have advised the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority
in excess of 5% of the number of shares of Common Stock offered hereby.
Each of the Underwriters has represented and, during the period of six
months after the date hereof, agreed that (a) it has not offered or sold and
will not offer or sell any shares of Common Stock in the United Kingdom except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purpose of
their business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations (1995) (the "Regulations"); (b) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Regulations with respect to anything done by it in
relation to the shares of Common Stock offered hereby in, from or otherwise
involving the United Kingdom; and (c) it has only issued or passed on and will
only issue or pass on to any person in the United Kingdom any document received
by it in connection with the issue of the shares of Common Stock if that person
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996, or is a person to whom such
document may otherwise lawfully be issued or passed on.
Prior to this Offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock offered hereby was determined through negotiations between the
Company and the Representatives. Among the factors considered in such
negotiations were prevailing market conditions, certain financial information of
the Company, market valuations of other companies that the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is a bid for or the purchase of the Common Stock on behalf
of the Underwriters to reduce a short position incurred by the Underwriters in
connection with the Offering. A "penalty bid" is an arrangement permitting the
Representatives to reclaim the selling concession otherwise accruing to an
Underwriter or syndicate member in connection with the Offering of the Common
Stock originally sold by such Underwriter or syndicate member is repurchased by
the Representatives in syndicate covering transactions, in stabilizing
transactions or otherwise. The Representatives have advised the Company that
such transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
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<PAGE> 83
Certain investment funds managed by BancAmerica Robertson Stephens own
approximately 17.0% of the Common Stock (7.5% after giving effect to the
Offering) excluding any exercise of the Underwriters' over-allotment option).
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Kirkpatrick & Lockhart LLP, Pittsburgh, Pennsylvania.
Certain legal matters in connection with the validity of the shares of Common
Stock offered hereby will be passed upon for the Underwriters by Shearman &
Sterling, New York, New York.
EXPERTS
The consolidated financial statements and related financial statement
schedule of Balanced Care Corporation and Subsidiaries as of June 30, 1997 and
1996 and for the years then ended and the period April 17, 1995 (date of
inception) to June 30, 1995 have been included herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
The combined financial statements of Foster Health Care Affiliates as of
June 30, 1996 and 1995 and for the years then ended have been included herein in
reliance upon the report of Baird, Kurtz & Dobson, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
The combined financial statements of Keystone Affiliates as of and for the
years ended December 31, 1996, 1995 and 1994 have been included herein in
reliance upon the report of Snyder & Clemente, independent certified public
accountants, appearing elsewhere herein upon the authority of said firm as
experts in accounting and auditing.
The financial statements of Heavenly Health Care, Inc. (d/b/a Joe Clark
Residential Care Homes) as of December 31, 1996 and for the year then ended have
been included herein in reliance upon the report of Baird, Kurtz & Dobson,
independent certified public accountants, appearing elsewhere herein and upon
such report given upon the authority of said firm as experts in accounting and
auditing.
The consolidated balance sheets of Senior Living Centers, Inc. of December
31, 1996 and 1995 and the consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996 have been audited by Coopers & Lybrand L.L.P., independent accountants,
as set forth in their report appearing elsewhere herein, and are included herein
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The balance sheets of Feltrop's Personal Care Home as of June 30, 1997 and
1996 and the statements of operations, owners' equity and cash flows for each of
the three years in the period ended June 30, 1997 have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their report appearing
elsewhere herein, and are included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The balance sheets of Butler Senior Care, Inc. as of June 30, 1997 and 1996
and the statements of operations, shareholders' equity and cash flows for each
of the three years in the period ended June 30, 1997 have been audited by
Coopers & Lybrand L.L.P., independent accountants, as set forth in their report
appearing elsewhere herein, and are included herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The combined balance sheets of Gethsemane Affiliates as of June 30, 1997
and 1996 and the combined statements of operations, shareholders' equity and
cash flows for each of the three years in
82
<PAGE> 84
the period ended June 30, 1997 have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report appearing elsewhere
herein, and are included herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The balance sheets of [Confidential Treatment Requested] as of December 31,
1996 and 1995 and the statements of operations, shareholders' equity and cash
flows for each of the two years in the period ended December 31, 1996 have been
audited by Hodge, Steward & Company, P.A., independent accountants, as set forth
in their report appearing elsewhere herein, and are included herein in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
83
<PAGE> 85
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. The summaries in
this Prospectus of additional information included in the Registration Statement
or any exhibit thereto are qualified in their entirety by reference to such
information or exhibit. For further information with respect to the Company and
the Common Stock, reference is hereby made to such Registration Statement and
the exhibits and schedules thereto, copies of which may be inspected without
charge at the public reference facilities maintained by the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, or obtained from the Commission upon payment of the fees prescribed by
the Commission. In addition, registration statements and certain other documents
filed with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's site
on the 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 was founded as a Delaware corporation in April 1995. The
Company's executive offices are located at 5021 Louise Drive, Suite 200,
Mechanicsburg, Pennsylvania 17055, and its telephone number is (717) 796-6100.
84
<PAGE> 86
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
BALANCED CARE CORPORATION AND SUBSIDIARIES:
Independent Auditors' Report....................................................... F-3
Consolidated Balance Sheets as of June 30, 1997 and 1996........................... F-4
Consolidated Statements of Operations for the years ended June 30, 1997 and 1996
and the period April 17, 1995 (date of inception) to June 30, 1995.............. F-5
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1997
and 1996 and the period April 17, 1995 (date of inception) to June 30, 1995..... F-6
Consolidated Statements of Cash Flows for the years ended June 30, 1997 and 1996
and the period April 17, 1995 (date of inception) to June 30, 1995.............. F-7
Notes to Consolidated Financial Statements......................................... F-8
FOSTER HEALTH CARE AFFILIATES
Independent Accountants' Report.................................................... F-21
Combined Balance Sheets as of June 30, 1996 and 1995............................... F-22
Combined Statements of Income for the years ended June 30, 1996 and 1995........... F-23
Combined Statements of Shareholders' Equity for the years ended June 30, 1996 and
1995............................................................................ F-24
Combined Statements of Cash Flows for the years ended June 30, 1996 and 1995....... F-25
Notes to Combined Financial Statements............................................. F-26
KEYSTONE AFFILIATES
Independent Auditor's Report....................................................... F-38
Combined Balance Sheets as of December 31, 1996 and 1995........................... F-39
Combined Statements of Income for the years ended December 31, 1996, 1995 and
1994............................................................................ F-40
Combined Statements of Changes in Stockholders' Equity for the years ended December
31, 1996, 1995 and 1994......................................................... F-41
Combined Statements of Cash Flows for the years ended December 31, 1996, 1995 and
1994............................................................................ F-42
Notes to Combined Financial Statements............................................. F-43
HEAVENLY HEALTH CARE, INC. D/B/A JOE CLARK RESIDENTIAL CARE HOMES
Independent Accountants' Report.................................................... F-54
Balance Sheet as of December 31, 1996.............................................. F-55
Statement of Income for year ended December 31, 1996............................... F-56
Statement of Shareholders' Equity (Deficit) for the year ended December 31, 1996... F-57
Statement of Cash Flows for the year ended December 31, 1996....................... F-58
Notes to Financial Statements...................................................... F-59
BUTLER SENIOR CARE, INC.
Report of Independent Accountants.................................................. F-61
Balance Sheets as of June 30, 1997 and 1996........................................ F-62
Statements of Operations for the years ended June 30, 1997, 1996 and 1995.......... F-63
Statements of Shareholders' Equity for the years ended June 30, 1997, 1996 and
1995............................................................................ F-64
Statements of Cash Flows for the years ended June 30, 1997, 1996 and 1995.......... F-65
Notes to Financial Statements...................................................... F-66
</TABLE>
F-1
<PAGE> 87
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
GETHSEMANE AFFILIATES
Report of Independent Accountants.................................................. F-70
Combined Balance Sheets as of June 30, 1997 and 1996............................... F-71
Combined Statements of Income for years ended June 30, 1997, 1996 and 1995......... F-72
Combined Statements of Shareholders' Equity (Deficit) for the years ended June 30,
1997, 1996 and 1995............................................................. F-73
Combined Statements of Cash Flows for the years ended June 30, 1997, 1996 and
1995............................................................................ F-74
Notes to Combined Financial Statements............................................. F-75
FELTROP'S PERSONAL CARE HOME
Report of Independent Accountants.................................................. F-81
Balance Sheets as of June 30, 1997 and 1996........................................ F-82
Statements of Operations for the years ended June 30, 1997, 1996 and 1995.......... F-83
Statements of Owners' Equity for the years ended June 30, 1997, 1996 and 1995...... F-84
Statements of Cash Flows for the years ended June 30, 1997, 1996 and 1995.......... F-85
Notes to Financial Statements...................................................... F-86
SENIOR LIVING CENTERS, INC.
Report of Independent Accountants.................................................. F-90
Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
and 1995........................................................................ F-91
Consolidated Statements of Operations for years ended June 30, 1997 and 1996
(unaudited) and the six months ended December 31, 1996, 1995 and 1994........... F-92
Consolidated Statements of Shareholders' Equity for the years ended June 30, 1997
(unaudited) and the six months ended December 31, 1996, 1995 and 1994........... F-94
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995
and 1994........................................................................ F-95
Notes to Consolidated Financial Statements......................................... F-96
[CONFIDENTIAL TREATMENT REQUESTED]
Independent Auditor's Report....................................................... F-101
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 and 1995...... F-102
Statements of Income for the six months ended June 30, 1997 and 1996 (unaudited)
and the years ended December 31, 1996 and 1995.................................. F-103
Statements of Changes in Stockholders' Equity for the six months ended June 30,
1997 (unaudited) and the years ended December 31, 1996 and 1995................. F-104
Statements of Cash Flows for the six months ended June 30, 1997 and 1996
(unaudited) and the years ended December 31, 1996 and 1995...................... F-105
Notes to Financial Statements...................................................... F-107
</TABLE>
F-2
<PAGE> 88
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Balanced Care Corporation
We have audited the consolidated balance sheets of Balanced Care
Corporation and subsidiaries as of June 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended and the period April 17, 1995 (date of inception)
to June 30, 1995. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Balanced
Care Corporation and subsidiaries as of June 30, 1997 and 1996 and the results
of their operations, and their cash flows for the years then ended and the
period April 17, 1995 (date of inception) to June 30, 1995, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
July 30, 1997, except for Notes 11 and 12
which are as of October 14, 1997
F-3
<PAGE> 89
BALANCED CARE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30 1997 AND 1996
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 7,908 $ 567
Accounts receivable (net of allowance for doubtful accounts of $330 in
1997 and $-0- in 1996).............................................. 6,679 65
Preferred stock subscription receivable................................ -- 451
Deferred costs......................................................... 2,062 666
Prepaid expenses and other current assets.............................. 1,770 25
Assets held for sale................................................... 6,351 --
------- ------
Total current assets........................................... 24,770 1,774
Restricted investments................................................... 1,825 279
Property and equipment, net.............................................. 2,565 4,897
Goodwill, net............................................................ 2,219 315
Other assets............................................................. 2,463 27
------- ------
Total assets................................................... $33,842 $ 7,292
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt...................................... $ 97 $ 29
Accounts payable....................................................... 5,929 517
Accrued payroll........................................................ 1,818 201
Accrued expenses....................................................... 1,251 300
------- ------
Total current liabilities...................................... 9,095 1,047
Long-term debt, net of current portion................................... 8,177 5,043
Straight-line lease liability............................................ 3,133 --
Deferred revenues........................................................ 1,404 --
Other liabilities........................................................ 228 78
------- ------
Total liabilities.............................................. 22,037 6,168
------- ------
Redeemable preferred stock:
Series B authorized, issued and outstanding -- 5,009,750 shares at June
30, 1997 (at redemption value which includes accretion of $1,267)... 13,249 --
------- ------
Commitments and contingencies (Note 11)
Stockholders' equity (deficit):
Preferred stock, $.001 par value; 5,000,000 authorized; none
outstanding......................................................... -- --
Preferred stock, Series A authorized -- 1,150,958 shares at June 30,
1997 and 1,500,000 shares at June 30, 1996; issued and
outstanding -- 1,150,958 shares at June 30, 1997 and 1,000,000
shares at June 30, 1996............................................. 1 1
Series A subscription rights -- 250,000 shares at June 30, 1996........ -- 451
Common stock, $.001 par value -- authorized -- 50,000,000 shares at
June 30, 1997 and 7,000,000 shares at June 30, 1996; issued and
outstanding -- 4,024,812 shares at June 30, 1997 and 2,583,333
shares at June 30, 1996............................................. 5 3
Additional paid-in capital............................................. 3,961 1,588
Accumulated deficit.................................................... (5,411) (919)
------- ------
Total stockholders' equity (deficit)........................... (1,444) 1,124
------- ------
Total liabilities and stockholders' equity..................... $33,842 $ 7,292
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 90
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND THE PERIOD APRIL 17, 1995 (DATE
OF INCEPTION) TO JUNE 30, 1995
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Revenues:
Patient services.............................................. $41,616 -- --
Resident services............................................. 6,778 737 --
Other revenues................................................ 1,086 74 --
------- ----- ----
Total revenues........................................ 49,480 811 --
------- ----- ----
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits............................... 19,186 320 --
Other operating expenses (including related parties of $751
in 1997)................................................. 20,727 179 --
Development and pre-opening expenses.......................... 740 -- --
General and administrative expense (including related parties
of $1,210 in 1997)......................................... 4,913 1,000 10
Lease expense (including related parties of $4,030 in 1997)... 5,417 77 --
Depreciation and amortization expense......................... 693 49 --
Write-down of long-lived assets............................... 1,591 -- --
------- ----- ----
Total operating expenses................................. 53,267 1,625 10
------- ----- ----
Loss from operations.......................................... (3,787) (814) (10)
Other income (expense):
Interest income............................................ 265 13 --
Interest expense........................................... (917) (102) (10)
------- ----- ----
Loss before income taxes...................................... (4,439) (903) (10)
Provision for income taxes.................................... 53 6 --
------- ----- ----
Net loss...................................................... $(4,492) $ (909) $ (10)
======= ===== ====
Accretion of redemption value attributable to redeemable
convertible preferred stock................................ 1,267 -- --
------- ----- ----
Net loss allocable to common stockholders..................... $(5,759) $ (909) $ (10)
======= ===== ====
Pro forma:
Pro forma net loss per share.................................. $ (0.56) $(0.29) $ --
======= ===== ====
Shares used in computing pro forma loss per share............. 7,954 3,088 2,939
======= ===== ====
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 91
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND THE PERIOD APRIL 17, 1995 (DATE
OF INCEPTION) TO JUNE 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED A STOCK COMMON STOCK
------------------------------- ---------------- ADDITIONAL
ISSUED PAR SUBSCRIPTION ISSUED PAR PAID-IN NET
SHARES VALUE RIGHTS SHARES VALUE CAPITAL LOSS TOTAL
------ ----- ------------ ------ ----- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sale of common stock....... -- -- -- 2,325 $ 3 $ 24 -- $ 27
Net loss for the period.... -- -- -- -- -- -- $ (10) (10)
--- --- ---- ----- ---- ------- ------- -------
Blance at June 30, 1995... -- -- -- 2,325 3 24 (10) 17
Sale of preferred stock.... 562 $ 1 -- -- -- 1,499 -- 1,500
Preferred stock
subscription rights...... 188 -- $ 451 -- -- -- -- 451
Sale of common stock....... -- -- -- 258 -- 3 -- 3
Issuance of common stock
purchase warrants........ -- -- -- -- -- 62 -- 62
Net loss for the year...... -- -- -- -- -- -- (909) (909)
--- --- ---- ----- --- ------- ------- -------
Balance at June 30, 1996... 750 1 451 2,583 3 1,588 (919) 1,124
Stock dividend............. 113 -- -- -- -- -- -- --
Accretion of redemption
value attributable to
redeemable preferred
stock.................... -- -- -- -- -- (1,267) -- (1,267)
Issuance of common stock... -- -- -- 1,442 2 2,172 -- 2,174
Issuance of preferred
stock.................... -- -- (451) -- -- 451 -- --
Issuance of common stock
purchase warrants........ -- -- -- -- -- 1,017 -- 1,017
Net loss for the year...... -- -- -- -- -- -- (4,492) (4,492)
--- --- ---- ----- --- ------- ------- -------
Balance at June 30, 1997... 863 $ 1 $ 0 4,025 $ 5 $ 3,961 $(5,411) $(1,444)
=== === ==== ===== === ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 92
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND THE PERIOD APRIL 17, 1995 (DATE
OF INCEPTION) TO JUNE 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................................... $(4,492) $ (909) $(10)
Adjustments to reconcile net loss to net used for operating activities:
Depreciation and amortization............................................ 693 49 --
Non-cash lease expense................................................... 1,454 -- --
Write-down of long-lived assets.......................................... 1,591 -- --
Changes in operating assets and liabilities, excluding effects of
acquisitions:
Increase in accounts receivable........................................ (3,066) (65) --
Increase in deferred costs............................................. (1,396) (666) --
Increase in prepaid expenses and other current assets.................. (1,564) (25) --
Increase in accounts payable, accrued payroll and accrued expenses..... 5,340 1,052 --
Increase in deferred revenues.......................................... 1,404 -- --
------- ------- ----
Net cash used for operating activities............................ (36) (564) (10)
------- ------- ----
Cash Flows from Investing Activities:
Purchases of property and equipment...................................... (1,822) (157) --
Increase in restricted investments....................................... (1,546) (279) --
Increase in goodwill..................................................... (1,882) (318) --
Increase in other assets................................................. (1,462) (26) (1)
Acquisitions, net of cash acquired....................................... (487) (4,701) --
------- ------- ----
Net cash used for investing activities............................ (7,199) (5,481) (1)
------- ------- ----
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt................................. 385 5,094 --
Payments on long-term debt............................................... (142) (1) --
Proceeds from issuance of common stock................................... 110 3 27
Proceeds from issuance of Series A preferred stock....................... 451 1,500 --
Proceeds from issuance of Series B preferred stock....................... 11,982 -- --
Issuance of notes payable................................................ 1,476 -- --
Payments on notes payable................................................ (1,476) -- --
Increase in straight-line lease liability................................ 1,679 -- --
Increase in other liabilities............................................ 111 -- --
------- ------- ----
Net cash provided by financing activities......................... 14,576 6,596 27
------- ------- ----
Increase in cash and cash equivalents.................................... 7,341 551 16
Cash and cash equivalents at beginning of period......................... 567 16 --
------- ------- ----
Cash and cash equivalents at end of period................................. $ 7,908 567 16
======= ======= ====
Supplemental Cash Flow Information:
Cash paid during the period for interest................................. $ 927 $ 47 --
======= ======= ====
Cash paid during the period for income taxes............................. $ 35 $ -- --
======= ======= ====
Supplemental Non-cash Investing and Financing Activities:
Assets and lease obligations capitalized................................. $ 75 $ 40 --
======= ======= ====
Fair value of stock purchase warrants granted to a lender................ $ 1,017 $ 62 --
======= ======= ====
Preferred stock subscriptions receivable................................. $ -- $ 451 --
======= ======= ====
Accretion of preferred B stock........................................... $ 1,267 $ -- --
======= ======= ====
Acquisitions:
Fair value of assets acquired.......................................... (8,188) (4,745) --
Liabilities assumed.................................................... 5,636 44 --
Fair value of stock issued............................................. 2,065 -- --
------- ------- ----
Consideration paid for acquisitions.................................... $ (487) $(4,701) --
======= ======= ====
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE> 93
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Background
Balanced Care Corporation (BCC or the Company) was incorporated in April
1995 and is engaged in the development and acquisition of assisted living
facilities and selective acquisitions of other operations which facilitate
implementation of the Company's balanced care continuum strategy, such as
medical rehabilitation, home health care and skilled nursing. As of June 30,
1997, the Company owned or operated 22 assisted and independent living
communities, 12 skilled nursing facilities, and had 10 assisted living
communities under construction(see Note 3). The Company also operates an
institutional pharmacy, a home health agency and a rehabilitation agency (see
Note 12). The Company's operations are located primarily in Pennsylvania,
Missouri and Wisconsin.
(b) Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries from their respective acquisition
dates. All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
(c) Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments with original
maturities of three months or less. The Company maintains its cash and cash
equivalents at financial institutions which management believes are of high
credit quality.
(d) Fair Value of Financial Instruments
Cash and cash equivalents, receivables, restricted investments and mortgage
notes payable are reflected in the accompanying balance sheet at amounts
considered by management to approximate fair value. Management generally
estimates fair value of its long-term fixed rate notes payable using discounted
cash flow analysis based upon the current borrowing rate for debt with similar
maturities.
(e) Restricted Investments
Restricted investments consist of money market mutual funds invested in
government securities which have been deposited as collateral for certain of the
Company's mortgage and lease commitments. The amounts are equivalent to three to
six months debt service or lease payments and are generally restricted until the
related debt is repaid or through the initial lease term.
(f) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation or,
where appropriate, the present value of the related capital lease obligations
less accumulated amortization. Depreciation and amortization are computed using
the straight-line method over the estimated useful lives of the assets ranging
from 3-40 years. Expenditures for maintenance and repairs necessary to maintain
property and equipment in efficient operating condition are charged to
operations. Costs of additions and betterments are capitalized.
(g) Goodwill
Goodwill resulting from acquisitions accounted for as purchases is being
amortized on a straight-line basis over lives ranging from 15 to 25 years.
Goodwill is reviewed for impairment whenever events or circumstances provide
evidence which suggests that the carrying amount of goodwill may not be
F-8
<PAGE> 94
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recoverable. The Company evaluates the recoverability of goodwill by determining
whether the amortization of the goodwill balance can be recovered through
projected undiscounted cash flows. At June 30, 1997 and 1996, accumulated
amortization of goodwill was $175,000 and $2,000, respectively.
(h) Impairment of Long-lived Assets and Long-lived Assets To Be Disposed Of
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-lived Assets and
for Long-lived Assets To Be Disposed Of, on July 1, 1996. SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to undiscounted future net cash flow expected to
be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of SFAS No. 121 at July 1, 1996 did not have a material impact on
the Company's financial position, results of operations, or liquidity.
(i) Deferred Costs
Financing and leasing costs have been deferred and are being amortized on a
straight-line basis over the term of the related debt or lease. Accumulated
amortization of deferred financing and leasing costs was $43,000 and $0 at June
30, 1997 and 1996, respectively.
Third-party vendors invoice the Company for development costs which are
reimbursable by the real estate investments trusts (REITs) for whom the Company
develops assisted living facilities. These costs are recorded as current
deferred costs. Costs incurred by the Company for salaries, wages and benefits
and other direct costs of development activities are recorded as current
deferred costs until the related development fee revenue is recognized, at which
time these costs are expensed.
(j) Stock Option Plan
Prior to July 1, 1996 the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
July 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense the fair value of
all stock-based awards on the date of grant over the vesting period.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants as if the
fair-value-based-method defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.
(k) Revenue Recognition
Patient revenues are recorded based on standard charges applicable to all
patients. Under Medicare, Medicaid, and other cost-based reimbursement programs,
each facility is reimbursed for services rendered to covered program patients as
determined by reimbursement formulas. The differences between established
billing rates and the amounts reimbursable by the programs and
F-9
<PAGE> 95
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
patient payments are recorded as contractual adjustments and deducted from
revenues. Revenues from the Medicare and Medicaid programs represented 31% and
31%, respectively, of total 1997 revenues. The Company had no Medicaid or
Medicare revenues in 1996.
Retroactively calculated third-party contractual adjustments are accrued on
an estimated basis in the period the related services are rendered. Revisions to
estimated contractual adjustments are recorded based upon audits by third-party
payors, as well as other communications with third-party payors such as desk
reviews, regulation changes and policy statements. These revisions are made in
the year such amounts are determined.
Resident revenues are recognized when services are rendered and consist of
resident fees and other ancillary services provided to residents of the
Company's assisted living facilities.
Other revenues consist of management fees and development fees. Management
fees are recognized when services are rendered. Development fees in excess of
related development costs are recorded as deferred revenues and recognized as
earned over the lease term. Prepaid expenses and other current assets include
development fees receivable of $831,000 and $-0- at June 30, 1997 and 1996,
respectively.
(l) Income Taxes
The Company follows the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.
(m) Straight-line Lease Liability
Straight-line lease liabilities represent lease deposit funding received
from REITs relating to lease transactions. The Company pays rent on these funds
and amortizes the related straight-line lease liability over the initial lease
term as a reduction of rent expense.
(n) Classification of Expenses
All expenses associated with corporate or support functions are classified
as general and administrative.
(o) Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
(p) New Accounting Pronouncements
In February 1997 the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128 replaces the presentation of primary
earnings per share (EPS) with a presentation of basic EPS. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the period. SFAS
No. 128 also requires dual presentation of basic and diluted EPS on the face of
the income
F-10
<PAGE> 96
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
statement and other reconciliations and disclosures. The Company is required to
adopt SFAS No. 128 in fiscal year ending in 1998.
(q) Pro Forma Net Loss Per Share
Pro forma net loss per share is computed using the weighted average number
of common shares and common equivalent shares (using the treasury stock method)
outstanding and gives effect to certain adjustments described below. Common
equivalent shares from stock options and warrants and convertible preferred
stock are excluded from the computation as their effect is antidilutive, except
that, pursuant to Securities and Exchange Commission (SEC) Staff Accounting
Bulletins and SEC staff policy, common and common equivalent shares issued
during the 12-month period prior to the proposed Initial Public Offering
(Offering) at prices below the anticipated Offering price are presumed to have
been issued in contemplation of the Offering and have been included in the
calculations as if they were outstanding for all periods presented (using the
treasury stock method and a proposed Offering price of $10.00). In the
computation of pro forma net loss per share, accretion of the redemption value
attributable to redeemable preferred stock is not included as an increase to net
loss.
Pursuant to the policy of the SEC staff, the calculation of shares used in
computing pro forma net loss per share also includes the Series B redeemable
convertible preferred stock that will convert into shares of common stock upon
completion of the Offering (using the if-converted method) from their original
date of issuance.
The following table sets forth the calculation of total number of shares
used in the computation of pro forma net loss per common share:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Weighted average common shares outstanding.......................... 3,583 2,474 2,325
Additional shares assuming exercise of:
Convertible preferred stock....................................... 3,757 -- --
Common stock...................................................... 242 242 242
Stock options..................................................... 478 478 478
Warrants.......................................................... 240 240 240
Shares assumed repurchased.......................................... (346) (346) (346)
----- ----- -----
Weighted average common and common equivalent shares used in
computation of pro forma net loss per common share................ 7,954 3,088 2,939
===== ===== =====
</TABLE>
2. ACQUISITIONS
In May 1997, the Company acquired the operations of three assisted living
facilities with 77 operating beds (171 licensed beds) from Heavenly Healthcare
Inc. in Nevada, Missouri. In August 1997, the Company closed on the acquisition
of a fourth assisted living community with 25 beds (57 licensed beds) from the
same seller. The facilities were acquired by Capstone Capital Corporation
(Capstone), a health care REIT, for approximately $5,335,000 including
transaction costs. The Company has entered into a 10-year lease with three
5-year renewal options with the REIT. These acquisitions were accounted for
using the purchase method of accounting.
In January 1997, the Company acquired the operations of five assisted
living facilities (317 beds) and two skilled nursing facilities (103 beds)
located in Pennsylvania. Capstone acquired the facilities for approximately
$21,600,000 including transaction costs and leases them to the Company pursuant
to an 11-year lease agreement with three 5-year renewal options. The Company
paid $1,800,000 and
F-11
<PAGE> 97
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issued 187,500 shares of its common stock valued at $1.33 per share for the
non-real estate assets, operations and the rights to seven early stage
development projects. Goodwill of approximately $1,800,000 was recorded for this
acquisition, which is being amortized over 25 years. This acquisition was
accounted for using the purchase method of accounting.
In August 1996, the Company acquired the operations of ten skilled nursing
facilities, a facility based home health agency and a pharmacy company, all in
Missouri (Missouri acquisition). In this transaction, the Company exchanged
1,200,000 shares of its common stock valued at $1.33 per share for all of the
outstanding common stock of two skilled nursing companies and incurred
additional indebtedness of approximately $3,115,000 which was funded with
mortgage financing from Meditrust, a health care REIT. The Company also
purchased the stock of a pharmacy company ("The Pharmacy") and a skilled nursing
company which leases its facility from an independent owner as well as the non-
real estate assets and operations of seven skilled nursing facilities for
short-term notes payable of approximately $1,476,000. Goodwill of approximately
$3,401,000 relating to the Pharmacy was recorded. The Pharmacy has been
reclassified as an asset held for sale as of June 30, 1997 (see Note 3). The
real estate assets of these seven skilled nursing facilities were purchased by
Hawthorn Health Properties, Inc. (HHP), a related party, for approximately
$39,100,000 including transaction costs with mortgage financing provided by
Meditrust. The Company has leased these seven facilities from HHP pursuant to a
12-year lease agreement with four 6-year renewal options. This acquisition was
accounted for as a purchase. In February 1997, the Company leased two additional
assisted living facilities in Missouri from the same seller. The facilities have
a capacity for 61 residents. The initial lease term is for three years with two
1-year renewal options.
In May 1996, the Company acquired seven assisted living facilities in
Wisconsin with 158 licensed beds for $5,046,000 including transaction costs
which was funded with mortgage financing provided by a health care REIT
(Wisconsin Acquisition). This acquisition was accounted for using the purchase
method of accounting. (See Note 3).
In March 1996, the Company acquired the operations of a 68-bed assisted
living community in Pennsylvania for cash of approximately $318,000, which has
been recorded as goodwill and is being amortized over 25 years. Health Care
Property Investors, Inc. (HCPI), a health care REIT, acquired the facility for
$2,350,000 and leases it to the Company pursuant to a 15-year lease agreement
with three five-year renewal options. This acquisition was accounted for using
the purchase method of accounting.
The following unaudited summary, prepared on a pro forma basis, combines
the results of operations of the acquired businesses with those of the Company
as if the acquisitions and leases had been consummated as of the beginning of
the respective periods after including the impact of certain adjustments such
as: amortization of goodwill, depreciation on assets acquired, interest on
acquisition financing and lease payments on the leased facility (in thousands
except for net loss per common share):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Revenue......................................................... $ 63,627 $ 3,868
Expenses........................................................ (68,079) (4,305)
-------- -------
Net Loss........................................................ $ (4,452) $ (437)
======== =======
Net Loss per common share....................................... $ (0.55) $ (0.14)
======== =======
</TABLE>
F-12
<PAGE> 98
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The unaudited pro forma results are not necessarily indicative of what
actually might have occurred if the acquisitions had been completed as of July
1, 1996 and 1995, respectively. In addition, they are not intended to be a
projection of future results of operations.
3. ASSETS HELD FOR SALE
In June 1997, the Company committed to a plan for the disposal of its
Wisconsin assisted living facilities and the Pharmacy. As a result of the
planned Wisconsin disposition, a non-cash charge of $1,591,000 has been recorded
to write these assets down to their estimated fair value based on the present
value of expected discounted future cash flows less estimated costs of disposal.
For the year ended June 30, 1997, the Wisconsin operations experienced a pre-tax
loss of $381,000 and the Pharmacy experienced pretax income of $240,000 (see
Note 12).
4. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following as of June 30
(dollars in thousands).
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Land and land improvements......................................... $ 418 $ 194
Buildings and improvements......................................... 509 4,081
Fixed and moveable equipment....................................... 2,119 671
------ ------
3,046 4,946
Less: accumulated depreciation..................................... (481) (49)
------ ------
$2,565 $4,897
====== ======
</TABLE>
Depreciation expense was $477,000, $47,000 and $-0-, the years, ended June
30, 1997, 1996, and 1995.
5. LONG-TERM DEBT
Long-term debt consisted of the following as of June 30 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Mortgages payable to Meditrust, interest at rates ranging from
10.6% to 10.7%; principal and interest due monthly through August
2008 based on 30-year amortization; unpaid principal and interest
due May 2006 and August 2008. ................................... $8,159 $4,986
Other (including capital lease obligations)........................ 115 86
------ ------
8,274 5,072
Less: current portion.............................................. 97 29
------ ------
$8,177 $5,043
====== ======
</TABLE>
The mortgage notes payable were incurred for the acquisitions in Wisconsin
and Missouri. Commencing in the second year of the loans and thereafter, the
Company will pay additional interest of up to 2.0% of the total principal and
interest payments in the prior year based contingently on increases in revenues
of the facilities. The mortgage note is collateralized by the facilities
property and equipment which had a carrying amount of approximately $10,000,000
at June 30, 1997. Meditrust was issued approximately 460,000 common stock
warrants exercisable at a nominal value of $.001 per share in connection with
these financings. The value of the underlying shares of common stock of
F-13
<PAGE> 99
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $613,676 has been recorded as deferred financing cost and a
corresponding non-cash increase in additional paid-in capital. The interest cost
and discount are being recognized as interest expense over the life of the
mortgages using the effective interest method.
At June 30, 1997, the aggregate maturities of long-term debt for the next
five fiscal years ending June 30 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1998............................................ $ 97
1999............................................ 97
2000............................................ 49
2001............................................ 54
2002............................................ 60
Thereafter...................................... 7,917
------
$8,274
======
</TABLE>
6. REDEEMABLE PREFERRED STOCK
In September 1996 and March 1997, the Company completed a two-stage private
offering of Series B Convertible Preferred Stock (Series B Stock) at $2.50 per
share to a group of venture capital funds and certain other private investors
who purchased 5,009,750 shares for proceeds of approximately $12.2 million net
of related transaction costs.
Dividends of 8% per year are payable when and if declared by the Board of
Directors. The Series B Stock participates in any dividends on common stock on
an as-converted basis. The Series B stockholders are entitled to a liquidation
preference payment equal to $2.50 per share plus 8% accrued dividends from the
date of issue. The Series B stockholders can redeem their Series B Stock at the
fifth anniversary for $5.00 per share and on each subsequent anniversary of
their purchase date for an additional $0.50 per share per year. Each share of
Series B Stock is convertible into one share of the Company's common stock.
However, the conversion ratio increases if the Company issues shares at a price
less then $2.50 per share except for the granting of employee stock options. The
Company has the right to require conversion in the event of an initial public
offering of its common stock of $25 million or more at a per share price of at
least $8.00 per share. The Series B stockholders have separate class of voting
rights on certain matters such as dividends on common stock, repurchases of
common stock, creation of any senior equity security, changes to the Series B
Stock rights and increases in the size of the Board of Directors. There are no
redemption requirements on the Series B Stock during the next five years. There
are 3,757,313 authorized shares of common stock reserved for the conversion of
the Series B Stock. Hakman & Company Incorporated, a related party, was paid a
fee of $250,000 in connection with this capital raising. The value of Series B
stock includes $1,267,000 for the accretion of redemption value with a
corresponding charge to additional paid-in capital.
7. STOCKHOLDERS' EQUITY
The Series A stockholder purchased 1,000,000 shares of Series A Convertible
Preferred Stock (Series A Stock) and 344,444 shares of common stock for net
proceeds to the Company of approximately $2,000,000. These shares were purchased
in stages over a one year period from September 1995 through September 1996.
The Series A Stock is junior to the Series B Stock. Dividends on the Series
A Stock were payable annually at the rate of $0.24 per share in cash or Series A
Shares based on a $2.00 per share value. On September 6, 1996, the Company paid
a stock dividend of 50,958 Series A shares. The Company had the option to make a
payment of 100,000 Series A shares to terminate the dividend on Series A shares.
On
F-14
<PAGE> 100
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
September 6, 1996, the Company exercised its option and issued 100,000 Series A
shares to terminate this dividend provision. The Series A Stock is also entitled
to share in any dividend on common shares on a prorata basis as though the
Series A Stock has been converted. The Series A stockholders are entitled to a
liquidation preference payment equal to $2.00 per share. This preference right
is subordinate to the Series B preferential liquidation payment. Each share of
Series A Stock is convertible into one share of the Company's common stock. The
Series A Stock automatically converts in the event of an initial public offering
of the Company's common stock. The Company can redeem the Series A Stock at any
time at $2.00 per share. The Series A stockholders have the right to vote with
the common stockholders on a prorata basis as though the Series A Stock has been
converted. There are 863,218 authorized shares of common stock reserved for the
conversion of the Series A Stock. There are no redemption requirements on the
Series A Stock during the next five years.
Common Stock
As of June 30, 1997, the Company had 937,867 outstanding warrants to
purchase shares of its common stock. Of these warrants, 141,827 are exercisable
at $3.00 per share, 46,040 are exercisable at $3.33 per share and 750,000 are
exercisable at $.001 per share.
Other
The Company's mortgage loan and lease agreements place restrictions on the
ability of certain of its subsidiaries to transfer funds to the parent or other
affiliates in the form of loans, advances or cash dividends. Any such transfers
are subordinated to payment of lease or debt service and other payments required
under the agreements. However, such transfers are permissible if all required
lease or debt service payments are being made. The Company's payments under its
lease and debt agreements are current.
8. INCOME TAXES
The provision for income tax expense for the years ended June 30, 1997 and
1996, and the period April 17, 1995 (date of inception) through June 30, 1995
consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--- --- ---
<S> <C> <C> <C>
Current
Federal................................................................. -- -- --
State................................................................... $53 $ 6 --
--- -- ---
Total Income Tax Expense.................................................. $53 $ 6 --
=== == ===
</TABLE>
A reconciliation of income tax expense at the federal statutory rate of 34%
to the Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Income taxes computed at statutory rate............................. (34.0)% (34.0)% (34.0)%
State income taxes, net of federal benefit.......................... (6.0) (6.6) (6.0)
Other............................................................... 1.3 2.0 40.0
Valuation allowance adjustment...................................... 39.9 39.3 --
----- ----- -----
1.2% 0.7% --
===== ===== =====
</TABLE>
F-15
<PAGE> 101
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Temporary differences giving rise to a significant amount of deferred tax
assets and liabilities at June 30, 1997 and 1996 are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
6/30/97 6/30/96
------- -------
<S> <C> <C>
Excess tax over book basis of fixed assets............................... $ (985) $ 22
Development fee income................................................... 347 --
Lease acquisition proceeds............................................... (146) --
Accrued expense.......................................................... (99) (20)
Net operating loss....................................................... (1,721) (357)
Other.................................................................... (108) --
Net deferred tax asset................................................. (2,712) (355)
------- -----
Valuation allowance...................................................... 2,712 355
------- -----
Deferred income tax liability (asset).................................... $ -- $ --
======= =====
</TABLE>
The Company has net operating loss carryforwards at June 30, 1997 available
to offset future federal and state taxable income, if any, of approximately
$4,300,000 expiring through 2012 for federal tax purposes and $6,000,000
expiring through 2000 for state income tax purposes. The net operating losses
are subject to limits on their future utilization under federal and state tax
laws. A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The Company
is in a cumulative pretax loss position since inception. Recognition of deferred
tax assets will require generation of future taxable income. There can be no
assurance that the Company will generate any earnings or any specific level of
earnings in future years. Therefore, the Company established a valuation
allowance on deferred tax assets of approximately $2,712,000 as of June 30,
1997.
9. STOCK OPTIONS
The 1996 Stock Option Plan combines the features of an incentive and
non-qualified stock option plan, a stock appreciation rights ("SAR") plan and a
stock award plan (including restricted stock). The 1996 Plan is a long-term
incentive compensation plan and is designed to provide a competitive and
balanced incentive and reward program for participants.
The Company has authorized 2,025,000 shares of common stock to be reserved
for grants under the 1996 Plan. Options generally vest over a four-year period
in cumulative increments of 25% each year beginning one year after the date of
the grant and expire not later than five years from the date of grant. The
options are granted at an exercise price at least equal to the fair market value
of the common stock on the date of the grant.
The Company applies APB Opinion No. 25 in accounting for its 1996 Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, the
Company's net loss and net loss per share would have been increased to the pro
forma amounts indicated below.
F-16
<PAGE> 102
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For SFAS 123 purposes options were valued using the Black-Scholes Multiple
Option Model. Assumptions used were as follows:
<TABLE>
<S> <C>
Risk free interest rate.................................. 5.5% to 6.0%
Expected life............................................ 1 year after vest
Expected volatility...................................... .30
Expected dividends....................................... 0
</TABLE>
These assumptions produced weighted average fair values per option of $.41
and $.001 for options issued during the years ended June 30, 1997 and 1996. All
options issued during these periods were at an exercise price in excess of the
fair market value on the grant date.
<TABLE>
<CAPTION>
PRO FORMA NET
NET LOSS LOSS PER
IN THOUSANDS EXCEPT ----------------- -----------------
PER SHARE DATA 1997 1996 1997 1996
- ------------------- ------- ----- ------ ------
<S> <C> <C> <C> <C>
As reported $(4,492) $(909) $(0.56) $(0.29)
Pro forma $(4,511) $(910) $(0.57) $(0.29)
</TABLE>
<TABLE>
<CAPTION>
STOCK OPTION ACTIVITY DURING THE WEIGHTED-AVERAGE
PERIODS INDICATED NUMBERS OF SHARES EXERCISE PRICE
--------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Balance at July 1, 1995............................ -- --
Granted.......................................... 340,125 $ 2.00
Exercised........................................ -- --
Forfeited........................................ -- --
Expired.......................................... -- --
----------------- -------
Balance at June 30, 1996........................... 340,125 2.00
Granted.......................................... 673,300 5.16
Exercised........................................ (11,250) (2.00)
Forfeited........................................ (15,000) (2.84)
Expired.......................................... -- --
----------------- -------
Balance at June 30, 1997........................... 987,175 $ 4.15
================ ===============
</TABLE>
At June 30, 1997, the range of exercise prices, weighted-average remaining
contractual life of outstanding options and shares exercisable were as follows:
<TABLE>
<CAPTION>
EXERCISE OUTSTANDING WEIGHTED AVERAGE SHARES
PRICE OPTIONS CONTRACTUAL LIFE EXERCISABLE
- -------- ----------- ---------------- -----------
<S> <C> <C> <C>
$ 2.00 464,250 3.77 yrs. 127,687
$ 3.33 45,000 9.21 yrs. 45,000
$ 5.33 135,250 5.09 yrs. 11,250
$ 6.67 342,675 4.96 yrs. 0
------- -------
987,175 183,937
======= =======
</TABLE>
There were no options exercisable at June 30, 1996.
F-17
<PAGE> 103
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RELATED PARTY TRANSACTIONS
The Company had the following related party transactions:
- Fees paid to an investment banking firm for finding acquisition targets
and for raising private equity. A minority stockholder of the Company is
an officer of this firm.
- Rental payments made to companies owned by a stockholder/director for the
lease of two facilities and other items. Management fees paid to a
company owned by the same stockholder/director for managing ten skilled
nursing facilities owned or leased by the company. On July 1, 1997, the
Company purchased the assets and operations of this management company
for approximately $120,000.
- Respiratory therapy supplies and management fees paid to a company owned
by a stockholder/director.
- Legal services provided by a relative of a stockholder/officer and
consulting services provided by two stockholders/directors.
- Rental payments to a company owned by two minority stockholders for the
lease of seven skilled nursing facilities.
A summary of those transactions for the periods ended June 30 follows
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Finder's fees.................................... $ 250 35 --
Rentals.......................................... 175 -- --
Management fees.................................. 1,076 -- --
Respiratory therapy.............................. 731 -- --
Legal & consulting services...................... 134 -- --
Skilled nursing facility rentals................. 3,877 -- --
</TABLE>
Accounts payable include approximately $648,000 and $0 related to these
services at June 30, 1997 and 1996, respectively.
11. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases 16 assisted living facilities and 12 skilled nursing
facilities, as well as certain equipment and office space under noncancellable
operating and capital leases that expire at various times through 2011. Rental
expense on such operating leases for the years ended June 30, 1997, 1996 and
1995 was $5,417,000, $77,000, and $-0-. At June 30, 1997 and 1996, property and
equipment includes approximately $115,000 and $45,000 of assets that have been
capitalized under capital leases. Amortization of the leased assets is included
in depreciation and amortization expense.
F-18
<PAGE> 104
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future annual minimum lease payments for the next five years and thereafter
under capital leases and noncancellable operating leases with initial terms of
one year or more in effect at June 30, 1997, are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
---------------------------------------------------------------- ------- ---------
<S> <C> <C>
1998............................................................ $54 $ 8,040
1999............................................................ 37 7,940
2000............................................................ -- 7,915
2001............................................................ -- 7,896
2002............................................................ -- 7,786
Thereafter...................................................... -- 37,077
--- -------
Total Minimum Lease Payments.................................... 91 $76,654
=======
Amount Representing Interest.................................... 9
---
Present value of net minimum lease payments (including current $82
portion of $45)............................................... ===
</TABLE>
The operating lease agreements require the payment of additional rent
commencing in the second lease year of up to 2% of prior year rent based
contingently upon increases in facility gross revenues. In addition, most of the
facility leases have renewal options for periods ranging from 5 years up to 24
years after the initial lease period.
Financing Commitments
At October 14, 1997, the Company had an unused financing commitment from a
health care REIT of approximately $78,000,000 and has entered into term sheets
with two other REITs for up to $95,000,000 of additional financing to fund
development projects and acquisitions. Initial Lease rates under these
arrangements range from 3.20% to 3.40% over the 10-year Treasury rate. Specific
development projects and acquisitions require the approval of the REIT's board
of directors prior to financing. The Company has paid a commitment fee of
$100,000 in connection with the financing commitment.
Litigation
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, all
such matters are adequately covered by insurance or, if not so covered, are
without merit or are of such a kind, or involve such amounts, that their
unfavorable disposition would not have a material effect on the financial
position, results of operations or the liquidity of the Company.
12. SUBSEQUENT EVENTS
Line of Credit
On July 7, 1997, the Company executed a commitment letter with a commercial
bank for a $10 million line of credit which will be collateralized by the
accounts receivable of its skilled nursing facilities. The Company expects
borrowings under this credit arrangement to be available during November 1997.
F-19
<PAGE> 105
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stockholders' Equity
Effective October 14, 1997, the Company amended its certificate of
incorporation to increase the authorized common stock to 50,000,000 shares, to
increase the authorized preferred stock to 11,160,708 and to effect a
three-for-four reverse stock split. As a result, all share and per share data in
the accompanying consolidated financial statements have been restated to reflect
the stock split.
Completed Acquisition
On October 9, 1997, the Company purchased a 92-bed assisted living facility
for $5.8 million, including transaction costs, which will be accounted for as a
purchase. The purchase was financed with bridge financing from a health care
REIT at the prime rate plus 2.00%. The Company estimates that goodwill of
approximately $1.6 million will be recorded for this acquisition and amortized
over 40 years.
Sale of Pharmacy Operations
The Company has signed a letter of intent for the sale of the assets of its
pharmacy operations in Missouri to a national pharmacy provider for net proceeds
of approximately $4.7 million. This sale is expected to occur during October
1997.
Pending Acquisitions
The Company has executed a definitive agreement with respect to one pending
acquisition and letters of intent with respect to three other pending
acquisitions which collectively consist of seven assisted living facilities and
one skilled nursing facility with an aggregate capacity for 383 assisted living
residents, 134 skilled nursing patients and 20 independent living residents. The
aggregate purchase price for these four pending transactions is approximately
$32 million plus possible contingent consideration aggregating $4.3 million.
These acquisitions will be accounted for using the purchase method of
accounting.
F-20
<PAGE> 106
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Balanced Care Corporation
Mechanicsburg, Pennsylvania
We have audited the accompanying combined balance sheets of Foster Health
Care Affiliates (detailed in Note 1) as of June 30, 1996 and 1995, and the
related combined statements of income, shareholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Foster Health Care
Affiliates as of June 30, 1996 and 1995, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
BAIRD, KURTZ & DOBSON
Springfield, Missouri
July 17, 1997
F-21
<PAGE> 107
FOSTER HEALTH CARE AFFILIATES
COMBINED BALANCE SHEETS
JUNE 30, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 2,964 $ 755
Certificates of deposit................................................ 350 1,343
Accounts receivable, less allowance for uncollectible accounts of $414
and $305, respectively.............................................. 3,550 3,546
Estimated settlements from third-party payors.......................... 983 471
Prepaid expenses, inventory and other assets........................... 270 247
Due from related parties............................................... 176 374
Deferred income taxes.................................................. 280 233
------- -------
Total Current Assets........................................... 8,573 6,969
Investments.............................................................. 192 392
Assets limited as to use................................................. 1,188 1,721
Property, plant and equipment, net....................................... 16,483 14,636
Other assets............................................................. 538 689
------- -------
Total Assets................................................... $26,974 $24,407
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term notes payable to banks...................................... $ 2,456 $ 525
Current maturities of long-term debt................................... 997 964
Accounts payable....................................................... 1,510 1,190
Accrued expenses....................................................... 565 835
Income taxes payable................................................... 385 237
Accrued salaries and payroll taxes..................................... 848 792
Due to related parties................................................. 1,244 980
Estimated settlements due third-party payors........................... 162 187
------- -------
Total Current Liabilities...................................... 8,167 5,710
Long-term debt........................................................... 14,958 13,765
Deferred income taxes.................................................... 452 388
------- -------
Total Liabilities.............................................. 23,577 19,863
------- -------
Shareholders' equity:
Common stock........................................................... 20 20
Retained earnings...................................................... 5,888 4,524
Less: Treasury stock, at cost; 1996 -- 2,067 shares.................... (2,511) --
------- -------
Total Shareholders' Equity..................................... 3,397 4,544
------- -------
Total Liabilities and Shareholders' Equity..................... $26,974 $24,407
======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-22
<PAGE> 108
FOSTER HEALTH CARE AFFILIATES
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net patient service revenue.............................................. $35,220 $29,186
Pharmacy................................................................. 1,135 949
Rental income............................................................ 822 594
Other income............................................................. 132 45
------- -------
Total operating revenues....................................... 37,309 30,774
------- -------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits........................................ 15,942 14,787
Other operating expenses, including related parties of $1,854 and
$1,407............................................................. 8,349 7,065
Medical supplies, drugs and therapies expense, including related
parties of $61 in 1996............................................. 8,194 4,907
Provision for uncollectible accounts................................... 379 199
Interest expense, net, including related parties of $37 and $43........ 1,499 1,403
Depreciation and amortization.......................................... 1,055 934
------- -------
Total operating expenses....................................... 35,418 29,295
------- -------
Income from operations................................................... 1,891 1,479
Nonoperating income...................................................... 213 200
------- -------
Income before provision for income taxes................................. 2,104 1,679
Provision for income taxes............................................... 705 485
------- -------
Net income............................................................... $ 1,399 $ 1,194
======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-23
<PAGE> 109
FOSTER HEALTH CARE AFFILIATES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON RETAINED TREASURY
STOCK EARNINGS STOCK TOTAL
------ -------- -------- -------
<S> <C> <C> <C> <C>
Balance at July 1, 1994............................. $ 20 $3,330 $ -- $ 3,350
Net income........................................ -- 1,194 -- 1,194
--- ------ ------- -------
Balance at June 30, 1995............................ 20 4,524 -- 4,544
Net income........................................ -- 1,399 -- 1,399
Distribution to shareholders...................... -- (35) -- (35)
Purchase of treasury stock........................ -- -- (2,511) (2,511)
--- ------ ------- -------
Balance at June 30, 1996............................ $ 20 $5,888 $ (2,511) $ 3,397
=== ====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-24
<PAGE> 110
FOSTER HEALTH CARE AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities
Net income............................................................. $ 1,399 $ 1,194
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 1,055 935
Deferred income taxes............................................... 17 (15)
Changes in operating assets and liabilities:
Increase in accounts receivable..................................... (4) (575)
Increase in estimated third-party payor settlements................. (537) (90)
Decrease in prepaid expenses, inventory and other assets............ 66 59
Increase in accounts payable and accrued expenses................... 50 458
Increase (decrease) in accrued salaries and payroll................. 56 (25)
Increase in income tax payable...................................... 148 45
------- -------
Net cash provided by operating activities...................... 2,250 1,986
------- -------
Cash flows from investing activities
Purchases of property and equipment.................................... (1,797) (1,602)
Net maturities (purchases) of investments.............................. 1,193 (633)
Repayments from related parties........................................ 198 52
Change in assets limited as to use..................................... 533 (101)
------- -------
Net cash provided by (used in) investing activities............ 127 (2,284)
------- -------
Cash flows from financing activities
Payments on short-term notes payable................................... (179) (191)
Proceeds from short-term notes payable................................. 2,110 72
Net borrowings from (to) related parties............................... 264 (34)
Proceeds from issuance of long-term debt............................... 1,096 2,774
Payments on long-term debt............................................. (921) (1,956)
Payments of deferred financing costs................................... (27) (32)
Purchase of treasury stock............................................. (2,511) --
------- -------
Net cash provided by (used in) financing activities............ (168) 633
------- -------
Increase in cash and cash equivalents.................................... 2,209 335
Cash and cash equivalents, beginning of year............................. 755 420
------- -------
Cash and cash equivalents, end of year................................... $ 2,964 $ 755
======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-25
<PAGE> 111
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. COMPANY BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
Foster Health Care Affiliates (the "Affiliates") are a group of commonly
controlled corporations engaged in the ownership and management of facilities
which provide subacute, skilled, rehabilitative and intermediate nursing care,
residential care and personalized services to the elderly in independent living
units. The Affiliates own and operate nine skilled nursing facilities with an
aggregate of 1,065 beds and lease one 60-bed facility. The Affiliates also own
and operate three facilities which provide residential care and independent
living units. In addition, the Affiliates own and operate a pharmacy which
serves nine of the facilities and a home health agency which operates in 22
counties in Missouri.
(a) Principles of Combination and Basis of Presentation
The combined financial statements include only the accounts of the
companies sold on August 30, 1996 (see Note 15) which are as follows:
- National Care Centers of Lebanon, Inc. (Lebanon Park)
- National Care Centers, Inc. (Lebanon)
- Springfield Retirement Village, Inc. (Mt. Vernon Park)
- National Care Centers of Hermitage, Inc. (Hermitage)
- Dixon Management, Inc. (Dixon)
- National Care Centers of Nevada, Inc. (Nevada)
- National Care Centers of Nixa, Inc. (Nixa)
- National Care Centers of Republic, Inc. (Republic)
- National Care Centers of Springfield, Inc. (Springfield)
- Mt. Vernon Park Care Center West, Inc. (West Park)
- Long Term Pharmaceutical Care, Inc. (Pharmacy)
All of the above companies are included in the combined financial
statements for the two-year period ended June 30, 1996. All significant
intercompany accounts and transactions have been eliminated in the combined
financial statements.
(b) Cash and Cash Equivalents:
Cash and cash equivalents consist of cash and certificates of deposit
purchased with original maturities of three months or less.
(c) Property and Equipment
Property and equipment are stated at cost and depreciated using the
straight-line method over estimated useful lives ranging from four years to
forty years. Expenditures for maintenance and repairs necessary to maintain
property and equipment in efficient operating condition are charged to
operations. Costs of additions and betterments are capitalized. Interest costs
associated with construction or renovations are capitalized in the period in
which they are incurred.
(d) Inventory
Inventories of pharmaceuticals and supplies are stated at the lower of cost
or market. Cost is determined on the first-in, first-out (FIFO) method.
F-26
<PAGE> 112
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(e) Patient Service Revenues
Revenues are recorded at the estimated net realizable amounts from
residents, third-party payors (e.g. Medicare, Medicaid, managed care companies
and insurers) and others for services rendered. Revenues under third-party payor
agreements are subject to audit and retroactive adjustment. Provisions for
estimated third-party payor settlements are provided in the period the related
services are rendered. Differences between the estimated amounts accrued and the
interim or final settlements are reported in operations in the year of
settlement.
(f) Deferred Financing Costs
Costs incurred in connection with the arrangement of certain financings
have been capitalized and are being amortized over the term of the related debt
using the effective interest method. Accumulated amortization as of June 30,
1996 and 1995, was $111,000 and $90,000 respectively. Amortization expense
related to deferred financing costs for the years ended June 30, 1996 and 1995,
was $21,000 and $20,000 respectively. Financing fees increased $27,000 and
$32,000 during the years ended June 30, 1996 and 1995, respectively.
(g) Income Taxes
Deferred tax liabilities and assets are recognized for the tax effect of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not a deferred tax asset will not be realized.
(h) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(i) Concentrations
A significant portion of the Affiliates' revenues are derived from the
Medicare and Medicaid programs. There have been, and the Affiliates expect that
there will continue to be, a number of proposals to limit reimbursements to
long-term care facilities under these programs. The Affiliates cannot predict
whether any of the proposals will be adopted, or if adopted and implemented,
what effect such proposals would have on the Affiliates. Approximately 76% of
the Affiliates' net patient service revenues in the years ended June 30, 1996
and 1995, are from the Medicare and Medicaid programs. All of the Affiliates'
facilities are located in Missouri.
(j) Facility Operating Expenses
Facility operating expenses include direct operating costs at the facility
level. The majority of these costs consist of payroll and employee benefits
related to nursing, housekeeping, laundry and dietary services provided to
patients, as well as maintenance and administration of the facilities. Other
significant facility operating expenses include the cost of rehabilitation
therapies, medical and pharmacy supplies, food and utilities.
F-27
<PAGE> 113
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(k) Assessment of Long-lived Assets
The Affiliates periodically review the carrying values of their long-lived
assets whenever events or circumstances provide evidence that suggest that the
carrying amount of long-lived assets may not be recoverable. If this review
indicates that long-lived assets may not be recoverable, the Affiliates review
the expected undiscounted future net operating cash flows from their facilities,
as well as valuations obtained in connection with various refinancings. Any
permanent impairment in value is recognized as a charge against earnings in the
statement of income. As of June 30, 1996, the Affiliates do not believe there is
any indication that the carrying value or the amortization period of their
long-lived assets need to be adjusted.
(l) Shareholders' Equity
The Affiliates outstanding common stock is summarized below:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES
PAR VALUE SHARES ISSUED AND
PER SHARE AUTHORIZED OUTSTANDING
--------- --------- -----------
<S> <C> <C> <C>
Dixon............................................. $ 1.00 30,000 3,000
Hermitage......................................... $ 1.00 30,000 3,000
Pharmacy.......................................... $ 1.00 30,000 2,000
Lebanon........................................... None 2,000,000 100
Lebanon Park...................................... $ 1.00 30,000 1,000
Nevada............................................ $ 1.00 30,000 1,000
Nixa.............................................. None 30,000 999
Republic.......................................... $ 1.00 30,000 3,250
Springfield....................................... $ 1.00 30,000 1,000
Mt. Vernon Park................................... $ 1.00 100,000 1,500
West Park......................................... $100.00 300 30
</TABLE>
2. MEDICARE AND MEDICAID REIMBURSEMENT ADJUSTMENTS
The Affiliates have been reimbursed for services rendered to patients
covered by the Federal Medicare program on the basis of estimated per diem
rates. During fiscal years 1996 and 1995, the Affiliates were reimbursed either
at historical costs or prospectively for the routine and capital-related costs
of services and at historical costs for ancillary services provided to patients
covered under the Federal Medicare Program. Provisions for adjustment of the per
diem rates to actual reimbursements have been included in the accompanying
financial statements. The Medicare cost reports are subject to audit and
retroactive adjustment under the terms of the Affiliates' Medicare reimbursement
agreements which may affect the actual reimbursement for the year.
The Affiliates have also been reimbursed for services rendered to Title XIX
Medicaid patients on the basis of estimated per diem rates. The Medicaid
reimbursement plan is on a prospective basis. Any provisions for adjustments of
the per diem rates to actual reimbursement have been included in the
accompanying financial statements.
The home health agency has agreements with third-party payors that provide
for payments to the agency at amounts different from its established rate. A
summary of the payment arrangements with major third-party payors follows:
- Medicare. Services rendered to Medicare program beneficiaries are
reimbursed under a cost reimbursement methodology. The agency is
reimbursed at an interim rate with final settlement
F-28
<PAGE> 114
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
determined after submission of annual cost reports by the agency and
audits thereof by the Medicare fiscal intermediary.
- Medicaid. Services rendered to Medicaid program beneficiaries are
reimbursed prospectively at the lesser of the Medicaid periodic interim
payment rate or the Medicaid ceiling rate in effect.
3. RESIDENT PATIENTS' PERSONAL FUNDS
The Affiliates are the trustee of $98,000 and $127,000 at June 30, 1996 and
1995, respectively, in funds received on behalf of various residents. The
Affiliates have fiduciary responsibility for the administration of the bank
accounts and the distribution of the funds to residents.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1995
------- -------
<S> <C> <C>
Land............................................................. $ 849 $ 789
Land improvements................................................ 283 283
Buildings and improvements....................................... 19,255 18,193
Furniture and equipment.......................................... 3,799 3,115
Vehicles......................................................... 117 79
Construction in progress......................................... 1,042 28
------- -------
25,345 22,487
Less: Accumulated depreciation................................... 8,862 7,851
------- -------
$16,483 $14,636
======= =======
</TABLE>
Depreciation expense related to property and equipment for the years ended
June 30, 1996 and 1995, was $1,001,000 and $872,000 respectively. Interest costs
capitalized during the years ended June 30, 1996 and 1995, totaled $45,000 and
$77,000 respectively.
Construction in progress related to the construction of a 28-unit apartment
complex to open in August 1996. Estimated total construction should be
approximately $1,150,000.
5. ASSETS LIMITED AS TO USE
The Affiliates' Boards of Directors had designated $1,188,000 and
$1,721,000 as of June 30, 1996 and 1995, respectively, to be set aside for the
future replacement of capital assets. These investments consist of certificates
of deposit, recorded at cost which approximates fair value.
F-29
<PAGE> 115
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVESTMENTS
Investments consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30,
---------------
1996 1995
------ ----
<S> <C> <C>
Certificates of deposit(a).......................................... $ -- $200
Land(b)............................................................. 192 192
---- ----
$ 192 $392
==== ====
</TABLE>
- ---------------
(a) The certificates of deposit, which were purchased through various commercial
banks, are recorded at cost which approximates fair value and bear interest
at rates ranging from 4.72% to 7.0%.
(b) Land held for investment includes approximately 61 acres of land in Lebanon,
Missouri.
7. NOTES PAYABLE
Notes payable consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30,
---------------
1996 1995
------ ----
<S> <C> <C>
Notes payable to banks at rates ranging from 6.0% to 8.25% and due
dates ranging from August 1996 to December 1996(a)................ $2,000 $ 5
Line of credit borrowings at rates ranging from 5.625% to 10.25%,
due on demand(b).................................................. 456 520
------ ----
$2,456 $525
====== ====
</TABLE>
- ---------------
(a) At June 30, 1996, the note payable was collateralized by deeds of trust. The
proceeds were used to purchase treasury stock (see Note 10). The notes
payable were collateralized by land and land improvements at June 30, 1995.
(b) The lines of credit included unsecured notes payable and one note payable
guaranteed by stockholders of the Affiliates.
The weighted average interest rate on short-term debt was 8.37% and 8.58%
at June 30, 1996 and 1995, respectively.
The aggregate unused lines of credit were $179,000 at June 30, 1996. All
notes payable and line of credit borrowings were repaid in connection with the
merger transaction (see Note 15).
F-30
<PAGE> 116
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. LONG-TERM DEBT
Long-term debt consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1995
------- -------
<S> <C> <C>
Mortgages payable(a)............................................. $15,914 $14,664
Notes payable to banks(b)........................................ 41 53
Other(c)......................................................... -- 12
------- -------
15,955 14,729
Less current maturities.......................................... 997 964
------- -------
$14,958 $13,765
======= =======
</TABLE>
- ---------------
(a) At June 30, 1996, the mortgage loans payable to banks were at rates ranging
from 7.75% to 10.25% and mature at various dates from 1997 to 2022.
Aggregate monthly payments are approximately $82,000. The mortgage loans are
collateralized by a first or second deed of trust on the buildings and
rental property along with equipment, furniture and fixtures and land.
Mortgages payable includes a loan endorsed for insurance by the U.S.
Department of Housing and Urban Development (HUD) under authority of
Section 232 of the National Housing Act. Under the terms of its financing
arrangement, the Affiliates were required to make monthly escrow deposits
of approximately $5000 for insurance premiums and tax requirements. Also,
monthly deposits to a plant replacement reserve of approximately $1,000
were required.
Mortgages payable includes loans guaranteed by the Small Business
Administration, the Missouri Industrial Development Board and loans
personally guaranteed by certain shareholders of the Affiliates.
Mortgages payable includes a construction line of credit amortized over 15
years to be permanently financed upon completion of the project.
(b) The notes payable to banks bore interest at rates ranging from 7.75% to 9.5%
at June 30, 1996. Aggregate monthly payments were approximately $1,000. The
notes were collateralized by vehicles.
All long-term debt was repaid in connection with the merger transaction
(see Note 15).
Aggregate annual maturities of long-term debt at June 30, 1996, are
(dollars in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 997
1998............................................................... 968
1999............................................................... 1,055
2000............................................................... 1,115
2001............................................................... 1,102
Thereafter......................................................... 10,718
-------
$15,955
=======
</TABLE>
9. INCOME TAXES
The Affiliates are members of a controlled group for income tax purposes.
The effect of this controlled group membership is that the Affiliates must share
the corporate surtax exemption with the
F-31
<PAGE> 117
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
other members of the controlled group. The allocation of the graduated rates is
subject to the annual discretion of management.
The provision for income taxes includes these components (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
------ ----
<S> <C> <C>
Taxes currently payable..................................................... $ 688 $500
Deferred income taxes....................................................... 17 (15)
---- ----
$ 705 $485
==== ====
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on
the June 30, 1996 and 1995, balance sheets were (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts........................................... $ 157 $ 116
Accrued vacation pay...................................................... 76 68
Accrued professional fees................................................. 39 38
Contribution carryover.................................................... 19 14
Accumulated depreciation.................................................. 7 6
Net operating loss carryforwards.......................................... 292 325
Alternative minimum tax credits........................................... 48 34
General business credits.................................................. 9 9
Other..................................................................... 4 10
----- -----
651 620
----- -----
Deferred tax liabilities:
Accumulated depreciation.................................................. (655) (662)
Other..................................................................... (14) (12)
----- -----
(669) (674)
----- -----
Net deferred tax liability before valuation allowance............. (18) (54)
----- -----
Valuation allowance:
Beginning balance...................................................... (101) (262)
(Increase) decrease during the year.................................... (53) 161
----- -----
Ending balance......................................................... (154) (101)
----- -----
Net deferred tax liability........................................ $(172) $(155)
===== =====
</TABLE>
The above net deferred tax liability is presented on the balance sheets as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Deferred tax assets -- current.............................................. $ 280 $ 233
Deferred tax liability -- long-term......................................... (452) (388)
----- -----
$(172) $(155)
===== =====
</TABLE>
F-32
<PAGE> 118
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of income tax at the statutory rate to income tax expense
at the Affiliates' effective rate is shown below (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Computed at the statutory rate............................................... 34.0% 34.0%
Increase (decrease) in taxes resulting from:
State income taxes -- net of federal tax benefits.......................... 2.6 3.3
Change in deferred tax valuation allowance................................. 2.5 (9.6)
Other...................................................................... (5.6) 1.2
---- ----
Actual tax provision......................................................... 33.5% 28.9%
==== ====
</TABLE>
As of June 30, 1996, the Affiliates had approximately $768,000 of unused
net operating loss carryforwards. The carryforwards will expire as follows
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------
<S> <C>
2009............................................................. $ 79
2010............................................................. 533
2011............................................................. 156
----
$768
====
</TABLE>
The Affiliates also have approximately $48,000 of alternative minimum tax
credits with no expiration period available to offset future federal income
taxes and approximately $9,000 of general business credits which will expire in
2006.
10. RELATED PARTY TRANSACTIONS
The amounts due (to) from related parties consisted of the following
(dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -----
<S> <C> <C>
National Care Centers of America, Inc.(a)................................. $ (73) $ (79)
Foster Health Care Group, Inc.(a)......................................... (464) (241)
B. R. Foster, Inc.(a)..................................................... 15 65
Elder Care Facilities Development Co., Inc.(a)............................ 5 36
Elder Care Facilities Equipment Company, Inc.(a).......................... -- 2
Ozark Mobile(a)........................................................... -- (2)
Mid-Continental Marco(a).................................................. -- 18
National Care Centers of Licking, Inc.(a)................................. 22 --
Country Club Condominiums -- A Partnership(a)............................. -- 32
John D. Foster, Stockholder............................................... 2 (39)
Robert A. Foster, Stockholder............................................. 2 2
Mark Foster, Stockholder.................................................. -- 93
Bill R. Foster, Stockholder............................................... (83) (398)
Bill R. Foster, Jr., Stockholder.......................................... 6 7
</TABLE>
F-33
<PAGE> 119
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
------- -----
<S> <C> <C>
Todd Spence, Stockholder.................................................. -- (25)
Paul F. Rich, Stockholder................................................. (500) (77)
------- -----
$(1,068) $(606)
======= =====
</TABLE>
- ---------------
(a) These corporations/partnerships are related to the Affiliates through common
ownership.
The Affiliates entered into management contracts with Foster Health Care
Group, Inc., a corporation owned by the Affiliates' majority stockholder and his
family, to supervise, direct and control the management and operation of its
nursing and other facilities. Management fees paid to the management company
during the years ended June 30, 1996 and 1995, totaled $1,394,000 and
$1,165,000.
The Affiliates paid B. R. Foster, Inc. $54,000 for rental of their nurse
aide training building during the years ended June 30, 1996 and 1995.
The Affiliates paid Foster Health Care Group, Inc. $36,000 and $34,000 for
training and education during the years ended June 30, 1996 and 1995,
respectively.
The Affiliates' stockholders have personally guaranteed the obligations of
the Affiliates in regard to certain prepayment provisions of the HUD-insured
mortgage (see Note 8).
The Affiliates acquired computer equipment from Foster Health Care Group,
Inc. in the amount of $184,000. The equipment is recorded at the cost paid by
Foster Health Care Group, Inc.
The Affiliates wrote off $27,000 due from Elder Care Facilities
Development, Inc. determined to be uncollectible during the fiscal year 1996.
During the fiscal year ended June 30, 1996, the Affiliates purchased
treasury stock from stockholders of Hermitage, Mt. Vernon Park, Nixa, West Park
and Dixon totaling $2,511,000 of which $2,000,000 was financed through a
short-term note payable (see Note 7).
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Affiliates in
estimating the fair value of its financial instruments:
Cash, Certificates of Deposit and Assets Limited as to Use The
carrying amount reported in the balance sheet for these instruments
approximates their fair value.
Estimated Third-Party Payor Settlements The carrying amount reported
on the balance sheet for estimated third-party payor settlements
approximates its fair value.
Notes Payable to Banks For these short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Long-term Debt Fair values of the Affiliates' long-term debt are
estimated using discounted cash flow analysis, based on the Affiliates'
current incremental borrowing rates for similar types of borrowing
arrangements.
Due to/due From Related Parties It was not practicable to estimate
the fair value of amounts due to/due from related parties. The terms and
amounts outstanding at June 30, 1996, are described in Note 10.
F-34
<PAGE> 120
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amounts and fair values of the Affiliates' financial
instruments at June 30, 1996, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -------
<S> <C> <C>
Financial Assets:
Cash and cash equivalents.............................................. $ 2,964 $ 2,964
Certificates of deposit and asset limited as to use.................... 1,538 1,538
Estimated third-party payor settlements................................ 983 983
Financial Liabilities:
Short-term note payable to bank........................................ 2,456 2,456
Long-term debt......................................................... 15,955 15,955
Estimated third-party payor settlements................................ 162 162
</TABLE>
12. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1996 1995
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Noncash Investing and Financing Activities
Financing of construction-in-progress with long-term note payable...... $1,051 $ -0-
Property distributed to shareholder.................................... 35 -0-
Additional Cash Payment Information
Interest paid (net of amount capitalized).............................. 1,535 1,362
Income taxes paid...................................................... 524 399
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
Workers' Compensation Insurance
The Affiliates have obtained workers' compensation insurance through
membership in the Missouri Nursing Home Insurance Trust (the Trust), a trust
formed for the benefit of qualified nursing homes in the state of Missouri who
wish to pool their resources to qualify as a group self-insurer as permitted
under the Workmen's Compensation Law, Chapter 287 of the Revised Statutes of
Missouri, as amended. As of June 30, 1996, approximately 75 Missouri nursing
homes are participating in the Trust. The Trust and its members jointly and
severally agree to assume and discharge, by payment, any lawful awards entered
against any member of the Trust. Workers' compensation expense through
participation in the Trust was $476,000 and $413,000 for the years ended June
30, 1996 and 1995, respectively.
Professional Liability Coverage and Claims
The Affiliates pay fixed premiums for annual professional liability
coverage under an occurrence-basis policy. For covered claims, in general, the
Affiliates bear the risk of (1) the excess, if any, over individual claim costs
of $1,000,000 and (2) the excess, if any, over aggregate claims costs of
$3,000,000 for claims occurring during the policy year. The Affiliates accrue
the expense of their share of asserted and unasserted claims occurring during
the year by estimating the probable ultimate cost of any such claim. Such
estimates are based on the Affiliates' own claims experience. The Affiliates'
management does not expect any claims to exceed the professional liability
coverage limits; and accordingly, no accruals for claims have been included in
these financial statements.
F-35
<PAGE> 121
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Leases
The Affiliates lease a 60-bed skilled nursing facility located in Dixon,
Missouri, from an unrelated party under a noncancelable operating lease. In June
1997, the lease term was extended seven years to January 2007, and the rent
payments were renegotiated.
Future minimum lease payments for the next five years and thereafter under
noncancelable operating leases with initial terms of one year or more in effect
at June 30, 1996, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------------------
<S> <C>
1997................................................................ $ 307
1998................................................................ 307
1999................................................................ 307
2000................................................................ 307
2001................................................................ 307
Thereafter.......................................................... 1,714
------
Total minimum lease payments.............................. $3,249
======
</TABLE>
Total rental expense for the years ended June 30, 1996 and 1995, was
approximately $316,000 and $289,000, respectively.
Litigation
The Affiliates were a party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, all
such matters are adequately covered by insurance or, if not so covered, are
without merit or are of such a kind, or involve such amounts, that their
unfavorable disposition would not have a material effect on the financial
position or results of operation of the Affiliates.
14. DEFINED CONTRIBUTION PLAN
Foster Health Care Group, Inc., a related company, provides the Affiliates
a non-contributory defined contribution retirement savings plan (401k plan)
covering all of its eligible employees. Eligibility for this plan requires an
employee to be at least 21 years of age with one year of service (full-time or
at least thirty hours per week). Under the plan, employees may contribute up to
10% of their salaries.
15. SUBSEQUENT EVENTS
Sale of the Company
On August 30, 1996, the Affiliates' owners sold their stock in eight
skilled nursing companies (Lebanon Park, Lebanon, Mt. Vernon Park, Hermitage,
Dixon, Springfield, West Park and Nixa) and the Pharmacy. The majority of the
stock was sold to Hawthorne Health Properties (HHP) with the remainder redeemed
by the respective companies for certain liquid assets, land and rental property
included in these financial statements. At the same time, the Affiliates' owners
exchanged their stock in Republic and Nevada for 1,600,000 shares of Balanced
Care Corporation (BCC) common stock. HHP simultaneously sold the stock of Dixon
and the Pharmacy to BCC as well as the operations and nonreal estate assets of
the other seven skilled nursing facilities and leased these nursing facilities
to BCC pursuant to ten-year lease agreements.
F-36
<PAGE> 122
FOSTER HEALTH CARE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Debt
All of the Affiliates' outstanding indebtedness was paid off by HHP in
connection with the above transactions.
16. CONCENTRATION OF CREDIT RISK
The Affiliates are located in Missouri and grant credit without collateral
to their residents, most of whom are covered by third-party payor agreements.
The mix of receivables from residents and third-party payors at June 30,
1996 and 1995, was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Medicare....................................................... 18% 22%
Medicaid....................................................... 39 41
Other third-party payors....................................... 1 2
Private........................................................ 42 35
--- ---
100% 100%
=== ===
</TABLE>
17. SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerability due to certain concentrations.
Estimates of allowances for adjustments included in net patient revenues are
described in Note 2. Estimates related to the accrual for workers' compensation
self-insurance claims are described in Note 13.
F-37
<PAGE> 123
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Balanced Care Corporation
We have audited the accompanying combined balance sheets of Keystone
Affiliates ("S" corporations) as of December 31, 1996, and 1995, and the related
combined statements of income, retained earnings, and cash flows for each of the
years ended December 31, 1996, 1995 and 1994.. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Keystone
Affiliates as of December 31, 1996 and 1995 , and the results of their
operations and their cash flows for each of the years ended December 31, 1996,
1995 and 1994 in conformity with generally accepted accounting principles.
SNYDER & CLEMENTE
Kingston, Pennsylvania
May 13, 1997
F-38
<PAGE> 124
KEYSTONE AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................................... $ 561 $ 511
Residents' trust account................................................ 19 16
Accounts receivable..................................................... 1,006 782
Inventory -- food and supplies.......................................... 19 13
Prepaid expenses........................................................ 5 9
------- ------
Total current assets............................................ 1,610 1,331
Property and equipment, net............................................... 10,540 8,107
Prepaid financing costs................................................... 135 114
Certificate of Need, Net of Amortization.................................. 66 71
Security deposit -- lease................................................. -- 13
------- ------
Total assets.................................................... $12,351 $9,636
======= ======
LIABILITIES
Current liabilities:
Line of Credit.......................................................... $ 134 $ 99
Current Maturities of Long-term Debt...................................... 551 568
Resident prepayments.................................................... 36 13
Short-term borrowing.................................................... 39 39
Accounts payable........................................................ 1,247 809
Residents' trust account payable........................................ 18 16
Accrued expenses........................................................ 470 252
Accrued management fee.................................................. 51 67
Cost settlement payable................................................. -- 55
------- ------
Total current liabilities....................................... 2,546 1,918
Long-term debt............................................................ 8,005 6,346
------- ------
Total liabilities............................................... 10,551 8,264
------- ------
STOCKHOLDERS' EQUITY
Common stock.............................................................. 216 216
Additional paid-in capital................................................ 1,150 812
Retained earnings......................................................... 434 343
------- ------
Total stockholders' equity...................................... 1,800 1,372
------- ------
Total liabilities and stockholders' equity...................... $12,351 $9,636
======= ======
</TABLE>
See Notes to Combined Financial Statements.
F-39
<PAGE> 125
KEYSTONE AFFILIATES
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Resident revenues............................................... $10,000 $7,247 $4,331
------- ------ ------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits............................... 3,700 2,529 1,828
Other operating expenses................................... 3,743 2,671 1,072
Management fees............................................ 384 279 168
Depreciation and amortization................................. 436 299 251
Rent.......................................................... -- 163 288
------- ------ ------
Total operating expenses.............................. 8,263 5,941 3,607
------- ------ ------
Income from operations.......................................... 1,737 1,306 724
------- ------ ------
Other income (expenses):
Interest expense.............................................. (771) (540) (312)
Bad debts..................................................... (70) (53) (5)
Miscellaneous and interest income............................. 63 13 6
------- ------ ------
Total other income and (expenses)..................... (778) (580) (311)
------- ------ ------
Net income............................................ $ 959 $ 726 $ 413
======= ====== ======
PRO FORMA INCOME DATA (UNAUDITED):
Income before income taxes.................................... $ 959 $ 726 $ 413
Pro forma income tax provision................................ 389 295 173
------- ------ ------
Net income after pro forma tax provision.............. $ 570 $ 431 $ 240
======= ====== ======
</TABLE>
See Notes to Combined Financial Statements.
F-40
<PAGE> 126
KEYSTONE AFFILIATES
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------ ---------- --------
<S> <C> <C> <C>
Balance at January 1, 1994................................... $209 $ 224 $ 182
Additional contributions by Stockholder.................... -- 348 --
Net income................................................. -- -- 413
Stockholder distributions.................................. -- -- (430)
---- ------ ----
Balance at December 31, 1994................................. 209 572 165
Stock issued, Bloomsburg Manor Personal Care and Retirement
Center.................................................. 7 -- --
Additional contributions by Stockholder.................... -- 240 --
Net income................................................. -- -- 726
Stockholder distributions.................................. -- -- (548)
---- ------ ----
Balance at December 31, 1995................................. 216 812 343
Additional contributions by Stockholder.................... -- 338 --
Net income................................................. -- -- 959
Stockholder distributions.................................. -- -- (868)
---- ------ ----
Balance at December 31, 1996................................. $216 $1,150 $ 434
==== ====== ====
</TABLE>
See Notes to Combined Financial Statements.
F-41
<PAGE> 127
KEYSTONE AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................... $ 959 $ 726 $ 413
Adjustments to reconcile net income to net income to net cash
provided by operating activities:
Depreciation and amortization............................. 436 299 251
(Increase) decrease in:
Residents' trust account.................................. (3) (7) 8
Accounts receivable....................................... (223) (540) (81)
Prepaid expenses.......................................... 4 (8) (1)
Deposits.................................................. 13 -- 12
Inventory................................................. (6) (4) --
Other receivables......................................... -- -- 15
Increase (decrease) in:
Resident prepayments...................................... 23 (19) (3)
Accounts payable.......................................... 437 675 (14)
Residents' trust payable.................................. 2 7 (8)
Accrued expenses.......................................... 189 145 4
Cost settlement payable................................... (55) (1) 44
Emergency evacuation liability............................ 13 -- --
Due to affiliate.......................................... -- (1) 1
------- ------ -------
Net cash provided by operating activities.................... 1,789 1,272 641
------- ------ -------
Cash flows from investing activities:
Purchase of property and equipment........................... (2,852) (2,264) (2,581)
Certificate of need.......................................... -- -- (75)
Proceeds from affiliate receivable........................... -- 10 --
------- ------ -------
Net cash used by investing activities.......................... (2,852) (2,254) (2,656)
------- ------ -------
Cash flows from financing activities:
Stock issuance............................................... -- 7 --
Repayment of borrowings...................................... (850) (474) (1,056)
Proceeds from related party loan............................. 30 -- 42
Stockholder distributions.................................... (868) (548) (430)
Proceeds from borrowings..................................... 2,496 1,969 3,246
Additional paid-in capital contributed....................... 338 241 348
Payment for debt issue costs................................. (33) (35) (50)
------- ------ -------
Net cash provided by financing activities................. $ 1,113 $1,160 $ 2,100
------- ------ -------
Net increase in cash...................................... 50 178 85
Cash at beginning of year...................................... 511 333 248
------- ------ -------
Cash at end of year............................................ $ 561 $ 511 $ 333
======= ====== =======
Supplemental disclosures of cash flow information:
Interest paid (net of capitalized interest).................. $ 752 $ 541 $ 311
======= ====== =======
</TABLE>
See Notes to Combined Financial Statements.
F-42
<PAGE> 128
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS, ORGANIZATION AND CONCENTRATION
Keystone Affiliates (the "Company") is a group of commonly controlled
subchapter "S" corporations which own and operate two nursing homes and five
personal care homes. The nursing homes provide therapy services and skilled
nursing care and the personal care facilities provide assisted living services
to seniors. The facilities are located in northeastern Pennsylvania and service
residents in that region.
The combined financial statements include the accounts of the following
companies. Blakely Pine Health Care Center, Inc. is a thirty-eight bed nursing
home which was incorporated September 17, 1990. Kingston Healthcare Center, Inc.
is a sixty-five bed nursing home which was incorporated on April 12, 1993 and
commenced operations April 11, 1995. Kingston Manor Personal Care and Retirement
Center, Inc. was incorporated on July 12, 1991 as a personal care and retirement
facility which now has seventy-eight beds. Old Forge Manor Personal Care and
Retirement Center, Inc. is a forty-nine bed personal care facility incorporated
in November 1990. Keystone Health Ventures, Inc. D/B/A MidValley Manor Personal
Care Center is a seventy-one bed personal care facility incorporated January 25,
1989. West Side Manor Personal Care and Retirement Center, Inc. T/A West View
Personal Care and Retirement Center is a fifty bed personal care facility which
was incorporated on November 1, 1993. Bloomsburg Manor Personal Care and
Retirement Center, Inc. was incorporated September 11, 1995 and commenced
operations in April 1996 as a sixty-nine bed personal care facility.
The Company maintains cash accounts at a variety of banks. At various times
throughout the year, the balances on deposit exceeded the Federal Deposit
Insurance Corporation's ("FDIC") insured limit of $100,000 per depositor,
thereby creating a possible loss to the Company of the amounts in excess of the
insured limit.
The nursing homes extend credit to various parties in the form of accounts
receivable, which are essentially collected from the patient, third party
payors, federal and state agencies. These receivables are not collateralized.
The personal care homes collect rent from the residents in advance, however, on
occasion due to unusual circumstances, the Company will extend credit to
residents. These resident receivables are minimal and uncollateralized.
Revenue from private pay residents accounted for 54% of the Company's
revenue while 28% originated from Medicare and coinsurance and 17% from Medical
Assistance during 1996. During 1995, 55% of revenue originated from private pay
residents, 17% from Medical Assistance and 27% from Medicare. During 1994, 71%
of revenue originated from private pay residents, 21% of revenue from Medical
Assistance and 7% from Medicare. The personal care home revenues are solely from
private pay residents.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Combination
The combined financial statements do not contain any intercompany accounts
and transactions because none existed therefore eliminations were not necessary.
(b) Basis of Accounting
The Company uses the accrual basis of accounting, that is, it recognizes
income in the period it is earned and recognizes costs and expenses in the
period they are incurred. This method is used for both financial statements and
the Company's state and federal tax returns.
F-43
<PAGE> 129
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Patient Accounts Receivable from Third Party Payors
The Company records patient accounts receivable and recognizes as patient
revenue the amount that is going to be paid by the patient, the patient's
insurance carrier, or a state agency for Medical Assistance. These amounts are
predetermined prior to invoicing; any differences are minor and are resolved
when they occur. As such, the Companies do not record any allowance, or contra
accounts, for third party settlements or adjustments.
(d) Inventory
Inventory is valued at the lower of cost or market value using the
first-in, first-out method.
(e) Property and Equipment
Property and equipment are recorded at cost. Any improvements which enhance
the value or extend the life of the assets are capitalized and depreciated over
the expected life of the asset. Those items which do not enhance the value or
extend the life of the asset are expensed in the period they are incurred.
Depreciation of property and equipment is being taken using an accelerated
method which does not differ materially from the straight-line method.
(f) Other Assets
Other assets are recorded at cost and are being amortized using the
straight-line method. Financing fees are amortized over the life of the related
loans and the certificate of need is amortized over 15 years.
(g) Income Taxes
1. The Company has elected by unanimous consent of the respective
stockholders to be taxed under the provisions of Subchapter "S" status of the
Internal Revenue Code and for state tax purposes. Under these provisions, the
Company does not pay federal or state corporate income taxes on their taxable
income and are not allowed a net operating loss carryover or carryback as a
deduction. Instead, the stockholders are liable for individual federal and state
income taxes on their respective shares of the Company's taxable income or
include their respective shares of the Company's net operating loss in their
individual income tax return.
2. A pro forma provision for income taxes is presented as if the Company
were taxed as a "C" corporation. The pro forma income tax provisions for the
years ended December 31, 1996, 1995 and 1994 have been calculated using the
financial net income.
(h) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. RESIDENTS' TRUST ACCOUNT
Residents' trust account represents the patients' personal money being held
by the nursing homes and is used only for the individual patients' personal use.
A corresponding liability is also recognized by the nursing homes.
F-44
<PAGE> 130
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PATIENT ACCOUNTS RECEIVABLE
Patient accounts receivable are due from the following payors (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
------ ----
<S> <C> <C>
Private paying patients............................................. $ 30 $ 33
Pa. Medicaid........................................................ 377 119
N.Y. Medicaid....................................................... 78 34
Medicare A.......................................................... 362 299
Medicare B.......................................................... 159 124
Other............................................................... -- 173
------ ----
Total..................................................... $1,006 $782
====== ====
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment and accumulated depreciation consist of the
following (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Construction-in-progress.......................................... $ 160 $ 687
Land and improvements............................................. 846 716
Building and improvements......................................... 9,250 6,466
Equipment......................................................... 1,584 1,140
Vehicles.......................................................... 33 13
------- ------
Total property and equipment.................................... 11,873 9,022
Less: Accumulated depreciation.................................. 1,333 915
------- ------
Property and equipment, net..................................... $10,540 $8,107
======= ======
Depreciation expense for the year................................. $ 419 $ 287
======= ======
</TABLE>
6. CERTIFICATE OF NEED
Kingston Healthcare Center:
The balance consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Certificate of Need.................................................... $75 $75
Less: Amortization................................................... 9 4
--- ---
Total........................................................ $66 $71
=== ===
</TABLE>
Amortization expense for the years ended December 31, 1996, 1995 and 1994
is $5,000, $3,750 and $0, respectively.
7. PREPAID FINANCING COSTS
Prepaid financing costs are reported net of accumulated amortization.
Accumulated amortization at December 31, 1996 and 1995 was $29,000 and $17,000,
respectively. Amortization expense for the years ended 1996, 1995 and 1994 was
$12,000, $8,000 and $5,000 respectively.
F-45
<PAGE> 131
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. ACCRUED EXPENSES
Accrued expenses consist of the following items (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accrued pension.................................................... $ 5 $ 4
Accrued insurance.................................................. 49 20
Accrued payroll and taxes.......................................... 171 115
Accrued annual leave............................................... 72 46
Accrued PA capital stock tax....................................... 20 8
Accrued fees....................................................... 38 29
Accrued interest................................................... 46 28
Accrued property taxes............................................. 48 --
Accrued other expenses............................................. 21 2
---- ----
Total accrued expenses................................... $470 $252
==== ====
</TABLE>
9. SHORT-TERM DEBT
Credit line notes (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ---
<S> <C> <C>
Kingston Healthcare Center, Inc. maintains a line of credit at a
commercial bank in the amount of $100,000. This line of credit is
secured by the real and personal property of the debtor. Interest
is charged at 1% above prime. The rate at December 31, 1996 was
9.25%............................................................ $ 99 $99
West View Manor Personal Care and Retirement Center, Inc. maintains
a line of credit at a commercial bank in the amount of $35,000.
Interest is charged at 1% above the highest prime rate as
published by the Wall Street Journal. The interest rate at
December 31, 1996 was 9.25%...................................... 35 --
---- ---
Total short-term debt.................................... $134 $99
==== ===
</TABLE>
10. NOTES PAYABLE
The following is a summary of notes payable of the Company (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Short-term Borrowing:
Old Forge Manor Personal Care and Retirement Center, Inc.:
KISS Realty, Ltd., short-term loan originally due 10-01-93,
deferred to an unspecified period................................ $ 39 $ 39
====== ======
Long-term Debt:
Blakely Pine Health Care Center, Inc.:
First National Community Bank:
Note payable, $500,000, interest at 1 1/4% over Fidelity Bank of
Philadelphia, PA, prime, monthly payments of interest only
until July 21, 1992, thereafter $5,593 monthly including
interest, final payment due in full, 8-21-07, secured by land
and building in Peckville, PA................................. 366 397
</TABLE>
F-46
<PAGE> 132
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Amresco (MTGLQLP):
Note payable, construction phase loan to $500,000, interest at
approximately 8.0615%, monthly payments of interest only until
project completion or 6-21-92, whichever occurs first.
Thereafter, $4,291 monthly, including principal and interest.
Final payment due in full, 8-01-11. Secured with second lien
mortgages after the First National Community Bank on land and
buildings in Peckville, Lackawanna County, PA. Also, second
lien on all equipment, furnishings, fixtures, accounts
receivable and inventory...................................... $ 438 $ 455
Blakely Pine Health Care Center, Inc.:
Chrysler Financial Corporation:
Note payable, interest at 4.8%, monthly payments of $470, final
payment due May 2000, secured by vehicle of the Company....... 18 --
Shareholder:
Note payable, interest at 8.5%, monthly payments of $1,152, final
payment due June 1999, secured by personal guarantee of
certain shareholders.......................................... -- 41
Kingston Healthcare Center, Inc.:
Keystone Management Services:
Note payable, (original amount $75,000), note written at $59,078,
interest at 8%, monthly interest payments only, principal
payments will vary with cash availability. Unsecured.......... 24 59
Note payable, $173,000, interest payments at 8%, only until
January 1, 1997 then payments of $2,000 principal plus 8%
interest for two years. On January 1, 1999 the Company will
make balloon payment on the outstanding balance. Unsecured.... 173 173
Mellon Bank:
Mortgage payable, $1,547,700, interest at 9.07%, 119 monthly
payments of $15,762 plus interest beginning July 23, 1995.
Final payment due in full, June 23, 2005. Secured with all
property of the Company as first lien......................... 1,264 1,453
Kingston Healthcare Center, Inc.:
Mellon Bank:
Note payable, $122,500, interest at 9.49%, 59 monthly payments of
$2,002 including interest beginning January 23, 1995. Final
payment due December 23, 1999. Secured by all property of the
Company....................................................... 103 116
Luzerne National Bank:
Note payable, $80,000, interest at 10.25%, 24 payments of $3,072
beginning November 10, 1995. Final payment due October 10,
1997 for all unpaid principal and accrued interest. Secured by
a second lien on the real property of the Company............. -- 74
Kingston Manor Personal Care and Retirement Center, Inc.:
Mellon Bank:
Note payable, interest at 9.3%, 59 monthly principal and interest
payments of $15,088 with balance of indebtedness due and
payable on the 60th month from closing date, final payment due
07-99. Secured by lien on property located in Kingston, PA and
all equipment, furnishings, inventory and accounts receivable
and personal guarantees of majority stockholders.............. 993 1,076
</TABLE>
F-47
<PAGE> 133
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Keystone Management Services:
Demand note payable, term 7 years at 7%, with a balloon payment
of $55,279 after 36 months, monthly payments of $1,707,
including interest, related party transaction................. -- $ 71
Old Forge Manor Personal Care and Retirement Center, Inc.:
Old Forge Bank:
Note payable, monthly payment of $11,150, including interest at
10.0%, final payment 09-17-07, secured by a mortgage on 246
South Main Street, Old Forge, PA and personal guarantees of
the shareholders.............................................. $ 881 924
Keystone Management Services:
Loans to the Company with no stated interest rates or repayment
terms. The loans are to be available to the Company on a
long-term basis............................................... 66 66
Mid-Valley Manor Personal Care Center:
First National Community Bank:
Note payable, initial rate of 8.5% to be adjusted every 36 months
to a rate of prime plus 1 1/4%, monthly payment of $10,512,
final payment due September 2009, secured by property and
equipment..................................................... 984 1,023
Shareholders:
Notes payable, initial rate of 8.5% to be adjusted every 36
months to a rate of prime plus 1 1/4%, monthly payments of
interest only, principal due September 2009, secured by
property and equipment........................................ 250 250
West View Manor Personal Care and Retirement Center:
Keystone Management Services:
Loans to the Company with no stated interest rates or repayment
terms. The loans are to be available to the Company on a
long-term basis............................................... 41 41
First National Community Bank:
Note payable, interest at 9% for initial 60 month period then
adjusted by bank every 5 years, monthly payments of $13,496,
including interest, final payment date 01-2016. Loan includes
a call provision by bank for 180 months after closing. Secured
by real estate of the Company, real estate of Old Forge Manor
(an affiliate of the Company), all inventory, machinery and
equipment, furniture and fixtures and personal guarantee of
the majority shareholders, Old Forge Manor and Keystone
Management Services (Related Party)........................... 1,378 --
First Valley Bank:
Note payable, interest at 2% over Wall Street prime, monthly
principal payment of $2,619 plus interest, final payment
6-2002, secured by the personal guarantees of the
shareholders, accounts receivable, inventory, furniture and
fixtures and assignment of life insurance..................... -- 163
Bloomsburg Manor Personal Care and Retirement Center, Inc.:
First Columbia Bank and Trust:
Note payable, initial rate of 9.0% to be adjusted every 60 months
to a rate of prime plus 1 1/2%, monthly payment of $11,516,
final payment due May 2011, secured by property and equipment
and personal guarantees of two shareholders................... 1,266 439
</TABLE>
F-48
<PAGE> 134
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Note payable, initial rate of 9.0% to be adjusted every 60 months
to a rate of prime plus 1 1/2%, monthly payment of $3,218,
final payment due May 2003, secured by equipment and personal
guarantees of two shareholders................................ $ 188 --
Keystone Management Services:
Loans to the Company with no stated interest rates or repayment
terms. The loans are to be available to the Company on a
long-term basis............................................... 123 $ 93
------ ------
Total long-term debt..................................... $8,556 $6,914
Less: Current Portion.................................... 551 568
------ ------
Long-term debt........................................... $8,005 $6,346
====== ======
</TABLE>
The aggregate amount of required future principal payments at December 31,
1996 are estimated as follows (dollars in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 551
1998........................................................ 578
1999........................................................ 1,443
2000........................................................ 484
2001........................................................ 509
Later Years................................................. 4,991
------
Total notes payable............................... $8,556
======
</TABLE>
11. RELATED PARTY TRANSACTIONS
A. The Company paid Keystone Management Services management fees in the
amount of $385,000, $279,000 and $168,000 for the years ended December
31, 1996, 1995 and 1994, respectively. The principals of Keystone
Management Services own the majority of the outstanding stock in all
companies as follows:
<TABLE>
<S> <C>
Blakely Pine Healthcare Center.............................. 50%
Kingston Healthcare Center.................................. 55.1%
Kingston Manor.............................................. 58%
Old Forge Manor............................................. 66.67%
Mid-Valley Manor............................................ 66.67%
West View Manor............................................. 67%
Bloomsburg Manor............................................ 60%
</TABLE>
B. The following companies are indebted to Keystone Management Services
for working capital advances as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Kingston Healthcare Center.................... $197 $232 $180
Kingston Manor................................ -- 71 86
Old Forge Manor............................... 66 66 59
West View Manor............................... 41 41 41
Bloomsburg Manor.............................. 123 93 --
</TABLE>
F-49
<PAGE> 135
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
C. Blakely Pine Healthcare has notes payable to Eugene and Antoinette
Pazzaglia a 12.5% shareholder in the amount of $0, $41,000 and $97,000
at December 31, 1996, 1995 and 1994, respectively.
D. Kingston Healthcare Center owed Keystone Management Services $50,934,
$67,000 and $0 at December 31, 1996, 1995 and 1994, respectively, for
management services accrued.
E. Mid-Valley Manor has notes payable to two stockholders, Robert and Jane
Strony and Eugene and Antoinette Pazzaglia, each an 8.33% stockholder.
Both notes are in the amount of $125,000 for each of the periods ending
December 31, 1996, 1995 and 1994. Interest paid on these notes totaled
$21,000 during 1996 and 1995.
F. Mid-Valley Manor advanced funds to Harrison House Personal Care Center
during 1992 for insurance bills in the amount of $10,000. The Company's
majority stockholders also own controlling interest in this company.
This amount was repaid during 1995.
G. During part of 1994, Mid-Valley Manor leased its facilities from Omni
Enterprises, Inc. whose stockholders own shares of the outstanding stock
of this company. Rent expense for 1994 was $141,000. This facility was
purchased in 1994 for $1,306,000.
H. West View Manor was indebted to Keystone Management Services at December
31, 1994 in the amount of $1,000 for expenses.
I. The 401(k) plan for the Company is a plan administered by and under the
name of Keystone Management Services, Inc. making the Company's
participation a related party activity, as the principals of Keystone
Management Services, Inc., Michael Kelly and James Blumer own
controlling interest in the Company's stock.
12. COMPANY SAVINGS PLAN
The Company participates in a 401(k) Savings Plan. All employees who have
attained age 21 and completed one year of service are eligible to participate in
the plan. The plan allows all employees to defer up to 15% of their income on a
pre-tax basis through contributions from earnings each pay period, subject to
limitations established by the Internal Revenue Service. Nondeductible
contributions may be made at the option of the employee. The Company will match
salary reduction contributions at a rate of 100% on the first 2% of
compensation. In 1996, 1995 and 1994, the Company made contributions in the
amounts of $5,000, $5,000 and $5,000, respectively.
13. COMMON CONTROL
The Companies are under the same controlling interest. Patients from a
facility under this common control are at times referred to another facility for
nursing or physical therapy care. The Company bills either the patient or the
patients' third-party payor for the services provided. There are no transactions
involving billings or reimbursement for these referral situations between the
companies under common control.
14. MEDICAL ASSISTANCE AND MEDICARE COST SETTLEMENTS
Blakely Pine Healthcare Center and Kingston Healthcare Center have
residents who are approved Pennsylvania Medicare or Medicaid patients. As such,
the Company is paid at an established rate per day under the Medicare or Medical
Assistance Programs. However, the rate per day is subject to final determination
based on cost reports submitted by the Company. After the cost reports have been
reviewed, the final cost settlement amount is determined by the Medicare or
Medical Assistance Programs.
F-50
<PAGE> 136
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The nursing homes can negotiate or appeal the final cost settlement. The
settlement can result in either additional payments to the Company or a return
of funds to the Medicare or Medical Assistance Program. This settlement process
can occur up to several years after the year end report is submitted.
The estimated settlements receivable or (payable) are as follows (dollars
in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Blakely Pine Healthcare Center................................ $ 70 $(55) $(55)
Kingston Healthcare Center.................................... 267 50 --
</TABLE>
15. CAPITALIZED INTEREST
KINGSTON HEALTHCARE CENTER:
Interest costs charged to operations for the year ended December 31, 1995
consists of the following (dollars in thousands):
<TABLE>
<S> <C>
Interest cost incurred................................................ $144
Decrease as a result of capitalizing interest as a cost of
construction........................................................ 30
----
Interest charged to operations as an expense.......................... $114
====
</TABLE>
16. OPERATING LEASES
BLAKELY PINE HEALTHCARE CENTER:
The Company has entered into an agreement to lease a copier effective
February 6, 1995. This agreement is for a 60 month term with payments of $333
beginning March 1995. The Company entered into a vehicle lease agreement
effective June 1, 1996. The terms of the agreement are for monthly payments of
$424, beginning June 1, 1996 for a 24 month period. The Company has the option
to purchase this vehicle for $15,797 at the end of the lease period. The payment
schedule for these leases at December 31, 1996 is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
DUE DATE AMOUNT
-------------------------------------------------------------------- ------
<S> <C>
1997................................................................ $ 9
1998................................................................ 6
1999................................................................ 4
2000................................................................ 1
---
Total..................................................... $ 20
===
</TABLE>
F-51
<PAGE> 137
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
KINGSTON HEALTHCARE CENTER:
The Company has entered into an agreement to lease equipment effective
April 25, 1995. The terms of this agreement are for monthly payments of $302 for
a 60 month period. The payment schedule for this lease at December 31, 1996 is
as follows (dollars in thousands):
<TABLE>
<CAPTION>
DUE DATE AMOUNT
------------------------------------------------------------------ ------
<S> <C>
1997.............................................................. $ 4
1998.............................................................. 4
1999.............................................................. 3
2000.............................................................. 1
---
Total................................................... $ 12
===
</TABLE>
Total lease payments for the year ended December 31, 1996 and 1995 was
$4,000 and $3,000.
WEST VIEW MANOR:
The Company leased its facility from KISS Realty, Ltd. During the first 60
months of the lease, the monthly rent was to be $13,000. Rent expense for the
years ended December 31, 1995 and 1994 was $163,000 and $146,000. The Company
purchased the facility on January 11, 1996.
17. ADDITIONAL PAID-IN CAPITAL
A. The stockholders of West View Manor contributed $338,000 to the Company
during 1996 to assist with the purchase of the property and the
financing of the purchase of the facility.
B. The stockholders of Bloomsburg Manor contributed $240,000 for the year
ended December 31, 1995.
C. The stockholders of Kingston Healthcare Center contributed $348,000 for
the year ended December 31, 1994.
18. OUTSTANDING COMMON STOCK
The Keystone Affiliates outstanding stock is summarized below:
<TABLE>
<CAPTION>
PAR VALUE NUMBER OF SHARES NUMBER OF SHARES
PER SHARE AUTHORIZED OUTSTANDING
--------- ---------------- ----------------
<S> <C> <C> <C>
Kingston Healthcare Center...................... None 1,000 1,000
Blakely Pine Health Care Center................. None 1,000 500
Kingston Manor.................................. None 10,000 1,000
Old Forge Manor................................. None 1,000 150
Mid-Valley Manor................................ None 1,000 90
West View Manor................................. None 1,000 150
Bloomsburg Manor................................ None 1,000 200
</TABLE>
19. PRO FORMA INCOME TAX INFORMATION (UNAUDITED)
The pro forma tax data is based on the assumption that the Companies were
taxable as a "C" corporation for the years ended December 31, 1996, 1995 and
1994. Income tax provisions have been computed by multiplying the net income of
the combined company by the statutory tax rates for
F-52
<PAGE> 138
KEYSTONE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
federal and state tax purposes. There are no significant timing differences
which would necessitate applying SFAS 109 "Accounting for Income Taxes."
20. PENDING LITIGATION
Kingston Healthcare Center is being sued by another nursing home for
approximately $13,000 for temporary accommodations given during January 1996
when there was an emergency evacuation of the facility. During this emergency,
all patients and staff were given accommodations at another nursing home and
charged the semi-private rate plus expenses. The Company has accrued $13,000 to
meet this liability.
21. SUBSEQUENT EVENT
The fixed assets of the Companies were sold on January 31, 1997 and all
notes payable were subsequently paid off and the majority of the remaining sale
proceeds were distributed to the stockholders. The existing accounts receivable
of the Company will continue to be collected and the existing accounts payable
and other liabilities of the Company will be paid during 1997.
F-53
<PAGE> 139
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Heavenly Health Care, Inc.
d/b/a Joe Clark Residential Care Homes
Nevada, Missouri
We have audited the accompanying balance sheet of Heavenly Health Care,
Inc, d/b/a Joe Clark Residential Care Homes, as of December 31, 1996, and the
related statements of income, shareholders' equity (deficit) and cash flows for
the year then ended. 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Heavenly Health Care, Inc.,
d/b/a Joe Clark Residential Care Homes, as of December 31, 1996, and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Springfield, Missouri
September 12, 1997
F-54
<PAGE> 140
HEAVENLY HEALTH CARE, INC.
D/B/A/ JOE CLARK RESIDENTIAL CARE HOMES
BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash.................................................................................. $ 1
Accounts receivable, less allowance for uncollectible accounts $5..................... 27
Prepaid expenses...................................................................... 13
----
Total Assets................................................................ $ 41
====
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities:
Accounts payable.................................................................... $ 22
Accrued expenses.................................................................... 6
Accrued salaries and payroll taxes.................................................. 25
----
Total liabilities........................................................... 53
----
Shareholders' equity (deficit):
Common stock, $1 par value; authorized 30,000 shares, issued and outstanding 500
shares........................................................................... 1
Retained earnings (deficit)......................................................... (13)
----
Total shareholders' equity (deficit)........................................ (12)
----
Total liabilities and shareholders' equity.................................. $ 41
====
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE> 141
HEAVENLY HEALTH CARE, INC.
D/B/A JOE CLARK RESIDENTIAL CARE HOMES
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Resident service revenue.............................................................. $995
----
Expenses:
Facility operating expenses:
Salaries, wages and benefits..................................................... 326
Other operating expenses......................................................... 200
Lease expense....................................................................... 148
----
Total operating expenses.................................................... 674
----
Net income............................................................................ $321
====
PRO FORMA INCOME TAX DATA (UNAUDITED)
Income before income taxes.......................................................... $321
Pro forma income tax provision...................................................... 122
----
Net income after pro forma tax provision.................................... $199
====
</TABLE>
See accompanying notes to financial statements.
F-56
<PAGE> 142
HEAVENLY HEALTH CARE, INC.
D/B/A CLARK RESIDENTIAL CARE HOMES
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS
STOCK (DEFICIT) TOTAL
------ -------- -----
<S> <C> <C> <C>
Balance at January 1, 1996...................................... $ 1 $ 14 $ 15
Net income.................................................... -- 321 321
Distributions to shareholders................................. -- (348) (348)
--- ----- -----
Balance at December 31, 1996.................................... $ 1 $ (13) $ (12)
=== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-57
<PAGE> 143
HEAVENLY HEALTH CARE, INC.
D/B/A/ JOE CLARK RESIDENTIAL CARE HOMES
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net income......................................................................... $ 321
Changes in operating assets and liabilities:
Increase in accounts receivable................................................. (1)
Increase in prepaid expenses.................................................... (8)
Increase in accounts payable and accrued expenses............................... 17
Increase in accrued salaries and payroll........................................ 16
-----
Net cash provided by operating activities.................................. 345
-----
Cash Flows From Financing Activities:
Distributions to shareholders...................................................... (348)
-----
Net cash used in financing activities...................................... (348)
-----
Decrease in cash..................................................................... (3)
Cash, beginning of year.............................................................. 4
-----
Cash, end of year.................................................................... $ 1
=====
</TABLE>
See accompanying notes to financial statements.
F-58
<PAGE> 144
HEAVENLY HEALTH CARE, INC.
D/B/A JOE CLARK RESIDENTIAL CARE HOMES
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Operations
Heavenly Health Care, Inc., d/b/a Joe Clark Residential Care Homes,
operates four 57-bed residential care facilities licensed with the Missouri
Department of Social Services, Division of Aging as Residential Care Facility II
facilities. Two of the facilities are located in Nevada, Missouri. These
facilities opened in October 1993 and July 1995. The third facility is located
in Butler, Missouri, and opened in March 1996. The fourth facility opened in
April 1996 and is located in Lamar, Missouri.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Income Taxes
The Company, with the consent of its stockholders, has elected under
sec.1362 of the Internal Revenue Code and a similar section of the Missouri
income tax law to have the stockholder recognize their proportionate share of
the Company's income or loss on their personal income tax returns in lieu of
corporate income taxes. Therefore, the financial statements do not include any
provision for income taxes.
A pro forma provision for income taxes is presented as if the Company were
taxed as a "C" corporation. The pro forma income tax provision for the year
ended December 31, 1996, has been calculated using the financial net income.
(d) Patient Service Revenue
Patient service revenue is reported at the estimated net realizable amounts
from residents, third-party payors and others for services rendered.
2. MEDICAL MALPRACTICE COVERAGE AND CLAIMS
The Company pays fixed premiums for annual medical malpractice coverage
under occurrence-basis policies. The Company accrues the expense of its share of
asserted and unasserted claims occurring during the year by estimating the
probable ultimate cost of any such claim. Management does not expect any claims
to exceed malpractice insurance coverage limits; therefore, the financial
statements include no accrual for loss.
3. CONCENTRATIONS OF CREDIT RISK
The Company operates facilities located in Butler, Lamar and Nevada,
Missouri. The Company grants credit without collateral to its residents, most of
whom are local residents. The mix of revenues from residents and third-party
payors for 1996 was as follows:
<TABLE>
<S> <C>
Medicaid..................................................................... 37%
Private-pay.................................................................. 63
---
100%
===
</TABLE>
F-59
<PAGE> 145
HEAVENLY HEALTH CARE, INC.
D/B/A JOE CLARK RESIDENTIAL CARE HOMES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. RELATED PARTY TRANSACTIONS
The four residential care facilities are leased from the sole shareholders
under operating leases with month-to-month terms. These triple net leases
require the Company to pay respective executory costs (property taxes,
insurance, utilities and maintenance) in addition to the basic rent. The monthly
lease payments for the facilities range from $3,395 to $3,625. The total lease
expense for all four facilities for the year ended December 31, 1996, was
$148,000.
5. SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerability due to certain concentrations.
Estimates related to the accrual for medical malpractice claims are described in
Note 2.
6. SUBSEQUENT EVENT
During 1997 the facilities at all of the Company's operating locations were
sold to an unrelated party. Following the sale, the Company ceased operating the
facilities.
F-60
<PAGE> 146
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Butler Senior Care, Inc.:
We have audited the accompanying balance sheets of Butler Senior Care, Inc.
(the Company) as of June 30, 1997 and 1996, and the related statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of June 30,
1997 and 1996, and the results of its operations and cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Pittsburgh, Pennsylvania
September 12, 1997
F-61
<PAGE> 147
BUTLER SENIOR CARE, INC.
BALANCE SHEETS
JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 125 $ 51
Accounts receivable...................................................... 17 19
Prepaid expenses......................................................... 24 12
------ ------
Total current assets............................................. 166 82
Property and equipment, net................................................ 3,655 3,714
Other assets............................................................... 8 13
------ ------
Total assets..................................................... $3,829 $3,809
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................... 63 70
Accrued payroll and related expenses..................................... 52 48
Other accrued liabilities................................................ 57 32
Current portion of long-term debt........................................ 148 156
Notes payable -- related parties......................................... 131 --
------ ------
Total current liabilities........................................ 451 306
Long-term debt............................................................. 2,323 2,214
Notes payable -- related parties........................................... -- 240
------ ------
Total liabilities................................................ 2,774 2,760
------ ------
Contingencies (Note 5)
Shareholders' equity:
Common stock, $1 par value; 1,000,000 shares authorized; 22,059 shares
issued and outstanding................................................ 22 22
Paid-in capital.......................................................... 844 844
Retained earnings........................................................ 189 183
------ ------
Total shareholders' equity....................................... 1,055 1,049
------ ------
Total liabilities and shareholders' equity..................... $3,829 $3,809
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-62
<PAGE> 148
BUTLER SENIOR CARE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues:
Resident services.............................................. $2,617 $2,426 $1,499
Office rentals................................................. 159 163 166
Other.......................................................... 23 17 16
------ ------ ------
Total revenues......................................... 2,799 2,606 1,681
------ ------ ------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits................................ 1,017 950 635
Other operating expenses.................................... 467 491 400
General and administrative..................................... 282 261 178
Depreciation and amortization.................................. 135 131 112
------ ------ ------
Total operating expenses............................... 1,901 1,833 1,325
------ ------ ------
Operating income....................................... 898 773 356
Other income (expense):
Interest income................................................ 17 1 2
Interest expense............................................... (183) (245) (192)
Other.......................................................... (25) (11) (46)
------ ------ ------
Net income............................................. $ 707 $ 518 $ 120
====== ====== ======
PRO FORMA INCOME TAX DATA (UNAUDITED):
Income before income taxes..................................... $ 707 $ 518 $ 120
Pro forma income tax provision................................. 283 208 48
------ ------ ------
Net income after pro forma tax provision............... $ 424 $ 310 $ 72
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-63
<PAGE> 149
BUTLER SENIOR CARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ -------- -------- ------
<S> <C> <C> <C> <C>
Balance at June 30, 1994.............................. $ 22 $844 $ 98 $ 964
Distributions paid.................................. -- -- (130) (130)
Net income.......................................... -- -- 120 120
--- ---- ----- ------
Balance at June 30, 1995.............................. 22 844 88 954
Distributions paid.................................. -- -- (423) (423)
Net income.......................................... -- -- 518 518
--- ---- ----- ------
Balance at June 30, 1996.............................. 22 844 183 1,049
Distributions paid.................................. -- -- (701) (701)
Net income.......................................... -- -- 707 707
--- ---- ----- ------
Balance at June 30, 1997.............................. $ 22 $844 $ 189 $1,055
=== ==== ===== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-64
<PAGE> 150
BUTLER SENIOR CARE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................................... $ 707 $ 518 $ 120
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 135 131 112
Increase (decrease) from changes in:
Accounts receivable......................................... 2 (3) (1)
Prepaid expenses............................................ (12) 5 (10)
Accounts payable............................................ (7) (3) 41
Accrued payroll and related expenses........................ 4 5 25
Other accrued liabilities................................... 25 (28) 33
----- ----- -------
Cash provided by operating activities.................. 854 625 320
----- ----- -------
Cash flows from investing activities:
Purchase of property and equipment............................. (71) (117) (1,719)
----- ----- -------
Cash used in investing activities...................... (71) (117) (1,719)
----- ----- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt....................... 790 -- 1,900
Repayment of long-term debt.................................... (688) (99) (593)
Proceeds from notes payable to shareholders.................... 131 115 175
Repayment of notes payable to shareholders..................... (240) (50) --
Distributions paid............................................. (702) (423) (130)
----- ----- -------
Cash (used in) provided by financing activities........ (709) (457) 1,352
----- ----- -------
Net increase (decrease) in cash and cash equivalents............. 74 51 (47)
Cash and cash equivalents at beginning of year................... 51 -- 47
----- ----- -------
Cash and cash equivalents at end of year......................... $ 125 $ 51 $ --
===== ===== =======
Supplemental disclosure of cash flows information:
Cash paid for interest......................................... $ 183 $ 245 $ 192
===== ===== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-65
<PAGE> 151
BUTLER SENIOR CARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Background
Butler Senior Care, Inc. (the Company) is incorporated as an S-Corporation
and operates assisted living communities and office buildings. As of June 30,
1997, the Company owned and operated three assisted living communities with a
total of 176 beds and two office buildings with 19,000 square feet in total
rental space.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
(c) Cash and Cash Equivalents
All unrestricted, highly liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents. The
Company maintains its cash and cash equivalents at financial institutions which
management believes are of high credit quality.
(d) Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Expenditures for
maintenance and repairs are expensed as incurred. The cost and related
accumulated depreciation applicable to property no longer in service are
eliminated from the accounts and any gain or loss thereon is included in
operations.
(e) Other Assets
Other assets consist of organizational costs and are being amortized using
the straight-line method over five years.
(f) Revenue Recognition
Resident fees are recognized when services are rendered and consist of
resident fees and other ancillary services provided to residents of the
Company's assisted living communities. Office rentals are recognized ratably
over the life of the tenant lease agreements.
(g) Income Tax Status
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under these provisions, the Company does not pay
federal or state corporate income taxes on its taxable income. Instead, the
shareholders are liable for individual taxes on their respective shares of the
Company's taxable income. Accordingly, no provision has been made for federal or
state income tax in the accompanying statements of operations.
A pro forma provision for income taxes is presented as if the Company had
been subject to federal and state income taxes as a C-Corporation based on a tax
rate of 40%. The pro forma tax provision for the years ended June 30, 1997, 1996
and 1995 have been calculated using financial net income.
F-66
<PAGE> 152
BUTLER SENIOR CARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of June 30 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Land..................................................... $ 124 $ 124
Buildings and improvements (10 to 40 years).............. 3,554 3,504
Furniture, fixtures and equipment (5 to 15 years)........ 359 347
Construction in progress................................. 8 --
------ ------
4,045 3,975
Less accumulated depreciation............................ 390 261
------ ------
$3,655 $3,714
====== ======
</TABLE>
Depreciation expense was approximately $130,000, $125,000 and $104,000 for
the years ended June 30, 1997, 1996 and 1995, respectively.
3. LONG-TERM DEBT
Long-term debt consisted of the following as of June 30 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Construction loan........................................ $1,708 $1,830
Refinancing note......................................... 763 --
Other notes payable...................................... -- 540
------ ------
2,471 2,370
Less current portion..................................... 148 156
------ ------
$2,323 $2,214
====== ======
</TABLE>
In April 1994, the Company entered into a $1,900,000 Construction Loan
Agreement (the Loan), the proceeds of which were used to construct an assisted
living community that opened in September 1994. The Loan is payable in varying
monthly principal installments with a final balloon payment in May 2005.
In August 1996, the Company entered into a $790,000 Refinancing Note
Agreement (the Note), the proceeds of which were used to retire the then
outstanding indebtedness from two bank notes and a note payable to a related
party (see Note 4). The Note is payable in varying monthly principal
installments with a final balloon payment in July 2001.
Interest on both the Loan and the Note is payable subject to the Company's
election of a floating or fixed rate option, as defined in the agreements. As of
June 30, 1997, the Company elected the fixed rate option to be in effect for
both the Loan and the Note, which was approximately 7.5% and 7.6%, respectively.
The Company has pledged substantially all of the assets of the Company as
collateral for the Loan and the Note.
F-67
<PAGE> 153
BUTLER SENIOR CARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate scheduled maturities of long-term debt for each of the five years
ending June 30 and thereafter are as follows (dollars in thousands):
<TABLE>
<S> <C>
1998................................................................ $ 148
1999................................................................ 160
2000................................................................ 172
2001................................................................ 186
2002................................................................ 773
Thereafter.......................................................... 1,032
------
$2,471
======
</TABLE>
4. NOTES PAYABLE -- RELATED PARTIES
In May 1995, the Company borrowed $175,000 from a shareholder, the proceeds
of which were used to aid in the financing of the construction of an additional
wing to an existing assisted living community. In addition, the Company borrowed
an additional $115,000 in 1996 from this shareholder for the same purpose.
Interest only payments were made monthly at the prime rate plus 1%, which was
9.25% at June 30, 1996 and 9.50% at June 30, 1997, with a $50,000 principal
payment being made in 1996. The remaining unpaid balance from these loans was
retired with the proceeds from the Refinancing Note discussed in Note 3.
Interest paid and expensed by the Company for the years ended June 30, 1997,
1996 and 1995 was approximately $2,000, $24,000 and $1,000, respectively.
In June 1997, the Company entered into a non-interest bearing demand note
payable with an entity affiliated with the shareholders in the amount of
$131,000, the proceeds of which are being used for the construction discussed in
Note 8. The note will be repaid concurrently with the sale of certain assets of
the Company discussed in Note 8.
5. CONTINGENCIES
In the ordinary course of business, various lawsuits, claims and
proceedings have been or may be instituted or asserted against the Company.
Based on currently available facts, management is not aware of any matters that
are pending or asserted that would have a material adverse effect on the
financial position, results of operations or liquidity of the Company.
6. RELATED PARTY TRANSACTIONS
In addition to the notes payable disclosed in Note 4, the Company has a
management agreement with an entity affiliated with certain shareholders. The
management agreement provides for a base fee of 2% of certain revenues earned
from the assisted living communities and 5% of certain revenues earned from the
office buildings. Management fees paid and expensed by the Company for the years
ended June 30, 1997, 1996 and 1995 were approximately $62,000, $60,000 and
$49,000, respectively.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
determining the estimated fair value for financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents -- The carrying amount reported in the balance
sheets for cash and cash equivalents approximates its fair value.
F-68
<PAGE> 154
BUTLER SENIOR CARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Long-term Debt and Notes Payable -- Related Parties -- The fair value of
long-term debt and notes payable -- related parties is estimated using a
discounted cash flow analysis, based on the Company's current available
incremental borrowing rate.
The carrying amounts and the estimated fair values of the financial
instruments as of December 31 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cash and cash equivalents............................. $ 125 125 $ 51 51
Long-term debt........................................ 2,471 2,471 2,370 2,370
Notes payable -- related parties...................... 131 131 240 240
</TABLE>
8. SUBSEQUENT EVENTS
In July 1997, the Company closed one of the office buildings and began
construction that will convert the facility to an additional wing of an existing
assisted living community. The conversion will add 28 beds at a projected cost
of approximately $450,000 with an anticipated opening date of November 1997.
On July 21, 1997, the Company entered into a Letter of Intent (Agreement)
pursuant to which Balanced Care Corporation, a Delaware Corporation, will
acquire only the business, licenses and other intangibles and property and
equipment of the Company's assisted living communities for approximately $12
million, subject to certain terms and conditions as outlined in the Agreement.
F-69
<PAGE> 155
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders of Gethsemane Affiliates:
We have audited the combined balance sheets of Gethsemane Affiliates as of
June 30, 1997 and 1996, and the related combined statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 1997. These financial statements are the responsibility of the
Companies' 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 Gethsemane
Affiliates as of June 30, 1997 and 1996 and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1997
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
One South Market Street
Harrisburg, Pennsylvania
September 23, 1997
F-70
<PAGE> 156
GETHSEMANE AFFILIATES
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30,
-----------------
1997 1996
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................................... $ 3 $ 1
Restricted cash -- resident funds........................................ 19 23
Accounts receivable -- residents (net of allowance for doubtful accounts
of $2 and $2)......................................................... 159 117
Receivable from third-party.............................................. 147 150
Prepaid expenses......................................................... 34 37
------ ------
Total current assets............................................. 362 328
Organizational costs....................................................... 11 --
Property and equipment, net................................................ 3,924 1,690
------ ------
Total assets..................................................... $4,297 $2,018
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Demand notes payable -- bank............................................. $ 376 $ 394
Current portion of long-term debt........................................ 120 23
Notes payable to shareholder............................................. 390 380
Accounts payable......................................................... 382 131
Accrued expenses......................................................... 115 114
Deferred revenue......................................................... 18 17
Resident funds........................................................... 19 23
------ ------
Total current liabilities........................................ 1,420 1,082
Long-term debt............................................................. 2,293 637
------ ------
Total liabilities................................................ 3,713 1,719
------ ------
Commitments and Contingencies (Note 8)
Shareholders' equity:
Common stock, $1 par value -- authorized -- 100,100 shares; issued and
outstanding -- 10,100................................................. 10 10
Additional paid-in capital............................................... 240 240
Retained earnings........................................................ 334 49
------ ------
Total shareholders' equity....................................... 584 299
------ ------
Total liabilities and shareholders' equity....................... $4,297 $2,018
====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-71
<PAGE> 157
GETHSEMANE AFFILIATES
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues:
Patient services............................................... $2,876 $1,864 $1,705
Other revenues................................................. 1 2 5
------ ------ ------
Total revenues......................................... 2,877 1,866 1,710
------ ------ ------
Expenses:
Facility operating expenses:
Salaries, wages and benefits................................ 1,227 1,181 1,013
Other operating, including related parties $45, $0, and
$45....................................................... 856 308 339
General and administrative expense, including related parties
of $65, $119 and $65........................................ 198 235 171
Depreciation and amortization expense.......................... 120 64 49
------ ------ ------
Total operating expenses............................... 2,401 1,788 1,572
------ ------ ------
Income from operations........................................... 476 78 138
Other expense:
Interest expense............................................... (191) (68) (85)
------ ------ ------
Net income....................................................... $ 285 $ 10 $ 53
====== ====== ======
Pro forma income data (unaudited):
Income before income taxes..................................... $ 285 $ 10 $ 53
Pro forma income tax provision................................. (114) (4) (21)
------ ------ ------
Net income after pro forma tax provision............... $ 171 $ 6 $ 32
====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-72
<PAGE> 158
GETHSEMANE AFFILIATES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ADDITIONAL RETAINED
ISSUED PAR PAID-IN EARNINGS
SHARES VALUE CAPITAL (DEFICIT) TOTAL
------ ----- ---------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994..................... 10,000 $10 $ 84 $ (14) $ 80
Capital contributed........................ -- -- 156 -- 156
Net income................................. -- -- -- 53 53
------ --- ---- ---- ----
Balance at June 30, 1995..................... 10,000 10 240 39 289
Net income................................. -- -- -- 10 10
------ --- ---- ---- ----
Balance at June 30, 1996..................... 10,000 10 240 49 299
Shares issued.............................. 100 -- -- --
Net income................................. -- -- -- 285 285
------ --- ---- ---- ----
Balance at June 30, 1997..................... 10,100 $10 $240 $ 334 $ 584
====== === ==== ==== ====
</TABLE>
See accompanying notes to combined financial statements.
F-73
<PAGE> 159
GETHSEMANE AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1997
------- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................................... $ 285 $ 10 $ 53
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on disposal of assets.................................. -- -- (1)
Depreciation and amortization............................... 120 64 49
Changes in operating assets and liabilities:
(Increase) in accounts receivable......................... (42) (35) (17)
(Increase) decrease in cost rate adjustment receivable.... 3 (3) 35
(Increase) decrease in prepaid expenses................... 3 (6) 3
Increase in accounts payable.............................. 251 67 1
Increase (decrease) in accrued expenses................... 1 26 (3)
Increase (decrease) in deferred revenue................... 1 4 14
------- ----- -----
Net cash provided by operating activities.............. 622 127 134
------- ----- -----
Cash flows from investing activities:
Organizational costs........................................... (11)
Purchase of property and equipment, net........................ (2,354) (838) (27)
------- ----- -----
Net cash used for investing activities................. (2,365) (838) (27)
------- ----- -----
Cash flows from financing activities:
Proceeds from borrowings on demand notes....................... 84 71 523
Repayments on demand notes..................................... (102) (16) (460)
Proceeds from long-term borrowings............................. 1,796 482 (134)
Repayments of long-term borrowings............................. (43) (205) --
Proceeds of borrowings from shareholder........................ 386 380 --
Repayments of borrowings from shareholder...................... (376) -- (36)
------- ----- -----
Net cash provided (used by) financing activities....... 1,745 711 (107)
------- ----- -----
Increase in cash and cash equivalents............................ 2 -- --
Cash and cash equivalents at beginning of period................. 1 1 1
------- ----- -----
Cash and cash equivalents at end of period....................... $ 3 $ 1 $ 1
======= ===== =====
Supplemental Cash Flow Information:
Cash paid during the period for interest....................... $ 179 $ 53 $ 86
======= ===== =====
During 1995, the shareholders paid $271,000 of the Company's
long-term debt. This transaction reduced the balance of a note
receivable from shareholders by $115,000 and increased
additional paid-in capital by $156,000.
</TABLE>
See accompanying notes to combined financial statements.
F-74
<PAGE> 160
GETHSEMANE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Background
Gethsemane Affiliates (the "Company") consists of two corporations under
common control, Gethsemane Retirement Community, Inc. ("GRCI") -- formerly
operated as Boone Nursing Home, Inc. and Gethsemane Assisted Living, Inc.
("GALI"). The Company operates a 66-bed skilled nursing facility located in
Bloomsburg, Pennsylvania and a 51-bed assisted living facility located in
Millville, Pennsylvania which commenced operations in April, 1997.
(b) Basis of Presentation
The accompanying combined financial statements for the year ended June 30,
1997 include the accounts of GRCI and GALI, from the date operations were
commenced through June 30, 1997. The financial statements for the years ended
June 30, 1996 and 1995 include only the accounts of the GRCI. All significant
intercompany accounts and transactions have been eliminated in the combined
financial statements.
(c) Fair Value of Financial Instruments
Cash and mortgage notes payable are reflected in the accompanying balance
sheets at amounts considered by management to approximate fair value. Management
generally estimates fair value of its long-term fixed rate notes payable using
discounted cash flow analysis based upon its current borrowing rate for debt
with similar maturities.
(d) Restricted Cash -- Resident Funds
GRCI is the trustee for these funds which are held on behalf of the
residents. The Company has fiduciary responsibility for the administration of
the bank accounts and the distribution of funds to the residents.
(e) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation or,
where appropriate, the present value of the related capital lease obligations
less accumulated amortization. Depreciation and amortization are computed using
the straight-line method over the estimated useful lives of the assets ranging
from 5 to 40 years. Expenditures for maintenance and repairs necessary to
maintain property and equipment in efficient operating condition are charged to
operations. Costs of additions and betterments are capitalized.
(f) Impairment of Long-Lived Assets and Long-Lived Assets To Be Disposed of
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of long-lived Assets
and for long-lived Assets To Be Disposed of," on July 1, 1996. This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
F-75
<PAGE> 161
GETHSEMANE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
(g) Patient Service Revenue/Third Party Payor
The Company records patient service revenue at its full charge rates. For
services provided to patients under agreements with its third-party cost payors
(Medicare and Medicaid), the Company records contractual adjustments which are
the difference between its full charge rates and the allowable costs incurred to
render such services. The Company receives interim payments under the
third-party cost payor agreements based upon its estimated allowable costs.
Estimated allowable costs are subject to audit and retroactive adjustment by the
third-party cost payors. Revenues from the Medicare and Medicaid programs
represented 19% and 50% respectively of total 1997 revenues. Revenues from the
Medicaid program represented 70% and 69% of total 1996 and 1995 revenues,
respectively.
Retroactively calculated third-party contractual adjustments are accrued on
an estimated basis in the period the related services are rendered. Revisions to
estimated contractual adjustments are recorded based upon audits by third-party
payors, as well as other communications with third-party payors such as desk
reviews, regulation changes and policy statements. These revisions are made in
the year such amounts are determined. Patient service revenues were increased by
$63,000 in 1997 for changes in estimates due to settlements with third-party
payors.
Resident services are recognized when services are rendered and consist of
resident fees and other ancillary services provided to residents of the
Company's assisted living communities.
(h) Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code and Laws of the Commonwealth of Pennsylvania. Under
those provisions, the Company does not pay federal or state corporate income
taxes on its taxable income. Instead, the stockholders are liable for individual
federal and state income taxes on their respective shares of the Company's
taxable income. Accordingly, no provision has been made for federal or state
income tax in the accompanying statements of income.
A pro forma provision for income taxes is presented as if the Company were
taxed as a C corporation based on a tax rate of 40%. The pro forma tax
provisions for the years ended June 30, 1997, 1996 and 1995 have been calculated
using financial net income.
(i) Use of Estimates
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
F-76
<PAGE> 162
GETHSEMANE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following as of June 30
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Land............................................................... $ 136 $ 136
Buildings and improvements......................................... 3,791 975
Fixed and moveable equipment....................................... 482 238
Construction-in-progress........................................... -- 707
------ ------
4,409 2,056
Less: accumulated depreciation..................................... (485) (366)
------ ------
$3,924 $1,690
====== ======
</TABLE>
Depreciation expense was $119,000, $53,000 and $48,000 for the years ended
June 30, 1997, 1996 and 1995, respectively.
3. DEMAND NOTES PAYABLE
Demand notes payable, bank consists of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ----
<S> <C> <C>
Line of credit, to a maximum of $300,000 bearing interest at a rate
of 1% above prime (10% at June 30, 1997). The note is
collateralized by accounts receivable from residents and
third-party payors, estimated third-party payor settlements, a
second mortgage on substantially all property and equipment and
personal guarantees of the shareholders........................... $ 298 $299
Line of credit, to a maximum of $75,000 bearing interest at rate of
1% above prime 10% at June 30, 1997. The note is collateralized by
accounts receivable from residents and third-party payors,
estimated third-party payor settlements, and personal guarantees
of the shareholders............................................... 15 20
Note payable, bank -- interest at 10.5% with the principal due on
demand. The note is collateralized by a Company vehicle........... -- 4
Note payable, bank -- interest at 9.75% with the principal due on
demand. The note is collateralized by a Company vehicle........... -- 6
Note payable, bank -- interest at a rate of 1% above prime adjusted
annually (10.0% at June 30, 1997) with the principal due on
demand. The note is collateralized by a first lien on 19 acres of
land.............................................................. 63 65
------ ----
$ 376 $394
====== ====
</TABLE>
F-77
<PAGE> 163
GETHSEMANE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
Long-term debt consisted of the following as of June 30 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ----
<S> <C> <C>
Fixed 6% third mortgage note requiring monthly principal and
interest payments of $2,867 through December 2002. The note is
collateralized by a third mortgage on substantially all property
and equipment and the personal guarantees of the shareholders..... $ 147 $169
Adjustable rate first mortgage note (current rate 8.37%) requiring
monthly principal and interest payments of $144 (as currently
calculated based on the 8.37% current rate) through November 1997.
Thereafter, the interest rate is adjustable every three years and
monthly payments will be adjusted to fully amortize the
indebtedness by October 2003. The note is collateralized by a
first mortgage on land and the personal guarantees of the
shareholders...................................................... 9 9
Adjustable rate first mortgage (current rate 8.75%) requiring
monthly principal interest payments of $17,990 (as currently
calculated on the 8.75% current rate) through March 2012. The note
is collateralized by a first lien position on the new nursing
facility; personal guarantees of the shareholders; a security
interest in stock of the company; a first lien on all inventory
and equipment; assignment of life insurance; and assignment of
rents............................................................. 1,786 482
Adjustable rate loan (current rate 9.0%) requiring monthly principal
and interest payments ($3,805 (as currently calculated on the 9.0%
current rate) through January 2000. Thereafter, the interest rate
is adjustable every three years and monthly payments will be
adjusted to fully amortize the indebtedness by January 2007. The
note is collateralized by a lien on the nursing home property; a
lien on the assisted living property; and the personal guarantees
of the shareholders............................................... 292 --
Fixed rate loan at 9.25% requiring monthly principal and interest
payments of $2,368 through November 2006.......................... 175 --
The note is collateralized by a lien on the assisted living
facility property and personal guarantees of the shareholders.
Capital lease -- monthly payments of $75 for 60 months with a lease
end buy out of $1. This lease is collateralized by a dishwasher... 4 --
------ ----
2,413 660
Less current maturities............................................. 120 23
------ ----
$2,293 $637
====== ====
</TABLE>
At June 30, 1997, the aggregate maturities of long-term debt for the next
five fiscal years ending June 30 are $120,000 in 1998, $117,000 in 1999,
$127,000 in 2000, $137,000 in 2001, $148,000 in 2002 and $1,601,000 thereafter.
5. NOTES PAYABLE -- SHAREHOLDER
The Company has received advances from shareholders for payments on the
Company's mortgage. These advances bear interest at 8% per annum and are due on
demand. The Company has received $390,000 and $380,000 from shareholders as of
June 30, 1997 and 1996, respectively.
6. PROFIT SHARING PLAN
The Company has a profit-sharing retirement plan covering substantially all
employees. Contributions are made to the plan at the matching contribution equal
to 50% of the employees' contributions
F-78
<PAGE> 164
GETHSEMANE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
with a maximum matching contribution of $350 per employee. Additional amounts
can be contributed at the discretion of the Company's Board of Directors.
Company policy is to fund currently the costs accrued. The profit-sharing
contribution amounted to $7,000, $7,000 and $4,000 for the years ended June 30,
1997, 1996 and 1995, respectively.
7. RELATED PARTY TRANSACTIONS
The Company had the following related party transactions:
Salary paid to shareholder as administrator
Salary paid to shareholder in operations
A summary of those transactions follows for the years ended June 30
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Salaries, wages, and benefits.......................... $65 $119 $65
Other operating costs.................................. $45 $ 0 $45
</TABLE>
In addition, a shareholder sold a parcel of land purchased in 1995 for
$90,000 to the Company in 1996 for $90,000.
8. COMMITMENTS AND CONTINGENCIES
(j) Medical Malpractice Claims Coverage
The Company's professional liability insurance provides for coverage with a
limit of $1 million per occurrence. The Company believes it has adequate
coverage for all asserted claims and it has no knowledge of unasserted claims
which would exceed its insurance coverage. The Company is not aware of
additional premiums, if any, it may be charged or credits it may receive under
the terms of the policy and it has, therefore, expensed only its billed premium
costs ratably over the term of the policy.
(k) Litigation
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, all
such matters are adequately covered by insurance or, if not so covered, are
without merit or are of such a kind, or involve such amounts, that their
unfavorable disposition would not have a material effect on the financial
position, results of operations or the liquidity of the Company.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate fair value of
each class of financial instruments for which is practicable to estimate that
value.
CASH AND EQUIVALENTS: The carrying amount approximates fair value because
of the short maturity of those instruments.
DEMAND NOTES PAYABLE -- BANK: The carrying amount approximate fair value
since the interest rate fluctuates with the lending bank's prime rate.
LONG-TERM DEBT: The fair value of long-term debt is estimated based on
interest rates for the same or similar debt offered to the Company having the
same or similar remaining maturity and collateral requirements.
F-79
<PAGE> 165
GETHSEMANE AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES PAYABLE -- SHAREHOLDER: The fair value of notes
payable -- shareholder is estimated based on interest rates for the same or
similar debt offered to the Company by a lending institution having the same or
similar remaining maturities.
Estimated fair values of the Company's financial instruments are as follows
at June 30, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- ------
<S> <C> <C>
Assets:
Cash............................................................ $ 3 $ 3
Restricted cash, resident funds................................. 19 19
Liabilities:
Demand notes payable, bank...................................... 376 376
Long-term debt.................................................. 2,413 2,395
Notes payable -- shareholder.................................... 390 390
</TABLE>
10. SUBSEQUENT EVENT
Pending Sale of the Company
On August 8, 1997, the Company signed a letter of intent for the sale of
the assets of GRCI and GALI to Balanced Care Corporation for $5.5 million plus
additional consideration of up to $1.2 million which is contingent upon the
Company achieving certain future targeted operating results. The Company expects
the sale to be completed in the fall of 1997.
11. SHAREHOLDERS' EQUITY
Outstanding Common Stock
Gethsemane Affiliates outstanding common stock at June 30, 1997 is
summarized below:
<TABLE>
<CAPTION>
PAR VALUE NUMBER OF SHARES NUMBER OF SHARES
PER SHARE AUTHORIZED ISSUED AND OUTSTANDING
--------- ---------------- ----------------------
<S> <C> <C> <C>
Gethsemane Retirement Community............. $1.00 100,000 10,000
Gethsemane Assisted Living Community........ $1.00 100 100
</TABLE>
F-80
<PAGE> 166
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of
Feltrop's Personal Care Home:
We have audited the accompanying balance sheets of Feltrop's Personal Care
Home (the Company) as of June 30, 1997 and 1996, and the related statements of
operations, owners' equity and cash flows for each of the three years in the
period ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of June 30,
1997 and 1996, and results of its operations and cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Pittsburgh, Pennsylvania
September 29, 1997
F-81
<PAGE> 167
FELTROP'S PERSONAL CARE HOME
BALANCE SHEETS
JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $ 24 $ 25
Accounts receivable...................................................... 7 9
Inventories.............................................................. 14 15
Prepaid expenses......................................................... 3 7
----- -----
Total current assets............................................. 48 56
Property and equipment, net................................................ 1,245 1,278
----- -----
Total assets............................................................. $1,293 $1,334
===== =====
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable......................................................... $ 47 $ 53
Accrued liabilities...................................................... 42 40
Deferred revenue......................................................... 72 81
Current portion of long-term debt........................................ 117 106
----- -----
Total current liabilities........................................ 278 280
Long-term debt............................................................. 976 1,050
----- -----
Total liabilities................................................ 1,254 1,330
----- -----
Contingencies (Note 4)
Owners' equity............................................................. 39 4
----- -----
Total liabilities and owners' equity............................. $1,293 $1,334
===== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-82
<PAGE> 168
FELTROP'S PERSONAL CARE HOME
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues:
Resident services.............................................. $1,980 $1,812 $1,788
------ ------ ------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits................................ 1,041 1,049 920
Other operating expenses.................................... 372 329 370
General and administrative..................................... 119 115 124
Depreciation................................................... 73 68 71
------ ------ ------
Total operating expenses............................... 1,605 1,561 1,485
------ ------ ------
Operating income............................................... 375 251 303
Other income (expense):
Interest income................................................ 1 1 1
Interest expense............................................... (119) (120) (83)
------ ------ ------
Net income............................................. $ 257 $ 132 $ 221
====== ====== ======
Pro forma income tax data (unaudited):
Income before income taxes..................................... $ 257 $ 132 $ 221
Pro forma income tax provision................................. 103 53 88
------ ------ ------
Net income after pro forma tax provision............... $ 154 $ 79 $ 133
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-83
<PAGE> 169
FELTROP'S PERSONAL CARE HOME
STATEMENTS OF OWNERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
-----
<S> <C>
Balance at June 30, 1994............................................................. $ 45
Capital contributions.............................................................. 136
Distributions paid to owners....................................................... (359)
Net income......................................................................... 221
-----
Balance at June 30, 1995............................................................. 43
Capital contributions.............................................................. 158
Distributions paid to owners....................................................... (329)
Net income......................................................................... 132
-----
Balance at June 30, 1996............................................................. 4
Capital contributions.............................................................. 35
Distributions paid to owners....................................................... (257)
Net income......................................................................... 257
-----
Balance at June 30, 1997............................................................. $ 39
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-84
<PAGE> 170
FELTROP'S PERSONAL CARE HOME
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 257 $ 132 $ 221
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.................................................. 73 68 71
Increase (decrease) from changes in:
Accounts receivable........................................... 2 1 (5)
Inventory..................................................... 1 (1) (2)
Prepaid expenses.............................................. 4 8 (6)
Accounts payable.............................................. (6) (21) 14
Accrued liabilities........................................... 2 (17) 2
Deferred revenues............................................. (9) (9) 27
----- ----- -----
Cash provided by operating activities.................... 324 161 322
----- ----- -----
Cash flows from investing activities:
Proceeds from sale of property and equipment..................... 19 -- 37
Purchase of property and equipment............................... (59) (103) (18)
----- ----- -----
Cash (used in) provided by investing activities.......... (40) (103) 19
----- ----- -----
Cash flows from financing activities:
Proceeds from issuance of long-term debt......................... 16 152 10
Repayment of long-term debt...................................... (79) (78) (90)
Capital contributions from owners................................ 35 158 136
Distributions paid to owners..................................... (257) (329) (360)
----- ----- -----
Cash used in financing activities........................ (285) (97) (304)
----- ----- -----
Net (decrease) increase in cash and cash equivalents............... (1) (39) 37
Cash and cash equivalents at beginning of year..................... 25 64 27
----- ----- -----
Cash and cash equivalents at end of year........................... $ 24 $ 25 $ 64
===== ===== =====
Supplemental disclosure of cash flow information:
Noncash investing activities:
Capital expenditures included in accounts payable............. $ -- $ -- $ 27
===== ===== =====
Other:
Cash paid for interest........................................ $ 117 $ 107 $ 86
===== ===== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-85
<PAGE> 171
FELTROP'S PERSONAL CARE HOME
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Background
Feltrop's Personal Care Home (the Company) is a 92-bed assisted living
facility located in Darlington, Pennsylvania.
(b) Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
(c) Cash and Cash Equivalents
All unrestricted, highly liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents. The
Company maintains its cash and cash equivalents at financial institutions which
management believes are of high credit quality.
(d) Inventories
Inventories consist of fuel, food and supplies and are stated at the lower
of cost (first-in, first-out) or market value.
(e) Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Expenditures for
maintenance and repairs are expensed as incurred. The cost and related
accumulated depreciation applicable to property no longer in service are
eliminated from the accounts and any gain or loss thereon is included in
operations.
(f) Deferred Revenue
Deferred revenue represents amounts received from patients before services
have been performed. These amounts represent a liability of the Company until
the service has been provided.
(g) Revenue Recognition
Resident fees are recognized when services are rendered and consist of
resident fees and other ancillary services provided to residents of the
Company's personal care home.
(h) Income Tax Status
The Company is a pass-through entity and does not pay federal or state
corporate income taxes on its taxable income. Instead the owners are liable for
individual federal and state income taxes on the taxable income. Accordingly, no
provision has been made for federal or state income tax in the accompanying
statements of operations.
A pro forma provision for income taxes is presented as if the Company had
been subject to federal and state income taxes as a C-Corporation based on an
effective tax rate of 40%. The pro forma tax provision for the years ended June
30, 1997, 1996 and 1995 have been calculated using financial net income.
F-86
<PAGE> 172
FELTROP'S PERSONAL CARE HOME
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Land............................................................... $ 126 $ 126
Buildings and improvements (20 to 40 years)........................ 1,283 1,267
Fixed and movable equipment (5 to 10 years)........................ 437 428
------ ------
1,846 1,821
Less accumulated depreciation...................................... (601) (543)
------ ------
$1,245 $1,278
====== ======
</TABLE>
Depreciation expense was $73,000, $68,000 and $71,000 for the years ended
June 30, 1997, 1996 and 1995, respectively.
3. LONG-TERM DEBT
Long-term debt consisted of the following at June 30 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Line of credit(a).................................................. $ 23 $ 21
Mortgage payable(b)................................................ 923 965
Construction loan(c)............................................... 121 142
Installment notes(d)............................................... 26 28
------ ------
1,093 1,156
Less current portion............................................... 117 106
------ ------
$ 976 $1,050
====== ======
</TABLE>
- ---------------
(a) In November 1994, the Company entered into an agreement for an
uncollateralized line of credit for $25,000. The line of credit requires
monthly interest payments with the outstanding borrowings due on demand. The
interest rate in effect on the line of credit was 8.5% and 8.25% at June 30,
1997 and 1996, respectively.
(b) On August 20, 1993, the Company entered into an agreement to borrow
$1,085,000, a portion of which was used to refinance $726,000 of previously
held debt. The mortgage note provides for monthly principal and interest
payments through July 2008. The interest rate is the bank's prime rate plus
2%, which was 8% on the date of the note. The interest rate is fixed and
adjusted every three years thereafter on the anniversary date to the then
existing bank's prime rate plus 2%, until the next adjustment date. In no
event will the interest rate change by more than 2% at each adjustment date.
The interest rate in effect at June 30, 1997, and 1996 was 10.25%. The note
is collateralized by substantially all real and personal property of the
Company.
(c) On December 20, 1995, the Company entered into an agreement to borrow
$150,000 for construction purposes. The loan provides for monthly
installments of $3,192 including interest at the bank's prime rate plus 1%.
The interest rate in effect was 9.5% and 9.25% at June 30, 1997 and 1996,
respectively. The note is collateralized by real property and is guaranteed
by the owners of the Company.
F-87
<PAGE> 173
FELTROP'S PERSONAL CARE HOME
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) The installment notes are payable in monthly installments through June 2001.
Interest on these notes ranges from 6.50% to 8.25%. The notes are
collateralized by certain equipment.
Aggregate scheduled maturities of long-term debt for each of the five years
ending June 30 and thereafter are as follows (dollars in thousands):
<TABLE>
<S> <C>
1998................................................ $ 117
1999................................................ 85
2000................................................ 89
2001................................................ 152
2002................................................ 74
Thereafter.......................................... 576
------
$1,093
======
</TABLE>
4. CONTINGENCIES
In the ordinary course of business, various lawsuits, claims and
proceedings have been or may be instituted or asserted against the Company.
Based on currently available facts, management is not aware of any matters that
are pending or asserted that would have a material adverse effect on the
financial position, results of operations or liquidity of the Company.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
determining the estimated fair value for financial instruments for which it is
practicable to estimate that value.
Cash and Cash Equivalents -- The carrying amount reported in the balance
sheets for cash and cash equivalents approximates its fair value.
Long-term Debt -- The fair value of long-term debt is estimated using
discounted cash flow analysis, based on the Company's current available
incremental borrowing rate.
The carrying amounts and the estimated fair values of the financial
instruments as of December 31 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $ 24 $ 24 $ 25 $ 25
Long-term debt.................................... 1,093 1,025 1,156 1,108
</TABLE>
6. RELATED PARTIES
The Company's owners received distributions earnings of approximately
$257,600, $328,600 and $360,000 in 1997, 1996 and 1995, respectively. One owner
of the Company was paid a salary for management services of approximately
$200,400, $201,900 and $114,300, and a related party of the owners was paid a
salary for management services of approximately $25,500, $25,400 and $32,500 in
1997, 1996 and 1995, respectively.
The Company paid ZAF Construction, a related entity of the owners,
approximately $71,900, $89,700 and $15,000 for construction and maintenance in
1997, 1996 and 1995, respectively.
F-88
<PAGE> 174
FELTROP'S PERSONAL CARE HOME
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. SUBSEQUENT EVENTS
On September 3, 1997, the Company entered into an Asset Purchase Agreement
(Agreement), pursuant to which Balanced Care Corporation, a Delaware
Corporation, will acquire only the business, licenses and other intangibles and
the property and equipment of the Company as outlined in the Agreement, for
approximately $5.7 million, subject to certain terms and conditions.
F-89
<PAGE> 175
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Senior Living Centers, Inc.:
We have audited the accompanying consolidated balance sheets of Senior
Living Centers, Inc. (the Company) as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholder's equity and cash
flows for each of the three years in the period ended 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 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1996 and 1995, and the consolidated results of
their operations and cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Pittsburgh, Pennsylvania
September 26, 1997
F-90
<PAGE> 176
SENIOR LIVING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30 -----------------
1997 1996 1995
----------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 261 $ 15 $ 225
Investments................................................. 11 9 34
Accounts receivable, less allowance for doubtful accounts of
$28...................................................... 477 510 279
Estimated amounts due from third party payor................ 204 239 288
Current portion of note receivable.......................... 12 12 11
Inventories................................................. 14 17 18
Prepaid expenses............................................ 10 17 58
------ ------ ------
Total current assets..................................... 989 819 913
Property and equipment, net................................... 2,395 2,452 2,036
Note receivable............................................... 50 56 68
Due from affiliate............................................ 25 9 10
Other assets.................................................. 30 17 14
------ ------ ------
Total assets........................................ $ 3,489 $3,353 $3,041
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 141 $ 67 $ 213
Accrued payroll and related expenses........................ 117 35 96
Other accrued liabilities................................... 3 22 16
Current portion of long-term debt........................... 85 85 50
------ ------ ------
Total current liabilities................................ 346 209 375
Minority Interest............................................. 2 1 2
Long-term debt................................................ 1,433 1,480 1,221
------ ------ ------
Total liabilities................................... 1,781 1,690 1,598
------ ------ ------
Contingencies (Note 7)
Shareholder's equity:
Common stock, no par value; 100,000 shares authorized;
10,000 shares issued and outstanding..................... 90 90 90
Paid-in capital............................................. 203 203 203
Retained earnings........................................... 1,679 1,452 1,244
Shareholder's advances...................................... (264) (82) (94)
------ ------ ------
Total shareholder's equity............................... 1,708 1,663 1,443
------ ------ ------
Total liabilities and shareholder's equity.......... $ 3,489 $3,353 $3,041
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-91
<PAGE> 177
SENIOR LIVING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net patient and resident service revenues........................ $4,377 $3,693 $3,589
------ ------ ------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits................................ 1,716 1,452 1,367
Other operating expenses.................................... 1,318 1,086 1,010
General and administrative..................................... 904 1,220 939
Depreciation and amortization.................................. 122 102 104
------ ------ ------
Total operating expenses............................... 4,060 3,860 3,420
------ ------ ------
Operating income (loss)................................ 317 (167) 169
Other income (expense):
Interest and dividend income................................... 18 42 29
Interest expense............................................... (118) (67) (73)
Minority interest in consolidated partnership.................. (11) (12) (18)
Other.......................................................... 2 31 29
------ ------ ------
Net income (loss)...................................... $ 208 $ (173) $ 136
====== ====== ======
PRO FORMA INCOME TAX DATA (UNAUDITED):
Income (loss) before income taxes.............................. $ 208 $ (173) $ 136
Pro forma income tax provision (benefit)....................... 83 (69) 54
------ ------ ------
Net income (loss) after pro forma tax provision........ $ 125 $ (104) $ 82
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-92
<PAGE> 178
SENIOR LIVING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------ ------
(UNAUDITED)
<S> <C> <C>
Net patient and resident service revenues.................................. $2,088 $2,112
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits.......................................... 858 814
Other operating expenses.............................................. 513 554
General and administrative............................................... 362 364
Depreciation and amortization............................................ 69 56
------ ------
Total operating expenses......................................... 1,802 1,788
------ ------
Operating income................................................. 286 324
Other income (expense):
Interest and dividend income............................................. 9 7
Interest expense......................................................... (65) (50)
Minority interest in consolidated partnership............................ (5) (7)
Other.................................................................... 2 --
------ ------
Net income....................................................... $ 227 $ 274
====== ======
PRO FORMA INCOME TAX DATA (UNAUDITED):
Income before income taxes............................................... 227 274
Pro forma income tax provision........................................... 91 110
------ ------
Net income after pro forma tax provision......................... $ 136 $ 164
====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-93
<PAGE> 179
SENIOR LIVING CENTERS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
AND THE SIX MONTH PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED SHAREHOLDER'S
STOCK CAPITAL EARNINGS ADVANCE TOTAL
------ ------- -------- ------------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993.................... $ 90 $ 203 $1,281 $(162) $1,412
Net increase in shareholder's advances........ -- -- -- 41 41
Net income.................................... -- -- 136 -- 136
--- ---- ------ ----- ------
Balance at December 31, 1994.................... 90 203 1,417 (121) 1,589
Net increase in shareholder's advances........ -- -- -- 27 27
Net loss...................................... -- -- (173) -- (173)
--- ---- ------ ----- ------
Balance at December 31, 1995.................... 90 203 1,244 (94) 1,443
Net increase in shareholder's advances........ -- -- -- 12 12
Net income.................................... -- -- 208 -- 208
--- ---- ------ ----- ------
Balance at December 31, 1996.................... 90 203 1,452 (82) 1,663
Net decrease in shareholder's advances
(unaudited)................................ -- -- -- (182) (182)
Net income (unaudited)........................ -- -- 227 -- 227
--- ---- ------ ----- ------
Balance at June 30, 1997 (unaudited)............ $ 90 $ 203 $1,679 $(264) $1,708
=== ==== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-94
<PAGE> 180
SENIOR LIVING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ 208 $(173) $ 136
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization................................. 122 102 104
Bad debts provision........................................... -- 27 --
Minority interest in consolidated partnership................. 11 12 18
Realized (gain) loss on sale of investments................... 1 1 (8)
Unrealized (gain) loss on investments......................... (3) (9) 9
Gain on sale of fixed assets.................................. -- (19) --
Increase (decrease) from changes in:
Net proceeds from sale of trading securities.................. 25 72 9
Accounts receivable, net...................................... (231) (21) 53
Estimated amounts due from third party........................ 49 1 (109)
Inventories................................................... 1 (6) --
Prepaid expenses.............................................. 41 (8) (26)
Accounts payable.............................................. 47 9 (13)
Accrued payroll and related expenses.......................... (61) -- 2
Other accrued liabilities..................................... 6 (8) --
----- ----- -----
Cash provided by (used in ) operating activities......... 216 (20) 175
----- ----- -----
Cash flows from investing activities:
Purchase of property and equipment............................... (731) (425) (99)
Proceeds from sale of property and equipment..................... -- 65 --
Distributions received from affiliates........................... (10) (17) (11)
----- ----- -----
Cash used in investing activities........................ (741) (377) (110)
----- ----- -----
Cash flows from financing activities:
Proceeds from construction loan.................................. 369 481 --
Repayment of long-term debt...................................... (75) (66) (32)
Proceeds from repayment of notes receivable...................... 12 10 9
Funds advanced to shareholder.................................... (371) (511) (280)
Repayment of funds advanced to shareholder....................... 383 537 322
Payment of loan closure costs.................................... (3) (5) --
----- ----- -----
Cash provided by financing activities.................... 315 446 19
----- ----- -----
Net (decrease) increase in cash and cash equivalents............... (210) 49 84
Cash and cash equivalents at beginning of year..................... 225 176 92
----- ----- -----
Cash and cash equivalents at end of year........................... $ 15 $ 225 $ 176
===== ===== =====
Supplemental disclosure of cash flow information:
Non-cash investing activities:
Capital expenditures included in accounts payable................ $ -- $ 193 $ --
===== ===== =====
Other:
Cash paid for interest................................... $ 132 $ 72 $ 73
===== ===== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-95
<PAGE> 181
SENIOR LIVING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Background
Senior Living Centers, Inc. (the Company) operates Saxony Health Center, a
facility with 68 skilled nursing beds and 63 assisted living beds and other
assisted living facilities with an aggregate of 37 beds. These facilities serve
southwestern Pennsylvania.
(b) Principles of Consolidation
The consolidated financial statements of Senior Living Centers, Inc.
include the accounts of the Company and its majority owned partnership,
Elizabeth Associates. All material intercompany accounts and transactions have
been eliminated.
(c) Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
(d) Cash and Cash Equivalents
All unrestricted, highly liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents. The
Company maintains its cash and temporary cash investments at financial
institutions which management believes are of high credit quality.
(e) Investments
The Company's investment portfolio consists of municipal bond funds and
equity funds and are considered short-term investments as the Company uses these
investments to invest excess cash. These securities are classified as trading
securities, and are carried at fair market value. The fair market value of the
investment portfolio is based on current published prices, and any unrealized
gains and losses are included in earnings.
(f) Inventories
Inventories consist of food, nursing and housekeeping supplies and are
stated at the lower of cost (first-in, first-out) or market value.
(g) Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Leasehold improvements
are amortized over the related lease period or the estimated useful life,
whichever is shorter. Expenditures for maintenance and repairs are expensed as
incurred. The cost and related accumulated depreciation or amortization
applicable to property no longer in service are eliminated from the accounts and
any gain or loss thereon is included in operations.
F-96
<PAGE> 182
SENIOR LIVING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(h) Due from Affiliate
Due from affiliate represents advances made to the minority partner in
Elizabeth Associates, which are repaid on a current basis.
(i) Other Assets
Other assets consist of debt issuance costs and are being amortized using
the straight-line method over a period of 5 years.
(j) Revenue Recognition
Patient and resident service revenue is recognized when services are
rendered and consists of assisted living, skilled nursing patient charges and
resident fees.
Patient revenues are recorded based on standard charges applicable to all
patients. Under Medicare, Pennsylvania Medical Assistance, and other cost-based
reimbursement programs, each facility is reimbursed for services rendered to
covered program patients as determined by reimbursement formulas. The difference
between established billing rates and the amounts reimbursable by the program
and patient payments are recorded as contractual adjustments and deducted from
revenues. Revenues from Medicare and Pennsylvania Medical Assistance programs
represented 37%, 33%, and 32% of total patient and resident services revenues
for the years ended December 31, 1996, 1995 and 1994, respectively. Receivables
from Medicare and Pennsylvania Medical Assistance programs represented 73% and
78% of accounts receivable at December 31, 1996 and 1995, respectively.
Net patient service revenues earned under third-party contracts are subject
to audit and retroactive adjustment by third-party payors. Adjustments are
included in the determination of income from operations in the year the
adjustments become known. It is reasonably possible that future adjustments
could have an impact on the Company's statement of operations or cash flows in
the near term.
(k) Income Tax Status
The Company has elected to be taxed under the provisions of Subchapter S
and Elizabeth Associates as a partnership under the provisions of the Internal
Revenue Code. Under these provisions, these entities do not pay federal or state
corporate income taxes on their taxable income. Instead, the shareholder or
partner is liable for individual taxes on his share of the entity's taxable
income. Accordingly, no provision has been made for federal or state income tax
in the accompanying consolidated statements of operations.
A pro forma provision for income taxes is presented as if the Company had
been subject to federal and state income taxes as a C-Corporation based on an
effective tax rate of 40%. The pro forma tax provision (benefit) for the years
ended December 31, 1996, 1995 and 1994 and for the six month periods ended June
30, 1997 and 1996 have been calculated using financial net income (loss).
(l) Unaudited Financial Statements
The unaudited consolidated balance sheet as of June 30, 1997 and the
unaudited statements of operations and changes in shareholder's equity for the
six months ended June 30, 1997 and 1996, in the opinion of management, have been
prepared on the same basis as the audited consolidated financial statements and
include all significant adjustments (consisting primarily of normal recurring
adjustments) considered necessary for a fair presentation of the results of
these interim periods. The data disclosed in these notes to the consolidated
financial statements for these periods are also unaudited.
F-97
<PAGE> 183
SENIOR LIVING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Operating results for the six month period ended June 30, 1997 is not
necessarily indicative of the results for the entire year.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
ESTIMATED JUNE 30 -----------------
USEFUL LIVES 1997 1996 1995
------------ ----------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land..................................... $ 37 $ 37 $ 37
Buildings and improvements............... 10 -- 40 2,480 2,480 1,619
Leasehold improvements................... 10 -- 40 105 105 98
Furniture, fixtures and equipment........ 5 -- 15 743 768 562
Construction in progress................. -- -- 547
------ ------ ------
3,365 3,390 2,863
Less accumulated depreciation and
amortization........................... (970) (938) (827)
------ ------ ------
$ 2,395 $2,452 $2,036
====== ====== ======
</TABLE>
Depreciation expense was approximately $120,000, $101,000 and $103,000 for
the years ended December 31, 1996, 1995 and 1994, respectively and $68,000 and
$55,000 for the six month periods ended June 30, 1997 and 1996, respectively.
3. NOTES RECEIVABLE
In connection with the sale of properties in October 1991, the Company
entered into a note receivable with the buyer. The note receivable is repayable
in monthly installments of $1,000, including interest at 8%, through October
1999 with a balloon payment of $32,000 due in November 1999. The note is
collateralized by the assets sold and personal guarantees of the buyers.
4. LONG TERM DEBT
Long-term debt consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER
JUNE 30 -----------------
1997 1996 1995
----------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Mortgage payable...................................... $ 732 $ 753 $ 790
Construction loan..................................... 786 812 481
------ ------ ------
1,518 1,565 1,271
Less current portion.................................. (85) (85) (50)
------ ------ ------
$ 1,433 $1,480 $1,221
====== ====== ======
</TABLE>
In 1993, the Company entered into a $874,000 mortgage payable agreement,
the proceeds of which were used to construct an assisted living community that
opened in June 1993. The mortgage is payable in monthly installments of $8,000,
including interest at 8.1% through June 2003 with a final balloon payment of
approximately $419,000.
In 1995, the Company entered into a $875,000 construction loan, the
proceeds of which were used to construct an assisted living facility that opened
in August 1995 and an addition to this facility which
F-98
<PAGE> 184
SENIOR LIVING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was completed in April 1996. The construction loan is payable in monthly
principal installments of approximately $4,000 plus interest at the prime rate
plus 1/2%. The company may elect in the future to fix the interest rate on this
loan at the current fixed rate of the bank. The interest rate in effect at
December 31 was 8.25%. Interest capitalized in 1996 and 1995 as a result of this
project was $14,000 and $5,000, respectively.
The long-term debt is collateralized by substantially all of the assets of
the Company. Aggregate scheduled maturities of long-term debt for each of the
five years ending December 31 and thereafter are as follows (dollars in
thousands):
<TABLE>
<S> <C>
1997.............................................................. $ 85
1998.............................................................. 97
1999.............................................................. 100
2000.............................................................. 104
2001.............................................................. 109
Thereafter........................................................ 1,070
------
$1,565
======
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company's sole shareholder was paid a salary of $444,000, $765,000, and
$536,000 in 1996, 1995 and 1994, respectively. For the six months ended June 30,
1997 and 1996, the sole shareholder was paid a salary of $45,000 and $46,000
respectively.
The Company advanced its shareholder $371,000, $511,000, and $280,000 in
1996, 1995 and 1994, respectively. Such advances, which accrue interest at
various rates ranging from 3.46% to 3.95%, have no specific repayment terms and
have been classified as a reduction of shareholder's equity in the consolidated
balance sheets. Amounts repaid by the shareholder were $383,000, $537,000 and
$322,000 in 1996, 1995 and 1994, respectively.
6. OPERATING LEASES
The Company leased one of its assisted living facilities. Rent expense for
this facility approximated $24,000, $28,000 and $28,000 during the years ended
December 31, 1996, 1995 and 1994, respectively. This lease expired on December
31, 1996, and the fixed assets used in the leased facility were transferred to
an affiliated company (see Note 9).
In addition, the Company leases its executive office space under an
agreement which expires March 31, 2000. Monthly rental payments of $3,000 are
due through March 21, 1998 and $3,000 thereafter through March 31, 2000. Rent
expense approximated $33,000, $31,000 and $18,000 for the executive office space
for the years ended December 31, 1996, 1995 and 1994, respectively.
Minimum net rental payable under the non-cancelable leases as of December
31, 1996 is as follows (dollars in thousands):
<TABLE>
<S> <C>
1997................................................................ $ 32
1998................................................................ 34
1999................................................................ 34
2000................................................................ 9
----
$109
====
</TABLE>
F-99
<PAGE> 185
SENIOR LIVING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CONTINGENCIES
In the ordinary course of business, various lawsuits, claims and
proceedings have been or may be instituted or asserted against the Company.
Based on currently available facts, management is not aware of any matters that
are pending or asserted that would have a material adverse effect on the
financial position, results of operations or liquidity of the Company.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
determining the estimated fair value for financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents -- The carrying amount reported in the balance
sheets for cash and cash equivalents approximates its fair value.
Investments -- Investments are reported in the balance sheets at fair
market value.
Note Receivable -- Fair values were estimated for the note receivable by
discounting contractual cash flows considering credit risk, overhead and other
factors.
Long-term Debt -- The fair value of long-term debt is estimated using
discounted cash flow analysis, based on the Company's current available
incremental borrowing rate.
The carrying amounts and the estimated fair values of the financial
instruments as of December 31 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cash and cash equivalents..................... $ 15 $ 15 $ 225 $ 225
Investments................................... 9 9 34 34
Note receivable............................... 68 68 79 79
Long-term debt................................ 1,565 1,556 1,271 1,263
</TABLE>
9. SUBSEQUENT EVENTS
On January 1, 1997, the Company transferred the net assets of one assisted
living facility to Norbert, Inc. at its net book value, which totaled $24,000 at
December 31, 1996. Norbert, Inc. is 100% owned by the sole shareholder of Senior
Living Centers, Inc. No gain or loss was recognized on the transaction.
On September 2, 1997, the Company entered into a Letter of Intent
(Agreement) pursuant to which Balanced Care Corporation, a Delaware Corporation,
will acquire only the business, licenses and other intangibles and the property
and equipment of Saxony Health Center, for approximately $8,800,000, subject to
certain terms and conditions as outlined in the agreement.
F-100
<PAGE> 186
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
[Confidential Treatment Requested]
We have audited the accompanying balance sheets of [Confidential Treatment
Requested] (an S Corporation) as of December 31, 1996 and 1995, and the related
statements of income, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of [Confidential Treatment
Requested] as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
HODGE, STEWARD & COMPANY, P.A.
Raleigh, North Carolina
September 23, 1997
F-101
<PAGE> 187
[CONFIDENTIAL TREATMENT REQUESTED]
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
JUNE 30, ------ ------
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 196 $ 205 $ 150
Marketable securities, available for sale................... 228 63 42
Accounts receivable -- other................................ 6 -- --
Inventory................................................... 6 6 3
Note receivable -- stockholder.............................. 15 15 14
------ ------ ------
Total current assets................................ 451 289 209
Properties and equipment, net................................. 3,097 3,158 1,243
Deposits...................................................... 3 4 1
Note receivable -- stockholder................................ 136 144 158
Loan fees..................................................... 21 23 26
Other investments............................................. 30 4 --
------ ------ ------
Total assets........................................ $ 3,738 $3,622 $1,637
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of installment notes payable............. $ 185 $ 178 $ 104
Short-term construction loan payable........................ -- -- 183
Accounts payable -- trade................................... 26 39 33
Accrued salaries and wages.................................. 49 48 32
Other accrued expenses...................................... 47 32 13
------ ------ ------
Total current liabilities........................... 307 297 365
Long-term portion of installment notes payable................ 2,902 2,999 1,041
------ ------ ------
Total liabilities................................... 3,209 3,296 1,406
------ ------ ------
Stockholders' equity:
Common stock, authorized 100,000 shares with $1 stated
value; 3,000 shares issued and outstanding............... 3 3 3
Paid-in capital............................................. 50 50 50
Unrealized gain on securities available for sale............ 38 6 2
Retained earnings........................................... 438 267 176
------ ------ ------
Total stockholders' equity.......................... 529 326 231
------ ------ ------
Total liabilities and stockholder's equity.......... $ 3,738 $3,622 $1,637
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-102
<PAGE> 188
[CONFIDENTIAL TREATMENT REQUESTED]
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
--------------- -----------------
1997 1996 1996 1995
------ ---- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Resident services revenue................................ $1,374 $818 $1,967 $1,536
------ ---- ------ ------
Expenses:
Facility operating expenses:
Salaries, wages and benefits........................ 626 400 983 766
Other operating expenses............................ 248 171 396 314
Depreciation and amortization.......................... 75 30 97 66
------ ---- ------ ------
Total operating expenses....................... 949 601 1,476 1,146
------ ---- ------ ------
Income from operations......................... 425 217 491 390
Other income (expense):
Interest income........................................ 8 8 17 16
Interest expense....................................... (138) (45) (172) (94)
Other income........................................... 4 9 22 17
------ ---- ------ ------
Net income............................................... $ 299 $189 $ 358 $ 329
====== ==== ====== ======
PRO FORMA INCOME TAX DATA (UNAUDITED):
Net earnings before income taxes....................... $ 299 $189 $ 358 $ 329
Pro forma income tax provision......................... 110 67 127 127
------ ---- ------ ------
Net income after pro forma income tax provision........ $ 189 $122 $ 231 $ 202
====== ==== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-103
<PAGE> 189
[CONFIDENTIAL TREATMENT REQUESTED]
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED GAIN ON
COMMON PAID-IN SECURITIES AVAILABLE RETAINED
STOCK CAPITAL FOR SALE EARNINGS
------ ------- -------------------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1994................. $3 $50 $ -- $ 55
Net income for 1995.......................... -- -- -- 329
Provision for unrealized gains on securities
available for sale......................... -- -- 2 --
Distributions to stockholders................ -- -- -- (208)
--- --- --- -----
Balance at December 31, 1995................. 3 50 2 176
Net income for 1996.......................... -- -- -- 358
Provision for unrealized gains on securities
available for sale......................... -- -- 4 --
Distributions to stockholders................ -- -- -- (267)
--- --- --- -----
Balance at December 31, 1996................. 3 50 6 267
Net income for 1997.......................... -- -- -- 299
Provision for unrealized gains on securities
available for sale......................... -- -- 32 --
Distributions to stockholders................ -- -- -- (128)
--- --- --- -----
Balance at June 30, 1997..................... $3 $50 $ 38 $ 438
=== === === =====
</TABLE>
See accompanying notes to financial statements.
F-104
<PAGE> 190
[CONFIDENTIAL TREATMENT REQUESTED]
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
----------------- -----------------
1997 1996 1996 1995
----- ------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Net cash flows from operating activities:
Net earnings......................................... $ 299 $ 188 $ 358 $ 329
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation...................................... 72 29 93 64
Amortization...................................... 3 1 3 1
Interest income not received in cash.............. (5) (6) (10) (11)
Gain on sale of properties and equipment.......... -- -- (5) --
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable -- other.......................... (5) -- -- --
(Increase) decrease in inventory................ -- -- (3) (1)
(Increase) decrease in prepaid expenses......... -- -- 1 --
Increase (decrease) in accounts payable and
accrued expenses............................. 3 32 39 6
----- ------ ------ -----
Net cash provided by operating activities.... 367 244 476 388
----- ------ ------ -----
Cash flows from investing activities:
Purchases of properties and equipment................ (11) (1,370) (2,022) (204)
Proceeds from sale of properties and equipment....... -- -- 50 --
Investment in marketable securities, available for
sale.............................................. (137) -- (17) (36)
Increase in deposits and loan fees................... -- -- (3) (15)
Increase in other investments........................ (22) -- (4) --
----- ------ ------ -----
Net cash used in investing activities........ (170) (1,370) (1,996) (255)
----- ------ ------ -----
Cash flows from financing activities:
Increase in construction loan payable................ -- -- -- 183
Increase in installment notes payable................ -- 1,339 1,967 --
Repayments on installment notes payable.............. (90) (52) (149) (98)
Distributions to stockholders........................ (116) (154) (243) (184)
----- ------ ------ -----
Net cash provided by (used in) financing
activities................................. (206) 1,133 1,575 (99)
----- ------ ------ -----
Increase (decrease) in cash and cash equivalents....... (9) 7 55 34
Cash and cash equivalents, beginning of period......... 205 150 150 116
----- ------ ------ -----
Cash and cash equivalents, end of period............... $ 196 $ 157 $ 205 $ 150
===== ====== ====== =====
</TABLE>
See accompanying notes to financial statements.
F-105
<PAGE> 191
[CONFIDENTIAL TREATMENT REQUESTED]
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
--------------- ---------------
1997 1996 1996 1995
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest..................... $138 $45 $183 $95
==== === ==== ===
Non-cash Investing and Financing Activities:
Property and equipment acquired through installment notes
payable............................................... $ -- $-- $ 32 $28
==== === ==== ===
Repayment of note receivable -- stockholder, funded by
distribution to stockholder........................... $ 7 $ 6 $ 14 $13
==== === ==== ===
Net change in unrealized holding gains on marketable
securities -- available for sale...................... $ 31 $-- $ 4 $ 2
==== === ==== ===
</TABLE>
See accompanying notes to financial statements.
F-106
<PAGE> 192
[CONFIDENTIAL TREATMENT REQUESTED]
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies of the Corporation described below have been followed
consistently during the years.
(a) Nature of Business
[Confidential Treatment Requested] is a domiciliary care facility. The
Company is a [Confidential] corporation, which was established in 1984.
(b) Interim Financial Information
The financial statements as of and for the six month periods ended June 30,
1997 and 1996, are unaudited, but, in the opinion of management, have been
prepared on the same basis as the audited financial statements and reflect all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the information set forth therein. The results of operations for
the six months ended June 30, 1997, are not necessarily indicative of the
operating results to be expected for the full year or any other period.
(c) Cash and Cash Equivalents
The Company considers all checking accounts, sweep accounts and money
market accounts to be cash and cash equivalents.
The Company's checking and sweep accounts are located with various banking
institutions. The amount on hand at any one time in any of these institutions
may exceed the $100,000 federally insured limit.
(d) Inventory
Inventory, which consists of a food reserve, is stated at cost, with cost
determined using the average cost method.
(e) Properties and Equipment
Properties and equipment are stated at cost. Expenditures for maintenance,
repairs, and other renewals of items are expensed currently. When items are
disposed of or replaced, the cost and accumulated depreciation amounts are
removed from the accounts, and any gain or loss is included in other income.
(f) Depreciation
Depreciation is computed using the straight line method over the following
useful lives:
<TABLE>
<S> <C>
Vehicles....................................................... 5 years
Office furniture and equipment................................. 3 - 10 years
Buildings...................................................... 30 years
</TABLE>
Depreciation expense amounted to $93,000 and $64,000 for the years ended
December 31, 1996 and 1995, respectively.
F-107
<PAGE> 193
[CONFIDENTIAL TREATMENT REQUESTED]
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(h) Advertising
The Company expenses advertising costs as incurred. Advertising expense of
$30,000 and $15,000 has been included in the statement of income for the years
ended December 31, 1996 and 1995, respectively.
2. MARKETABLE SECURITIES -- AVAILABLE FOR SALE
The Company has elected to classify its investments in equity securities as
available-for-sale securities and report them at fair value, with unrealized
gain or loss excluded from earnings and reported as a separate component of
equity. The investments classified as available-for-sale securities are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mutual funds at cost................................................... $34 $26
Other securities....................................................... 23 14
Net change in unrealized gains......................................... 6 2
--- ---
Marketable securities at fair value.................................... $63 $42
=== ===
</TABLE>
The change in the unrealized holding gains on marketable securities
available for sale during the years ended December 31, 1996 and 1995, are
reported as a separate component of stockholders' equity is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Beginning balance...................................................... $ 2 $--
Unrealized gains....................................................... 4 2
-- --
Ending balance......................................................... $ 6 $ 2
== ==
</TABLE>
3. NOTE RECEIVABLE -- STOCKHOLDER
Note receivable from stockholder of $158,000 (1996) and $172,000 (1995) is
an unsecured note dated February 24, 1994, payable in monthly installments of
$2,000 including interest at 6.17%, through October 2005.
During the year ended December 31, 1996, the stockholder repaid the Company
principal of $14,000 and also paid the Company interest of $10,000. During the
year ended December 31, 1995, the stockholder repaid the Company principal of
$13,000 and interest of $11,000.
F-108
<PAGE> 194
[CONFIDENTIAL TREATMENT REQUESTED]
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT LEASE
Property and equipment consisted of the following as of December 31
(dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Land............................................................... $ 181 $ 181
Buildings.......................................................... 3,222 1,356
Furniture and equipment............................................ 327 199
Vehicles........................................................... 44 40
------- -------
3,774 1,776
Less accumulated depreciation...................................... (616) (533)
------- -------
$3,158 $1,243
======= =======
</TABLE>
5. INSTALLMENT NOTES PAYABLE
The Company's installment notes payable as of December 31, 1996 and 1995,
consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Note payable to a bank in monthly installments of $524 including
interest at 9.10% through October 1998, collateralized by a
vehicle.......................................................... $ 31 $ --
Note payable to a bank in monthly installments of $522 including
interest at 9.25% through March 1998, collateralized by a
vehicle.......................................................... -- 25
Note payable to a bank in monthly installments of $15,572 plus
interest at 7.75% until February 2004, collateralized by
properties and equipment and personally guaranteed by the
stockholders of the Company...................................... 1,017 1,120
Note payable to a bank in average monthly principal payments of
$6,667 plus interest at the 30 day London Interbank offering rate
plus 2.00% through August 2001, collateralized by properties and
equipment and personally guaranteed by the stockholders of the
Company (See note 7 for information about an interest rate swap
agreement related to this note).................................. 2,129 --
------- -------
3,177 1,145
Less current portion............................................. 178 104
------- -------
Long-term portion................................................ $2,999 $1,041
======= =======
</TABLE>
Scheduled principal repayments of installment notes payable assuming no
changes in their terms are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNT
-------------------------------------------------------------------- ------
<S> <C>
1997................................................................ $ 178
1998................................................................ 218
1999................................................................ 207
2000................................................................ 226
2001................................................................ 1,954
Thereafter.......................................................... 394
------
$3,177
======
</TABLE>
F-109
<PAGE> 195
[CONFIDENTIAL TREATMENT REQUESTED]
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. CONSTRUCTION LOAN PAYABLE
In October 1995, the Company entered into a short term construction loan
agreement with a bank to finance an expansion of the existing facility. Under
the terms of this agreement, the Company borrowed funds as needed to pay
contractor's progress billings.
The total amount available to the Company under this construction loan
agreement was $2,150,000. Interest is payable monthly at the bank's prime rate.
As of December 31, 1995, the total amount borrowed under this construction loan
agreement was $183,000 and the total interest paid amounted to $1,000.
In 1996, the Company completed the construction project and this loan was
converted by a bank to a term loan (see note 5).
7. INTEREST RATE SWAP
In 1996, the Company began utilizing an interest rate swap agreement to
effectively convert a portion of its variable interest rate exposure to a fixed
rate basis. Under the agreement, the Company receives a fixed rate of 9.12% on
its $2,129,000 note payable to a bank.
This agreement which expires on August 15, 2001, effectively increased the
Company's interest expense on its long-term debt for the year ended December 31,
1996, by $17,000. The Company believes that future changes in interest rates
will not have a material impact on the Company's financial position or results
of operations. All gains or losses on interest rate swaps are recognized when
realized.
8. INCOME TAXES
The stockholders of the Company have elected for income tax purposes to be
taxed as an S Corporation under the of the Internal Revenue Code and laws of the
State of North Carolina. Accordingly, taxable income is passed through directly
to the shareholders rather than being taxed at the corporate level. Therefore,
no provision for federal or state income taxes has been recorded.
A pro forma provision for income taxes is presented as if the Company were
taxed as a C Corporation. The pro forma tax provisions for the years ended
December 31, 1996 and 1995, have been calculated using recorded taxable income.
9. EQUIPMENT OPERATING LEASES
The Company leases properties and equipment under operating lease
agreements. Future minimum rental payments required under operating leases that
have an initial or remaining noncancellable lease term in excess of one year, as
of December 31, 1996, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
PERIOD ENDING
DECEMBER 31
-----------------------------------------------------------------------
<S> <C>
1997................................................................... $ 10
1998................................................................... 9
1999................................................................... 3
---
$ 22
===
</TABLE>
Lease expenses for property and equipment operating leases of $8,000 and
$7,000 have been included in total operating expenses for the period ended
December 31, 1996 and 1995, respectively.
F-110
<PAGE> 196
[CONFIDENTIAL TREATMENT REQUESTED]
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. CAPITALIZED INTEREST
The Company has capitalized interest paid in connection with the
construction of a new facility as a part of the cost of the facility. All
interest paid after the facility was completed and placed in service has been
expensed to operations.
<TABLE>
<CAPTION>
1996 1995
---- ----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Interest costs capitalized................................ $ 17 $ 1
Interest expense charged to operations.................... 172 94
---- ---
Total interest expense incurred........................... $189 $95
==== ===
</TABLE>
11. SUBSEQUENT EVENT
The Company has signed a letter of intent to sell its assets to an
unrelated third party.
F-111
<PAGE> 197
BALANCED CARE CORP LOGO
SENIOR CARE FOR LIFE
<PAGE> 198
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth estimated expenses expected to be incurred
in connection with the issuance and distribution of the securities being
registered.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........................ $26,684
NASD Fee................................................................... *
Nasdaq National Market Listing Fee......................................... *
Printing and Engraving Expenses............................................ *
Accounting Fees and Expenses............................................... *
Legal Fees and Expenses.................................................... *
Blue Sky Qualification Fees and Expenses................................... *
Transfer Agent Fees and Expenses........................................... *
Miscellaneous.............................................................. *
-------
Total............................................................ $ *
=======
</TABLE>
- ------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of directors
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation 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 DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. Article Ninth of the
Company's Certificate of Incorporation provides that the personal liability of
directors of the Company is eliminated to the fullest extent permitted by
Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his being a director or officer of the
corporation if it is determined that he acted in accordance with the applicable
standard of conduct set forth in such statutory provision. Article V of the
Company's By-Laws provides that the Company will indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
entity, against certain liabilities, costs and expenses. Article V further
permits the Company to maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of another
entity against any liability asserted against such person and incurred by such
person in any such capacity or arising out of his status as such, whether or not
the Company would have the power to indemnify such person against such liability
under the DGCL. The Company maintains directors' and officers' liability
insurance.
The Underwriting Agreement filed as an exhibit hereto contains provisions
pursuant to which each Underwriter severally agrees to indemnify the Company,
any person controlling the Company
II-1
<PAGE> 199
within the meaning of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended, each director of
the Company, and each officer of the Company who signs this registration
statement with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter expressly for use in this
registration statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, the Company sold shares of its capital stock
in the following transactions, each of which was intended to be exempt from the
registration requirements of the Securities Act of 1933, as amended, by virtue
of Section 4(2) thereof.
Common Stock
On September 20, 1995, the Company issued 773,062 shares of Common Stock to
Brad E. Hollinger, 463,837 shares of Common Stock to Robert J. Sutton, 116,250
shares of Common Stock to Brian L. Barth, 640,538 shares of Common Stock to KD
Investment and 331,312 shares of Common Stock to SAE Partners, in each case at a
price of $.0129 per share.
From September 1995 through January 1996, the Company issued an aggregate
of 258,333 shares of Common Stock to John Brennan at a price of $.0129 per
share.
On or prior to September 11, 1996 the Company issued an aggregate of
767,412 shares of Common Stock to Billy Ray Foster, Trustee, the Inter Vivos
Trust of Billy Ray Foster, as partial consideration in connection with the
Company's acquisition of Foster Health Care Group.
On or prior to September 11, 1996, the Company issued an aggregate of
337,484 shares of Common Stock to John D. Foster as partial consideration in
connection with the Company's acquisition of Foster Health Care Group.
On September 11, 1996, the Company issued 95,104 shares of Common Stock to
Bill R. Foster, Jr. as partial consideration in connection with the Company's
acquisition of Foster Health Care Group.
On January 31, 1997, the Company issued 93,750 shares of Common Stock to
James J. Blumer, Jr. and 93,750 shares of Common Stock to Michael P. Kelly, in
each case at a price of $1.33 per share in connection with the Company's
acquisition of Foster Health Care Group.
On March 26, 1997, the Company issued 26,250 shares of Common Stock at a
price of $1.33 per share and 11,250 shares of Common Stock at a price of $2.00
per share to George Strong.
On April 1, 1997, the Company issued 16,479 shares of Common Stock to Roger
Breed at a price of $3.33 per share.
Series A Convertible Preferred Stock
From September 1995 through September 1996, the Company issued an aggregate
of 1,150,958 shares of Series A Convertible Preferred Stock to John Brennan at a
price of $2.00 per share.
Series B Convertible Preferred Stock
From September 1996 through March 1997, the Company issued an aggregate of
5,009,750 shares of Series B Convertible Preferred Stock as follows: 441,750
shares to Meditrust Mortgage Investments, Inc., 671,794 shares to Omega Ventures
II, L.P., 173,344 shares to Omega Ventures II Cayman, L.P., 109,928 shares to
Bayview Investors, Ltd., 554,735 shares to Crossover Fund II, L.P., 163,699
shares to Crossover Fund IIA, L.P., 40,000 shares to David L. Goldsmith and
Diane D. Goldsmith, Trustees, Goldsmith Family Trust, 394,875 shares to Boston
Safe Deposit and Trust Company, Trustee, US WEST Pension Trust, 131,625 shares
to Boston Safe Deposit and Trust Company, Trustee, US WEST Benefit Assurance
Trust, 700,000 shares to Juliet Challenger, Inc., 210,000 shares to Henry L.
Hillman, Elsie Hilliard Hillman and C.G. Grefenstette, Trustees, Henry L.
Hillman Trust, 70,000 shares to Thomas G. Bigley and C.G. Grefenstette,
Trustees, Trust for the Children of Juliet Lea Hillman Simonds, 70 shares to
Thomas G. Bigley and C. G. Grefenstette, Trustees, Trust for the Children of
Audrey Hillman Fisher,
II-2
<PAGE> 200
70,000 shares to Thomas G. Bigley and C. G. Grefenstette, Trustees, the Trust
for the Children of William Talbott Hillman, 70,000 shares to Thomas G. Bigley
and C. G. Grefenstette, Trustees, the Trust for the Children of Henry L.
Hillman, Jr., 210,000 shares to DBH Sec IV, L.P., 400,000 shares to RS Pacific
Venture L.P., 480,000 shares to HCO Partners IV-BCC, 8,000 shares to Mal Serure,
8,000 shares to Stanley Cayre, 8,000 shares to Frieda Cayre, Trustee (Jack S.
Cayre), 8,000 shares to Frieda Cayre, Trustee (Amin Cayre), 8,000 shares to
Frieda Cayre, Trustee (David Cayre), and 8,000 shares to Frieda Cayre, Trustee
(Robert Cayre), in each case at a price of $2.50 per share.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement (to be filed by amendment)
2.1 Stock Purchase Agreement, dated as of July 26, 1996, by and among Billy Ray Foster,
Sr., both individually and as Trustee of the Revocable Inter-Vivos Trust Agreement of
Billy Ray Foster dated February 4, 1988, John Douglas Foster, Billy Ray Foster, Jr.,
J. Kaye Foster-Gibson, Robert Anthony Foster, Mark Bradley Foster and Hawthorn Health
Properties, Inc. (filed herewith)
2.2 Stock Purchase Agreement, dated as of August 30, 1996, by and between Hawthorn Health
Properties, Inc. and Balanced Care Corporation (filed herewith)
2.3 Merger Agreement, dated as of July 26, 1996, by and among Billy Ray Foster, Sr., both
individually and as Trustee of the Revocable Inter-Vivos Trust Agreement of Billy Ray
Foster dated February 4, 1988, John Douglas Foster, Billy Ray Foster, Jr., J. Kaye
Foster-Gibson, Robert Anthony Foster, Mark Bradley Foster, Balanced Care Corporation,
BCC at Republic Park Center, Inc. and National Care Centers of Republic, Inc. (filed
herewith)
2.4 Merger Agreement, dated as of July 26, 1996, by and among Billy Ray Foster, Sr., both
individually and as Trustee of the Revocable Inter-Vivos Trust Agreement of Billy Ray
Foster dated February 4, 1988, John Douglas Foster, Billy Ray Foster, Jr., J. Kaye
Foster-Gibson, Robert Anthony Foster, Mark Bradley Foster, National Care Centers of
Nevada, Inc., Balanced Care Corporation, BCC at Nevada Park Care Center, Inc. and
National Care Centers of Nevada, Inc. (filed herewith)
2.5 Agreement of Sale, dated as of February 23, 1996, by and between Balanced Care
Corporation and Mount Royal Pines, L.P. (filed herewith)
2.6 Asset Purchase Agreement, dated as of February 28, 1996, by and between Balanced Care
Corporation and Senior Care of Wisconsin, Inc. (filed herewith)
2.7 Asset Purchase Agreement, dated as of December 27, 1996, by and between Balanced Care
Corporation and Bloomsburg Manor Personal Care and Retirement Center, Inc. (filed
herewith)
2.8 Asset Purchase Agreement, dated as of December 27, 1996, by and between Balanced Care
Corporation and Kingston Health Care Center, Inc. (filed herewith)
2.9 Asset Purchase Agreement, dated as of December 27, 1996, by and between Balanced Care
Corporation and Kingston Manor Personal Care and Retirement Center, Inc. (filed
herewith)
2.10 Asset Purchase Agreement, dated as of December 27, 1996, by and between Balanced Care
Corporation and Keystone Health Ventures, Inc. (filed herewith)
2.11 Asset Purchase Agreement, dated as of December 27, 1996, by and between Balanced Care
Corporation and Blakely-Pine Health Care Center, Inc. (filed herewith)
</TABLE>
II-3
<PAGE> 201
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
2.12 Asset Purchase Agreement, dated as of December 27, 1996, by and between Balanced Care
Corporation and West Side Manor Personal Care and Retirement Center, Inc. (filed
herewith)
2.13 Asset Purchase Agreement, dated as of December 27, 1996, by and between Balanced Care
Corporation and Old Forge Manor Personal Care and Retirement Center, Inc. (filed
herewith)
2.14 Purchase and Sale Agreement, dated as of December 27, 1996, by and between Balanced
Care Corporation and Keystone Development Group, Inc. (filed herewith)
2.15 Agreement of Amendment, dated as of February 6, 1997, to Purchase and Sale Agreement
dated as of December 27, 1996 by and between Balanced Care Corporation and Keystone
Development Group, Inc. (filed herewith)
2.16 Asset Purchase Agreement, dated as of April 8, 1997, by and among Balanced Care
Corporation, Barry G. Clark and Karen R. Clark, husband and wife, and Heavenly Health
Care, Inc. d/b/a Joe Clark Residential Care Homes (filed herewith)
2.17 Asset Purchase Agreement, dated as of September 18, 1997, by and between Balanced
Care Corporation and Butler Senior Care, Inc. (filed herewith)
2.18 Asset Purchase Agreement, dated as of September 3, 1997, by and among Balanced Care
Corporation, Delores Feltrop Nahar, with the joinder of Albert L. Nahar and Kenneth
A. Feltrop, with the joinder of Lori L. Feltrop, individually and d/b/a Feltrop
Personal Care Home (filed herewith)
3.1 Amended and Restated Certificate of Incorporation of Balanced Care Corporation (filed
herewith)
3.2 Bylaws of Balanced Care Corporation, as amended (filed herewith)
4.1 Commitment Letter, dated as of September 20, 1995, by and between Balanced Care
Corporation and John Brennan in connection with Convertible Series A Preferred Stock
(filed herewith)
4.2 Series B Stock Purchase Agreement, dated as of September 20, 1996, by and among
Balanced Care Corporation and certain investors listed on Schedule 1.1 thereto (filed
herewith)
4.3 Agreement of Amendment to Series B Stock Purchase Agreement, dated as of October 25,
1996, by and among Balanced Care Corporation and certain persons (filed herewith)
4.4 Stock Restriction Agreement, dated as of September 20, 1996, by and among Balanced
Care Corporation, Brad E. Hollinger, Robert Sutton, Brian Barth, Kurt Meyer, William
McCarthy and Russell DiGilio and certain other persons listed thereto (filed
herewith)
4.5 Registration Rights Agreement, dated as of September 20, 1996, by and among Balanced
Care Corporation and certain holders of shares, or rights to purchase shares, of
various classes of Common Stock and Preferred Stock of Balanced Care Corporation
(filed herewith)
4.6 Termination and Release Agreement, dated as of September 20, 1996, by and among the
holders of Common Stock or Preferred Stock of Balanced Care Corporation (filed
herewith)
4.7 Waiver of John Brennan, dated as of August 30, 1996, in connection with that certain
Capital Stock Purchase Warrant to be executed in favor of Hawthorn Health Properties,
Inc. (filed herewith)
4.8 Waiver of John Brennan, dated as of August 30, 1996, in connection with that certain
Capital Stock Purchase Warrant to be executed in favor of Meditrust Mortgage
Investments, Inc. (filed herewith)
</TABLE>
II-4
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
4.9 Form of Capital Stock Purchase Warrant, together with schedule (filed herewith)
4.10 Form of Capital Stock Purchase Warrant, together with schedule (filed herewith)
4.11 Form of Capital Stock Purchase Warrant, together with schedule (filed herewith)
4.12 First Amendment to Capital Stock Purchase Warrant, dated as of April 15, 1997, by and
between Balanced Care Corporation and Meditrust Acquisition Corporation II (filed
herewith)
5.1 Opinion of Kirkpatrick & Lockhart LLP as to the legality of the securities being
registered (to be filed by amendment)
10.1 Balanced Care Corporation 1996 Stock Option Plan as Amended and Restated, effective
July 25, 1997 (filed herewith)
10.2 Master Distribution Agreement, dated as of March 3, 1997, between Sysco Corporation
and Balanced Care Corporation (filed herewith)
10.3 Sublease, dated as of January 16, 1997, by and between Ryder Truck Rental, Inc. and
Balanced Care Corporation (filed herewith)
10.4 Sublease, dated as of June 26, 1996, by and between Liberty Mutual Insurance Company
and Balanced Care Corporation (filed herewith)
10.5 Lease, dated as of January 16, 1997, by and among Cherokee Assisted Living, L.L.C.,
Nevada Independent Living, L.L.C. and Balanced Care Corporation (filed herewith)
10.6 Lease, dated as of January 25, 1990, by and between Dixon Care Centre, Inc. and Dixon
Oaks Health Center, Inc. (filed herewith)
10.7 Amendment to Lease and Assignment, dated as of October 1, 1990, by and among Noble
House of Dixon, Inc., Dixon Management, Inc. and Dixon Oaks Health Center, Inc.
(filed herewith)
10.8 Second Lease Amendment, dated as of July 1, 1997, by and between Noble House of
Dixon, Inc. and Dixon Management, Inc. (filed herewith)
10.9 Sublease, dated as of October 1, 1996, by and between BCC at Mt. Royal Pines, Inc.
and BCC Therapies of Pennsylvania, Inc. (filed herewith)
10.10 Sublease, dated as of June 1, 1997, by and between BCC at State College, Inc. and BCC
Therapies of Pennsylvania, Inc. (filed herewith)
10.11 Form of Meditrust Leasehold Improvement Agreement, together with schedule (filed
herewith)
10.12 Form of Meditrust Facility Lease Agreement, together with schedule (filed herewith)
10.13 Form of Meditrust Security Agreement, together with schedule (filed herewith)
10.14 Mortgage and Security Agreement, dated as of May 2, 1996, by BCC of Wisconsin, Inc.
and Meditrust Mortgage Investments, Inc. (filed herewith)
10.15 Form of Meditrust Deed of Trust and Security Agreement, together with schedule (filed
herewith)
10.16 Form of Meditrust Guaranty, together with schedule (filed herewith)
10.17 Form of Meditrust Guaranty, together with schedule (filed herewith)
10.18 Form of Meditrust Guaranty (Development), together with schedule (to be filed by
amendment)
10.19 Form of Meditrust Loan Agreement, together with schedule (filed herewith)
10.20 Form of Meditrust Promissory Note, together with schedule (filed herewith)
10.21 Form of Capstone Lease, together with schedule (filed herewith)
</TABLE>
II-5
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
10.22 Form of Capstone Assignment and Security Agreement, together with schedule (filed
herewith)
10.23 Form of Capstone Assignment Agreement, together with schedule (filed herewith)
10.24 Form of Capstone Assignment of Rents and Leases, together with schedule (filed
herewith)
10.25 Form of Capstone Guaranty, together with schedule (filed herewith)
10.26 Form of Capstone Guaranty, together with schedule (filed herewith)
10.27 Form of Capstone Indemnity Agreement, together with schedule (filed herewith)
10.28 Form of Capstone Management Agreement, together with schedule (filed herewith)
10.29 Form of Capstone Assignment and Pledge of Deposit Account, together with schedule
(filed herewith)
10.30 Lease, dated as of March 21, 1996, by and between HCPI Trust and BCC at Mt. Royal
Pines, Inc. (filed herewith)
10.31 First Amendment, dated as of March 31, 1997, to Lease dated as of March 21, 1996 by
and between HCPI Trust and BCC at Mt. Royal Pines, Inc. (filed herewith)
10.32 Guaranty of Obligations, dated as of March 21, 1996, by and between HCPI Trust and
Balanced Care Corporation (to be filed by amendment)
10.33 Employment Agreement, dated as of August 1, 1996, by and between Balanced Care
Corporation and Brad E. Hollinger (filed herewith)
10.34 Employment Agreement, dated as of May 1, 1996, by and between Balanced Care
Corporation and William T. McCarthy (filed herewith)
10.35 Employment Agreement, dated as of September 20, 1995, by and between Balanced Care
Corporation and Robert J. Sutton (filed herewith)
10.36 Employment Agreement, dated as of September 20, 1995, by and between Balanced Care
Corporation and Brian L. Barth (filed herewith)
10.37 Employment Agreement, dated as of September 1, 1996, by and among Foster Health Care
Group, Inc., John D. Foster and Balanced Care Corporation (filed herewith)
10.38 Assignment, Assumption and Consent Agreement, dated as of June 30, 1997, by and among
Foster Health Care Group, Inc., BCC Management Company at Missouri, Inc. and John
Foster (filed herewith)
10.39 Consulting Agreement, dated as of October 3, 1996, by and between Balanced Care
Corporation and Kenneth F. Barber (filed herewith)
10.40 First Amendment, dated as of March 13, 1997, to the Consulting Agreement dated as of
October 3, 1996 by and between Balanced Care Corporation and Kenneth F. Barber (filed
herewith)
10.41 Letter of Intent, dated as of August 8, 1997, by and among Balanced Care Corporation,
Gethsemane Retirement Community, Inc. and Gethsemane Assisted Living, Inc. (filed
herewith)
10.42 Letter of Intent, dated as of September 2, 1997, by and between Balanced Care
Corporation and Senior Living Centers, Inc. (filed herewith)
10.43 Letter of Intent, dated as of September 22, 1997, by and between Balanced Care
Corporation and [Confidential Treatment Requested] (filed herewith)
11.1 Statement Regarding Computation of Earnings Per Share (filed herewith)
23.1 Consent of Kirkpatrick & Lockhart LLP (to be included in opinion to be filed as
Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP (filed herewith)
</TABLE>
II-6
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
23.3 Consents of Coopers & Lybrand LLP (filed herewith)
23.4 Consent of Baird, Kurtz & Dobson (filed herewith)
23.5 Consent of Snyder & Clemente (filed herewith)
23.6 Consent of Hodge, Steward & Company, P.A. (filed herewith)
24.1 Power of Attorney (filed herewith; appears as part of signature page)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
- ------------
* The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained
herein.
(b) The following financial statement schedule is filed herewith,
accompanied by a report of independent accountants on such schedule:
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
for the years ended June 30, 1997 and 1996 and the period
April 17, 1995 (date of inception) to June 30, 1997
Financial statement schedules not listed above have been omitted because
they are inapplicable, are not required under applicable provisions of
Regulation S-X, or the information that would otherwise be included in such
schedules is contained in the registrant's financial statements or accompanying
notes.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 registrant 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 of 1933, 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-7
<PAGE> 205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Borough of Mechanicsburg,
Commonwealth of Pennsylvania, on October 14, 1997.
BALANCED CARE CORPORATION
By: /s/ BRAD E. HOLLINGER
------------------------------------
Brad E. Hollinger
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Brad E. Hollinger and Mark S. Moore and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement (including any and all amendments, including post-effective
amendments, effected pursuant to Rule 462), and to file the same, with all
exhibits thereto, and other documentation in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ----------------------------- -------------------
<C> <S> <C>
/s/ BRAD E. HOLLINGER Chairman of the Board, October 14, 1997
- ------------------------------------------ President and Chief Executive
Brad E. Hollinger Officer (Principal Executive
Officer) and a Director
/s/ MARK S. MOORE Vice President (Principal October 14, 1997
- ------------------------------------------ Financial and Accounting
Mark S. Moore Officer)
/s/ KENNETH F. BARBER Director September 25, 1997
- ------------------------------------------
Kenneth F. Barber
/s/ JOHN M. BRENNAN Director October 14, 1997
- ------------------------------------------
John M. Brennan
/s/ BILL R. FOSTER Director September 26, 1997
- ------------------------------------------
Bill R. Foster
/s/ DAVID L. GOLDSMITH Director October 14, 1997
- ------------------------------------------
David L. Goldsmith
/s/ EDWARD R. STOLMAN Director September 30, 1997
- ------------------------------------------
Edward R. Stolman
/s/ GEORGE H. STRONG Director October 14, 1997
- ------------------------------------------
George H. Strong
</TABLE>
<PAGE> 206
The Board of Directors and Stockholders
Balanced Care Corporation:
Under date of July 30, 1997 except for Notes 11 and 12 which are as of
October 14, 1997, we reported on the consolidated balance sheets of Balanced
Care Corporation as of June 30, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended and the period April 17, 1995 (date of inception) to June 30,
1995. In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule in the
Registration Statement. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion such financial statement schedule when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KMPG Peat Marwick LLP
Philadelphia, Pennsylvania
July 30, 1997
S-1
<PAGE> 207
BALANCED CARE CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND THE PERIOD
APRIL 17, 1995 (DATE OF INCEPTION) TO JUNE 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
---------
COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E
--------- --------- ----------- --------- ---------
BALANCE AT CHARGED
BEGINNING CHARGED TO TO OTHER BALANCE AT
DESCRIPTION OF PERIOD OPERATIONS ACCOUNTS DEDUCTIONS END OF PERIOD
- --------------------------------- ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997:
Allowance for doubtful
accounts....................... $ -- $ 40 $326(1) $(36)(2) $ 330
==== === ===== === ====
Year ended June 30, 1996:
Allowance for doubtful
accounts....................... $ -- $ -- $ -- $ -- $ --
==== === ===== === ====
Period April 17, 1995 (date of
inception) to June 30, 1995:
Allowance for doubtful
accounts....................... $ -- $ -- $ -- $ -- $ --
==== === ===== === ====
</TABLE>
- ---------------
(1) Net additions as a result of acquisitions
(2) Amount represents bad debt write-offs
S-2
<PAGE> 208
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement (to be filed by amendment)
2.1 Stock Purchase Agreement, dated as of July 26, 1996, by and among Billy
Ray Foster, Sr., both individually and as Trustee of the Revocable
Inter-Vivos Trust Agreement of Billy Ray Foster dated February 4, 1988,
John Douglas Foster, Billy Ray Foster, Jr., J. Kaye Foster-Gibson, Robert
Anthony Foster, Mark Bradley Foster and Hawthorn Health Properties, Inc.
(filed herewith)
2.2 Stock Purchase Agreement, dated as of August 30, 1996, by and between
Hawthorn Health Properties, Inc. and Balanced Care Corporation (filed
herewith)
2.3 Merger Agreement, dated as of July 26, 1996, by and among Billy Ray
Foster, Sr., both individually and as Trustee of the Revocable
Inter-Vivos Trust Agreement of Billy Ray Foster dated February 4, 1988,
John Douglas Foster, Billy Ray Foster, Jr., J. Kaye Foster-Gibson, Robert
Anthony Foster, Mark Bradley Foster, Balanced Care Corporation, BCC at
Republic Park Center, Inc. and National Care Centers of Republic, Inc.
(filed herewith)
2.4 Merger Agreement, dated as of July 26, 1996, by and among Billy Ray
Foster, Sr., both individually and as Trustee of the Revocable
Inter-Vivos Trust Agreement of Billy Ray Foster dated February 4, 1988,
John Douglas Foster, Billy Ray Foster, Jr., J. Kaye Foster-Gibson, Robert
Anthony Foster, Mark Bradley Foster, National Care Centers of Nevada,
Inc., Balanced Care Corporation, BCC at Nevada Park Care Center, Inc. and
National Care Centers of Nevada, Inc. (filed herewith)
2.5 Agreement of Sale, dated as of February 23, 1996, by and between Balanced
Care Corporation and Mount Royal Pines, L.P. (filed herewith)
2.6 Asset Purchase Agreement, dated as of February 28, 1996, by and between
Balanced Care Corporation and Senior Care of Wisconsin, Inc. (filed
herewith)
2.7 Asset Purchase Agreement, dated as of December 27, 1996, by and between
Balanced Care Corporation and Bloomsburg Manor Personal Care and
Retirement Center, Inc. (filed herewith)
2.8 Asset Purchase Agreement, dated as of December 27, 1996, by and between
Balanced Care Corporation and Kingston Health Care Center, Inc. (filed
herewith)
2.9 Asset Purchase Agreement, dated as of December 27, 1996, by and between
Balanced Care Corporation and Kingston Manor Personal Care and Retirement
Center, Inc. (filed herewith)
2.10 Asset Purchase Agreement, dated as of December 27, 1996, by and between
Balanced Care Corporation and Keystone Health Ventures, Inc. (filed
herewith)
2.11 Asset Purchase Agreement, dated as of December 27, 1996, by and between
Balanced Care Corporation and Blakely-Pine Health Care Center, Inc.
(filed herewith)
2.12 Asset Purchase Agreement, dated as of December 27, 1996, by and between
Balanced Care Corporation and West Side Manor Personal Care and
Retirement Center, Inc. (filed herewith)
</TABLE>
<PAGE> 209
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
2.13 Asset Purchase Agreement, dated as of December 27, 1996, by and between
Balanced Care Corporation and Old Forge Manor Personal Care and
Retirement Center, Inc. (filed herewith)
2.14 Purchase and Sale Agreement, dated as of December 27, 1996, by and
between Balanced Care Corporation and Keystone Development Group, Inc.
(filed herewith)
2.15 Agreement of Amendment, dated as of February 6, 1997, to Purchase and
Sale Agreement dated as of December 27, 1996 by and between Balanced Care
Corporation and Keystone Development Group, Inc. (filed herewith)
2.16 Asset Purchase Agreement, dated as of April 8, 1997, by and among
Balanced Care Corporation, Barry G. Clark and Karen R. Clark, husband and
wife, and Heavenly Health Care, Inc. d/b/a Joe Clark Residential Care
Homes (filed herewith)
2.17 Asset Purchase Agreement, dated as of September 18, 1997, by and between
Balanced Care Corporation and Butler Senior Care, Inc. (filed herewith)
2.18 Asset Purchase Agreement, dated as of September 3, 1997, by and among
Balanced Care Corporation, Delores Feltrop Nahar, with the joinder of
Albert L. Nahar and Kenneth A. Feltrop, with the joinder of Lori L.
Feltrop, individually and d/b/a Feltrop Personal Care Home (filed
herewith)
3.1 Amended and Restated Certificate of Incorporation of Balanced Care
Corporation (filed herewith)
3.2 Bylaws of Balanced Care Corporation, as amended (filed herewith)
4.1 Commitment Letter, dated as of September 20, 1995, by and between
Balanced Care Corporation and John Brennan in connection with Convertible
Series A Preferred Stock (filed herewith)
4.2 Series B Stock Purchase Agreement, dated as of September 20, 1996, by and
among Balanced Care Corporation and certain investors listed on Schedule
1.1 thereto (filed herewith)
4.3 Agreement of Amendment to Series B Stock Purchase Agreement, dated as of
October 25, 1996, by and among Balanced Care Corporation and certain
persons (filed herewith)
4.4 Stock Restriction Agreement, dated as of September 20, 1996, by and among
Balanced Care Corporation, Brad E. Hollinger, Robert Sutton, Brian Barth,
Kurt Meyer, William McCarthy and Russell DiGilio and certain other
persons listed thereto (filed herewith)
4.5 Registration Rights Agreement, dated as of September 20, 1996, by and
among Balanced Care Corporation and certain holders of shares, or rights
to purchase shares, of various classes of Common Stock and Preferred
Stock of Balanced Care Corporation (filed herewith)
4.6 Termination and Release Agreement, dated as of September 20, 1996, by and
among the holders of Common Stock or Preferred Stock of Balanced Care
Corporation (filed herewith)
4.7 Waiver of John Brennan, dated as of August 30, 1996, in connection with
that certain Capital Stock Purchase Warrant to be executed in favor of
Hawthorn Health Properties, Inc. (filed herewith)
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
4.8 Waiver of John Brennan, dated as of August 30, 1996, in connection with
that certain Capital Stock Purchase Warrant to be executed in favor of
Meditrust Mortgage Investments, Inc. (filed herewith)
4.9 Form of Capital Stock Purchase Warrant, together with schedule (filed
herewith)
4.10 Form of Capital Stock Purchase Warrant, together with schedule (filed
herewith)
4.11 Form of Capital Stock Purchase Warrant, together with schedule (filed
herewith)
4.12 First Amendment to Capital Stock Purchase Warrant, dated as of April 15,
1997, by and between Balanced Care Corporation and Meditrust Acquisition
Corporation II (filed herewith)
5.1 Opinion of Kirkpatrick & Lockhart LLP as to the legality of the
securities being registered (to be filed by amendment)
10.1 Balanced Care Corporation 1996 Stock Option Plan as Amended and Restated,
effective July 25, 1997 (filed herewith)
10.2 Master Distribution Agreement, dated as of March 3, 1997, between Sysco
Corporation and Balanced Care Corporation (filed herewith)
10.3 Sublease, dated as of January 16, 1997, by and between Ryder Truck
Rental, Inc. and Balanced Care Corporation (filed herewith)
10.4 Sublease, dated as of June 26, 1996, by and between Liberty Mutual
Insurance Company and Balanced Care Corporation (filed herewith)
10.5 Lease, dated as of January 16, 1997, by and among Cherokee Assisted
Living, L.L.C., Nevada Independent Living, L.L.C. and Balanced Care
Corporation (filed herewith)
10.6 Lease, dated as of January 25, 1990, by and between Dixon Care Centre,
Inc. and Dixon Oaks Health Center, Inc. (filed herewith)
10.7 Amendment to Lease and Assignment, dated as of October 1, 1990, by and
among Noble House of Dixon, Inc., Dixon Management, Inc. and Dixon Oaks
Health Center, Inc. (filed herewith)
10.8 Second Lease Amendment, dated as of July 1, 1997, by and between Noble
House of Dixon, Inc. and Dixon Management, Inc. (filed herewith)
10.9 Sublease, dated as of October 1, 1996, by and between BCC at Mt. Royal
Pines, Inc. and BCC Therapies of Pennsylvania, Inc. (filed herewith)
10.10 Sublease, dated as of June 1, 1997, by and between BCC at State College,
Inc. and BCC Therapies of Pennsylvania, Inc. (filed herewith)
10.11 Form of Meditrust Leasehold Improvement Agreement, together with schedule
(filed herewith)
10.12 Form of Meditrust Facility Lease Agreement, together with schedule (filed
herewith)
10.13 Form of Meditrust Security Agreement, together with schedule (filed
herewith)
10.14 Mortgage and Security Agreement, dated as of May 2, 1996, by BCC of
Wisconsin, Inc. and Meditrust Mortgage Investments, Inc. (filed herewith)
</TABLE>
<PAGE> 211
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
10.15 Form of Meditrust Deed of Trust and Security Agreement, together with
schedule (filed herewith)
10.16 Form of Meditrust Guaranty, together with schedule (filed herewith)
10.17 Form of Meditrust Guaranty, together with schedule (filed herewith)
10.18 Form of Meditrust Guaranty (Development), together with schedule (to be
filed by amendment)
10.19 Form of Meditrust Loan Agreement, together with schedule (filed herewith)
10.20 Form of Meditrust Promissory Note, together with schedule (filed
herewith)
10.21 Form of Capstone Lease, together with schedule (filed herewith)
10.22 Form of Capstone Assignment and Security Agreement, together with
schedule (filed herewith)
10.23 Form of Capstone Assignment Agreement, together with schedule (filed
herewith)
10.24 Form of Capstone Assignment of Rents and Leases, together with schedule
(filed herewith)
10.25 Form of Capstone Guaranty, together with schedule (filed herewith)
10.26 Form of Capstone Guaranty, together with schedule (filed herewith)
10.27 Form of Capstone Indemnity Agreement, together with schedule (filed
herewith)
10.28 Form of Capstone Management Agreement, together with schedule (filed
herewith)
10.29 Form of Capstone Assignment and Pledge of Deposit Account, together with
schedule (filed herewith)
10.30 Lease, dated as of March 21, 1996, by and between HCPI Trust and BCC at
Mt. Royal Pines, Inc. (filed herewith)
10.31 First Amendment, dated as of March 31, 1997, to Lease dated as of March
21, 1996 by and between HCPI Trust and BCC at Mt. Royal Pines, Inc.
(filed herewith)
10.32 Guaranty of Obligations, dated as of March 21, 1996, by and between HCPI
Trust and Balanced Care Corporation (to be filed by amendment)
10.33 Employment Agreement, dated as of August 1, 1996, by and between Balanced
Care Corporation and Brad E. Hollinger (filed herewith)
10.34 Employment Agreement, dated as of May 1, 1996, by and between Balanced
Care Corporation and William T. McCarthy (filed herewith)
10.35 Employment Agreement, dated as of September 20, 1995, by and between
Balanced Care Corporation and Robert J. Sutton (filed herewith)
10.36 Employment Agreement, dated as of September 20, 1995, by and between
Balanced Care Corporation and Brian L. Barth (filed herewith)
10.37 Employment Agreement, dated as of September 1, 1996, by and among Foster
Health Care Group, Inc., John D. Foster and Balanced Care Corporation
(filed herewith)
10.38 Assignment, Assumption and Consent Agreement, dated as of June 30, 1997,
by and among Foster Health Care Group, Inc., BCC Management Company at
Missouri, Inc. and John Foster (filed herewith)
</TABLE>
<PAGE> 212
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
10.39 Consulting Agreement, dated as of October 3, 1996, by and between
Balanced Care Corporation and Kenneth F. Barber (filed herewith)
10.40 First Amendment, dated as of March 13, 1997, to the Consulting Agreement
dated as of October 3, 1996 by and between Balanced Care Corporation and
Kenneth F. Barber (filed herewith)
10.41 Letter of Intent, dated as of August 8, 1997, by and among Balanced Care
Corporation, Gethsemane Retirement Community, Inc. and Gethsemane
Assisted Living, Inc. (filed herewith)
10.42 Letter of Intent, dated as of September 2, 1997, by and between Balanced
Care Corporation and Senior Living Centers, Inc. (filed herewith)
10.43 Letter of Intent, dated as of September 22, 1997, by and between Balanced
Care Corporation and [Confidential Treatment Requested] (filed herewith)
11.1 Statement Regarding Computation of Earnings Per Share (filed herewith)
23.1 Consent of Kirkpatrick & Lockhart LLP (to be included in opinion to be
filed as Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP (filed herewith)
23.3 Consents of Coopers & Lybrand LLP (filed herewith)
23.4 Consent of Baird, Kurtz & Dobson (filed herewith)
23.5 Consent of Snyder & Clemente (filed herewith)
23.6 Consent of Hodge, Steward & Company, P.A. (filed herewith)
24.1 Power of Attorney (filed herewith; appears as part of signature page)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
- ------------
* The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained
herein.
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
Dated as of July 26, 1996, by and between Billy Ray Foster, Sr., both
individually and as Trustee of the Revocable Inter Vivos Trust Agreement of
Billy Ray Foster dated February 4, 1988, John Douglas Foster, Billy Ray Foster,
Jr., J. Kaye Foster Gibson, Robert Anthony Foster, and Mark Bradley Foster, all
individual residents of Missouri ("Seller"), and Hawthorn Health Properties,
Inc., a California corporation ("Buyer").
Seller owns and desires to sell all of the capital stock of each of
the following corporations (each, a "Company," collectively, the "Companies")
that will be issued and outstanding following the closing of the transactions
contemplated in the Redemption Agreements.
1. National Care Centers, Inc., a Missouri corporation, d/b/a Lebanon
Care Center.
2. National Care Centers of Hermitage, Inc., a Missouri corporation,
d/b/a Hermitage Park Regional Care Centers.
3. National Care Centers of Lebanon, Inc., a Missouri corporation,
d/b/a Lebanon Park Manor, d/b/a Fremont Terrace Apts., and d/b/a Elder Care
Home Health Agency.
4. National Care Centers of NIXA, Inc., a Missouri corporation, d/b/a
Nixa Park Care Center, d/b/a Nixa Park Terrace Apts.
5. National Care Centers of Springfield, Inc., a Missouri corporation,
d/b/a Springfield Park Care Center, d/b/a Bedford Park Terrace Apts. (excluding
d/b/a Cherokee Residential Care Center).
6. Dixon Management Inc., a Missouri corporation, d/b/a Dixon Oaks
Care Center.
7. Long Term Pharmaceutical Care, Inc., formerly known as Juan
Construction Company, a Missouri corporation, d/b/a Mt. Vernon Park Pharmacy
and d/b/a Long Term Pharmaceutical Care.
8. Springfield Retirement Village, Inc., d/b/a Mt. Vernon Park Care
Center.
9. Mt. Vernon Park Care Center West, Inc.
to Buyer, and Buyer desires to purchase such capital stock on the terms and
subject to the conditions set forth below. In consideration of the
representations, warranties, covenants, and agreements contained herein, Seller
and Buyer, each intending to be legally bound hereby, agree as set forth below.
<PAGE> 2
ARTICLE I
DEFINITIONS: CONSTRUCTION
1.01 DEFINITIONS. As used in this Agreement, the following terms have
the meanings specified in this Section 1.01. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
"Accounting Principles" means GAAP.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person or any Family Member
of such Person.
"Agreement" means this Stock Purchase Agreement, as it may be amended
from time to time.
"Auditors" means Ernst & Young LLP.
"BCC" means Balanced Care Corporation, a Delaware corporation.
"Benefit Plan" has the meaning given that term in Section 3.23(a).
"Business" means the business conducted by each Company, which
generally includes the ownership and operation of an elderly living center
including a skilled nursing facility, operation of a pharmacy, and operation of
a home health agency, including all activities related to the foregoing.
"Buyer" means Hawthorn Health Properties, Inc., a California
corporation.
"Buyer Damages" has the meaning given that term in Section 7.02.
"Buyer Indemnitees" has the meaning given that term in Section 7.02.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System Database pursuant to Superfund.
"Closing" has the meaning given that term in Section 2.03.
"Closing Date" has the meaning given that term in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.
"Combined Companies" means each of the Companies plus the Other
Companies.
"Company" and "Companies" have the meanings set forth in the Preamble
to this Agreement.
- 2 -
<PAGE> 3
"Company Group" has the meaning given that term in Section 3.23(b).
"Company Plan" has the meaning given that term in Section 3.23(a).
"Contract" and "Contracts" have the respective meanings given those
terms in Section 3.15.
"Covenant Not to Compete" means an agreement in the form attached
hereto as Exhibit 1.01(1).
"Damages" has the meaning given that term in Section 7.05.
"Defined Benefit Plan" has the meaning given that term in Section
3.23(e).
"Employment Agreements" means the contracts between Foster Health Care
Group, Inc., Buyer and each of John Foster, Susan Foster, and Greg Smith in
substantially the form of Exhibits 1.01(2) through 1.01(4), respectively.
"Encumbrance" means any liability, debt, mortgage, deed of trust,
pledge, security interest, encumbrance, option, right of first refusal,
agreement of sale, adverse claim, easement, lien, assessment, restrictive
covenant, encroachment, burden or charge of any kind or nature whatsoever or
any item similar or related to the foregoing.
"Environment" means soil, land, surface or subsurface waters, ground
waters, and ambient air.
"Environmental Condition" means any condition with respect to the
Environment relating to or arising out of the use, handling, storage,
transportation, treatment, recycling, release, or threatened release by the
Company.
"Environmental Law" means any applicable Law relating to public health
and safety or protection of the environment, including common law nuisance,
property damage and similar common law theories.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the applicable rulings and regulations thereunder.
"Escrow Agent" means Commerce Bank.
"Escrow Agreement" means an agreement substantially in the form of
Exhibit 1.01(5) hereto among Buyer, Seller, and Escrow Agent.
"Escrow Amount" means $1,200,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
"Exchange Agreement" means, collectively, the Merger Agreement of even
date herewith between BCC, BCC at Nevada Park Care Center, Inc., and National
Care Centers of Nevada, Inc.
- 3 -
<PAGE> 4
(the "Nevada Merger Agreement") and that certain Merger Agreement of even date
herewith between BCC, BCC at Republic Park Center, Inc., and National Care
Centers of Republic (the "Republic Merger Agreement"). Under the Nevada Merger
Agreement and the Republic Merger Agreement, the capital stock of those
corporations shall be exchanged for shares of BCC's common stock as a result of
the merger of National Care Centers of Republic, Inc., into BCC at Republic
Park Care Center, Inc., and of National Care Centers of Nevada, Inc., into BCC
at Nevada Park Care Center, Inc.
"Family Member" means any spouse, sibling, parent, offspring; personal
representatives or heirs of a Person or any spouse of such Family Member.
"FASB" means the Financial Accounting Standards Board or its
successor.
"Fiscal Year Financial Statements" has the meaning given that term in
Section 3.07(b).
"Foster Health Care Group Purchase Agreement" means the Asset Purchase
Agreement of even date herewith between Hawthorn Health Properties, Inc., and
Foster Health Care Group, Inc.
"Funded Debt" means the aggregate amount of all indebtedness of the
Combined Companies for borrowed money or the deferred purchase price of any
property or the redemption of any stock plus the amount required to satisfy all
obligations of any of the Combined Companies with respect to any capital lease
in order to obtain title to the underlying property, provided, however, that
the Funded Debt shall not include (i) obligations undertaken by National Care
Centers of Springfield, Inc., d/b/a Springfield Park Care Center, for the
purchase of a van and (ii) obligations undertaken by each of the Companies
payable to Foster Health Care Group, Inc., for the purchase of computers and
related equipment.
"GAAP" means United States generally accepted accounting principles.
"Governing Documents" means, with respect to any Person who is not a
natural Person, the certificate or articles of incorporation, bylaws, deed of
trust, formation or governing agreement and other charter documents or
organization or governing documents or instruments of such Person.
"Governmental Body" means any court, government (federal, state,
local, or foreign department, commission, board, bureau, agency, official or
other regulatory, administrative or governmental authority or instrumentality,
including, without limitation, any Medicare fiscal intermediary.
"Hazardous Activity" means the distribution, generation, handling,
storage, treatment, use, transportation, recycling, release or threatened
release of Hazardous Materials.
"Hazardous Materials" means any substance listed, defined, classified,
or determined to be hazardous, radioactive, or toxic contaminant pursuant to
any Environmental Law.
- 4 -
<PAGE> 5
"Indemnified Party" has the meaning given that term in Section 7.05.
"Indemnifying Party" has the meaning given that term in Section 7.05.
"Intellectual Property" has the meaning given that term in Section
3.22.
"IRS" means the Internal Revenue Service.
"Law" means any applicable federal, state, municipal, local or foreign
statute, law, ordinance, rule, regulation, policy or order of any kind or
nature whatsoever including any public policy, order of any Governmental Body
or principle of common law.
"Litigation" has the meaning given that term in Section 3.14.
"Management Agreement" means, collectively, each of the agreements in
the form attached hereto as Exhibit 1.01(6) between the affiliates of BCC and
Foster Health Care Group, Inc., a Missouri corporation owned by Seller.
"Material" means all items which, in the aggregate and disregarding
materiality, shall equal or exceed $100,000.
"Multiemployer Plan" has the meaning given that term in Section
3.23(f).
"Other Agreement" means each other agreement or document contemplated
hereby to be executed and delivered in connection with the transactions
contemplated by this Agreement on or before Closing, including the Management
Agreement, the Exchange Agreement, the Right of First Refusal Agreement, the
Escrow Agreement, the Covenants Not to Compete, and the Employment Agreements.
"Other Companies" means National Care Centers of Republic, Inc., a
Missouri corporation, d/b/a Republic Park Center, and National Care Centers of
Nevada, Inc., a Missouri corporation, d/b/a Nevada Park Care Center (excluding
d/b/a Nevada Park Terrace Apartments).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCBs" means polychlorinated biphenyls.
"Permit" and "Permits" have the respective meanings given those terms
in Section 3.16.
"Person" means and includes a natural person, a corporation, an
association, a partnership, a limited liability company, a trust, a joint
venture, an unincorporated organization, a business, any other legal entity,
and a Governmental Body.
"Purchase Price" has the meaning given that term in Section 2.02.
"Qualified Plan" has the meaning given that term in Section 3.23(d).
- 5 -
<PAGE> 6
"Real Property" has the meaning given that term in Section 3.17.
"Receivables" has the meaning given that term in Section 3.12.
"Redemption Agreement" means collectively each of the Stock Redemption
Agreements in the form of Exhibit 1.01(8) among Seller and each Company
identified in Schedule 3.03 as a Company which is redeeming certain of its
Stock.
"Related Party" means (i) Seller, (ii) any Affiliate of Seller, (iii)
any officer, director or shareholder or former officer, director or shareholder
of any Person identified in clauses (i) or (ii) preceding, and (iv) any spouse,
sibling, parent, offspring; personal representative, or heir of any natural
Person identified in any one of the preceding clauses.
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the environment.
"Right of First Refusal Agreement" means the agreement in the form of
Exhibit 1.01(9) hereto between BCC and Seller pursuant to which Seller grants
to BCC the right of first refusal to purchase the Nevada Park Apartments and
Cherokee Residential Care on the terms set forth therein.
"Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's Governing Documents or by agreement.
"Seller" means collectively Billy Ray Foster, Sr., both individually
and as Trustee of the Revocable Inter Vivos Trust Agreement of Billy Ray Foster
dated February 4, 1988, John Douglas Foster, Billy Ray Foster, Jr., J. Kaye
Foster Gibson, Robert Anthony Foster, and Mark Bradley Foster, all individual
residents of Missouri.
"Seller Damages" has the meaning given that term in Section 7.03.
"Seller Indemnitees" has the meaning given that term in Section 7.03.
"Shares" has the meaning given that term in Section 3.03.
"Subsidiary" means any corporation, partnership, joint venture or
other entity in which the Company owns, directly or indirectly, more than 20%
of the outstanding voting securities or equity interests.
"Superfund" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901, et seq., as
amended.
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"Tax" means any domestic or foreign federal, state, county or local
tax, levy, impost or other similar charge of any kind whatsoever, including any
interest or penalty thereon or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to any Tax, including any schedule
or attachment thereto, and including any amendment thereof.
"Threatened Release" means a substantial likelihood of a release that
requires action to prevent or mitigate damage to the environment that may
result from such release.
1.02. CONSTRUCTION. As used herein, unless the context otherwise
requires: (i) references to "Article" or "Section" are to an article or section
hereof; (ii) all "Exhibits" and "Schedules" referred to herein are to Exhibits
and Schedules attached hereto and are incorporated herein by reference and made
a part hereof; (iii) "include", "includes" and "including" are deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import; and (iv) the headings of the various
articles, sections and other subdivisions hereof are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
ARTICLE II
THE TRANSACTION
2.01. SALE AND PURCHASE OF SHARES. Upon the terms and subject to the
conditions of this Agreement and in consideration of the Purchase Price, Seller
shall sell, assign, transfer and deliver the Shares to Buyer, and Buyer shall
purchase from Seller and take delivery of the Shares, at the Closing, free of
all Encumbrances.
2.02. PURCHASE PRICE. The aggregate purchase price for the Shares (the
"Purchase Price") shall be $38,500,000 less the amount of the Funded Debt. The
parties agree that the Purchase Price is allocated among the Companies as shown
on Schedule 2.02. Seller and Buyer agree to report the transactions effected in
accordance with this Agreement for federal income tax and governmental
reimbursement purposes in accordance with such allocation. In addition, Buyer
agrees to pay or cause to be paid the Funded Debt at the Closing pursuant to
Section 2.05 below.
2.03. CLOSING. The consummation of the purchase and sale of the Shares
and the other transactions contemplated hereby (the "Closing") shall take place
at 10:00 a.m., local time, on or before August 19, 1996, at the offices of
Mercantile Bank of Springfield, 417 St. Louis Street, Springfield, Missouri, or
at such other time, date or place as the parties agree (the "Closing Date"),
provided, however, that the Closing shall be effective as of August 31, 1996
(the "Effective Closing Date").
2.04. CLOSING DATE PROMISSORY NOTE. At Buyer's option, Buyer may pay
the Purchase Price by delivery to Seller's agent of a Promissory Note in the
form of Exhibit 2.04(1) hereto (the
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"Promissory Note"). Such note shall be payable on the Closing Date by payment
in the manner set forth in Section 2.05. The Promissory Note shall be secured
by a pledge of all of the issued and outstanding stock of the Companies issued
to Buyer pursuant to the Stock Pledge Agreement in the form of Exhibit 2.04(2).
2.05. PAYMENT. Upon the terms and subject to the conditions of this
Agreement,
(a) at Closing, Buyer shall deliver
(i) to Seller by cashier's check or wire transfer of
federal funds $38,500,000 less (A) the Escrow Amount, and (B) the amount of the
Funded Debt,
(ii) to Seller by cashier's check or wire transfer of
federal funds the aggregate sum of $2,000,000, such amount being the
consideration for the Covenant Not to Compete, and such amount shall be payable
among Seller as shown on Schedule 2.05,
(iii) to the Escrow Agent by wire transfer of federal
funds the Escrow Amount, and
(iv) to each creditor of Seller to which the Funded Debt
is owed, Buyer shall pay the full amount of the Funded Debt by cashier's check
or wire transfer of federal funds.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and consummate
the transactions contemplated hereby, Seller represents and warrants to Buyer,
as to each of the Companies, and, where applicable as to himself, that each of
the following representations and warranties is true as of the date hereof:
3.01. ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of Missouri, and has the
corporate power and authority to own or lease its properties, carry on its
business as now conducted, enter into this Agreement and the Other Agreements
to which it is or is to become a party and perform its obligations hereunder
and thereunder.
3.02. AUTHORIZATION: ENFORCEABILITY. This Agreement and each Other
Agreement to which Seller or the Company, or both, is a party have been duly
executed and delivered by and constitute the legal, valid and binding
obligations of such party, enforceable against it in accordance with their
respective terms, except for (i) the effect of bankruptcy, insolvency,
reorganization, moratorium, equity of redemption or other similar laws now or
hereafter in effect relating to or affecting creditors generally and (ii) the
effect of general principles of equity and the discretion of the court before
which any proceeding therefor may be brought. Each Other Agreement to which
either Seller or the Company, or both, is to become a party pursuant to the
provisions hereof, when executed and delivered by such party, will constitute
the legal, valid and
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<PAGE> 9
binding obligation of such party, enforceable against such party in accordance
with the terms of such Other Agreement, except for (i) the effect of
bankruptcy, insolvency, reorganization, moratorium, equity of redemption or
other similar laws now or hereafter in effect relating to or affecting
creditors generally and (ii) the effect of general principles of equity and the
discretion of the court before which any proceeding therefor may be brought.
All actions contemplated by this Agreement and the Other Agreements have been
duly and validly authorized by all necessary proceedings by Seller and the
Company.
3.03. SHARES; CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of the Company consists solely of the number of shares
of common stock at the par value per share of such common stock identified on
Schedule 3.03 (the "Stock"). Schedule 3.03 identifies the number of shares of
Stock issued and outstanding and the number of shares of Stock held in the
treasury of the Company. Schedule 3.03 also sets forth truthful and accurate
information concerning the shares of capital stock of the Company that will be
issued and outstanding as of the Closing Date after consummation of the
transactions contemplated in the Redemption Agreements (the "Shares"). All of
the Stock is owned of record, legally and beneficially by Seller, except for
the Stock identified on Schedule 3.03 as treasury stock. Except as may be
disclosed on Schedule 3.03, the Stock is free and clear of any and all
Encumbrances, including without limitation any Encumbrance resulting from the
acquisition by Seller of the Stock, and upon delivery of the Shares hereunder,
Buyer will acquire title thereto, free and clear of any and all Encumbrances.
There are no Security Rights relating to any of the Stock except as disclosed
on Schedule 3.03. All rights and powers to vote the Stock are held exclusively
by Seller. All of the Stock is validly issued, fully paid and nonassessable,
was not issued in violation of the terms of any agreement or other
understanding, and was issued and acquired by Seller in substantial compliance
with all applicable Laws. Any shares of Stock that were previously outstanding
but that are now owned by the Company were acquired by the Company in
substantial compliance with all applicable Laws.
3.04. SUBSIDIARIES AND FICTITIOUS NAMES. Except as disclosed in
Schedule 3.04, the Company does not own, nor has it ever owned, any shares of
capital stock of or other equity interest in any corporation, partnership,
joint venture or other entity. Schedule 3.04 discloses with respect to each
Company (i) its name, (ii) the jurisdiction of its organization, and (iii) all
fictitious or other names under which the Company does business or ever
conducted business.
3.05 QUALIFICATION. The Company is duly qualified and in good
standing as a foreign corporation and is duly authorized to transact business
in each jurisdiction wherein the character of the properties owned or leased by
it or the nature of the activities conducted by it makes such qualification and
good standing necessary.
3.06 NO VIOLATION OF LAWS OR AGREEMENTS; CONSENTS.
(a) Neither the execution and delivery of this Agreement or any
Other Agreement to which Seller or the Company, or both, is or is to become a
party, the consummation of the transactions contemplated hereby or thereby nor
the compliance with or fulfillment of the terms, conditions or provisions
hereof or thereof by Seller or the Company, or
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<PAGE> 10
both, will, except as disclosed in Schedule 3.06: (i) contravene any provision
of the Governing Documents of the Company, (ii) conflict with, result in a
breach of, constitute a default or an event of default (or an event that might,
with the passage of time or the giving of notice or both, constitute a default
or event of default) under any of the terms of, result in the termination of,
result in the loss of any right under, or give to any other Person the right to
cause such a termination of or loss under, any asset of Seller or the Company,
including any Permit, Intellectual Property, license, franchise, indenture,
mortgage or any other contract, agreement or instrument to which either Seller
or the Company is a party or by which any of their assets may be bound or
affected, (iii) result in the creation, maturation or acceleration of any
liability or obligation of Seller or the Company (or give to any other Person
the right to cause such a creation, maturation or acceleration), (iv) violate
any Law or violate any judgment or order of any Governmental Body to which
Seller or the Company is subject or by which any of their respective assets may
be bound or affected, or (v) result in the creation or imposition of any
Encumbrance upon the Stock or any asset of Seller or the Company or give to any
other Person any interest or right therein.
(b) Except as set forth on Schedule 3.06 and in Section 5.05, no
consent, approval or authorization of, or registration or filing with, any
Person is required in connection with the execution or delivery by Seller or
the Company, or both, of this Agreement or any of the Other Agreements to which
either, or both, is or is to become a party pursuant to the provisions hereof
or the consummation by Seller or the Company, or both, of the transactions
contemplated hereby or thereby.
3.07. FINANCIAL INFORMATION.
(a) RECORDS. The books of account and related records of the
Company reflect accurately and in detail its assets, liabilities, revenues,
expenses and other transactions.
(b) FINANCIAL STATEMENTS. Attached as Exhibit 3.07(b)(1) are the
audited or reviewed balance sheets, income statements and statements of cash
flows for each Company's two most recent fiscal years (except that the
statements for Dixon Management, Inc., and Long Term Pharmaceutical Care, Inc.,
are not audited or reviewed) (collectively, the "Fiscal Year Financial
Statements"). The most recent Fiscal Year Financial Statement for National Care
Centers of Lebanon, Inc., as of the Closing shall be as of April 30, 1995, and
for Dixon Management, Inc., as of the Closing shall be June 30, 1995, for the
reason that the most recent fiscal year end statements of National Care Centers
of Lebanon, Inc., and Dixon Management, Inc., shall not be prepared on or
before the Closing. Also attached hereto as Exhibit 3.07(b)(2) are the
unaudited interim balance sheets and income statements for the Companies as of
April 30, 1996 and for the interim periods ended April 30, 1996, except that
the Estimated Interim Financial Statement for Long Term Pharmaceutical Care,
Inc., shall be as of March 31, 1996 (collectively, the "Estimated Interim
Financial Statements"). The Fiscal Year Financial Statements in all material
respects (i) are accurate, correct, and complete in accordance with the books
of account and records of the Companies, (ii) have been prepared in accordance
with Accounting Principles on a consistent basis throughout the indicated
periods, and (iii) present fairly the financial condition, assets and
liabilities and results of operation of the Companies at
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<PAGE> 11
the dates and for the relevant periods indicated in accordance with the
Accounting Principles. The Estimated Interim Financial Statements in all
material respects (i) are accurate, correct, and complete in accordance with
the books of account and records of the Companies, (ii) have been prepared in
accordance with Accounting Principles on a consistent basis, except that they
contain no footnotes, no year-end adjustments, including, but not limited to,
adjustments for amounts which may be receivable or payable as a result of any
Medicare cost report, adjustments for uncollectable accounts receivable and
adjustments for income tax accruals, and (iii) present fairly the financial
condition, assets and liabilities and results of operations of the Companies at
the dates and for the relevant periods indicated in accordance with the
Accounting Principles.
(c) STATE SURVEYS AND COST REPORTS. Attached as Exhibit 3.07(c)
are copies of the state surveys completed and cost reports filed by or on
behalf of each Company for the years 1994 and 1995 and filed for 1996 on or
before April 30, 1996. Each such report was prepared in substantial compliance
with all Laws and is complete and accurate in all material respects.
(d) FUNDED DEBT. Schedule 3.07 indicates the amount of Funded
Debt for each of the Combined Companies as of July 31, 1996, and describes each
component thereof by indicating the identity of the creditor and the type of
indebtedness.
3.08. UNDISCLOSED LIABILITIES. The Company has no debt, obligation or
liability, absolute, fixed, contingent or otherwise, of any nature whatsoever,
whether due or to become due, including any unasserted claim, whether incurred
directly or by any predecessor thereto, and whether arising out of any act,
omission, transaction, circumstance, sale of goods or services, state of facts
or other condition, except: (i) those reflected or reserved against its Fiscal
Year Financial Statements and/or its Estimated Interim Financial Statements in
the amounts shown therein; (ii) those not required under GAAP to be reflected
or reserved against in its Fiscal Year Financial Statements and/or its
Estimated Interim Financial Statements; (iii) those disclosed on Schedule 3.08;
(iv) those of the same nature as those set forth on its Fiscal Year Financial
Statements and/or its Estimated Interim Financial Statements that have arisen
in the ordinary course of business of the Company after the effective dates of
each of its Fiscal Year Financial Statements and each of its Estimated Interim
Financial Statements through the date hereof, all of which obligations
described in this clause (iv) have been consistent in amount and character with
past practice and experience, and none of which, individually or in the
aggregate, has had or will have an adverse effect on the business, financial
condition or prospects of any Company and none of which is a liability for
breach of contract or warranty or has arisen out of tort, infringement of any
intellectual property rights, or violation of Law or is claimed in any pending
or threatened legal proceeding; (v) those claims which are (1) first asserted
in writing after the date hereof, (2) which an insurance carrier identified on
Schedule 3.21 is obligated to defend, (3) the amount of the claim is not in
excess of the coverage available under such insurance, and (4) which shall be
disclosed by Seller to Buyer in the Closing Certificate pursuant to Section
6.01(d); (vi) those claims which are asserted by employees of Companies under
the Workers' Compensation Law and which would not have a materially adverse
effect on the Companies, and (vii) those which are not material in the
aggregate.
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3.09. NO CHANGES. Since April 30, 1996, each Company has conducted its
business only in the ordinary course, except for actions taken in compliance
with the terms of this Agreement. Without limiting the generality of the
foregoing sentence, since April 30, 1996, except as otherwise disclosed or
provided for in this Agreement, in Schedule 3.09, in any other Schedule or
Exhibit hereto, or in any other document which Seller shall deliver to Buyer on
or after the date hereof pursuant to the terms of this Agreement, there has not
been any of the following which are material in the aggregate: (i) damage or
destruction to any asset of the Company, whether or not covered by insurance;
(ii) strike, work stoppage, slowdown, or similar concerted activity by
employees at the Company; (iii) creation of any Encumbrance on any asset of the
Company; (iv) declaration or payment of any dividend or other distribution on
or with respect to or redemption or purchase by the Company of any shares of
capital stock of the Company; (v) increase in the salary, wage or bonus of any
employee of the Company which is not customary in amount; (vi) asset
acquisition or expenditure, including capital expenditure, in excess of
$100,000 in the aggregate, other than the purchase of inventory in the ordinary
course of business; (vii) change in any Company Plan; (viii) change in any
method of accounting; (ix) payment to or transaction with any Related Party,
which payment or transaction is not specifically disclosed on Schedule 3.18;
(x) disposition of any asset (other than inventory in the ordinary course of
business) for more than $100,000 in the aggregate or for less than fair market
value; (xi) payment, prepayment or discharge of any liability other than in the
ordinary course of business; (xii) write-offs or write-downs of any assets of
the Company in excess of $100,000 in the aggregate; (xiii) creation,
termination or amendment of, or waiver of any right under, any material
agreement of the Company not in the ordinary course of business; or (xiv)
agreement or commitment to do any of the foregoing.
3.10. TAXES.
(a) TAX RETURNS; PAYMENT. The Company has filed or caused to be
filed on a timely basis, or will file or cause to be filed on a timely basis,
all Tax Returns that are required to be filed by it prior to or on the
Effective Closing Date, without regard to any extensions, pursuant to the Law
of each governmental authority with taxing power over it. All such Tax Returns
were or will be, as the case may be, correct and complete in all material
respects. The Company has paid all Taxes that have become due as shown on such
Tax Returns or pursuant to any assessment received as an adjustment to such Tax
Returns, except (i) such Taxes, if any, as are being contested in good faith
and disclosed on Schedule 3.10, (ii) such Taxes that are fully reserved against
on the Fiscal Year Financial Statements or the Estimated Interim Financial
Statements, (iii) Taxes accruing after the end of the last fiscal year of each
Company and Other Company that are not yet due, and (iv) payroll taxes which
have accrued but were not required to have been paid on or before the Closing
and for which Seller shall cause the Company to have cash for such payments on
the Closing date. The Company is not currently the beneficiary of any extension
of time within which to file any Tax Return, except as disclosed on Schedule
3.10. No claim has been made by a taxing authority of a jurisdiction where the
Company does not file Tax Returns that it is or may be subject to taxation in
that jurisdiction. Without limiting the foregoing, the Company has no liability
for any Tax except Taxes disclosed on Schedule 3.10. Schedule 3.10 contains a
complete and accurate list of each type of Tax paid by the Company and each
Governmental Body to which such Tax is paid. Seller has no actual knowledge of
any
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proposed change in Law (other than the Code) that would result in a material
increase in Tax payable by any Company.
(b) WITHHOLDING. The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
(c) ASSESSMENTS. There is no pending, or, to the knowledge of
Seller or the Company, threatened or anticipated, assessment of any additional
Tax against the Company. The Company has not waived any statute of limitations
in respect of any Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency for any taxable period for which the period of
limitations on assessment has not expired, except as disclosed on Schedule
3.10. No Tax audit or examination is now pending or currently in progress with
respect to the Company.
(d) OTHER MATTERS. Except as disclosed on Schedule 3.10, the
Company is not a party to any income Tax allocation or sharing agreement. The
Company has not filed a consent under Code Section 341 (f) concerning
collapsible corporations. The Company has not made any payment, nor is it
obligated to make any payment, nor is it a party to any agreement that under
certain circumstances could obligate it to make any payment, that will not be
deductible under Code Sections 280G or 162 (m). The Company is not (nor does it
have any liability for unpaid Taxes because it once was) a member of an
affiliated group as defined in Section 1504 of the Code. The Company is not and
has not been during the applicable period specified in Code Section
897(c)(1)(A)(ii) a United States real property holding corporation as defined
in Code Section 897(c)(2).
(e) CONTROLLED GROUP. The Combined Companies constitute one
controlled group of corporations within the meaning of Sections 52 and 1563 of
the Code. Schedule 3.10 contains a list of all other entities that are also
members of such controlled group. There have been no transactions between any
Company and any other Person for which a loss has been disallowed or deferred
or which has otherwise been subject to Section 267 (a) of the Code.
3.11. INVENTORY. All of the material inventory owned by the Company is
valued on the books and records of the Company and in the Fiscal Year Financial
Statements at lower of cost or market, the cost thereof being determined on a
first-in, first-out basis in accordance with GAAP. Except to the extent of the
reserve in the Fiscal Year Financial Statements, none of the Company's
inventory is obsolete, has been consigned to others, or is on consignment from
others.
3.12. RECEIVABLES. Schedule 3.12 discloses all trade and other
accounts receivable of the Company (Receivables) outstanding as of July 31,
1996, presented on an aged basis and separately identifies the name of each
account debtor and the total amount of each related Receivable. The term
"Receivable is further defined to include billing in advance for services to be
rendered to "Private Pay Patients" (as defined in Section 5.07 below) of the
Companies and the Medicaid resource portion of billing for services to be
rendered to patients of the Companies for whom the Companies are entitled to
Medicaid reimbursement. All Receivables, whether
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reflected on the Fiscal Year Financial Statements, disclosed on Schedule 3.12,
or created after the end of the last fiscal year of each Company and each Other
Company, arose from bona fide sale or service transactions of the Company, and
no portion of any Receivable is subject to counterclaim, defense or set-off or
is otherwise in dispute. Except to the extent of the recorded reserve for
doubtful accounts specified on the Fiscal Year Financial Statements, all of the
Receivables are collectible in the ordinary course of business and will be
fully collected within 90 days after having been created using commercially
reasonable efforts.
3.13. CONDITION OF ASSETS; BUSINESS. The Company is engaged in the
Business and no other business, except as disclosed in Schedule 3.13. The
buildings, fixtures, improvements, machinery, equipment, tools, furniture,
improvements and tangible personal property of the Company, including those
reflected on the Fiscal Year Financial Statements, are in good operating
condition and repair and are suitable for the purposes for which they are used
in the Business, except (i) minor or routine maintenance, (ii) matters
disclosed on Schedule 3.13, and (iii) conditions which in the aggregate would
cost less than $25,000 to repair or replace. Except for Encumbrances listed on
Schedule 3.13 and those Encumbrances included in the title insurance
commitments received by Buyer, the Company has good and marketable title to all
of its assets; all of such assets are reflected on the Fiscal Year Financial
Statements, or, under GAAP, are not required to be reflected thereon; such
assets include all assets that are necessary for use in and operation of the
Business; and none of such assets is subject to any Encumbrance or impairment,
whether due to its condition, utility, collectability or otherwise.
3.14. NO PENDING LITIGATION OR PROCEEDINGS. Except for those matters
described on Schedule 3.14, no action, suit, investigation, claim or proceeding
of any nature or kind whatsoever, whether civil, criminal or administrative, by
or before any Governmental Body or arbitrator ("Litigation") is pending or, to
the knowledge of Seller, threatened against or affecting the Company, the
Business, any of the Company's assets, any of the Shares, or any of the
transactions contemplated by this Agreement or any Other Agreement. In
addition, none of the Combined Companies has been a party to any action in a
court of general jurisdiction during the time period January 1, 1993 through
the present, except as disclosed on Schedule 3.14. There is presently no
outstanding judgment, decree or order of any Governmental Body against or
affecting the Company, the Business, any of the Company's assets, any of the
Shares, or any of the transactions contemplated by this Agreement or any Other
Agreement. The Company does not have pending any Litigation against any third
party, except for those matters described on Schedule 3.14.
3.15. CONTRACTS; COMPLIANCE. Disclosed on Schedule 3.15, 3.21, 3.22,
or 3.23 is a brief description of each contract, lease, indenture, mortgage,
instrument, commitment or other agreement, arrangement or understanding, oral
or written, formal or informal, to which the Company is a party or by which it
or its assets may be affected and that (i) is material to the Business or the
Company's assets or operations, individually or in the aggregate, (ii) involves
the purchase, sale or lease of any asset, materials, supplies, inventory or
services in excess of $10,000 per year, (iii) has an unexpired term of more
than six months from the date hereof, taking into account the effect of any
renewal options, (iv) relates to the borrowing or lending of any money or
guarantee of any obligation (other than the guarantee represented by the
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endorsement of negotiable instruments presented for collection), (v) limits the
right of the Company to compete in any line of business or otherwise restricts
any right the Company may have, (vi) is an employment or consulting contract
(vii) is with a Governmental Body or (viii) was not entered into in the
ordinary course (each, a "Contract" and collectively, the "Contracts"). Each
Contract is a legal, valid and binding obligation of the Company and is in full
force and effect. The Company and, to the best knowledge of Seller, each other
party to each Contract has performed substantially all obligations required to
be performed by it thereunder and is not in breach or default, and is not
alleged to be in breach or default, in any respect thereunder, and no event has
occurred and no condition or state of facts exists (or would exist upon the
giving of notice or the lapse of time or both) that would become or cause a
breach, default or event of default thereunder, would give to any Person the
right to cause such a termination or would cause an acceleration of any
obligation thereunder. The Company is not currently renegotiating any Contract
nor has the Company received any notice of non-renewal or price increase or
sales or production allocation with respect to any Contract.
3.16. PERMITS; COMPLIANCE WITH LAW. The Company holds all permits,
certificates, licenses, franchises, privileges, approvals, registrations and
authorizations required under any applicable Law in connection with the
operation of its assets and Business (each, a "Permit" and, collectively,
"Permits"). Each Permit is valid, subsisting and in full force and effect. The
Company is in substantial compliance with and has fulfilled and performed its
obligations under each Permit, and no event or condition or state of facts
exists (or would exist upon the giving of notice or lapse of time or both) that
could constitute a material breach or default under any Permit. The Company has
not been since January 1, 1994, nor is it currently in violation of any Law and
has received no notice of any violation of Law, and no event has occurred or
condition or state of facts exists that could give rise to any such violation,
except for notices of deficiencies received from the Missouri Department of
Social Services, Division of Aging, as set out in Schedule 3.16, and the
matters disclosed in Schedule 3.14. The Company has not received any notice of
non-renewal of any Permit nor will the transactions contemplated hereby result
in the cancellation or increase the likelihood of non-renewal of any Permit.
3.17. REAL PROPERTY. Schedule 3.17 contains a list of all real
properties currently owned, used or leased by the Company or in which the
Company has an interest, excluding those properties identified in Schedule 5.05
which Seller shall have a right to convey to other parties prior to the Closing
(collectively, the "Real Property"), and identifies the record title holder of
all of the Real Property. The Company has good and marketable fee simple title
to all Real Property shown as owned by it on Schedule 3.17, free and clear of
all Encumbrances, other than (i) as indicated on Schedule 3.17, (ii) zoning
restrictions, (iii) liens for current taxes not yet due, and (iv) those
Encumbrances set out in the title insurance commitments received by Buyer with
respect to the Real Estate and which are set out in Schedule 3.17. The Company
has the right to quiet enjoyment of all Real Property in which it holds a
leasehold interest for the full term, including all renewal rights, of the
lease or similar agreement relating thereto. Schedule 3.17 contains a list of
all title insurance policies held by the Company. Seller has delivered an ALTA
as-built survey for all Real Property owned by the Company to Buyer. The
Company has not received any written notice of assessments for public
improvements or condemnation against any Real Property.
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3.18. TRANSACTIONS WITH RELATED PARTIES. No Related Party is or has
been since January 1, 1992 a party to any transaction, agreement or
understanding with the Company except pursuant to arrangements disclosed on
Schedule 3.18 and except for dividends properly reflected as such in the Fiscal
Year Financial Statements or the Estimated Interim Financial Statements, except
as set forth in Schedule 3.18. No Related Party uses any assets of the Company
except directly in connection with the Business, and no Related Party owns any
asset used in the Business. Except as set forth on Schedule 3.18, no Related
Party has any claim of any nature, including any inchoate claim, against the
Company, and the Company has no claim of any nature, including any inchoate
claim, against any Related Party. Except as disclosed on Schedule 3.18, as
otherwise expressly provided hereby or by any Other Agreement or as otherwise
may be mutually agreed after Closing, (i) no Related Party will at any time
after Closing for any reason, directly or indirectly, be or become entitled to
receive any payment or transfer of money or other property of any kind from the
Company, and (ii) the Company will not at any time after Closing for any
reason, directly or indirectly, be or become subject to any obligation to any
Related Party.
3.19. LABOR RELATIONS. The relations of the Company with its employees
are good to the best of Seller's knowledge. No employee of the Company is
represented by any union or other labor organization. No representation
election, arbitration proceeding, grievance, labor strike, dispute, slowdown,
stoppage or other concerted activity on the part of Company's employees is
pending or, to the knowledge of Seller or the Company, threatened against,
involving, affecting or potentially affecting the Company. No complaint against
the Company is pending or, to the knowledge of Seller or the Company,
threatened before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any similar state or local agency, by or on behalf of
any employee of the Company. The Company has no contingent liability for sick
leave, vacation time, severance pay or any similar item not fully reserved on
the Fiscal Year Financial Statements and/or the Estimated Interim Financial
Statements. The Company has no contingent liability for any occupational
disease of any of its employees, former employees or others. Neither the
execution and delivery of this Agreement, the performance of the provisions
hereof nor the consummation of the transactions contemplated hereby will
trigger any severance pay obligation under any contract or under any Law.
3.20. PRODUCTS LIABILITY; WARRANTIES. The Company shall have no
liability after the Effective Closing Date not fully covered by insurance
relating to any services rendered, or any product manufactured, distributed, or
sold by the Company prior to the Effective Closing Date, whether or not such
liability relates to products or services that are defective or improperly
designed, manufactured, or rendered in breach of any express or implied
warranty. Schedule 3.20 discloses and describes the terms of all express
product warranties under which the Company may have liability after the
Effective Closing Date.
3.21. INSURANCE. Schedule 3.21 discloses all insurance policies with
respect to which the Company is the owner, insured or beneficiary. The Company
will not have any liability after the Effective Closing Date for retrospective
or retroactive premium adjustments. Since incorporation, all insurance policies
covering professional liability and general liability maintained by or for the
benefit of the Company have been "occurrence" policies and not "claims
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<PAGE> 17
made" policies. All such liability policies are listed on Schedule 3.21.
Schedule 3.21 discloses the manner in which the Company provides coverage for
workers' compensation claims.
3.22. INTELLECTUAL PROPERTY RIGHTS. Schedule 3.22 discloses all of the
trademark and service mark rights, applications and registrations, trade names,
fictitious names, service marks, logos and brand names, copyrights, copyright
applications, letters patent, patent applications and licenses of any of the
foregoing owned or used by the Company in or applicable to the Business. The
Company has the entire right, title and interest in and to, or has the
exclusive perpetual royalty-free right to use, the intellectual property rights
disclosed on Schedule 3.22 and all other processes, know-how, show-how,
formulae, trade secrets, inventions, discoveries, improvements, blueprints,
specifications, drawings, designs, and other proprietary rights necessary or
applicable to or advisable for use in the Business ("Intellectual Property"),
free and clear of all Encumbrances, except as disclosed in Schedule 3.22.
Schedule 3.22 separately discloses all intellectual property rights to which
the Company holds rights under any license. The Intellectual Property is valid
and not the subject of any interference, opposition, reexamination or
cancellation. To the knowledge of Seller or the Company, no Person is
infringing upon nor has any Person misappropriated any Intellectual Property.
The Company is not infringing upon the intellectual property rights of any
other Person.
3.23. EMPLOYEE BENEFITS.
(a) BENEFIT PLANS; COMPANY PLANS. Schedule 3.23(a) discloses all
existing written and unwritten "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and any other written and unwritten profit sharing,
pension, savings, deferred compensation, fringe benefit, insurance, medical,
medical reimbursement, life, disability, accident, post-retirement health or
welfare benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other plan, agreement, contract, policy, trust fund
or arrangement (each, a "Benefit Plan"), whether or not funded and whether or
not terminated, (i) maintained or sponsored by the Company, or (ii) with
respect to which the Company (or Seller with respect to the Company) is
obligated to contribute, or (iii) that otherwise covers any of the current or
former employees of the Company or their beneficiaries, or (iv) as to which any
such current or former employees or their beneficiaries participated or were
entitled to participate or accrue or have accrued any rights thereunder (each,
a "Company Plan").
(b) COMPANY GROUP MATTERS; FUNDING. Neither the Company nor any
corporation that may be aggregated with the Company under Sections 414(b), (c),
(m) or (o) of the Code (the "Company Group") has any obligation to contribute
to or any direct or indirect liability under or with respect to any Benefit
Plan of the type described in Sections 4063 and 4064 of ERISA or Section 413(c)
of the Code. The Company does not have any liability as a result of delinquent
contributions, distress terminations, fraudulent transfers, failure to pay
premiums to the PBGC, or withdrawal liability (as defined in Section 4201 of
ERISA). Following the Closing, the Company will not have any liability, with
respect to any Benefit Plan of any member of the Company Group (other than one
of the Combined Companies) as a result of delinquent contributions, distress
terminations, fraudulent transfers, failure to pay premiums to the PBGC, or
withdrawal liability (as defined in Section 4201 of ERISA). No accumulated
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<PAGE> 18
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code) exists nor has any funding waiver from the IRS been received or requested
with respect to any Company Plan or any Benefit Plan sponsored or maintained by
any member of the Company Group and no excise or other Tax is due or owing
because of any failure to comply with the minimum funding standards of the Code
or ERISA with respect to any of such plans.
(c) COMPLIANCE. Except as otherwise provided on Schedule
3.23(c), each of the Company Plans and all related trusts, insurance contracts
and funds have been created, maintained, funded and administered in all
respects in substantial compliance with all applicable Laws and in substantial
compliance with the plan document, trust agreement, insurance policy or other
writing creating the same or applicable thereto. No Company Plan is or is
proposed to be under audit or investigation by the IRS or Department of Labor,
and no completed audit of any Company Plan has resulted in the imposition of
any Tax, fine or penalty.
(d) QUALIFIED PLANS. Schedule 3.23(d) discloses each Company
Plan that purports to be a qualified plan under Section 401(a) of the Code and
exempt from United States federal income tax under Section 501(a) of the Code
(a "Qualified Plan"). With respect to each Qualified Plan, a determination
letter (or opinion or notification letter, if applicable) has been received
from the IRS that such plan is qualified under Section 401(a) of the Code and
exempt from federal income tax under Section 501(a) of the Code. No Qualified
Plan has been amended since the date of the most recent such letter.
No member of the Company Group, nor (to the best of Seller's
knowledge) any fiduciary of any Qualified Plan, nor (to the best of Seller's
knowledge) any agent of any of the foregoing, has done anything that would
adversely affect the qualified status of a Qualified Plan or the qualified
status of any related trust.
(e) NO DEFINED BENEFIT PLANS. No Company Plan is a defined
benefit plan within the meaning of Section 3(35) of ERISA (a "Defined Benefit
Plan"). No Defined Benefit Plan sponsored or maintained by any member of the
Company Group has been terminated or partially terminated after September 1,
1974, except as set forth on Schedule 3.23(e). Each Defined Benefit Plan
identified as terminated on Schedule 3.23(e) has met the requirement for
standard termination of single-employer plans contained in Section 4041(b) of
ERISA. During the five-year period ending on the Effective Closing Date, no
member of the Company Group has transferred a Defined Benefit Plan to a
corporation that was not, at the time of transfer, related to the transferor in
any manner described in Sections 414(b), (c), (m) or (o) of the Code.
(f) MULTIEMPLOYER PLANS. No Company Plan is a multiemployer plan
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"). No member of the Company Group has withdrawn from any
Multiemployer Plan or incurred any withdrawal liability to or under any
Multiemployer Plan. No Company Plan covers any employees of any member of the
Company Group in any foreign country or territory.
(g) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES; POSTRETIREMENT
BENEFITS. Except as otherwise provided on Schedule 3.23(g), no prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975 of the
Code) with respect to any Company Plan exists
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<PAGE> 19
or has occurred that could subject the Company to any liability or Tax under
Part 5 of Title I of ERISA or Section 4975 of the Code. To Seller's knowledge,
no member of the Company Group, nor any administrator or fiduciary of any
Company Plan, nor any agent of any of the foregoing, has engaged in any
transaction or acted or failed to act in a manner that will subject the Company
to any liability for a breach of fiduciary or other duty under ERISA. With the
exception of the requirements of Section 4980B of the Code, no post-retirement
benefits are provided under any Company Plan that is a welfare benefit plan as
described in ERISA Section 3(1).
3.24. ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 3.24:
(a) COMPLIANCE; NO LIABILITY. The Company has operated the
Business and each parcel of Real Property in substantial compliance with all
applicable Environmental Laws. The Company is not subject to any liability,
penalty or expense (including legal fees) that would have a material adverse
effect on the financial condition of the Seller or the Companies and will not
hereafter suffer or incur any loss, liability, penalty or expense (including
legal fees) by virtue of any material violation of any applicable Environmental
Law occurring prior to the Effective Closing Date, any Hazardous Activity
conducted on or with respect to any property at or prior to the Effective
Closing Date or any Environmental Condition existing on or with respect to any
property at or prior to the Effective Closing Date, in each case whether or not
the Company permitted or participated in such act or omission.
(b) TREATMENT; CERCLIS. The Company has not treated, stored,
recycled or disposed of any Hazardous Material on any Real Property, and to the
best of Seller's knowledge no other Person has treated, stored, recycled or
disposed of any Hazardous Material on any part of the Real Property except in
accordance with Environmental Laws. The Company has not caused release of any
Hazardous Material at, on, or under any Real Property. The Company has not
transported any Hazardous Material or arranged for the transportation of any
Hazardous Material to any location that is listed on the National Priorities
List pursuant to Superfund. None of the Real Property is listed or, to the
knowledge of Seller or the Company, proposed for listing on the National
Priorities List or CERCLIS pursuant to Superfund or any state or local list of
sites requiring investigation or cleanup.
(c) NOTICES; EXISTING CLAIMS; HAZARDOUS MATERIALS; STORAGE
TANKS. The Company has not received any request for information, notice of
claim, demand or other notification that it is or may be potentially
responsible with respect to any investigation, abatement or cleanup of any
Threatened Release or Release of any Hazardous Material. The Company is not
required to place any notice or restriction relating to the presence of any
Hazardous Material at any Real Property or, if it sold the Real Property, in
any deed to any Real Property. The Company has provided to Buyer a list of
locations to which the Company has transported any Hazardous Material for
recycling, treatment, disposal, or other handling. There has been no past, and
there is no pending or contemplated, claim by the Company under any
Environmental Law or Laws based on actions of others that may have impacted on
the Real Property, and the Company has not entered into any agreement with any
Person regarding any Environmental Law, remedial action or other environmental
liability or expense. No PCBs or asbestos is present on or in any structure or
equipment located on any Real Property. All storage
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<PAGE> 20
tanks located on the Real Property, whether underground or aboveground, are
disclosed on Schedule 3.24. Seller has no knowledge of any past or present leak
from any such storage tank. Notwithstanding any provision in this Agreement to
the contrary, Seller makes no representation or warranty with respect to any
occurrence, condition, or state of facts which is set out in the Site Reports,
as defined in Section 4.06 below or in Schedule 4.06. To the extent the
foregoing representations in any of the subsections of this Section 3.24 relate
to matters involving the Real Property prior to its ownership by any Company or
Seller or to matters resulting from actions of Persons other than any Company
or Seller, such representations are made solely to the best of Seller's
knowledge.
3.25. FINDERS' FEES. Neither Seller nor the Company nor any of their
respective officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fee, commission or finders' fee in
connection with any of the transactions contemplated hereby or by any Other
Agreement.
3.26. DISCLOSURE. None of the representations or warranties of Seller
and the Company contained herein and none of the information contained in the
Schedules referred to in Article III is false or misleading in any material
respect or omits to state a fact herein or therein necessary to make the
statements herein or therein not misleading in any material respect.
3.27. HART-SCOTT-RODINO. The Seller, together with all corporations,
partnerships, or other business entities controlled by the Seller, as of their
last regularly prepared financial statements, have less than $100,000,000 of
total assets and, for the last fiscal year of each such entity, less than
$100,000,000 of net revenues. The terms used in this Section, including without
limitation, controlled, person, hold, voting stock, entities, total assets and
net revenues, shall be defined and interpreted in accordance with the Premerger
Notification Regulations promulgated by the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1974.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and consummate
the transactions contemplated hereby, Buyer represents and warrants to Seller
as follows:
4.01. ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to own or lease its
properties, carry on its business, enter into this Agreement and the Other
Agreements to which it is or is to become a party and perform its obligations
hereunder and thereunder. Buyer is qualified as a foreign corporation in each
jurisdiction where such qualification is required by law.
4.02. AUTHORIZATION; ENFORCEABILITY. This Agreement and each Other
Agreement to which Buyer is a party have been duly executed and delivered by
and constitute the legal, valid and binding obligations of Buyer, enforceable
against it in accordance with their respective
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<PAGE> 21
terms, except for (i) the effect of bankruptcy, insolvency, reorganization,
moratorium, equity of redemption or other similar laws now or hereafter in
effect relating to or affecting creditors generally and (ii) the effect of
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought. Each Other Agreement to which Buyer is to
become a party pursuant to the provisions hereof, when executed and delivered
by Buyer, will constitute the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with the terms of such Other Agreement,
except for (i) the effect of bankruptcy, insolvency, reorganization,
moratorium, equity of redemption or other similar laws now or hereafter in
effect relating to or affecting creditors generally and (ii) the effect of
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought. All actions contemplated by this Section
have been duly and validly authorized by all necessary proceedings by Buyer.
4.03. NO VIOLATION OF LAWS; CONSENTS. Neither the execution and
delivery of this Agreement or any Other Agreement to which Buyer is or is to
become a party, the consummation of the transactions contemplated hereby or
thereby nor the compliance with or fulfillment of the terms, conditions or
provisions hereof or thereof by Buyer will: (i) contravene any provision of the
Governing Documents of Buyer, or (ii) violate any Law or any judgment or order
of any Governmental Body to which Buyer is subject or by which any of its
assets may be bound or affected. No consent, approval or authorization of, or
registration or filing with, any Person is required in connection with the
execution or delivery by Buyer of this Agreement or any of the Other Agreements
to which Buyer is or is to become a party pursuant to the provisions hereof or
the consummation by Buyer of the transactions contemplated hereby or thereby.
4.04. NO PENDING LITIGATION OR PROCEEDINGS. No Litigation is pending
or, to the knowledge of Buyer, threatened against or affecting Buyer in
connection with any of the transactions contemplated by this Agreement or any
Other Agreement to which Buyer is or is to become a party. There is presently
no outstanding judgment, decree or order of any Governmental Body against or
affecting Buyer in connection with the transactions contemplated by this
Agreement or any Other Agreement to which Buyer is or is to become a party.
4.05. FINDERS' FEES. Neither Buyer nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for
any brokerage fee, commission or finders' fee in connection with any of the
transactions contemplated hereby.
4.06. INSPECTIONS BY BUYER. Buyer has inspected the Real Property to
its satisfaction and has independently investigated the Real Property and
analyzed the results of such investigations and is satisfied with same, but
such inspections shall not serve to limit Seller's representations set forth
herein relating to the Real Property. Attached hereto as Schedule 4.06 is a
copy of each environmental site report which Buyer caused to be prepared for
the Real Property (the "Site Reports").
4.07. HART-SCOTT-RODINO. The Buyer, together with (a) all
corporations, partnerships, or other business entities controlled by the Buyer,
(b) all persons who hold, directly or indirectly, 50% or more of the voting
stock of the Buyer, and (c) all corporations, partnerships or other
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<PAGE> 22
business entities controlled by such persons in (b) as of the date of its last
regularly prepared financial statements, have less than $10,000,000 of total
assets and, for its fiscal year ended December 31, 1995 had less than
$10,000,000 of net revenues. The terms used in this Section, including without
limitation, controlled, person, hold, voting stock, entities, total assets and
net revenues, shall be defined and interpreted in accordance with the Premerger
Notification Regulations promulgated by the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1974.
4.08. BUYER'S LENDER. Buyer agrees to deliver to Seller not later than
one business day before the Closing Date Schedule 4.08 which shall set forth
(i) the name and address of Buyer's and BCC's lender for the acquisition (the
"Lender") for the purpose of this Agreement; (ii) a statement of the full
principal amount of the loan from the Lender to Buyer and to BCC; and (iii) a
statement which shows the distribution of all of the principal of said
financing to be made upon the Closing.
ARTICLE V
CERTAIN COVENANTS
5.01. CONDUCT OF BUSINESS PENDING CLOSING. From and after the date
hereof and until the Closing Date, unless Buyer shall otherwise consent in
writing and except for actions taken in compliance with the terms of this
Agreement or any Exhibit or Schedule hereto, each Company shall, and Seller
shall cause each Company to, conduct its affairs as follows:
(a) ORDINARY COURSE; COMPLIANCE. The Business shall be conducted
only in the ordinary course and consistent with past practice. Each Company
shall maintain its property, equipment and other assets consistent with their
present condition, ordinary wear and tear excepted, and shall comply in a
timely fashion with the provisions of all Contracts, Permits and Laws and its
other agreements and commitments. Each Company shall use its best efforts to
keep its business organization intact, keep available the services of its
present employees and preserve the goodwill of its referring physicians,
suppliers, customers and others having business relations with it. Each Company
shall maintain in full force and effect the policies of insurance disclosed on
Schedule 3.21, subject only to variations required by the ordinary operations
of the Business, or else shall obtain, prior to the lapse of any such policy,
substantially similar coverage with insurers of recognized standing.
(b) TRANSACTIONS. No Company shall: (i) amend its Governing
Documents; (ii) change its authorized or issued capital stock or issue any
Security Rights with respect to shares of its capital stock; (iii) enter into
any contract or commitment the performance of which may extend beyond the
Closing, except those made in the ordinary course of business, the terms of
which are consistent with past practice; (iv) enter into any employment or
consulting contract or arrangement that is not terminable at will and without
penalty or continuing obligation; (v) fail to pay any Tax or any other
liability or charge when due, other than charges contested in good faith by
appropriate proceedings; (vi) make, change or revoke any Tax election or make
any agreement or settlement with any taxing authority; (vii) take any action
that is reasonably likely to result in the occurrence of any event set forth in
Section 3.09; (viii) take any action or omit to
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take any action that will cause a breach or termination of any Contract, other
than termination by fulfillment of the terms thereunder; or (ix) declare any
dividend or make any distribution with respect to its Stock other than a
distribution of the assets set forth on Schedule 5.01 and pursuant to the
Redemption Agreements.
(c) ACCESS, INFORMATION AND DOCUMENTS. Seller and each Company
shall give to Buyer and BCC and to Buyer's and BCC's employees and
representatives and financial sources (including, without limitation,
accountants, actuaries, attorneys, environmental consultants and engineers)
access during normal business hours to all of the properties, books, Tax
Returns, contracts, commitments, records, officers, personnel and accountants
(including independent public accountants and their audit workpapers concerning
the Company) of the Company and shall furnish to Buyer all such documents and
copies of documents and all information with respect to the properties,
liabilities and affairs of the Company as Buyer may reasonably request.
5.02 CERTAIN TAX MATTERS.
(a) ALLOCATION OF TAXES FOR PERIODS THROUGH THE EFFECTIVE
CLOSING DATE. The income of each Company shall be apportioned for the period up
to and including the Effective Closing Date and the period after the Effective
Closing Date by closing the books of Company as of the close of business on the
day before the Effective Closing Date. All Tax liability for taxes due and
payable for the period prior to the Effective Closing Date shall be either paid
by Company before the Closing or shall be paid by Seller pursuant to the terms
of the Escrow Agreement. Buyer shall cause any refund which may be received by
the Company or any Other Company after the Closing as a result of any short
period tax return to be paid to Seller.
(b) TAX RETURNS DUE AFTER THE CLOSING DATE. Buyer will file, or
cause Company to file, all Tax Returns that are required to be filed by Company
after the Closing Date, without regard to any extensions, pursuant to the law
of each governmental authority with taxing power over it. In addition, Buyer
shall file, or cause Company to file, the tax return of National Care Centers
of Lebanon, Inc., for its fiscal year ended April 30, 1996, and the tax return
of Dixon Management, Inc., for its fiscal year ended June 30, 1996.
(c) CARRYBACKS. If a Company is required to carry back any item
of loss, deduction or credit that arises in any taxable period ending after the
Effective Closing Date to a Tax Return of the Company for any taxable period
ending on or before the Effective Closing Date, Buyer or the Company, as the
case may be, will be entitled to an amount equal to the refund or credit of
Taxes realized as a result thereof.
(d) MUTUAL COOPERATION. Buyer and Seller shall each provide the
other, and Buyer shall cause each Company to provide Seller, with such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return, any Tax audit, or any judicial or administrative
proceedings relating to any Tax, and each will retain and provide the other
with any records or information that may be relevant to such Tax Return, Tax
audit,
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<PAGE> 24
proceeding or determination. The party requesting assistance hereunder shall
reimburse the other for direct expenses incurred in providing such assistance.
(e) AUDITS AND REFUND CLAIMS. Upon Seller's written request,
Buyer shall cause Company to claim any and all Tax credits and file any and all
applications for refunds of Taxes to which Company may from time to time be
entitled to claim or recover, and which are in respect of Taxes paid by Company
for any taxable period (or partial period) ending on or prior to the Effective
Closing Date, at the earliest date that such credits and/or refunds become
available. In the event that Company receives a Tax refund for any taxable
period (or partial period) ending on or prior to the Effective Closing Date,
except to the extent that the refund is attributable to a carryback described
in Section 5.02(c), Company shall pay such refund to Seller within ten days of
receipt of such refund.
Seller shall have the right, at its own expense, to control
any audit or determination by any authority, or the resolution of any claim for
refund or amended return, and contest, resolve, and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment of
Taxes for any taxable period (or partial period) ending on or prior to the
Effective Closing Date, provided, however, that Seller shall consult with Buyer
with respect to the resolution of any issue that would materially affect Buyer
for any taxable period (or partial period) ending after the Effective Closing
Date and shall not settle any such issue or file any amended return relating to
such issue without the consent of Buyer, which consent shall not be
unreasonably withheld. Where consent to a settlement is withheld by Buyer
pursuant to the preceding sentence, Buyer may continue or initiate any further
proceedings at its own expense, provided that the liability of Seller, after
giving effect to this Agreement, shall not exceed the liability that would have
resulted from the settlement or amended return. In the event any such audit
shall occur after the termination of the Escrow Agreement, or in the event the
reasonably anticipated potential liability of the Company in connection with
any such audit shall exceed the balance of the Escrow Account after taking into
account pending claims against the Escrow Account from time to time, Seller
agrees to post a bond or other security reasonably acceptable to Buyer to serve
as security for the reasonably anticipated potential liability related to such
audit. Any such bond or other security shall be released upon resolution of any
such audit and Seller's fulfillment of its obligations with regard to same.
For purposes of this subsection (e), any taxable period
beginning before and ending after the Effective Closing Date shall be treated
as two partial periods, one ending on the Effective Closing Date and the other
beginning on the day after the Effective Closing Date, except that Taxes (such
as property taxes) imposed on a periodic basis shall be allocated on a per diem
basis.
(f) CONSOLIDATED RETURN BY BUYER. Buyer agrees to file (or cause
to be filed) timely consents by Buyer and each of the Companies with the
appropriate federal and state tax authorities to qualify for filing
consolidated federal and state income tax returns. Following the Closing, Buyer
shall file consolidated federal and state income tax returns for itself and the
Companies for the first taxable year ending after the Closing.
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<PAGE> 25
5.03. PUBLICITY. Seller and Buyer shall not issue any press release or
otherwise make any announcements to the public with respect to this Agreement
without the prior written consent of the other, except as required by Law. This
Section shall expire on the Closing Date.
5.04. FULFILLMENT OF AGREEMENTS. Each party hereto shall use its best
efforts to cause all of those conditions to the obligations of the other under
Article VI that are not beyond its reasonable control to be satisfied on or
prior to the Closing and shall use its best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.05. ASSETS TO BE TRANSFERRED BEFORE CLOSING. Pursuant to the
Redemption Agreements, Seller shall cause each of the Companies to transfer
each of the following described assets (the "Excluded Assets") to Seller
pursuant to the Redemption Agreements in exchange for the number of shares of
Stock specified in the Redemption Agreements: (i) all cash except for advance
payments for services to be rendered to private-pay patients after the Closing,
resident trust funds, deposits for Worker's Compensation contributions and;
(ii) any assets owned by one or more of the Companies which are not related to
the operation of the skilled nursing facilities, residential care facilities,
independent living apartments for the elderly, home health agency, and pharmacy
businesses which are described in the list of Companies set out in the first
declaration paragraph beginning on page 1 of this Agreement; (iii) Billy Ray
Foster's personal assets and furniture, including artwork, office equipment
which is currently used by him; and (iv) certain items of furniture in the
independent living apartments with a value not to exceed $5,000. The assets to
be so transferred pursuant to the Redemption Agreements shall be identified on
Schedule 5.05. Seller shall be obligated to pay to Buyer any tax which may be
incurred by the Companies as a result of the foregoing transfer of the Excluded
Assets. Such payment shall be made pursuant to the terms of the Escrow
Agreement.
5.06. LETTER OF INTENT. Execution of this Agreement shall terminate
any and all obligations of the parties which might otherwise arise under the
letter of intent dated April 19, 1996, between Balanced Care Corporation,
Foster Health Care Group, Inc., and Billy Ray Foster, Sr.
5.07. RECEIVABLES. All payments upon Receivables received by the
Company or any Other Company on or before the Effective Closing Date shall be a
part of the cash of the Companies and Other Companies which shall be removed by
Seller before the Closing pursuant to Section 5.05 above, except for payments
of Receivables of "Private-Pay Patients" (as defined below) for services to be
rendered on or after the Closing. "Private-Pay Patients" are defined to be
those patients of a Company or Other Company for whom no reimbursement is
received from Medicare or Medicaid reimbursement programs or from any insurance
company, except the private resource portion of Medicaid reimbursement for
Medicaid-approved patients. Seller represents and warrants that the aggregate
total of all Receivables of the Combined Companies as of the Effective Closing
Date shall not be less than $4,400,000.
5.08. ACCOUNTS PAYABLE. "Accounts Payable" is defined as amounts which
any Company or Other Company is required to pay for goods received or services
rendered in the
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ordinary course of business. Seller agrees to pay or cause each Company or
Other Company to pay on or before the Closing all Accounts Payable for all
goods received and for all services rendered on or before July 31, 1996. The
parties agree that Seller shall have no obligation with respect to Accounts
Payable for goods received or services rendered to the Company or any Other
Company from and after August 1, 1996, except that Seller shall pay or cause to
be paid each payroll and the related payroll taxes for salary payments to
employees of the Companies which are paid on or before the Effective Closing
Date.
5.09. COST REPORTS. Buyer will file, or cause Company to file all
Medicare and Medicaid cost reports that are required to be filed by Company
after the Closing Date, without regard to any extensions, pursuant to
applicable law. Any liability of Company required to be paid as a result of any
such cost report for any period prior to the Closing Date shall either be paid
by Company before the Closing Date or shall be paid by Seller pursuant to the
terms of the Escrow Agreement. Buyer shall cause any refund which may be
received by the Company or any Other Company after the Closing as a result of
any such cost report to be paid to Seller.
5.10. APPOINTMENT OF SELLERS' AGENT. Each Seller hereby irrevocably
appoints Billy Ray Foster, Sr. (herein called the "Seller's Agent"), as such
Seller's Agent and attorney-in-fact to take any action required or permitted to
be taken by such Seller under the terms of this Agreement, including, without
limiting the generality of the foregoing, the giving and receipt of any notices
to be delivered or received by or on behalf of any or all of the Seller, the
payment of expenses relating to the transactions contemplated by this
Agreement, the representation of the Seller in indemnification proceedings
hereunder, and the right to waive any of the terms of this Agreement in any
respect, whether or not material, and agrees to be bound by any and all actions
taken by the Seller's Agent on his or her behalf. Each Seller agrees jointly
and severally to indemnify the Seller's Agent from and against and in respect
of any and all liabilities, damages, claims, costs and expenses, including, but
not limited to, attorneys' fees arising out of or due to any action as the
Seller's Agent and any and all actions, proceedings, demands, assessments or
judgments, costs and expenses incidental thereto, except to the extent that the
same result from bad faith or gross negligence on the part of the Seller's
Agent. Buyer shall be entitled to rely exclusively upon any communications
given by the Seller's Agent on behalf of any Seller, and shall not be liable
for any action taken or not taken in reliance upon the Seller's Agent. Except
for any notice with regard to a replacement for Seller's Agent pursuant to this
Section 5.12, Buyer shall be entitled to disregard any notices or
communications given or made by Seller unless given or made through the
Seller's Agent. In the event that Seller's Agent dies, resigns, refuses to act
or becomes disabled or unavailable, the Seller shall promptly by majority vote
in accordance with their prior ownership of the Shares appoint another Seller
as the substitute Seller's Agent to act under this Agreement; such substitute
Seller's Agent shall have all the powers of the initial Seller's Agent
hereunder; and, the Seller shall promptly deliver a copy of such appointment to
the Buyer.
5.11. DELIVERIES TO BUYER'S LENDER. Buyer shall have the right to
assign its rights arising under this Agreement, including but not limited to,
its rights arising under Article III (Representations and Warranties of Seller)
to Buyer's Lender. Seller shall cause to be delivered and addressed to Buyer's
Lender the opinion of Seller's counsel described in 6.03(a)(viii).
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5.12. RELATED PARTY BALANCES. Not later than the Closing, Seller shall
cause all amounts due among Seller, any Related Party, any present or former
shareholder of the Company, and the Company to be paid in full.
5.13. EXHIBITS, SCHEDULES, AND OTHER AGREEMENTS. The parties
acknowledge that certain of the Exhibits, Schedules, and Other Agreements
contemplated hereunder have not yet been prepared upon the date this Agreement
was executed. Each party agrees to use its best efforts to prepare and to
deliver to the other party each such remaining Exhibit, Schedule, and Other
Agreement which is required under the terms of this Agreement not later than
August 16, 1996. The parties agree to negotiate in good faith to arrive at the
definitive terms and conditions of any such Schedule, Exhibit, and Other
Agreement not later than August 16, 1996.
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION
6.01. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. The obligation of
Buyer to proceed with the Closing under this Agreement with respect to any
Company is subject to the fulfillment prior to or at Closing of the following
conditions with respect to Seller and each and every Company, any one or more
of which may be waived in whole or in part by Buyer at Buyer's sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each
of the representations and warranties of Seller contained in this Agreement
shall be true and correct in all material respects on and as of the Effective
Closing Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Effective Closing
Date. Seller shall have performed in all respects all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by it at or before the Closing.
(b) LITIGATION. No Law shall be in effect that restrains or
prohibits the transactions contemplated hereby or that would limit or adversely
affect Buyer's ownership of all of the capital stock of the Company or control
of the Company, and there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any Governmental Body
challenging the lawfulness of or seeking to prevent or delay any of the
transactions contemplated by this Agreement or any of the Other Agreements or
seeking monetary or other relief by reason of the consummation of any of such
transactions.
(c) NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Effective Closing Date, there shall have been no material adverse change,
regardless of insurance coverage therefor, in the Business or any of the
assets, results of operations, liabilities, or condition, financial or
otherwise, of the Company.
(d) CLOSING CERTIFICATE. Seller shall have delivered a
certificate, dated the Effective Closing Date, in such detail as Buyer shall
reasonably request, certifying to the fulfillment of the conditions set forth
in subparagraphs (a), (b) and (c) of this Section 6.01. Such
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certificate shall constitute a representation and warranty of Seller with
regard to the matters therein for purposes of this Agreement.
(e) CLOSING DOCUMENTS. Buyer shall have received the other
documents referred to in Section 6.03(a). All agreements, certificates,
opinions and other documents delivered by Seller or the Company to Buyer
hereunder shall be in form and substance satisfactory to Buyer.
(f) CONSENTS. The Company shall have received the consents,
approvals and actions of the Persons listed on Schedule 6.01.
(g) COVENANT NOT TO COMPETE. Each of Seller and Buyer shall have
executed a Covenant Not to Compete.
(h) MANAGEMENT AGREEMENT. Foster Health Care Group, Inc., shall
have entered into the Management Agreement.
(i) FOSTER PURCHASE AGREEMENT. Seller shall have entered into
the Foster Health Care Group Purchase Agreement.
(j) EXCHANGE AGREEMENT. Seller and the Other Companies shall
have entered into the Exchange Agreement and the transactions contemplated
thereby shall have been consummated.
(k) PAYOFF LETTERS ETC. Seller shall have delivered to Buyer at
least five days prior to the Closing Date a payoff letter from the holder of
each Funded Debt and each such holder shall have delivered to Buyer's title
insurance company appropriate releases in recordable form of all Encumbrances
relating to such Funded Debt with instructions to record such releases upon
payment of the Funded Debt as of the Closing Date.
(1) ESCROW AGREEMENT. Buyer, Seller, and Escrow Agent shall have
entered into the Escrow
(m) RIGHT OF FIRST REFUSAL AGREEMENT. Seller shall have executed
the Right of First Refusal Agreement.
(n) FINANCING AVAILABLE. Buyer shall have obtained the necessary
financing for payment of the Purchase Price.
(o) EMPLOYMENT AGREEMENTS. Foster Health Care Group, Inc., and
each of Billy Ray Foster, Sr., John Foster, Susan Foster and Greg Smith, shall
have executed the Employment Agreements.
(p) SHAREHOLDERS' AGREEMENTS. Each of the Companies and each
party included in Seller shall execute all documents which are necessary and
appropriate in order to either terminate all agreements entered into between
the Company and Seller or whereby the Seller shall waive all of his or her
rights arising under any such Shareholders' Agreements.
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<PAGE> 29
6.02. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of
Seller to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions, any one or more
of which may be waived in whole or in part by Seller at Seller's sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each
of the representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects on and as of the Effective
Closing Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Effective Closing
Date. Buyer shall have performed all of the covenants and complied in all
respects with all of the provisions required by this Agreement to be performed
or complied with by it at or before the Closing.
(b) LITIGATION. No Law shall be in effect that restrains or
prohibits the transactions contemplated hereby, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Body challenging the lawfulness of or seeking to prevent or
delay any of the transactions contemplated by this Agreement or the Other
Agreements or seeking monetary or other relief by reason of the consummation of
such transactions.
(c) NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Effective Closing Date, there shall have been no material adverse change,
regardless of insurance coverage therefor, in the business or any of the
assets, results of operations, liabilities, or condition, financial or
otherwise, of Buyer.
(d) CLOSING CERTIFICATE. Buyer shall have delivered a
certificate, dated the Effective Closing Date, in such detail as Seller shall
request, certifying to the fulfillment of the conditions set forth in
subparagraphs (a) and (b) of this Section 6.02. Such certificate shall
constitute a representation and warranty of Buyer with regard to the matters
therein for purposes of this Agreement.
(e) CLOSING DOCUMENTS. Seller shall also have received the other
documents referred to in Section 6.03(b). All agreements, certificates,
opinions and other documents delivered by Buyer to Seller hereunder shall be in
form and substance reasonably satisfactory to Seller.
(f) MANAGEMENT AGREEMENT. BCC's affiliates shall have entered
into the Management Agreement.
(g) FOSTER PURCHASE AGREEMENT. BCC or its affiliates shall have
entered into the Foster Health Care Group Purchase Agreement.
(h) EXCHANGE AGREEMENT. BCC shall have entered into the Exchange
Agreement and shall have performed all actions necessary on Buyer's part to
consummate the transactions contemplated thereby.
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(i) ESCROW AGREEMENT. Buyer, Seller, and Escrow Agent shall have
entered into the Escrow Agreement.
(j) RIGHT OF FIRST REFUSAL AGREEMENT. BCC shall have executed
the Right of First Refusal Agreement.
(k) COVENANT NOT TO COMPETE. Each of Buyer and Seller shall have
executed a Covenant Not to Compete and Buyer shall have made the payment
required thereby.
(1) DIXON LEASE. BCC shall have executed an Indemnification
Agreement in the form of Exhibit 6.02(1) whereby BCC shall agree to indemnify,
defend, and hold harmless John D. Foster, Todd A. Spence, and Sally M. Spence
from any liabilities which may arise after the Closing Date as a result of the
Guaranty Agreement of payment and performance by Dixon Management, Inc., under
the Lease (as amended) between Noble House of Dixon, Inc., as landlord, and
Dixon Management, Inc., assignee of Dixon Oaks Health Care Centre, Inc., as
tenant. Buyer hereby waives any obligation which Seller might otherwise have to
deliver to Buyer evidence of consent by Noble House of Dixon, Inc., to any
transaction contemplated in this Stock Purchase Agreement or any Other
Agreement.
(m) EMPLOYMENT AGREEMENTS. Buyer shall have executed the
Employment Agreements and such Employment Agreements shall each include the
following:
(i) Buyer shall guaranty all obligations of Foster Health
Care Group, Inc. ("FHCG") arising from and after the earlier of eighteen months
after the Closing or the date when the assets of FHCG shall be transferred to
BCC pursuant to the Foster Purchase Agreement.
(ii) FHCG shall agree to assign such Employment Agreement to
BCC and BCC shall agree to accept such assignment and shall agree to take over
and perform all obligations of FHCG from and after the date defined in (i)
above.
(n) SHAREHOLDERS' AGREEMENTS. Each of the Companies and each
party included in Seller shall execute all documents which are necessary and
appropriate in order to either terminate all agreements entered into between
the Company and Seller or whereby the Seller shall waive all of his or her
rights arising under any such Shareholders' Agreements.
(o) PROMISSORY NOTE AND STOCK PLEDGE AGREEMENT. If Buyer shall
elect to pay the Purchase Price by delivery of a Promissory Note, Buyer shall
execute and deliver the Promissory Note in the form of Exhibit 2.04(1), and
Buyer and the Escrow Agent shall execute the Stock Pledge Agreement.
6.03. DELIVERIES AND PROCEEDINGS AT CLOSING.
(a) DELIVERIES BY SELLER. Seller shall deliver or cause to be
delivered to Buyer at the Closing:
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(i) Certificates representing the Shares duly endorsed in
negotiable form or accompanied by stock powers duly executed in blank, in
either case with signatures guaranteed by a commercial bank or brokerage firm
and with all transfer taxes, if any, paid in full.
(ii) Certificates of the appropriate public officials to the
effect that each Company was a validly existing corporation in good standing in
its state of incorporation as of a date not more than 10 days prior to the
Effective Closing Date.
(iii) Incumbency and specimen signature certificates dated
the Closing Date, signed by the officers of each Company and certified by their
respective Secretaries.
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of each Company as of a date not more than 10 days
prior to the Closing Date, certified by the Secretaries of State of their
respective states of incorporation and (B) the bylaws of each Company as of the
Closing Date, certified by their respective Secretaries.
(v) Certificates of the respective Secretaries of each
Company (A) setting forth all resolutions of the Board of Directors of the
Company authorizing the execution and delivery of this Agreement and the
performance by the Company of the transactions contemplated hereby, and (B) to
the effect that the Governing Documents of the Company delivered pursuant to
Section 6.03 (a)(iv) were in effect at the date of adoption of such
resolutions, the date of execution of this Agreement and the Closing Date.
(vi) General releases by all officers and directors of each
Company and by Seller and all Related Parties of all liability of the Company
to them and of any claim that they or any of them may have against the Company
(exclusive of pension obligations) in the form of Exhibit 6.03(a)(vi).
(vii) The minute books, stock ledgers and corporate seal of
each Company.
(viii) The opinion of Husch & Eppenberger, legal counsel to
Seller and the Company, in substantially the form of Exhibit 6.03(a)(viii).
(ix) Resignations of the officers and directors of the
Company effective at the Closing.
(x) The other named agreements and documents listed on
Schedule 6.03.
(xi) Such other agreements and documents as Buyer may
reasonably request.
(b) DELIVERIES BY BUYER. Buyer shall deliver or cause to be
delivered to Seller at the Closing:
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(i) A wire transfer of federal funds in accordance with
Section 2.05 pursuant to complete wire transfer instructions delivered by
Seller to Buyer in writing at least five days prior to Closing.
(ii) A certificate of the appropriate public official to the
effect that Buyer is a validly existing corporation in its state of
incorporation as of a date not more than 10 days prior to the Closing Date.
(iii) Incumbency and specimen signature certificates signed
by the officers of Buyer and certified by the Secretary of Buyer.
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of Buyer as of a date not more than 10 days prior to
the Closing Date, certified by the Secretary of State of the state of Buyer's
incorporation and (B) the bylaws of Buyer as of the Closing Date, certified by
the Secretary of Buyer.
(v) A certificate of the Secretary of Buyer (A) setting
forth all resolutions of the Board of Directors of Buyer authorizing the
execution and delivery of this Agreement and the performance by Buyer of the
transactions contemplated hereby, certified by the Secretary of Buyer and (B)
to the effect that the Governing Documents of Buyer delivered pursuant to
Section 6.03(b)(iv) were in effect at the date of adoption of such resolutions,
the date of execution of this Agreement and the Closing Date.
(vi) The opinion of Kirkpatrick & Lockhart LLP, Buyer's
legal counsel, in substantially the form of Exhibit 6.03(b)(vi).
(vii) The other named agreements and documents listed on
Schedule 6.03.
(viii) Such other agreements and documents as Seller may
reasonably request.
6.04. TERMINATION. This Agreement may be terminated at any time prior
to Closing by: (i) mutual consent of Buyer and Seller; (ii) Buyer, if any of
the conditions specified in Section 6.01 hereof shall not have been fulfilled
by August 29, 1996, and shall not have been waived by Buyer; or (iii) Seller,
if any of the conditions specified in Section 6.02 hereof shall not have been
fulfilled by August 29, 1996, and shall not have been waived by Seller. In the
event of termination of this Agreement by either Buyer or Seller pursuant to
clause (ii) or (iii) of the immediately preceding sentence, Buyer, on the one
hand, and Seller and the Company, on the other hand, shall be liable to the
other for any breach hereof by such party, which breach led to such
termination, and the rights and obligations of the parties set forth in
Sections 7.02, 7.03, and 8.01 shall survive such termination. Buyer, on the one
hand, and Seller and the Company, on the other hand, shall also be entitled to
seek any other remedy to which it may be entitled at law or in equity in the
event of such termination, which remedies shall include injunctive relief and
specific performance.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.01. SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall survive
the Closing, but all claims for damages made by virtue of such representations,
warranties and agreements shall be made under, and subject to the limitations
set forth in, this Article VII. The representations and warranties set forth in
Articles III and IV are cumulative, and any limitation or qualification set
forth in any one representation and warranty therein shall not limit or qualify
any other representation and warranty therein. After Closing, no Company shall
have any liability to Seller for any breach of any representation or warranty
made by Seller or the Company to Buyer in this Agreement, in any certificate or
document furnished pursuant hereto by Seller or the Company or any Other
Agreement to which Seller or the Company, or both, is or is to become a party.
7.02. INDEMNIFICATION BY SELLER.
(a) BASIC INDEMNIFICATION. Seller shall indemnify, defend, save
and hold Buyer, BCC, and their respective officers, directors, employees,
agents and Affiliates (including, after the Closing, the Companies,
collectively, "Buyer Indemnitees") harmless from and against all demands,
claims, allegations, assertions, actions or causes of action, assessments,
losses, damages, deficiencies, liabilities, costs and expenses (including
reasonable legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious; collectively, "Buyer Damages") asserted against, imposed upon,
resulting to, required to be paid by or incurred by any Buyer Indemnitees,
directly or indirectly, in connection with, arising out of, which could result
in, or which would not have occurred but for, (i) a breach of any
representation or warranty made by Seller or the Company in this Agreement, in
any certificate or document furnished pursuant hereto by Seller or the Company
or any Other Agreement to which Seller or the Company, or both, is or is to
become a party, (ii) a breach or nonfulfillment of any covenant or agreement
made by Seller or the Company in or pursuant to this Agreement or in any Other
Agreement to which Seller or the Company, or both, is or is to become a party,
and (iii) any and all liabilities of the Company of any nature whatsoever,
whether due or to become due, whether accrued, absolute, contingent or
otherwise, existing on the Effective Closing Date or arising out of any
transaction entered into, or any state of facts existing, prior to the
Effective Closing Date, except for (i) liabilities fully reserved on the Fiscal
Year Financial Statements and/or the Estimated Interim Financial Statements,
but only to the extent reserved therein, (ii) those liabilities not required
under GAAP to be reserved in the Fiscal Year Financial Statements and/or the
Estimated Interim Financial Statements that are expressly quantified and set
forth in the Contracts, and (iii) obligations disclosed in this Agreement or in
any Other Agreement, Schedule, or Exhibit and (iv) obligations for Accounts
Payable which are not the responsibility of Seller pursuant to Section 5.10
above.
(b) PAYMENT OF BUYER DAMAGES. To the extent any Buyer Indemnitee
is entitled to collect Buyer Damages, Buyer shall, at its option, be entitled
to withdraw sufficient funds pursuant to the Escrow Agreement in lieu of
payment directly from Seller, and to the
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extent the amount due to any Buyer Indemnitee exceeds the balance of the funds
held under the Escrow Agreement, Buyer shall be entitled to collect such
balance owed to Buyer Indemnitee directly from Seller.
7.03. INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend, save
and hold Seller and Seller's heirs, personal representatives and assigns
(collectively, "Seller Indemnitees") harmless from and against any and all
demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing, whether or not the underlying demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, (i) a breach of any representation or warranty made by Buyer
in this Agreement or in any certificate or document furnished pursuant hereto
by Buyer or any Other Agreement to which Buyer is a party, (ii) a breach or
nonfulfillment of any covenant or agreement made by Buyer in or pursuant to
this Agreement and in any Other Agreement to which Buyer is a party, and (iii)
any and all liabilities of the Company of any nature whatsoever arising after
the Effective Closing Date or arising out of any transaction entered into, or
any state of facts which come into existence after the Effective Closing Date,
except for any liability which Seller has agreed hereunder to assume.
7.04. LIMITATION OF LIABILITY. Notwithstanding the foregoing, Seller's
obligations to indemnify Buyer Indemnitees against any Buyer Damages shall be
subject to all of the following limitations:
(a) THRESHOLD. No indemnification shall be made under clause (i)
of Section 7.02 until the aggregate amount of Buyer Damages thereunder exceeds
$100,000, but if the aggregate amount of Buyer Damages thereunder exceeds such
amount, indemnification shall be made by Seller thereunder to the full extent
of Buyer Damages.
(b) TIME PERIOD. Seller shall be obligated to indemnify Buyer
Indemnitees by virtue of clause (i) of Section 7.02 only for those Buyer
Damages as to which Buyer has given Seller written notice thereof within two
years after the Closing Date; provided, however, that with respect to any claim
for Buyer Damages sustained by reason of a breach of any representation or
warranty relating to those matters governed by Sections 3.10 and 3.24 Seller's
liability shall be limited to Buyer Damages as to which such written notice
shall have been given within the periods of the applicable federal and state
statutes of limitations related to such matters. Notwithstanding the foregoing,
Seller shall be obligated to indemnify Buyer Indemnitees for claims of alleged
breach of any representation or warranty of Seller with regard to the condition
of assets of the Company contained in Section 3.13 only if Buyer shall have
given Seller written notice of facts upon which the claim is based not later
than ninety days after the Closing.
(c) MAXIMUM LIABILITY. Notwithstanding any provision of this
Agreement to the contrary, the aggregate liability of Seller under (1) Section
7.03 above and (2) Section 7.03 of
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Exchange Agreements shall not in any event exceed $2,400,000, except for the
following: (i) claims as otherwise provided in Section 7.04(d) below; (ii)
claims arising under Sections 3.10 or 5.02 (taxes); and (iii) claims against
the Company for a refund of any amount previously received by the Company for
any Medicare reimbursement.
(d) FRAUD; INTENTIONAL MISREPRESENTATION. The limitations set
forth in Sections 7.04(a), (b), and (c) shall not apply to Buyer Damages
arising out of (i) fraud or (ii) the breach of any representation or warranty
contained herein or pursuant hereto if such representation or warranty was made
with actual knowledge that it contained an untrue statement of a fact or
omitted to state a fact necessary to make the statements of facts contained
therein not misleading.
7.05. NOTICE OF CLAIMS. If any Buyer Indemnitee or Seller Indemnitee
(an "Indemnified Party") believes that it has suffered or incurred or will
suffer or incur any Buyer Damages or Seller Damages, as the case may be
("Damages"), for which it is entitled to indemnification under this Article
VII, such Indemnified Party shall so notify the party or parties from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article VII or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
7.06. THIRD PARTY CLAIMS. The Indemnifying Party shall have the right
at its sole cost and expense to conduct and control, through counsel of its
choosing, the defense of any third party claim, action or suit, and the
Indemnifying Party may compromise or settle the same, provided that the
Indemnifying Party shall give the Indemnified Party advance notice of any
proposed compromise or settlement. The Indemnifying Party shall permit the
Indemnified Party to participate in the defense of any such action or suit
through counsel chosen by the Indemnified Party, provided that the fees and
expenses of such counsel shall be borne by the Indemnified Party. If the
Indemnifying Party shall control the conduct and settlement of such action or
suit, (i) the Indemnifying Party shall not thereby permit to exist any
Encumbrance upon any asset of the Indemnified Party; (ii) the Indemnifying
Party shall not consent to any settlement that does not include as an
unconditional term thereof the giving of a complete release from liability with
respect to such action or suit to the Indemnified Party; (iii) the Indemnifying
Party shall permit the Indemnified Party to participate in such conduct or
settlement through counsel chosen by the Indemnified Party; and (iv) the
Indemnifying Party shall agree promptly to reimburse the Indemnified Party for
the full amount of any Damages including fees and expenses of counsel for the
Indemnified Party incurred after giving the foregoing notice to the
Indemnifying Party and prior to the assumption of the conduct and control of
such action or suit by the Indemnifying Party.
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<PAGE> 36
ARTICLE VIII
MISCELLANEOUS
8.01. COSTS AND EXPENSES. Subject to Section 6.04., Buyer and Seller
shall each pay its respective expenses, brokers' fees and commissions, and
Seller shall pay all of the pre-Closing expenses of the Company incurred in
connection with this Agreement and the transactions contemplated hereby,
including all accounting, legal and appraisal fees and settlement charges.
8.02. FURTHER ASSURANCES. Seller shall, at any time and from time to
time on and after the Closing Date, upon request by Buyer and without further
consideration, take or cause to be taken such actions and execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments, documents, transfers, conveyances and assurances as may be
required or desirable for the better conveying, transferring, assigning,
delivering, assuring and confirming the Shares to Buyer or any of the assets
used in the Business to the Company.
8.03. NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made (i) the second business day after the date of mailing, if
delivered by registered or certified mail, postage prepaid, (ii) upon delivery,
if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with
a record of receipt, or (iv) the next day after the date of dispatch, if sent
by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, postage prepaid, return receipt requested), to
the parties at the following addresses:
(i) if to Buyer, to:
F. David Carr, President
Hawthorn Health Properties, Inc.
1350 Bayshore Highway,
Suite 300
Burlingame, California 94010
Telecopy: (415) 348-6943
with a required copy to:
Richard D. Harroch
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
Telecopy: (415) 773-5759
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<PAGE> 37
with a required copy to:
Brad E. Hollinger
Chairman and CEO
Balanced Care Corporation
8507 Market Street, Suite 202
Camp Hill, PA 17011
Telecopy: (717) 381-9179
with a required copy to:
Kirkpatrick & Lockhart LLP
Attn: John C. Rodney, Esquire
1500 Oliver Building
Pittsburgh, PA 15222
Telecopy: (412) 355-6501
(ii) if to Seller, to:
Mr. Billy Ray Foster
President and CEO
Foster Health Care Group
426 S. Jefferson
Springfield, MO 65806
Telecopy: (417) 831-7383
with a required copy to:
Harvey Tettlebaum
Busch & Eppenberger
235 East High Street, Suite 300
Jefferson City, Missouri 65101
Telecopy: (573) 634-7854
Notices to each Company shall be addressed in care of Seller before Closing and
in care of Buyer after Closing. Any party hereto may change the address to
which notice to it, or copies thereof, shall be addressed, by giving notice
thereof to the other parties hereto in conformity with the foregoing.
8.04. CURRENCY. All currency references herein are to United States
dollars.
8.05. OFFSET; ASSIGNMENT; GOVERNING LAW. Buyer shall be entitled to
offset or recoup from any amounts due to Seller from Buyer hereunder or under
any Other Agreement against any obligation of Seller to Buyer hereunder or
under any Other Agreement. This Agreement and all
- 37 -
<PAGE> 38
the rights and powers granted hereby shall bind and inure to the benefit of the
parties hereto and their respective permitted successors and assigns. This
Agreement and the rights, interests and obligations hereunder may not be
assigned by any party hereto without the prior written consent of the other
parties hereto, except that Buyer may make such assignments to any Affiliate of
Buyer provided that Buyer remains liable hereunder. This Agreement shall be
governed by and construed in accordance with the laws of the Missouri without
regard to its conflict of law doctrines.
8.06. AMENDMENT AND WAIVER; CUMULATIVE EFFECT. To be effective, any
amendment or waiver under this Agreement must be in writing and be signed by
the party against whom enforcement of the same is sought. Neither the failure
of any party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by any other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof shall constitute a waiver by such party of its right to exercise any
such right, power or remedy or to demand such compliance. The rights and
remedies of the parties hereto are cumulative and not exclusive of the rights
and remedies that they otherwise might have now or hereafter, at law, in
equity, by statute or otherwise.
8.07. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
and the Schedules and Exhibits set forth all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with respect
to the subject matter hereof, and supersede all prior or contemporaneous
agreements and understandings, negotiations, inducements or conditions, express
or implied, oral or written, including the letter of intent. This Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder, except the provisions of Sections 7.02 and 7.03 relating
to Buyer Indemnitees and Seller Indemnitees, provided, however, that BCC shall
be a third party beneficiary of Buyer's rights hereunder.
8.08. SEVERABILITY. If any term or other provision of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced under any rule of Law in any particular respect or
under any particular circumstances, such term or provision shall nevertheless
remain in full force and effect in all other respects and under all other
circumstances, and all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
8.09. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
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<PAGE> 39
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AS
OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
SELLER
/s/ Billy Ray Foster, Sr.
----------------------------------------
Billy Ray Foster, Sr., both individually
and as Trustee of the Revocable Inter
Vivos Trust Agreement of Billy Ray
Foster dated February 4, 1988
/s/ John Douglas Foster
----------------------------------------
John Douglas Foster
/s/ Billy Ray Foster, Jr.
----------------------------------------
Billy Ray Foster, Jr.
/s/ J. Kaye Foster Gibson
----------------------------------------
J. Kaye Foster Gibson
/s/ Robert Anthony Foster
----------------------------------------
Robert Anthony Foster
/s/ Mark Bradley Foster
----------------------------------------
Mark Bradley Foster
BUYER
Hawthorn Health Properties, Inc.
By: /s/ James A. Diebold
------------------------------------
Name: James A. Diebold
----------------------------------
Title: Vice President
---------------------------------
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<PAGE> 1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") dated as of
August 30, 1996, between Hawthorn Health Properties, Inc., a California
corporation ("Seller"), and Balanced Care Corporation, a Delaware corporation
("Buyer").
Seller owns all of the issued and outstanding shares of
capital stock (the "Shares") of Dixon Management, Inc., a Missouri corporation
(the "Company"). Seller desires to sell and transfer to Buyer, and Buyer
desires to purchase from Seller, the Shares on the terms and subject to the
conditions set forth below. In consideration of the mutual promises, covenants
and agreements contained herein, Seller and Buyer, intending to be legally
bound, agree as follows:
ARTICLE I.
THE TRANSACTION
1.01. SALE AND PURCHASE OF ASSETS. At the Closing, Seller shall sell,
assign, transfer and deliver to Buyer, and Buyer shall purchase from Seller and
take delivery of the Shares free and clear of all encumbrances.
1.02. PURCHASE PRICE. The aggregate purchase price for the Shares
shall be $81,000, payable in cash at the Closing.
1.03. CLOSING. The consummation of the purchase and sale of the Shares
and the other transactions contemplated hereby (the "Closing") shall take place
contemporaneously with the Closing under the Stock Purchase Agreement dated as
of July 26, 1996 (the "Foster Stock Purchase Agreement"), by and between
Seller, Billy Ray Foster, Sr., both individually and as Trustee of the
Revocable Inter Vivos Trust Agreement of Billy Ray Foster, Jr., J. Kaye Foster
Gibson, Robert Anthony Foster and Mark Bradley Foster (collectively, "Foster"),
at the offices of Mercantile Bank of Springfield, 417 St. Louis Street,
Springfield, Missouri, or at such other place as the parties agree.
<PAGE> 2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and consummate
the transactions contemplated hereby, Seller represents and warrants to Buyer
as follows:
2.01. SHARES; CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of the Company consists solely of the number of shares
of common stock at the par value per share of such common stock identified on
Schedule 2.01. Schedule 2.01 identifies the number of shares of Stock issued
and outstanding and the number of shares of Stock held in the treasury of the
Company. All of the Shares are owned of record, legally and beneficially, by
Seller, except for any Shares identified on Schedule 2.01 as treasury stock.
Except as may be disclosed on Schedule 2.01, the Shares are free and clear of
any and all encumbrances, including without limitation any and encumbrances
resulting from the acquisition by Seller of the Shares, and upon delivery of
all the Shares hereunder, Buyer will acquire title thereto, free and clear of
any and all encumbrances. There are no options, warrants, subscription rights,
preemptive rights, other rights, proxies, puts, calls, demands, plans,
commitments, agreements, understandings or arrangements of any kind relating to
the Shares. All of the Shares are validly issued, fully paid and non-assessable
and were acquired by Seller in full compliance with all applicable laws, except
as disclosed in Schedule 2.01.
2.02. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of California, and has the
corporate power and authority to enter into this Agreement and perform its
obligations hereunder and thereunder. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Missouri,
and has the corporate power and authority to own or lease its properties and to
carry on its business.
2.03. AUTHORIZATION; ENFORCEABILITY. This Agreement has been duly
executed and delivered by and constitute the legal, valid and binding
obligations of Seller, enforceable against it in accordance with its terms. All
actions contemplated by this Section 2.03 have been duly and validly authorized
by all necessary corporate proceedings by Seller.
2.04. FINDERS' FEES. Neither Seller, the Company nor any of their
respective officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fee, commission or finders' fee in
connection with any of the transactions contemplated hereby.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and consummate
the transactions contemplated hereby, Buyer represents and warrants to Seller
as follows:
3.01. ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has the power and
authority to own or lease its properties, carry on its business, enter into
this Agreement and perform its obligations hereunder.
- 2 -
<PAGE> 3
3.02. AUTHORIZATION; ENFORCEABILITY. This Agreement has been duly
executed and delivered by and constitute the legal, valid and binding
obligations of Buyer, enforceable against it in accordance with its terms. All
actions contemplated by this Section 3.02 have been duly and validly authorized
by all necessary proceedings by Buyer.
3.03. FINDERS' FEES. Neither Buyer nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for
any brokerage fee, commission or finders' fee in connection with any of the
transactions contemplated hereby.
ARTICLE IV.
CONDITIONS TO CLOSING; TERMINATION
4.01. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. The obligation of
Buyer to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in part by Buyer at Buyer's sole option
provided that if Buyer elects to waive such condition, Buyer shall have no
claim against Seller for the waived condition):
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS.
Each of the representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Closing Date.
Seller shall have performed in all material respects all of the covenants and
complied in all material respects with all of the provisions required by this
Agreement to be performed or complied with by it at or before the Closing.
(b) LITIGATION. No statute, regulation or order of any
governmental body shall be in effect that restrains or prohibits the
transactions contemplated hereby or that would limit or adversely affect the
Buyer's ownership of the Shares and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any governmental
body challenging the lawfulness of or seeking to prevent or delay any of the
transactions contemplated by this Agreement or seeking monetary or other relief
by reason of the consummation of any of such transactions.
(c) CLOSING DOCUMENTS. Buyer shall have received the other
documents referred to in Section 4.03(a). All agreements, certificates,
opinions and other documents delivered by Seller to Buyer hereunder shall be in
form and substance satisfactory to counsel for Buyer, in the exercise of such
counsel's reasonable professional judgment.
4.02. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of
Seller to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in
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<PAGE> 4
part by Seller at Seller's sole option provided that if Seller elects to waive
such condition, Seller shall have no claim against Buyer for the waived
condition):
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS.
Each of the representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Closing Date.
Buyer shall have performed in all material respects the covenants and complied
in all material respects with all of the provisions required by this Agreement
to be performed or complied with by it at or before the Closing.
(b) LITIGATION. No statute, regulation or order of any
governmental body shall be in effect that restrains or prohibits the
transactions contemplated hereby, and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any Governmental
Body challenging the lawfulness of or seeking to prevent or delay any of the
transactions contemplated by this Agreement or seeking monetary or other relief
by reason of the consummation of such transactions.
(c) CLOSING DOCUMENTS. Seller shall also have received the
other documents referred to in Section 4.03(b). All agreements, certificates,
opinions and other documents delivered by Buyer to Seller hereunder shall be in
form and substance satisfactory to counsel for Seller, in the exercise of such
counsel's reasonable professional judgment.
4.03. DELIVERIES AND PROCEEDINGS AT CLOSING.
(a) DELIVERIES BY SELLER. Seller shall deliver or cause to be
delivered to Buyer at the Closing:
i) Certificates representing the Shares duly
endorsed in negotiable form or accompanied by stock powers
duly endorsed in blank.
ii) Certificate executed by an officer of Seller
setting forth all resolutions of the Board of Directors of
Seller authorizing the execution and delivery of this
Agreement and the performance by Seller of the transactions
contemplated hereby.
iii) All governmental and third party consents
required to consummate the transactions contemplated hereby.
iv) The minute books, stock ledgers and corporate
seal of the Company.
v) Resignations of the officers and directors of the
Company, effective at the Closing.
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<PAGE> 5
vi) Consent of Foster to the assignment of Seller's
rights under the Foster Stock Purchase Agreement.
vii) Such other agreements and documents as Buyer
may reasonably request.
(b) DELIVERIES BY BUYER. Buyer shall deliver or cause to be
delivered to Seller at the Closing:
i) A certificate of the Secretary of Buyer setting
forth all resolutions of the Board of Directors of Buyer
authorizing the execution and delivery of this Agreement and
the performance by Buyer of the transactions contemplated
hereby, certified by the Secretary of Buyer.
ii) Such other agreements and documents as Seller
may reasonably request.
ARTICLE V.
MISCELLANEOUS
5.01. ASSIGNMENT OF RIGHTS. Seller hereby agrees to assign its rights
to indemnification under the Foster Stock Purchase Agreement to the extent such
rights relate to the Shares and the Company.
5.02. COSTS AND EXPENSES. All applicable transfer, sales and use taxes
and documentary, filing, recording and vehicle registration fees payable as a
result of the transfer of the Shares hereunder shall be paid by Buyer.
5.03. CONSTRUCTION. As used herein, unless the context otherwise
requires: i) references to "Article" or "Section" are to an article or section
hereof; ii) all "Schedules" referred to herein are to Schedules attached hereto
and are incorporated herein by reference and made a part hereof; iii)
"include", "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import; and iv) the headings of the various articles, sections and other
subdivisions hereof are for convenience of reference only and shall not modify,
define or limit any of the terms or provisions hereof.
5.04. FURTHER ASSURANCES. Seller shall, at any time and from time to
time on and after the Closing Date, upon request by Buyer and without further
consideration, take or cause to be taken such actions and execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments, documents, transfers, conveyances and assurances as may be
required or desirable for the better conveying, transferring, assigning and
delivering the Shares to Buyer.
- 5 -
<PAGE> 6
5.05. NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made i) the second business day after the date of mailing, if
delivered by registered or certified mail, postage prepaid, return receipt
requested, ii) upon delivery, if sent by hand delivery, iii) upon delivery, if
sent by prepaid overnight carrier, with a record of receipt, or iv) the next
day after the date of dispatch, if sent by cable, telegram, facsimile or
telecopy (with a copy simultaneously sent by registered or certified mail,
postage prepaid, return receipt requested), to the parties at the following
addresses:
(i) if to Buyer, to:
Balanced Care Corporation
3507 Market Street, Suite 202
Camp Hill, PA 17001
with a required copy to:
John C. Rodney, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Telecopy: 412-355-6501
(ii) if to Seller, to:
Hawthorne Health Properties, Inc.
1350 Bayshore Highway, Suite 300
Burlingame, CA 94010
with a required copy to:
Richard D. Harroch, Esq.
Orrick, Herrington & Sutcliffe
One Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Any party hereto may change the address to which notice to it, or copies
thereof, shall be addressed, by giving notice thereof to the other parties
hereto in conformity with the foregoing.
5.06. CURRENCY. All currency references herein are to United States
dollars.
- 6 -
<PAGE> 7
5.07. ASSIGNMENT; GOVERNING LAW. This Agreement and all the rights and
powers granted hereby shall bind and inure to the benefit of the parties hereto
and their respective permitted successors and assigns. This Agreement and the
rights, interests and obligations hereunder may not be assigned by any party
hereto without the prior written consent of the other parties hereto, except
that Buyer may make such assignments to any Affiliate of Buyer provided that
Buyer remains liable hereunder. This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri without regard
to its conflict of law doctrines.
5.08. AMENDMENT AND WAIVER; CUMULATIVE EFFECT. To be effective, any
amendment or waiver under this Agreement must be in writing and be signed by
the party against whom enforcement of the same is sought. Neither the failure
of any party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by any other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof shall constitute a waiver by such party of its right to exercise any
such right, power or remedy or to demand such compliance. The rights and
remedies of the parties hereto are cumulative and not exclusive of the rights
and remedies that they otherwise might have now or hereafter, at law, in
equity, by statute or otherwise.
5.09. SEVERABILITY. If any term or other provision of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced under any rule of Law in any particular respect or
under any particular circumstances, such term or provision shall nevertheless
remain in full force and effect in all other respects and under all other
circumstances, and all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
5.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HAWTHORN HEALTH PROPERTIES, INC.
By: /s/ JAMES A. DIEBOLD
---------------------------
James A. Diebold
Title: Executive Vice President
----------------------------
<PAGE> 8
BALANCED CARE CORPORATION
By: /s/ ROBIN L. BARBER
-----------------------
Robin L. Barber
Title: Assistant Secretary
-----------------------
- 8 -
<PAGE> 1
Exhibit 2.3
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") dated as of July 26, 1996, by and
between Balanced Care Corporation, a Delaware corporation ("Parent"), BCC at
Republic Park Center, Inc., a Delaware corporation ("Parent Sub"), National
Care Centers of Republic, Inc., a Missouri corporation, d/b/a Republic Park
Center ("National"), and Billy Ray Foster, Sr., both individually and as
Trustee of the Revocable Inter Vivos Trust Agreement of Billy Ray Foster dated
February 4, 1988, John Douglas Foster, Billy Ray Foster, Jr., J. Kaye Foster
Gibson, Robert Anthony Foster, and Mark Bradley Foster, all individual
residents of Missouri (individually referred to as "Stockholder" and
collectively the "Stockholders"), each of whom is a shareholder of National.
WHEREAS, Stockholders are the registered owners and holders of all of
the issued and outstanding shares of stock of National; and
WHEREAS, Parent Sub is the wholly owned subsidiary of Parent; and
WHEREAS, the parties hereto desire to effectuate the merger of
National into Parent Sub ("Merger"); and
WHEREAS, each of the Stockholders have reviewed this Agreement and all
other information deemed necessary or appropriate by such Stockholder to be
reviewed in connection with the Merger and have determined to execute this
Agreement and consummate the transactions contemplated thereby; and
WHEREAS, for federal income tax purposes, it is intended that the
transactions contemplated in this Agreement qualify as tax-free reorganization
under the provisions of Section 368 of the Internal Revenue Code of 1986, as
amended ("Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth in this
Agreement, the parties hereto intending to be legally bound hereby agree as
follows:
ARTICLE I
DEFINITIONS: CONSTRUCTION
1.01 DEFINITIONS. As used in this Agreement, the following terms have
the meanings specified in this Section 1.01. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
"1933 Act" has the meaning given that term in Section 3.28.
"Accounting Principles" means GAAP.
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person or any Family Member
of such Person.
<PAGE> 2
"Agreement" means this Exchange Agreement, as it may be amended
from time to time.
"Benefit Plan" has the meaning given that term in Section
3.23(a).
"Business" means the business conducted by National, which
generally includes the ownership and operation of an elderly living center
including a skilled nursing facility, including all activities related to the
foregoing.
"CERCLIS" means the Comprehensive Environmental Response
Compensation Liability Information System Database pursuant to Superfund.
"Certificate" has the meaning given that term in Section
2.02(d).
"Certificate of Merger" has the meaning given that term in
Section 2.01(b).
"Closing" has the meaning given that term in Section 2.04.
"Closing Date" has the meaning given that term in Section 2.04.
"Code" means the Internal Revenue Code of 1986, as amended, and
the applicable rulings and regulations thereunder.
"Company Group" has the meaning given that term in Section
3.23(b).
"Company Plan" has the meaning given that term in Section
3.23(a).
"Contract" and "Contracts" have the respective meanings given
those terms in Section 3.15.
"Defined Benefit Plan" has the meaning given that term in
Section 3.23(e).
"Effective Time" has the meaning given that term in Section
2.01(b).
"Encumbrance" means any liability, debt, mortgage, deed of
trust, pledge, security interest, encumbrance, option, right of first refusal,
agreement of sale, adverse claim, easement, lien, assessment, restrictive
covenant, encroachment, burden or charge of any kind or nature whatsoever or
any item similar or related to the foregoing.
"Environment" means soil, land, surface or subsurface waters,
ground waters, and ambient air.
"Environmental Condition" means any condition with respect to
the Environment relating to or arising out of the use, handling, storage,
transportation, treatment, recycling, release, or threatened release by
National.
- 2 -
<PAGE> 3
"Environmental Law" means any applicable law relating to public
health and safety or protection of the environment, including common law
nuisance, property damage and similar common law theories.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the applicable rulings and regulations thereunder.
"Effective Closing Date" has the meaning given that term in
Section 2.04.
"Estimated Interim Financial Statement" has the meaning given
that term in Section 3.07(b).
"Family Member" means any spouse, sibling, parent, offspring;
personal representatives or heirs of a Person or any spouse of such Family
Member.
"Fiscal Year Financial Statements" has the meaning given that
term in Section 3.07(b).
"GAAP" means United States generally accepted accounting
principles.
"Governing Documents" means, with respect to any Person who is
not a natural Person, the certificate or articles of incorporation, bylaws,
deed of trust, formation or governing agreement and other charter documents or
organization or governing documents or instruments of such Person.
"Governmental Body" means any court, government (federal, state,
local, or foreign department, commission, board, bureau, agency, official or
other regulatory, administrative or governmental authority or instrumentality,
including, without limitation, any Medicare fiscal intermediary.
"Hazardous Activity" means the distribution, generation,
handling, storage, treatment, use, transportation, recycling, release or
threatened release of Hazardous Materials.
"Hazardous Materials" means any substance listed, defined,
classified, or determined to be hazardous, radioactive, or toxic contaminant
pursuant to any Environmental Law.
"Intellectual Property" has the meaning given that term in
Section 3.22.
"IRS" means the Internal Revenue Service.
"Law" means any applicable federal, state, municipal, local or
foreign statute, law, ordinance, rule, regulation, policy or order of any kind
or nature whatsoever including any public policy, order of any Governmental
Body or principle of common law.
"Litigation" has the meaning given that term in Section 3.14.
- 3 -
<PAGE> 4
"National Shares" has the meaning given that term in Section
3.03.
"National Stock" has the meaning given that term in Section
3.03.
"Management Agreement" means an agreement in the form attached
hereto as Exhibit 1.01(1) between Parent Sub and Foster Health Care Group,
Inc., a Missouri corporation owned by some or all of the Stockholders.
"Material" means all items which, in the aggregate and
disregarding materiality, shall equal or exceed $100,000.
"Merger" has the meaning given that term in Section 2.01.
"Missouri Act" has the meaning given that term in Section 3.28.
"Multiemployer Plan" has the meaning given that term in Section
3.23(f).
"Parent" means Balanced Care Corporation, a Delaware
corporation.
"Parent Shares" means shares of common stock of Parent.
"Parent Sub" means BCC at Republic Park Center, Inc., a Missouri
corporation.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCBs" means polychlorinated biphenyls.
"Permit" and "Permits" have the respective meanings given those
terms in Section 3.16.
"Person" means and includes a natural person, a corporation, an
association, a partnership, a limited liability company, a trust, a joint
venture, an unincorporated organization, a business, any other legal entity,
and a Governmental Body.
"Qualified Plan" has the meaning given that term in Section
3.23(d).
"Real Property" has the meaning given that term in Section 3.17.
"Receivables" has the meaning given that term in Section 3.12.
"Related Party" means (i) National, (ii) any Affiliate of
National, (iii) any officer, director or shareholder or former officer,
director or shareholder of any Person identified in clauses (i) or (ii)
preceding, and (iv) any spouse, sibling, parent, offspring, personal
representative, or heir of any natural Person identified in any one of the
preceding clauses.
"Release" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping into the environment.
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"Security Right" means, with respect to any security, any
option, warrant, subscription right, preemptive right, other right, proxy, put,
call, demand, plan, commitment, agreement, understanding or arrangement of any
kind relating to such security, whether issued or unissued, or any other
security convertible into or exchangeable for any such security. "Security
Right" includes any right relating to issuance, sale, assignment, transfer,
purchase, redemption, conversion, exchange, registration or voting and includes
rights conferred by statute, by the issuer's Governing Documents or by
agreement.
"Site Reports" has the meaning given that term in Section 4.06.
"Stockholders" means collectively Billy Ray Foster, Sr., both
individually and as Trustee of the Revocable Inter Vivos Trust Agreement of
Billy Ray Foster dated February 4, 1988, John Douglas Foster, Billy Ray Foster,
Jr., J. Kaye Foster Gibson, Robert Anthony Foster, and Mark Bradley Foster, all
individual residents of Missouri.
"Stockholders' Agent" has the meaning given that term in Section
5.09.
"Stock Purchase Agreement" means that certain agreement of even
date herewith between Hawthorn Health Properties, Inc. ("HHPI") and
Stockholders pursuant to which HHPI agreed to purchase from Stockholders all of
the capital stock of National Care Centers, Inc., a Missouri corporation, d/b/a
Lebanon Care Center; National Care Centers of Lebanon, Inc., a Missouri
corporation, d/b/a Lebanon Park Manor, d/b/a Fremont Terrace Apts., and d/b/a
Elder Care Home Health Agency; National Care Centers of NIXA, Inc., a Missouri
corporation, d/b/a Nixa Park Care Center, d/b/a Nixa Park Terrace Apts.;
National Care Centers of Hermitage, Inc., a Missouri corporation, d/b/a
Hermitage Park Regional Care Centers; National Care Centers of Springfield,
Inc., a Missouri corporation, d/b/a Springfield Park Care Center, d/b/a Bedford
Park Terrace Apts. (excluding d/b/a Cherokee Residential Care Center); Dixon
Management Inc., a Missouri corporation, d/b/a Dixon Oaks Care Center; Long
Term Pharmaceutical Care, Inc., formerly known as Juan Construction Company, a
Missouri corporation, d/b/a Mt. Vernon Park Pharmacy and d/b/a Long Term
Pharmaceutical Care; Springfield Retirement Village, Inc., d/b/a Mt. Vernon
Park Care Center; and Mt. Vernon Park Care Center West, Inc.
"Superfund" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901, et seq., as
amended.
"Surviving Corporation" has the meaning given that term in
Section 2.01(a).
"Tax" means any domestic or foreign federal, state, county or
local tax, levy, impost or other similar charge of any kind whatsoever,
including any interest or penalty thereon or addition thereto, whether disputed
or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
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"Threatened Release" means a substantial likelihood of a release
that requires action to prevent or mitigate damage to the environment that may
result from such release.
1.02 CONSTRUCTION. As used herein, unless the context otherwise
requires: (i) references to "Article" or "Section" are to an article or section
hereof; (ii) all "Exhibits" and "Schedules" referred to herein are to Exhibits
and Schedules attached hereto and are incorporated herein by reference and made
a part hereof; (iii) "include," "includes," and "including" are deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import; and (iv) the headings of the various
articles, sections and other subdivisions hereof are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
ARTICLE II
MERGER; CONVERSION; EXCHANGE
2.01 MERGER.
(a) MERGER OF NATIONAL INTO PARENT SUB. Upon the terms and
subject to the conditions set forth in this Agreement, and in accordance with
applicable law, at the Effective Time (as defined in Section 2.01(b)), National
shall be merged with and into Parent Sub (the "Merger"). As a result of the
Merger, the separate corporate existence of National shall cease and Parent Sub
shall continue as the surviving corporation of the Merger (the "Surviving
Corporation") and shall continue to be governed by the laws of the states of
Delaware and Missouri, and the separate corporate existence of Parent Sub with
all its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger, except as set forth below. The name of the Surviving
Corporation shall be BCC at Republic Park Center, Inc., or such other name as
Parent shall determine.
(b) EFFECTIVE TIME. As promptly as practicable after the
Satisfaction or, if permissible, waiver of the conditions set forth in Article
VI, the parties hereto shall cause the Merger to be consummated by filing a
certificate or articles of merger (the "Certificate of Merger") with the
Delaware and Missouri Secretaries of State in such form as required by, and
executed in accordance with the relevant provisions of, the law of the states
of Delaware and Missouri (the date and time of such filing being the "Effective
Time").
(c) EFFECT OF THE MERGER. At the Effective Time, the Merger
shall have the effect set forth in the applicable provisions of the states of
Delaware's and Missouri's corporate law. Without limiting the generality of the
foregoing, and subject thereto, and except as set forth in the Stock Purchase
Agreement, in Schedule 3.06 thereto, in any Schedule or Exhibit to the Stock
Purchase Agreement or in any "Other Agreement" (as defined in the Stock
Purchase Agreement), at the Effective Time, except as otherwise specifically
set forth herein, all the property, rights, privileges, powers and franchises
of Parent Sub and National shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Parent Sub and National shall become the
debts, liabilities and duties of the Surviving Corporation.
(d) CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective Time,
the Certificate of Incorporation and the Bylaws of Parent Sub, as in effect
immediately prior to the
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Effective Time, shall be the Certificate of Incorporation and the Bylaws of the
Surviving Corporation.
2.02 CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.
(a) NATIONAL SHARES. By virtue of the Merger and without any
action on the part of Parent, Parent Sub, National, or stockholders:
(i) At the Effective Time, the National Shares, as defined
in Section 3.03, issued and outstanding immediately prior to the Effective Time
other than any National Shares to be canceled pursuant to Section 2.02(a)(ii)
hereof, shall be converted, into the right to receive on a pro rata basis a
total of 1,256,022 Parent Shares as set forth on Schedule 2.02(a) hereto.
(ii) At the Effective Time, all National Shares held in the
treasury of National immediately prior to the Effective Time shall be canceled
and extinguished at the Effective Time without any conversion thereof and no
Parent Shares shall be exchanged with respect thereto.
(iii) At the Effective Time, the National Shares issued and
outstanding immediately prior to the Effective Time shall cease to exist.
(b) As soon as practicable after the Effective Time, each holder
of a certificate that prior thereto represented National Shares shall be
entitled, upon surrender thereof to Parent in the manner set forth in Section
2.02(c) hereof, to receive in exchange therefor, in accordance with Section
2.02(a)(i) hereof and Schedule 2.02(a) hereto, of Parent Shares into which the
National Shares so surrendered shall have been converted as provided in Section
2.02(a)(i) hereof and Schedule 2.02(a) hereto. Until so surrendered, each such
certificate that, prior to the Effective Time, represented National Shares
shall be deemed from and after the Effective Time, for all corporate purposes
to evidence solely the right to receive the pro rata share of the Parent
Shares, into which such National Shares shall have been converted pursuant to
this Section 2.02.
(c) At the Effective Time, Parent will deliver or cause to be
delivered, on behalf of Parent Sub, to the Stockholders' Agent, certificates
for the Parent Shares which each stockholder has the right to receive pursuant
hereto.
2.03 STOCK TRANSFER BOOKS. Upon the execution hereof, the stock
transfer book of National shall be closed and there shall be no further
registration of transfers of National Stock on the records of National unless
and until this Agreement is terminated.
2.04 CLOSING. The consummation of the purchase and sale of the Shares
and the other transactions contemplated hereby (the "Closing") shall take place
at 10:00 a.m., local time, on or before August 19, 1996, at the offices of
[Mercantile Bank of Springfield, 417 St. Louis Street, Springfield, Missouri],
or at such other time, date or place as the parties agree (the "Closing Date"),
provided, however, that the Closing shall be effective as of August 31, 1996
(the "Effective Closing Date").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As an inducement to Parent to enter into this Agreement and consummate
the transactions contemplated hereby, Stockholders represent and warrant to
Parent, as to National, and, where applicable as to themselves, that each of
the following representations and warranties is true as of the date hereof:
3.01 ORGANIZATION. National is a corporation duly organized, validly
existing and in good standing under the laws of Missouri, and has the corporate
power and authority to own or lease its properties, carry on its business as
now conducted, enter into this Agreement and perform its obligations hereunder.
3.02 AUTHORIZATION; ENFORCEABILITY. This Agreement has been duly
executed and delivered by and constitutes the legal, valid and binding
obligation of National and the Stockholders, enforceable against them in
accordance with their respective terms, except for (i) the effect of
bankruptcy, insolvency, reorganization, moratorium, equity of redemption or
other similar laws now or hereafter in effect relating to or affecting
creditors generally and (ii) the effect of general principles of equity and the
discretion of the court before which any proceeding therefor may be brought.
All actions contemplated by this Agreement have been duly and validly
authorized by all necessary proceedings by the Stockholders and National.
3.03 SHARES, CAPITALIZATION. The authorized capital stock of National
consists solely of the number of shares of common stock at the par value per
share of such common stock identified on Schedule 3.03 (the "National Shares").
Schedule 3.03 identifies the number of National Shares issued and outstanding
and the number of National shares held in the treasury of National. Schedule
3.03 also sets forth truthful and accurate information concerning the issued
and outstanding shares of capital stock of National (the "National Stock". All
of the National Stock is owned of record, legally and beneficially by
Stockholders, except for the National Stock identified on Schedule 3.03 as
treasury stock. Except as may be disclosed on Exhibit 3.03, the National Stock
is free and clear of any and all Encumbrances, including without limitation any
Encumbrance resulting from the acquisition by Stockholders of the National
Stock. There are no Security Rights relating to any of the National Shares
except as disclosed on Exhibit 3.03. All rights and powers to vote the National
Stock are held exclusively by Stockholders. All of the National Stock is
validly issued, fully paid and nonassessable, was not issued in violation of
the terms of any agreement or other understanding, and was issued and acquired
by Stockholders in substantial compliance with all applicable Laws. Any
National Shares that were previously outstanding but that are now owned by
National were acquired by National in substantial compliance with all
applicable Laws.
3.04 SUBSIDIARIES AND FICTITIOUS NAMES. Except as disclosed in
Schedule 3.04, National does not own, nor has it ever owned, any shares of
capital stock of or other equity interest in any corporation, partnership,
joint venture or other entity. Schedule 3.04 discloses all fictitious or other
names under which National does business or ever conducted business.
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<PAGE> 9
3.05 QUALIFICATION. National is duly qualified and in good standing as
a foreign corporation and is duly authorized to transact business in each
jurisdiction wherein the character of the properties owned or leased by it or
the nature of the activities conducted by it makes such qualification and good
standing necessary.
3.06 NO VIOLATION OF LAWS OR AGREEMENTS; CONSENTS.
(a) Neither the execution and delivery of this Agreement or any
Other Agreement to which Stockholders or National, or both, is or is to become
a party, the consummation of the transactions contemplated hereby or thereby
nor the compliance with or fulfillment of the terms, conditions or provisions
hereof or thereof by Stockholders or National, or both, will, except as
disclosed in Schedule 3.06: (i) contravene any provision of the Governing
Documents of National, (ii) conflict with, result in a breach of, constitute a
default or an event of default (or an event that might, with the passage of
time or the giving of notice or both, constitute a default or event of default)
under any of the terms of, result in the termination of, result in the loss of
any right under, or give to any other Person the right to cause such a
termination of or loss under, any asset of Stockholders or National, including
any Permit, Intellectual Property, license, franchise, indenture, mortgage or
any other contract, agreement or instrument to which either Stockholders or
National is a party or by which any of their assets may be bound or affected,
(iii) result in the creation, maturation or acceleration of any liability or
obligation of Stockholders or National (or give to any other Person the right
to cause such a creation, maturation or acceleration), (iv) violate any Law or
violate any judgment or order of any Governmental Body to which stockholders or
National is subject or by which any of their respective assets may be bound or
affected, or (v) result in the creation or imposition of any Encumbrance upon
the Stock or any asset of Stockholders or National or give to any other Person
any interest or right therein.
(b) Except as set forth on Schedule 3.06 and in Section 5.05, no
consent, approval or authorization of, or registration or filing with, any
Person is required in connection with the execution or delivery by Stockholders
or National, or both, of this Agreement or any of the Other Agreements to which
either, or both, is or is to become a party pursuant to the provisions hereof
or the consummation by Stockholders or National, or both, of the transactions
contemplated hereby or thereby.
3.07. FINANCIAL INFORMATION.
(a) RECORDS. The books of account and related records of
National reflect accurately and in detail its assets, liabilities, revenues,
expenses and other transactions.
(b) FINANCIAL STATEMENTS. Attached as Exhibit 3.07(b)(1) are the
audited or reviewed balance sheets, income statements and statements of cash
flows for National's two most recent fiscal years (collectively, the "Fiscal
Year Financial Statements"). Also attached hereto as Exhibit 3.07(b)2 are the
unaudited interim balance sheet and income statement for National as of April
30, 1996, and for the interim periods ended April 30, 1996 (collectively, the
"Estimated Interim Financial Statements"). The Fiscal Year Financial Statements
in all material respects (i) are accurate, correct, and complete in accordance
with the books of account and records of
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<PAGE> 10
National, (ii) have been prepared in accordance with Accounting Principles on a
consistent basis throughout the indicated periods, and (iii) present fairly the
financial condition, assets and liabilities and results of operation of
National at the dates and for the relevant periods indicated in accordance with
the Accounting Principles. The Estimated Interim Financial Statements in all
material respects (i) are accurate, correct, and complete in accordance with
the books of account and records of National, (ii) have been prepared in
accordance with Accounting Principles on a consistent basis, except that they
contain no footnotes, no year-end adjustments, including, but not limited to,
adjustments for amounts which may be receivable or payable as a result of any
Medicare cost report, adjustments for uncollectible accounts receivable and
adjustments for income tax accruals, and (iii) present fairly the financial
condition, assets and liabilities, and results of operations of National at the
dates and for the relevant periods indicated in accordance with the Accounting
Principles.
(c) STATE SURVEYS AND COST REPORTS. Attached as Exhibit 3.07(c)
are copies of the state surveys completed and cost reports filed by or on
behalf of National for the years 1994 and 1995 and filed for 1996 on or before
April 30, 1996. Each such report was prepared in substantial compliance with
all Laws and is complete and accurate in all material respects.
3.08 UNDISCLOSED LIABILITIES. National has no debt, obligation or
liability, absolute, fixed, contingent or otherwise, of any nature whatsoever,
whether due or to become due, including any unasserted claim, whether incurred
directly or by any predecessor thereto, and whether arising out of any act,
omission, transaction, circumstance, sale of goods or services, state of facts
or other condition, except: (i) those reflected or reserved against its Fiscal
Year Financial Statements and/or its Estimated Interim Financial Statements in
the amounts shown therein; (ii) those not required under GAAP to be reflected
or reserved against in its Fiscal Year Financial statements and/or its
Estimated Interim Financial Statements; (iii) those disclosed on Schedule 3.08;
(iv) those of the same nature as those set forth on its Fiscal Year Financial
Statements and/or its Estimated Interim Financial Statements that have arisen
in the ordinary course of business of National after the effective dates of
each of its Fiscal Year Financial Statements and each of its Estimated Interim
Financial Statements through the date hereof, all of which obligations
described in this clause (iv) have been consistent in amount and character with
past practice and experience, and none of which, individually or in the
aggregate, has had or will have an adverse effect on the business, financial
condition or prospects of National and none of which is a liability for breach
of contract or warranty or has arisen out of tort, infringement of any
intellectual property rights, or violation of Law or is claimed in any pending
or threatened legal proceeding; (v) those claims which are (1) first asserted
in writing after the date hereof, (2) which an insurance carrier identified on
Schedule 3.20 is obligated to defend, (3) the amount of the claim is not in
excess of the coverage available under such insurance, and (4) which shall be
disclosed by Stockholders to Parent in the Closing Certificate pursuant to
Section 6.02(d); (vi) those claims which are asserted by employees of National
under the Workers' Compensation Law and which would not have a materially
adverse effect on National, and (vii) those which are not material in the
aggregate.
3.09 NO CHANGES. Since April 30, 1996, National has conducted its
business only in the ordinary course, except for actions taken in compliance
with the terms of this Agreement.
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<PAGE> 11
Without limiting the generality of the foregoing sentence, since April 30,
1996, except as otherwise disclosed or provided for in this Agreement, in
Schedule 3.08, in any other Schedule or Exhibit hereto, or in any other
document which Stockholders shall deliver to Parent on or after the date hereof
pursuant to the terms of this Agreement, there has not been any of the
following which are material in the aggregate: (i) damage or destruction to any
asset of National, whether or not covered by insurance; (ii) strike, work
stoppage, slowdown, or similar concerted activity by employees at National;
(iii) creation of any Encumbrance on any asset of National; (iv) declaration or
payment of any dividend or other distribution on or with respect to or
redemption or purchase by National of any shares of capital stock of National;
(v) increase in the salary, wage or bonus of any employee of National which is
not customary in amount; (vi) asset acquisition or expenditure, including
capital expenditure, in excess of $100,000 in the aggregate, other than the
purchase of inventory in the ordinary course of business; (vii) change in any
Company Plan; (viii) change in any method of accounting; (ix) payment to or
transaction with any Related Party, which payment or transaction is not
specifically disclosed on Schedule 3.18 (x); disposition of any asset (other
than inventory in the ordinary course of business) for more than $100,000 in
the aggregate or for less than fair market value; (xi) payment, prepayment or
discharge of any liability other than in the ordinary course of business; (xii)
write-offs or write-downs of any assets of National in excess of $100,000 in
the aggregate; (xiii) creation, termination or amendment of, or waiver of any
right under, any material agreement of National not in the ordinary course of
business; or (xiv) agreement or commitment to do any of the foregoing.
3.10. TAXES.
(a) TAX RETURNS; PAYMENT. National has filed or caused to be
filed on a timely basis, or will file or cause to be filed on a timely basis,
all Tax Returns that are required to be filed by it prior to or on the
Effective Closing Date, without regard to any extensions, pursuant to the Law
of each governmental authority with taxing power over it. All such Tax Returns
were or will be, as the case may be, correct and complete in all material
respects. National has paid all Taxes that have become due as shown on such
Tax Returns or pursuant to any assessment received as an adjustment to such Tax
Returns, except (i) such Taxes, if any, as are being contested in good faith
and disclosed on Schedule 3.10, (ii) such Taxes that are fully reserved against
on the Fiscal Year Financial Statements or the Estimated Interim Financial
Statements, (iii) Taxes accruing after the end of the last fiscal year of
National that are not yet due, and (iv) payroll taxes which have accrued but
were not required to have been paid on or before the Closing and for which
Stockholders shall cause National to have cash for such payments on the Closing
date. National is not currently the beneficiary of any extension of time within
which to file any Tax Return, except as disclosed on Schedule 3.10. No claim
has been made by a taxing authority of a jurisdiction where National does not
file Tax Returns that it is or may be subject to taxation in that jurisdiction.
Without limiting the foregoing, National has no liability for any Tax except
Taxes disclosed on Schedule 3.10. Schedule 3.10 contains a complete and
accurate list of each type of Tax paid by National and each Governmental Body
to which such Tax is paid. Stockholders have no actual knowledge of any
proposed change in Law (other than the Code) that would result in a material
increase in Tax payable by National.
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<PAGE> 12
(b) WITHHOLDING. National has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
(c) ASSESSMENTS. There is no pending, or, to the knowledge of
Stockholders or National, threatened or anticipated, assessment of any
additional Tax against National. National has not waived any statute of
limitations in respect of any Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency for any taxable period for which the
period of limitations on assessment has not expired, except as disclosed on
Schedule 3.10. No Tax audit or examination is now pending or currently in
progress with respect to National.
(d) OTHER MATTERS. Except as disclosed on Schedule 3.10,
National is not a party to any income Tax allocation or sharing agreement.
National has not filed a consent under Code Section 341(f) concerning
collapsible corporations. National has not made any payment, nor is it
obligated to make any payment, nor is it a party to any agreement that under
certain circumstances could obligate it to make any payment, that will not be
deductible under Code Sections 280G or 162(m). National is not (nor does it
have any liability for unpaid Taxes because it once was) a member of an
affiliated group as defined in Section 1504 of the Code. National is not and
has not been during the applicable period specified in Code Section
897(c)(1)(A)(ii) a United States real property holding corporation as defined
in Code Section 897(c)(2).
(e) DISALLOWED LOSSES. There have been no transactions between
National and any other Person for which a loss has been disallowed or deferred
or which has otherwise been subject to Section 267(a) of the Code.
3.11 INVENTORY. All of the material inventory owned by National is
valued on the books and records of National and in the Fiscal Year Financial
Statements at lower of cost or market, the cost thereof being determined on a
first-in, first-out basis in accordance with GAAP. Except to the extent of the
reserve in the Fiscal Year Financial Statements, none of National's inventory
is obsolete, has been consigned to others, or is on consignment from others.
3.12 RECEIVABLES. Schedule 3.12 discloses all trade and other accounts
receivable of National ("Receivables") outstanding as of July 31, 1996,
presented on an aged basis and separately identifies the name of each account
debtor and the total amount of each related Receivable. The term "Receivable"
is further defined to include billing in advance for services to be rendered to
"Private Pay Patients" (as defined in Section 5.06 below) of the Companies and
the Medicaid resource portion of billing for services to be rendered to
patients of the Companies for whom the Companies are entitled to Medicaid
reimbursement. All Receivables, whether reflected on the Fiscal Year Financial
Statements, disclosed on Schedule 3.12, or created after the end of the last
fiscal year of National, arose from bona fide sale or service transactions of
National, and no portion of any Receivable is subject to counterclaim, defense
or set-off or is otherwise in dispute. Except to the extent of the recorded
reserve for doubtful accounts specified on the Fiscal Year Financial
Statements, all of the Receivables are collectible in the ordinary course of
business and will be fully collected within 90 days after having been created
using commercially reasonable efforts.
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3.13 CONDITION OF ASSETS; BUSINESS. National is engaged in the
Business and no other business, except as disclosed in Schedule 3.13. The
buildings, fixtures, improvements, machinery, equipment, tools, furniture,
improvements and tangible personal property of National, including those
reflected on the Fiscal Year Financial Statements, are in good operating
condition and repair and are suitable for the purposes for which they are used
in the Business, except (i) minor or routine maintenance, (ii) matters
disclosed on Schedule 3.13, and (iii) conditions which in the aggregate would
cost less than $25,000 to repair or replace. Except for Encumbrances listed on
Schedule 3.13 and those Encumbrances included in the title insurance
commitments received by Parent, National has good and marketable title to all
of its assets; all of such assets are reflected on the Fiscal Year Financial
Statements, or, under GAAP, are not required to be reflected thereon; such
assets include all assets that are necessary for use in and operation of the
Business; and none of such assets is subject to any Encumbrance or impairment,
whether due to its condition, utility, collectability or otherwise.
3.14 NO PENDING LITIGATION OR PROCEEDINGS. Except for those matters
described on Schedule 3.14, no action, suit, investigation, claim or proceeding
of any nature or kind whatsoever, whether civil, criminal or administrative, by
or before any Governmental Body or arbitrator ("Litigation") is pending or, to
the knowledge of Stockholders, threatened against or affecting National, the
Business, any of National's assets, any of the National Shares, or any of the
transactions contemplated by this Agreement. There is presently no outstanding
judgment, decree or order of any Governmental Body against or affecting
National, the Business, any of National's assets, any of the National Shares,
or any of the transactions contemplated by this Agreement. National does not
have pending any Litigation against any third party, except for those matters
described on Schedule 3.14.
3.15 CONTRACTS; COMPLIANCE. Disclosed on Schedule 3.15, 3.21, 3.22, or
3.23 is a brief description of each contract, lease, indenture, mortgage,
instrument, commitment or other agreement, arrangement or understanding, oral
or written, formal or informal, to which National is a party or by which it or
its assets may be affected and that (i) is material to the Business or
National's assets or operations, individually or in the aggregate, (ii)
involves the purchase, sale or lease of any asset, materials, supplies,
inventory or services in excess of $10,000 per year, (iii) has an unexpired
term of more than six months from the date hereof, taking into account the
effect of any renewal options, (iv) relates to the borrowing or lending of any
money or guarantee of any obligation (other than the guarantee represented by
the endorsement of negotiable instruments presented for collection), (v) limits
the right of National to compete in any line of business or otherwise restricts
any right National may have, (vi) is an employment or consulting contract (vii)
is with a Governmental Body or (viii) was not entered into in the ordinary
course (each, a "Contract" and collectively, the "Contracts"). Each Contract is
a legal, valid and binding obligation of National and is in full force and
effect. National and, to the best knowledge of Stockholders, each other party
to each Contract has performed substantially all obligations required to be
performed by it thereunder and is not in breach or default, and is not alleged
to be in breach or default, in any respect thereunder, and no event has
occurred and no condition or state of facts exists (or would exist upon the
giving of notice or the lapse of time or both) that would become or cause a
breach, default or event of default thereunder, would give to any Person the
right to cause such a termination or would cause an acceleration of any
obligation
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thereunder. National is not currently renegotiating any Contract nor has
National received any notice of non-renewal or price increase or sales or
production allocation with respect to any Contract.
3.16 PERMITS; COMPLIANCE WITH LAW. National holds all permits,
certificates, licenses, franchises, privileges, approvals, registrations and
authorizations required under any applicable Law in connection with the
operation of its assets and Business (each, a "Permit" and, collectively,
"Permits"). Each Permit is valid, subsisting and in full force and effect.
National is in substantial compliance with and has fulfilled and performed its
obligations under each Permit, and no event or condition or state of facts
exists (or would exist upon the giving of notice or lapse of time or both) that
could constitute a material breach or default under any Permit. National has
not been since January 1, 1994, nor is it currently in violation of any Law and
has received no notice of any violation of Law, and no event has occurred or
condition or state of facts exists that could give rise to any such violation,
except for notices of deficiencies received from the Missouri Department of
Social Services, Division of Aging, as set out in Schedule 3.16, and the
matters disclosed in Schedule 3.14. National has not received any notice or
non-renewal of any Permit nor will the transactions contemplated hereby result
in the cancellation or increase the likelihood of non-renewal of any Permit.
3.17 REAL PROPERTY. Schedule 3.17 contains a list of all real
properties currently owned, used or leased by National or in which National has
an interest, excluding those properties identified on Schedule 5.10 which
Stockholders shall have a right to convey to other parties prior to the Closing
(collectively, the "Real Property"), and identifies the record title holder of
all of the Real Property, National has good and marketable fee simple title to
all Real Property shown as owned by it on Schedule 3.17, free and clear of all
Encumbrances, other than (i) as indicated on Schedule 3.17, (ii) zoning
restrictions, (iii) liens for current taxes not yet due, and (iv) those
Encumbrances set out in the title insurance commitments received by Parent with
respect to the Real Estate and which are set out in Schedule 3.17. National has
the right to quiet enjoyment of all Real Property in which it holds a leasehold
interest for the full term, including all renewal rights, of the lease or
similar agreement relating thereto. Schedule 3.17 contains a list of all title
insurance policies held by National. Stockholders have delivered an ALTA
as-built survey for all Real Property owned by National to Parent. National has
not received any written notice of assessments for public improvements or
condemnation against any Real Property.
3.18 TRANSACTIONS WITH RELATED PARTIES. No Related Party is or has
been since January 1, 1992, a party to any transaction, agreement or
understanding with National except pursuant to arrangements disclosed on
Schedule 3.18 and except for dividends properly reflected as such in the Fiscal
Year Financial Statements or the Estimated Interim Financial Statements, except
as set forth in Schedule 3.18. No Related Party uses any assets of National
except directly in connection with the Business, and no Related Party owns any
asset used in the Business. Except as set forth on Schedule 3.18, no Related
Party has any claim of any nature, including any inchoate claim, against
National, and National has no claim of any nature, including any inchoate
claim, against any Related Party. Except as disclosed on Schedule 3.18, as
otherwise expressly provided hereby or by any Other Agreement or as otherwise
may be mutually agreed after Closing, (i) no Related Party will at any time
after Closing for any reason, directly or indirectly,
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be or become entitled to receive any payment or transfer of money or other
property of any kind from National, and (ii) National will not at any time
after Closing for any reason, directly or indirectly, be or become subject to
any obligation to any Related Party.
3.19 LABOR RELATIONS. The relations of National with its employees are
good to the best of Stockholders' knowledge. No employee of National is
represented by any union or other labor organization. No representation
election, arbitration proceeding, grievance, labor strike, dispute, slowdown,
stoppage or other concerted activity on the part of National's employees is
pending or, to the knowledge of Stockholders or National, threatened against,
involving, affecting or potentially affecting National. No complaint against
National is pending or, to the knowledge of Stockholders or National,
threatened before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any similar state or local agency, by or on behalf of
any employee of National. National has no contingent liability for sick leave,
vacation time, severance pay or any similar item not fully reserved on the
Fiscal Year Financial Statements and/or the Estimated Interim Financial
Statements. National has no contingent liability for any occupational disease
of any of its employees, former employees or others. Neither the execution and
delivery of this Agreement, the performance of the provisions hereof nor the
consummation of the transactions contemplated hereby will trigger any severance
pay obligation under any contract or under any Law.
3.20 PRODUCTS LIABILITY; WARRANTIES. National shall have no liability
after the Effective Closing Date not fully covered by insurance relating to any
services rendered, or any product manufactured, distributed, or sold by
National prior to the Effective Closing Date, whether or not such liability
relates to products or services that are defective or improperly designed,
manufactured or rendered in breach of any express or implied warranty, Schedule
3.20 discloses and describes the terms of all express product warranties under
which National may have liability after the Effective Closing Date.
3.21 INSURANCE. Schedule 3.21 discloses all insurance policies with
respect to which National is the owner, insured or beneficiary. National will
not have any liability after the Effective Closing Date for retrospective or
retroactive premium adjustments. Since incorporation, all insurance policies
covering professional liability and general liability maintained by or for the
benefit of National have been "occurrence" policies and not "claims made"
policies. All such liability policies are listed on Schedule 3.21. Schedule
3.21 discloses the manner in which National provides coverage for workers'
compensation claims.
3.22. INTELLECTUAL PROPERTY RIGHTS. Schedule 3.22 discloses all of the
trademark and service mark rights, applications and registrations, trade names,
fictitious names, service marks, logos and brand names, copyrights, copyright
applications, letters patent, patent applications and licenses of any of the
foregoing owned or used by National in or applicable to the Business National
has the entire right, title and interest in and to, or has the exclusive
perpetual royalty-free right to use, the intellectual property rights disclosed
on Schedule 3.22 and all other processes, know-how, show-how, formulae, trade
secrets, inventions, discoveries, improvements, blueprints, specifications,
drawings, designs, and other proprietary rights necessary or applicable to or
advisable for use in the Business ("Intellectual Property"), free and clear of
all
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<PAGE> 16
Encumbrances, except as disclosed on Schedule 3.22. Schedule 3.22 separately
discloses all intellectual property rights to which National holds rights under
any license. The Intellectual Property is valid and not the subject of any
interference, opposition, reexamination or cancellation. To the knowledge of
Stockholders or National, no Person is infringing upon nor has any Person
misappropriated any Intellectual Property. National is not infringing upon the
intellectual property rights of any other Person.
3.23 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS; COMPANY PLANS. Schedule 3.23 (a) discloses
all existing written and unwritten "employee benefit plans" within the meaning
of Section 3(3) of ERISA, and any other written and unwritten profit sharing,
pension, savings, deferred compensation, fringe benefit, insurance, medical,
medical reimbursement, life, disability, accident, post-retirement health or
welfare benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other plan, agreement, contract, policy, trust fund
or arrangement (each, a "Benefit Plan"), whether or not funded and whether or
not terminated, (i) maintained or sponsored by National, or (ii) with respect
to which National (or Stockholders with respect to National) is obligated to
contribute, or (iii) that otherwise covers any of the current or former
employees of National or their beneficiaries, or (iv) as to which any such
current or former employees or their beneficiaries participated or were
entitled to participate or accrue or have accrued any rights thereunder (each,
a "Company Plan").
(b) COMPANY GROUP MATTERS; FUNDING. Neither National nor any
corporation that may be aggregated with National under Sections 414 (b), (c),
(m) or (o) of the Code (the "Company Group") has any obligation to contribute
to or any direct or indirect liability under or with respect to any Benefit
Plan of the type described in Sections 4063 and 4064 of ERISA or Section 413(c)
of the Code. National does not have any liability as a result of delinquent
contributions, distress terminations, fraudulent transfers, failure to pay
premiums to the PBGC, or withdrawal liability (as defined in Section 4201 of
ERISA). Following the Closing, National will not have any liability with
respect to any Benefit Plan of any member of the Company Group (other than one
of the Combined Companies as defined in the Stock Purchase Agreement) as a
result of delinquent contributions, distress terminations, fraudulent
transfers, failure to pay premiums to the PBGC, or withdrawal liability (as
defined in Section 4201 of ERISA). No accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code) exists nor has any
funding waiver from the IRS been received or requested with respect to any
Company Plan or any Benefit Plan sponsored or maintained by any member of
National Group and no excise or other Tax is due or owing because of any
failure to comply with the minimum funding standards of the Code or ERISA with
respect to any of such plans.
(c) COMPLIANCE. Except as otherwise provided on Schedule
3.23(c), each of the Company Plans and all related trusts, insurance contracts
and funds have been created, maintained, funded and administered in all
respects in substantial compliance with all applicable Laws and in substantial
compliance with the plan document, trust agreement, insurance policy or other
writing creating the same or applicable thereto. No Company Plan is or is
proposed to be
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under audit or investigation by the IRS or Department of Labor, and no
completed audit of any Company Plan has resulted in the imposition of any Tax,
fine or penalty.
(d) QUALIFIED PLANS. Schedule 3.23(d) discloses each Company
Plan that purports to be a qualified plan under Section 401(a) of the Code and
exempt from United States federal income tax under Section 501(a) of the Code
(a "Qualified Plan"). With respect to each Qualified Plan, a determination
letter (or opinion or notification letter, if applicable) has been received
from the IRS that such plan is qualified under Section 401(a) of the Code and
exempt from federal income tax under Section 501(a) of the Code. No Qualified
Plan has been amended since the date of the most recent such letter.
No member of Company Group, nor (to the best of
Stockholders' knowledge) any fiduciary of any Qualified Plan, nor (to the best
of Stockholders' knowledge) any agent of any of the foregoing, has done
anything that would adversely affect the qualified status of a Qualified Plan
or the qualified status of any related trust.
(e) NO DEFINED BENEFIT PLANS. No Company Plan is a defined
benefit plan within the meaning of Section 3(35) of ERISA (a "Defined Benefit
Plan"). No Defined Benefit Plan sponsored or maintained by any member of
National Group has been terminated or partially terminated after September 1,
1974, except as set forth on Schedule 3.23(e). Each Defined Benefit Plan
identified as terminated on Schedule 3.23(e) has met the requirement for
standard termination of single-employer plans contained in Section 4041(b) of
ERISA. During the five-year period ending on the Effective Closing Date, no
member of National Group has transferred a Defined Benefit Plan to a
corporation that was not, at the time of transfer, related to the transferor in
any manner described in Sections 414(b), (c), (m) or (o) of the Code.
(f) MULTIEMPLOYER PLANS. No Company Plan is a multiemployer plan
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"). No member of Company Group has withdrawn from any
Multiemployer Plan or incurred any withdrawal liability to or under any
Multiemployer Plan. No Company Plan covers any employees of any member of
Company Group in any foreign country or territory.
(g) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES; POST-RETIREMENT
BENEFITS. Except as otherwise provided on Schedule 3.23(g), no prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975 of the
Code) with respect to any Company Plan exists or has occurred that could
subject National to any liability or Tax under Part 5 of Title I of ERISA or
Section 4975 of the Code. To Stockholders' knowledge, no member of Company
Group, nor any administrator or fiduciary of any Company Plan, nor any agent of
any of the foregoing, has engaged in any transaction or acted or failed to act
in a manner that will subject National to any liability for a breach of
fiduciary or other duty under ERISA. With the exception of the requirements of
Section 4980B of the Code, no post-retirement benefits are provided under any
Company Plan that is a welfare benefit plan as described in ERISA Section 3(1).
3.24 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 3.24:
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<PAGE> 18
(a) COMPLIANCE; NO LIABILITY. National has operated the Business
and each parcel of Real Property in substantial compliance with all applicable
Environmental Laws. National is not subject to any liability, penalty or
expense (including legal fees) that would have a material adverse effect on the
financial condition of the Stockholders or the Companies and will not hereafter
suffer or incur any loss, liability, penalty or expense (including legal fees)
by virtue of any material violation of any applicable Environmental Law
occurring prior to the Effective Closing Date, any Hazardous Activity conducted
on or with respect to any property at or prior to the Effective Closing Date or
any Environmental Condition existing on or with respect to any property at or
prior to the Effective Closing Date, in each case whether or not National
permitted or participated in such act or omission.
(b) TREATMENT; CERCLIS. National has not treated, stored,
recycled or disposed of any Hazardous Material on any Real Property, and to the
best of Stockholders' knowledge no other Person has treated, stored, recycled
or disposed of any Hazardous Material on any part of the Real Property except
in accordance with Environmental Laws. National has not caused release of any
Hazardous Material at, on, or under any Real Property. National has not
transported any Hazardous Material or arranged for the transportation of any
Hazardous Material to any location that is listed on the National Priorities
List pursuant to Superfund. None of the Real Property is listed or, to the
knowledge of Stockholders or National, proposed for listing on the National
Priorities List or CERCLIS pursuant to Superfund or any state or local list of
sites requiring investigation or cleanup.
(c) NOTICES, EXISTING CLAIMS; HAZARDOUS MATERIALS; STORAGE
TANKS. National has not received any request for information, notice of claim,
demand or other notification that it is or may be potentially responsible with
respect to any investigation, abatement or cleanup of any Threatened Release or
Release of any Hazardous Material. National is not required to place any notice
or restriction relating to the presence of any Hazardous Material at any Real
Property or, if it sold the Real Property, in any deed to any Real Property.
National has provided to Parent a list of locations to which National has
transported any Hazardous Material for recycling, treatment, disposal, or other
handling. There has been no past, and there is no pending or contemplated,
claim by National under any Environmental Law or Laws based on actions of
others that may have impacted on the Real Property, and National has not
entered into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. No PCBs or
asbestos is present on or in any structure or equipment located on any Real
Property. All storage tanks located on the Real Property, whether underground
or aboveground, are disclosed on Schedule 3.24. Stockholders have no knowledge
of any past or present leak from any such storage tank. Notwithstanding any
provision in this Agreement to the contrary, Stockholders make no
representation or warranty with respect to any occurrence, condition, or state
of facts which is set out in the Site Reports, as defined in Section 4.06 below
or in Schedule 4.06. To the extent the foregoing representations in any of the
subsections of this Section 3.24 relate to matters involving the Real Property
prior to its ownership by National or Stockholders or to matters resulting from
actions of Persons other than National or Stockholders, such representations
are made solely to the best of Stockholder's knowledge.
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<PAGE> 19
3.25 FINDERS' FEES. Neither Stockholders nor National nor any of their
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fee, commission or finders' fee in connection
with any of the transactions contemplated hereby.
3.26 DISCLOSURE. None of the representations or warranties of
stockholders and National contained herein and none of the information
contained in the Schedules referred to in Article III is false or misleading in
any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect.
3.27 HART-SCOTT-RODINO. The Stockholders, together with all
corporations, partnerships, or other business entities controlled by the
Stockholders, as of their last regularly prepared financial statements, have
less than $100,000,000 of total assets and, for the last fiscal year of each
such entity, less than $100,000,000 of net revenues. The terms used in this
Section, including, without limitation, controlled, person, hold, voting stock,
entities, total assets and net revenues, shall be defined and interpreted in
accordance with the Premerger Notification Regulations promulgated by the
Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act
of 1974.
3.28 EXEMPTION FROM REGISTRATION; INVESTMENT PURPOSES. Stockholders
understand that the Parent Shares have not been registered under the Securities
Act of 1933 (the "1933 Act") or the _____________________________ (the
"Missouri Act") or the _______________________________ (the "Delaware Act") by
reason of specific exemptions under the provisions thereof which depend in part
upon the representations made by Stockholders in this Agreement. Stockholders
understand that Parent is relying upon Stockholders' representations and
agreements contained in this Agreement (and any supplemental information
furnished by Stockholders) for the purpose of determining whether this
transaction meets the requirements for such exemptions. Further, Stockholders
hereby confirm that Stockholders are acquiring the Parent Shares for investment
only and not with a view to or in connection with any resale or distribution of
the Parent Shares, except that Billy Ray Foster, Jr., J. Kaye Foster Gibson,
Robert Anthony Foster, and Mark Bradley Foster intend to sell all of their
Parent Shares to Billy Ray Foster, Sr., either individually or as Trustee of
the Revocable Inter Vivos Trust Agreement of Billy Ray Foster dated February 4,
1988, and John Douglas Foster not later than twelve months after the Effective
Time. Stockholders hereby affirm that Stockholders have no present intention of
making any sale, assignment, pledge, gift, transfer or other disposition of the
Parent Shares or any interest therein, except as otherwise provided in the
preceding sentence.
3.29 BUSINESS EXPERIENCE; FINANCIAL CONDITION. Stockholders have such
knowledge, skill and experience in business, financial and investment matters
so that Stockholders are capable of evaluating the merits and risks of an
investment in the Parent Shares. To the extent that Stockholders have deemed it
appropriate to do so, Stockholders have retained, and relied upon, appropriate
professional advice regarding the tax, legal and financial merits and
consequences of the investment in the Parent Shares. Each Stockholder
represents that he has reviewed his own financial condition and commitments,
alone and together with his advisors, and that, based on such review, each
Stockholder is satisfied that (i) Stockholder has adequate
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<PAGE> 20
means of providing for his financial needs and possible contingencies and has
assets or sources of income which, taken together, are more than sufficient so
that Stockholder could bear the risk of loss of Stockholder's entire investment
in the Parent Shares, (ii) Stockholder has no present or contemplated future
need to dispose of all or any portion of the Parent Shares to satisfy any
existing or contemplated undertaking, need or indebtedness, and (iii)
Stockholder is capable of bearing the economic risk of an investment in the
Parent Shares for the indefinite future. Stockholders agree to furnish any
additional information requested by Parent to assure compliance of the
transactions contemplated in this Agreement with applicable federal and state
securities laws in connection with the receipt of the Parent Shares.
3.30 INVESTIGATION. Each Stockholder has made, either alone or
together with advisors (if any), such independent investigation of Parent, its
management, and related matters as the Stockholder deems to be, or such
advisors (if any) have advised to be, necessary or advisable in connection with
an investment in the Parent Shares; and Stockholder and Stockholder's advisors
(if any) have received all information and data which Stockholder and such
advisors (if any) believe to be necessary in order to reach an informed
decision as to the advisability of an investment in the Parent Shares.
Stockholders are satisfied that there are no material facts regarding Parent or
the Parent Shares as to which Stockholders have not been fully informed.
Nothing set out in Section 3.29 or this Section 3.30 shall be interpreted to
limit the representations and warranties of Parent and Parent Sub set forth
herein.
3.31 RESTRICTED SECURITIES. Stockholders understand that the Parent
Shares are "restricted securities" under applicable federal securities laws and
that the 1933 Act and the rules of the Securities and Exchange Commission
provide in substance that Stockholders may dispose of the Parent Shares only
pursuant to an effective registration statement under the 1933 Act or an
exemption from such registration if available. Stockholders further understand
that Parent has no obligation to register any of the Parent Shares under or to
take action so as to permit sales pursuant to the 1933 Act. Accordingly,
Stockholders may dispose of the Parent Shares only in certain transactions that
are exempt from registration under the 1933 Act, including "private
placements," in which event any transferee will acquire "restricted securities"
subject to the same limitations as in the hands of Stockholders. Stockholders
further understand that the Missouri Act allows sales of the Parent Shares only
if the Parent Shares are registered or the transaction is subject to an
applicable exemption. As a consequence, Stockholders understand that
Stockholders must bear the economic risks of the investment in the Parent
Shares for an indefinite period of time.
3.32. RESTRICTIVE LEGEND. Stockholders understand that the
certificate(s) evidencing the Parent Shares will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER
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<PAGE> 21
THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.
3.33. NO GENERAL SOLICITATION. Neither Stockholders nor National nor
any of its officers, directors or employees have been provided with any form of
general solicitation, general or public media advertising or mass mailing by
Parent, Parent Sub or any person acting on their behalf in order to entice
Stockholders to acquire the Parent Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
As an inducement to Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, Parent and Parent Sub
represent and warrant to Stockholders as follows:
4.01 ORGANIZATION. Parent and Parent Sub are corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of organization, and have the corporate power and
authority to own or lease their properties, carry on its business, enter into
this Agreement to which they are or are to become a party and perform their
obligations hereunder. Parent and Parent Sub are qualified as foreign
corporations in each jurisdiction where such qualification is required by law.
Parent is a Delaware corporation in good standing. Parent Sub is a Delaware
corporation in good standing and is duly qualified as a foreign corporation in
Missouri and is in good standing as such.
4.02. AUTHORIZATION, ENFORCEABILITY. This Agreement has been duly
executed and delivered by and constitutes the legal, valid and binding
obligations of Parent and Parent Sub, enforceable against them in accordance
with its terms, except for (i) the effect of bankruptcy, insolvency,
reorganization, moratorium, equity of redemption or other similar laws now or
hereafter in effect relating to or affecting creditors generally and (ii) the
effect of general principles of equity and the discretion of the court before
which any proceeding therefor may be brought. All actions contemplated by this
Section have been duly and validly authorized by all necessary proceedings by
Parent and Parent Sub.
4.03. NO VIOLATION OF LAW; CONSENTS. Neither the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby nor the compliance with or fulfillment of the terms, conditions or
provisions hereof by Parent or Parent Sub will: (i) contravene any provision of
the Governing Documents of Parent or Parent Sub, or (ii) violate any Law or any
judgment or order of any Governmental Body to which Parent or Parent Sub are
subject or by which any of their assets may be bound or affected. No consent,
approval or authorization of, or registration or filing with, any Person is
required in connection with the execution or delivery by Parent or Parent Sub
of this Agreement pursuant to the provisions hereof or the consummation by
Parent or Parent Sub of the transactions contemplated hereby.
4.04. NO PENDING LITIGATION OR PROCEEDING. No Litigation is pending
or, to the knowledge of Parent, threatened against or affecting Parent or
Parent Sub in connection with any
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of the transactions contemplated by this Agreement. There is presently no
outstanding judgment, decree or order of any Governmental Body against or
affecting Parent in connection with the transactions contemplated by this
Agreement.
4.05. FINDERS' FEES. Neither Parent nor Parent Sub nor any of their
officers, directors or employees have employed any broker or finder or incurred
any liability for any brokerage fee, commission or finders' fee in connection
with any of the transactions contemplated hereby.
4.06. INSPECTIONS BY PARENT. Parent has inspected the Real Property to
its satisfaction and has independently investigated the Real Property and
analyzed the results of such investigations and is satisfied with same, but
such inspections shall not serve to limit Stockholders' representations set
forth herein relating to the Real Property. Attached hereto as Schedule 4.06 is
a copy of each environmental site report which Parent caused to be prepared for
the Real Property (the "Site Reports").
4.07. HART-SCOTT-RODINO. Parent, together with (a) all corporations,
partnerships, or other business entities controlled by Parent, (b) all persons
who hold, directly or indirectly, 50% or more of the voting stock of Parent,
and (c) all corporations, partnerships or other business entities controlled by
such persons in (b) as of the date of its last regularly prepared financial
statements, have less than $10,000,000 of total assets and, for its fiscal year
ended December 31, 1995, had less than $10,000,000 of net revenues. The terms
used in this Section, including without limitation, controlled, person, hold,
voting stock, entities, total assets and net revenues, shall be defined and
interpreted in accordance with the Premerger Notification Regulations
promulgated by the Federal Trade Commission under the Hart-Scott-Rodino
Antitrust Improvements Act of 1974.
ARTICLE V
CERTAIN COVENANTS
5.01. CONDUCT OF BUSINESS PENDING CLOSING. From and after the date
hereof and until the Closing Date, unless Parent shall otherwise consent in
writing, National shall, and Stockholders shall cause National to, conduct its
affairs as follows:
(a) ORDINARY COURSE; COMPLIANCE. The Business shall be conducted
only in the ordinary course and consistent with past practice. National shall
maintain its property, equipment and other assets consistent with their present
condition, ordinary wear and tear excepted, and shall comply in a timely
fashion with the provisions of all Contracts, Permits and Laws and its other
agreements and commitments. National shall use its best efforts to keep its
business organization intact, keep available the services of its present
employees and preserve the goodwill of its referring physicians, suppliers,
customers and others having business relations with it. National shall maintain
in full force and effect the policies of insurance disclosed on Schedule 3.21,
subject only to variations required by the ordinary operations of the Business,
or else shall obtain, prior to the lapse of any such policy, substantially
similar coverage with insurers of recognized standing.
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<PAGE> 23
(b) TRANSACTIONS. National shall not: (1) amend its Governing
Documents; (ii) change its authorized or issued capital stock or issue any
Security Rights with respect to shares of its capital stock; (iii) enter into
any contract or commitment the performance of which may extend beyond the
Closing, except those made in the ordinary course of business, the terms of
which are consistent with past practice; (iv) enter into any employment or
consulting contract or arrangement that is not terminable at will and without
penalty or continuing obligation; (v) fail to pay any Tax or any other
liability or charge when due, other than charges contested in good faith by
appropriate proceedings; (vi) make, change or revoke any Tax election or make
any agreement or settlement with any taxing authority; (vii) take any action
that is reasonably likely to result in the occurrence of any event set forth in
Section 3.09; (viii) take any action or omit to take any action that will cause
a breach or termination of any Contract, other than termination by fulfillment
of the terms thereunder; or (ix) declare any dividend or make any distribution
with respect to its Shares other than a distribution of the assets, if any, set
forth on Schedule 5.01.
(c) ACCESS, INFORMATION AND DOCUMENTS. Stockholders and National
shall give to Parent and to Parent's employees and representatives and
financial sources (including, without limitation, accountants, actuaries,
attorneys, environmental consultants and engineers) access during normal
business hours to all of the properties, books, Tax Returns, contracts,
commitments, records, officers, personnel and accountants (including
independent public accountants and their audit workpapers concerning National)
of National and shall furnish to Parent all such documents and copies of
documents and all information with respect to the properties, liabilities and
affairs of National as Parent may reasonably request.
5.02. CERTAIN TAX MATTERS.
(a) ALLOCATION OF TAXES FOR PERIODS THROUGH THE EFFECTIVE
CLOSING DATE. The income of National shall be determined for the period up to
and including the Effective Closing Date by closing the books of National as of
the close of business on the day before the Effective Closing Date. All Tax
liability for taxes due and payable for the period prior to the Effective
Closing Date shall be either paid by National before the Closing or shall be
paid by Stockholders from the amounts held in escrow as provided for under the
Stock Purchase Agreement. Parent shall cause any refund which may be received
by Parent or Surviving Corporation on behalf of National after the Closing as a
result of any short period tax return to be paid to Stockholders.
(b) TAX RETURNS DUE AFTER THE CLOSING DATE. Parent will file, or
cause Surviving Corporation to file, all Tax Returns that are required to be
filed by Surviving Corporation after the Closing Date, without regard to any
extensions, pursuant to the law of each governmental authority with taxing
power over it.
(c) CARRYBACKS. [Deleted.]
(d) MUTUAL COOPERATION. Parent and Stockholders shall each
provide the other, and Parent shall cause National to provide Stockholders,
with such assistance as may reasonably be requested by any of them in
connection with the preparation of any Tax Return, any Tax audit, or any
judicial or administrative proceedings relating to any Tax, and each will
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<PAGE> 24
retain and provide the other with any records or information that may be
relevant to such Tax Return, Tax audit, proceeding or determination. The party
requesting assistance hereunder shall reimburse the other for direct expenses
incurred in providing such assistance.
(e) AUDITS AND REFUND CLAIMS. Upon Stockholders' written
request, Parent shall cause Surviving Corporation to claim on behalf of
National any and all Tax credits and file any and all applications for refunds
of Taxes to which National may from time to time be entitled to claim or
recover, and which are in respect of Taxes paid by National for any taxable
period (or partial period) ending on or prior to the Effective Closing Date, at
the earliest date that such credits and/or refunds become available. In the
event that Parent or Surviving Corporation receives a Tax refund on behalf of
National for any taxable period (or partial period) ending on or prior to the
Effective Closing Date, Parent or Surviving Corporation shall pay such refund
to Stockholders within 10 days of receipt of such refund.
Stockholders shall have the right, at their own expense, to
control any audit or determination by any authority, or the resolution of any
claim for refund or amended return, and contest, resolve, and defend against
any assessment, notice of deficiency, or other adjustment or proposed
adjustment of Taxes for any taxable period (or partial period) ending on or
prior to the Effective Closing Date, provided, however, that Stockholders shall
consult with Parent with respect to the resolution of any issue that would
materially affect Parent for any taxable period (or partial period) ending
after the Effective Closing Date and shall not settle any such issue or file
any amended return relating to such issue without the consent of Parent, which
consent shall not be unreasonably withheld. Where consent to a settlement is
withheld by Parent pursuant to the preceding sentence, Parent may continue or
initiate any further proceedings at its own expense, provided that the
liability of Stockholders, after giving effect to this Agreement, shall not
exceed the liability that would have resulted from the settlement or amended
return. In the event any such audit shall occur after any amounts are still
held in escrow under the Stock Purchase Agreement, or in the event the
reasonably anticipated potential liability of National in connection with any
such audit shall exceed the balance of funds held in escrow under the Stock
Purchase Agreement after taking into account pending claims against the Escrow
Account from time to time to post a bond or other security reasonably
acceptable to Parent to serve as security for the reasonably anticipated
potential liability related to such audit. Any such bond or other security
shall be released upon resolution of any such audit and Stockholders'
fulfillment of their obligation with regard to same.
For purposes of this subsection (e), any taxable period
beginning before and ending after the Effective Closing Date shall be treated
as two partial periods, one ending on the Effective Closing Date and the other
beginning on the day after the Effective Closing Date, except that Taxes (such
as property taxes) imposed on a periodic basis shall be allocated on a per diem
basis.
5.03. PUBLICITY. Stockholders and Parent shall not issue any press
release or otherwise make any announcements to the public with respect to this
Agreement without the prior written consent of the other, except as required by
Law. This Section shall expire on the Closing Date.
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<PAGE> 25
5.04. FULFILLMENT OF AGREEMENTS. Each party hereto shall use its best
efforts to cause all of those conditions to the obligations of the other under
Article VI that are not beyond reasonable control to be satisfied on or prior
to the Closing and shall use its best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.05. LETTER OF INTENT. Execution of this Agreement shall terminate
any and all obligations of the parties which might other wise arise under the
letter of intent dated April 19, 1996, between Parent, Foster Health Care
Group, Inc., and Billy Ray Foster, Sr.
5.06. RECEIVABLES. All payments upon Receivables received by National
on or before the Effective Closing Date shall be a part of the cash of National
which may be removed by Stockholders before the Closing pursuant to Section
5.10 below, except for payments of Receivables of "Private Pay Patients" (as
defined below) for services to be rendered on or after the Closing. "Private
Pay Patients" are defined to be those patients of National for whom no
reimbursement is received from Medicare or Medicaid reimbursement programs or
from any insurance company, except the private resource portion of Medicaid
reimbursement for Medicaid-approved patients. Stockholders represent and
warrant that the aggregate total of all Receivables as of the Effective Closing
Date of National, together with the aggregate total of the Receivables of the
"Combined Companies" (as defined in the Stock Purchase Agreement), shall not be
less than $4,400,000.
5.07. ACCOUNTS PAYABLE. "Accounts Payable" is defined as amounts which
National is required (prior to the Effective Time) to pay for goods received or
services rendered in the ordinary course of business. Stockholders agree to pay
or cause National to pay on or before the Closing all Accounts Payable for all
goods received and for all services rendered on or before July 31, 1996. The
parties agree that Stockholders shall have no obligation with respect to
Accounts Payable for goods received or services rendered to National from and
after August 1, 1996, except that Stockholders shall pay or cause to be paid
each payroll and the related payroll taxes for salary payments to employees of
National which are paid on or before the Effective Closing Date.
5.08. COST REPORTS. Parent will file, or cause National to file, all
Medicare and Medicaid cost reports that are required to be filed by National
after the Closing Date, without regard to any extensions, pursuant to
applicable law. Any liability of National required to be paid as a result of
any such cost report for any period prior to the Closing Date shall either be
paid by Parent or Surviving Corporation on behalf of National before the
Closing Date or shall be paid by Stockholders from the amounts held in escrow
as provided in the Stock Purchase Agreement. Parent shall cause any refund
which may be received by National after the Closing as a result of any such
cost report to be paid to Stockholders.
5.09 APPOINTMENT OF STOCKHOLDERS' AGENT. Each Stockholder hereby
irrevocably appoints Billy Ray Foster, Sr. (herein called the "Stockholders'
Agent") as such Stockholders' Agent and attorney-in-fact to take any action
required or permitted to be taken by such Stockholders under the terms of this
Agreement, including, without limiting the generality of the
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<PAGE> 26
foregoing, the giving and receipt of any notices to be delivered or received by
or on behalf of any or all of the Stockholders, the payment of expenses
relating to the transactions contemplated by this Agreement, the representation
of the Stockholders in indemnification proceedings hereunder, and the right to
waive any of the terms of this Agreement in any respect, whether or not
material, and agrees to be bound by any and all actions taken by the
Stockholders' Agent on his or her behalf. Each Stockholder agrees Jointly and
severally to indemnify the Stockholders' Agent from and against and in respect
of any and all liabilities, damages, claims, costs and expenses, including, but
not limited to, attorneys' fees arising out of or due to any action as the
Stockholders' Agent and any and all actions, proceedings, demands, assessments
or judgments, costs and expenses incidental thereto, except to the extent that
the same result from bad faith or gross negligence on the part of the
Stockholders' Agent. Parent shall be entitled to rely exclusively upon any
communications given by the Stockholders' Agent on behalf of any Stockholders,
and shall not be liable for any action taken or not taken in reliance upon the
Stockholders' Agent. Except for any notice with regard to a replacement for
Stockholders' Agent pursuant to this Section 5.09, Parent shall be entitled to
disregard any notices or communications given or made by Stockholders unless
given or made through the Stockholders' Agent. In the event that Stockholders'
Agent dies, resigns, refuses to act or becomes disabled or unavailable, the
Stockholders shall promptly by majority vote in accordance with their prior
ownership of the National Stock appoint another Stockholder as the substitute
Stockholders' Agent to act under this Agreement; such substitute Stockholders'
Agent shall have all the powers of the initial Stockholders' Agent hereunder;
and, the Stockholders shall promptly deliver a copy of such appointment to the
Parent.
5.10. ASSETS TO BE TRANSFERRED BEFORE CLOSING. Stockholders shall have
the right at any time on or before the Closing Date to cause National to
transfer each of the following described assets (the "Excluded Assets") to
Stockholders or other parties for nominal or no consideration: (i) all cash
except for advance payments for services to be rendered to private-pay patients
after the Closing, resident trust funds, and deposits for Worker's Compensation
contributions and (ii) any assets owned by National which are not related to
the operation of the skilled nursing facility which is described in the
identification of National set out on page 1 of this Agreement; (iii) Billy Ray
Foster's personal assets and furniture, including artwork, office equipment
which is currently used by him; and (iv) certain items of furniture in the
independent living apartments with a value not to exceed $5,000. The assets to
be so transferred shall be identified on Schedule 5.10. Stockholders shall be
obligated to pay to Parent any tax which may be incurred by National as a
result of the foregoing transfer of the Excluded Assets. Such payment shall be
made pursuant to the terms of the Escrow Agreement.
5.11. EXHIBITS, SCHEDULES, AND OTHER AGREEMENTS. The parties
acknowledge that certain of the Exhibits, Schedules, and Other Agreements
contemplated hereunder have not yet been prepared upon the date this Agreement
was executed. Each party agrees to use its best efforts to prepare and to
deliver to the other party each such remaining Exhibit, Schedule, and Other
Agreement which is required under the terms of this Agreement not later than
August 12, 1996. The parties agree to negotiate in good faith to arrive at the
definitive terms and conditions of any such Schedule, Exhibit, and Other
Agreement not later than August 12, 1996.
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ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION
6.01 CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND PARENT SUB. The
obligation of Parent and Parent Sub to proceed with the Closing under this
Agreement with respect to National is subject to the fulfillment prior to or at
Closing of the following conditions with respect to Stockholders and National,
any one or more of which may be waived in whole or in part by Parent at
Parent's sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each
of the representations and warranties of Stockholders contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Closing Date.
Stockholders shall have performed in all respects all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by them at or before the Closing.
(b) LITIGATION. No Law shall be in effect that restrains or
prohibits the transactions contemplated hereby, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Body challenging the lawfulness of or seeking to prevent or
delay any of the transactions contemplated by this Agreement or the Stock
Purchase Agreement or seeking monetary or other relief by reason of the
consummation of any of such transactions.
(c) NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Effective Closing Date, there shall have been no material adverse change,
regardless of insurance coverage therefor, in the Business or any of the
assets, results of operations, liabilities, or condition, financial or
otherwise, of National.
(d) CLOSING CERTIFICATE. Stockholders shall have delivered a
certificate, dated the Effective Closing Date, in such detail as Parent shall
reasonably request, certifying to the fulfillment of the conditions set forth
in subparagraphs (a), (b) and (c) of this Section 6.01. Such certificate shall
constitute a representation and warranty of Stockholders with regard to the
matters therein for purposes of this Agreement.
(e) CLOSING DOCUMENTS. Parent and Parent Sub shall have received
the other documents referred to in Section 6.03(a). All agreements,
certificates, opinions and other documents delivered by Stockholders or
National to Parent and Parent Sub hereunder shall be in form and substance
satisfactory to Parent.
(f) CONSENTS. National shall have received the consents,
approvals and actions of the Persons listed on Schedule 6.01.
(g) STOCK PURCHASE AGREEMENT. HHPI and Stockholders shall have
entered into the Stock Purchase Agreement and the transactions contemplated
thereby shall have been consummated.
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<PAGE> 28
6.02. CONDITION PRECEDENT TO OBLIGATION OF STOCKHOLDERS. The
obligation of Stockholders to proceed with the Closing under this Agreement is
subject to the fulfillment prior to or at Closing of the following conditions,
any one or more of which may be waived in whole or in part by Stockholders at
Stockholders' sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each
of the representations and warranties of Parent and Parent Sub contained in
this Agreement shall be true and correct in all material respects on and as of
the Effective Closing Date, with the same force and effect as though such
representations and warranties had been made on, as of and with reference to
the Effective Closing Date. Parent and Parent Sub shall have performed all of
the covenants and complied in all respects with all of the provisions required
by this Agreement to be performed or complied with by them at or before the
Closing.
(b) LITIGATION. No Law shall be in effect that restrains or
prohibits the transactions contemplated hereby, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Body challenging the lawfulness of or seeking to prevent or
delay any of the transactions contemplated by this Agreement or the Stock
Purchase Agreement or seeking monetary or other relief by reason of the
consummation of such transactions.
(c) NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Effective Closing Date, there shall have been no material adverse change,
regardless of insurance coverage therefor, in the business or any of the
assets, results of operations, liabilities, or condition, financial or
otherwise, of Parent.
(d) CLOSING CERTIFICATE. Parent shall have delivered a
certificate, dated the Effective Closing Date, in such detail as Stockholders
shall request, certifying to the fulfillment of the conditions set forth in
subparagraphs (a), (b), and (c) of this Section 6.02. Such certificate shall
constitute a representation and warranty of Parent with regard to the matters
therein for purposes of this Agreement.
(e) CLOSING DOCUMENTS. Stockholders shall also have received the
other documents referred to in Section 6.03(b). All agreements, certificates,
opinions and other documents delivered by Parent and Parent Sub to Stockholders
hereunder shall be in form and substance reasonably satisfactory to
Stockholders.
(f) STOCK PURCHASE AGREEMENT. HHPI shall have entered into the
Stock Purchase Agreement and shall have performed all actions necessary on
HHPI's part to consummate the transactions contemplated thereby.
(g) MANAGEMENT AGREEMENT. Parent Sub shall have entered into the
Management Agreement.
(h) EMPLOYMENT AGREEMENTS. Parent shall have executed the
Employment Agreements and such Employment Agreements shall each include the
following:
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(i) Parent shall guaranty all obligations of Foster Health
Care Group, Inc. ("FHCG") arising from and after the earlier of eighteen months
after the Closing or the date when the assets of FHCG shall be transferred to
Parent pursuant to the Foster Health Care Group Purchase Agreement (as defined
in the Stock Purchase Agreement).
(ii) FHCG shall agree to assign such Employment Agreement to
Parent and Parent shall agree to accept such assignment and shall agree to take
over and perform all obligations of FHCG from and after the date defined in (i)
above.
(i) SHAREHOLDERS' AGREEMENTS. National and each of the
Stockholders shall execute all documents which are necessary and appropriate in
order to either terminate all agreements entered into between National and
Stockholders or whereby the Stockholders shall waive all of their rights
arising under any such shareholders' agreements.
6.03. DELIVERIES AND PROCEEDINGS AT CLOSING.
(a) DELIVERIES BY STOCKHOLDERS. Stockholders shall deliver or
cause to be delivered to Parent and Parent Sub at the Closing:
(i) Certificates representing the National Stock duly
endorsed in negotiable form or accompanied by stock powers duly executed in
blank, in either case with signatures guaranteed by a commercial bank or
brokerage firm and with all transfer taxes, if any, paid in full.
(ii) Certificates of the appropriate public officials to
the effect that National was a validly existing corporation in good standing in
the State of Missouri as of a date not more than 10 days prior to the Effective
Closing Date.
(iii) Incumbency and specimen signature certificates dated
the Closing Date, signed by the officers of National and certified by its
Secretary.
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of National as of a date not more than 10 days prior to
the Closing Date, certified by the secretary of State of Missouri and (B) the
bylaws of National as of the Closing Date, certified by its Secretary.
(v) Certificates of the Secretary of National (A) setting
forth all resolutions of the Board of Directors of National authorizing the
execution and delivery of this Agreement and the performance by National of the
transactions contemplated hereby, and (B) to the effect that the Governing
Documents of National delivered pursuant to Section 6.03(a)(iv) were in effect
at the date of adoption of such resolutions, the date of execution of this
Agreement and the Closing Date.
(vi) General releases by all officers and directors of
National and by Stockholders and all Related Parties of all liability of
National to them and of any claim that they
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<PAGE> 30
or any of them may have against National (exclusive of pension obligations) in
the form of Exhibit 6.03(a)(vi).
(vii) The minute books, stock ledgers and corporate seal of
National.
(viii) The opinion of Husch & Eppenberger, legal counsel to
Stockholders and National, in substantially the form of Exhibit 6.03(a)(viii).
(ix) Resignations of the officers and directors of
National effective at the Closing.
(x) The other named agreements and documents listed on
Schedule 6.03.
(xi) Such other agreements and documents as Parent may
reasonably request.
(b) DELIVERIES BY PARENT AND PARENT SUB. Parent and Parent Sub
shall deliver or Cause to be delivered to Stockholders at the Closing.
(i) Certificates representing 1,256,022 Parent shares
registered in the names of the Stockholders as set forth on Schedule 2.02.
(ii) Certificates of the appropriate public officials to
the effect that Parent and Parent Sub are validly existing corporations in
their respective states of incorporation and that Parent Sub is duly qualified
as a foreign corporation in the State of Missouri as of a date not more than 10
days prior to the Closing Date.
(iii) Incumbency and specimen signature certificates signed
by the officers of Parent and Parent Sub and certified by their respective
Secretaries.
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of Parent and Parent Sub as of a date not more than 10
days prior to the Closing Date, certified by the Secretary of State of their
respective states of incorporation and (B) the bylaws of Parent and Parent Sub
as of the Closing Date, certified by their respective Secretaries.
(v) A certificate of the Secretaries of Parent and Parent
Sub (A) setting forth all resolutions of the Board of Directors of Parent
authorizing the execution and delivery of this Agreement and the performance by
Parent and Parent Sub of the transactions contemplated hereby, certified by
their respective secretaries and (B) to the effect that the Governing Documents
of Parent and Parent Sub delivered pursuant to Section 6.03(b)(iv) were in
effect at the date of adoption of such resolutions, the date of execution of
this Agreement and the Closing Date.
(vi) The opinion of Kirkpatrick & Lockhart LLP, Parent's
legal counsel, in substantially the form of Exhibit 6.03(b)(vi).
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<PAGE> 31
(vii) The other named agreements and documents listed on
Schedule 6.03.
(viii) Such other agreements and documents as Stockholders
may reasonably request.
6.04 TERMINATION. This Agreement may be terminated at any time prior
to Closing by (i) mutual consent of Parent and Stockholders; (ii) Parent, if
any of the conditions specified in Section 6.01 hereof shall not have been
fulfilled by August 29, 1996, and shall not have been waived by Parent; or
(iii) Stockholders, if any of the conditions specified in Section 6.02 hereof
shall not have been fulfilled by August 29, 1996, and shall not have been
waived by Stockholders. In the event of termination of this Agreement by either
Parent or Stockholders pursuant to clause (ii) or (iii) of the immediately
preceding sentence, Parent, on the one hand, and Stockholders and National, on
the other hand, shall be liable to the other for any breach hereof by such
party, which breach led to such termination, and the rights and obligations of
the parties set forth in Sections 7.02, 7.03 of the Stock Purchase Agreement as
provided for in Section 7.02 hereof and 8.01 hereof shall survive such
termination. Parent, on the one hand, and Stockholders and National, on the
other hand, shall also be entitled to seek any other remedy to which it may be
entitled at law or in equity in the event of such termination, which remedies
shall include injunctive relief and specific performance.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.01 SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall survive
the Closing, but all claims for damages made by virtue of such representations,
warranties and agreements shall be made under, and subject to the limitations
set forth in, this Article VII. The representations and warranties set forth in
Articles III and IV are cumulative, and any limitation or qualification set
forth in any one representation and warranty therein shall not limit or qualify
any other representation and warranty therein. After Closing, National shall
not have any liability to Stockholders for any breach of any representation or
warranty made by Stockholders or National to parent in this Agreement, in any
certificate or document furnished pursuant hereto by Stockholders or National
to which Stockholders or National, or both, is or is to become a party.
7.02. INDEMNIFICATION BY STOCKHOLDERS.
(a) BASIC INDEMNIFICATION. Stockholders shall indemnify, defend,
save and hold Parent and its officers, directors, employees, agents and
Affiliates (including, after the Closing, the Surviving Corporation,
collectively, "Parent Indemnitees") harmless from and against all demands,
claims, allegations, assertions, actions or causes of action, assessments,
losses, damages, deficiencies, liabilities, costs and expenses (including
reasonable legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious; collectively, "Parent Damages") asserted against, imposed upon,
resulting to, required to be paid by or incurred by any Parent Indemnitees,
directly or indirectly, in connection
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<PAGE> 32
with, arising out of, which could result in, or which would not have occurred
but for, (i) a breach of any representation or warranty made by Stockholders in
this Agreement, in any certificate or document furnished pursuant hereto by
Stockholders or National or any Other Agreement to which Stockholders or
National, or both, is or is to become a party, (ii) a breach or nonfulfillment
of any covenant or agreement made by Stockholders or National in or pursuant to
this Agreement or in any Other Agreement to which Stockholders or National, or
both, is or is to become a party, and (iii) any and all liabilities of National
of any nature whatsoever, whether due or to become due, whether accrued,
absolute, contingent or otherwise, existing on the Effective Closing Date or
arising out of any transaction entered into, or any state of facts existing,
prior to the Effective Closing Date, except for (i) liabilities fully reserved
on the Fiscal Year Financial Statements and/or the Estimated Interim Financial
Statements, but only to the extent reserved therein, (ii) those liabilities not
required under GAAP to be reserved in the Fiscal Year Financial Statements
and/or the Estimated Interim Financial Statements that are expressly quantified
and set forth in the Contracts, and (iii) obligations disclosed in this
Agreement or in any Other Agreement, Schedule, or Exhibit and (iv) obligations
for Accounts Payable which are not the responsibility of Stockholders pursuant
to Section 5.07 above.
(b) PAYMENT OF PARENT DAMAGES. To the extent Parent is entitled
to collect Parent Damages, Parent shall, at its option, be entitled to withdraw
sufficient funds pursuant to the Escrow Agreement in lieu of payment directly
from Stockholders, and to the extent the amount due to Parent exceeds the
balance of the funds held under the Escrow Agreement, Parent shall be entitled
to collect such balance owed to Parent directly from Stockholders. [SUBJECT TO
FURTHER AMENDMENT.]
7.03. INDEMNIFICATION BY PARENT. Parent shall indemnify, defend, save
and hold Stockholders and Stockholders' heirs, personal representatives and
assigns (collectively, "Stockholders Indemnitees") harmless from and against
any and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious; collectively, "Stockholder Damages") asserted against, imposed
upon, resulting to, required to be paid by or incurred by any Stockholder
Indemnitee, directly or indirectly, in connection with, arising out of, which
could result in, or which would not have occurred but for, (i) a breach of any
representation or warranty made by Parent in this Agreement or in any
certificate or document furnished pursuant hereto by Parent or any Other
Agreement to which Parent is a party, (ii) a breach or nonfulfillment of any
covenant or agreement made by Parent in or pursuant to this Agreement and in
any Other Agreement to which Parent is a party, and (iii) any and all
liabilities of National of any nature whatsoever arising after the Effective
Closing Date or arising out of any transaction entered into, or any state of
facts which come into existence after the Effective Closing Date, except for
any liability which Stockholders have agreed hereunder to assume.
7.04. LIMITATION OF LIABILITY. Notwithstanding the foregoing,
Stockholders' obligations to indemnify Parent Indemnitees against any Parent
Damages shall be subject to all of the following limitations:
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<PAGE> 33
(a) THRESHOLD. No indemnification shall be made under clause (i)
of Section 7.02 until the aggregate amount of Parent Damages thereunder exceeds
$100,000, but if the aggregate amount of Parent Damages thereunder exceeds such
amount, indemnification shall be made by Stockholders thereunder to the full
extent of Parent Damages.
(b) TIME PERIOD. Stockholders shall be obligated to indemnify
Parent Indemnitees by virtue of clause (i) of Section 7.02 only for those
Parent Damages as to which Parent has given Stockholders written notice thereof
within two years after the Closing Date; provided, however, that with respect
to any claim for Parent Damages sustained by reason of a breach of any
representation or warranty relating to those matters governed by Sections 3.10
and 3.24 Stockholders' liability shall be limited to Parent Damages as to which
such written notice shall have been given within the periods of the applicable
federal and state statutes of limitations related to such matters.
Notwithstanding the foregoing, Stockholders shall be obligated to indemnify
Parent Indemnitees for claims of alleged breach of any representation or
warranty of Stockholders with regard to the condition of assets of National
contained in Section 3.13 only if Parent shall have given Stockholders written
notice of facts upon which the claim is based not later than ninety days after
the Closing.
(c) MAXIMUM LIABILITY. Notwithstanding any provision of this
Agreement to the contrary, the aggregate liability of Stockholders under (1)
Section 7.03 above, (2) Section 7.03 of the Stock Purchase Agreement, and (3)
Section 7.03 of that Merger Agreement of even date herewith between Parent, BCC
at Nevada Park Care Center, Inc., shall not in any event exceed $2,400,000,
except for the following: (i) claims as otherwise provided in Section 7.04(d)
below; (ii) claims arising under Sections 3.10 or 5.02 (taxes); and (iii)
claims against National for a refund of any amount previously received by
National for any Medicare reimbursement.
(d) FRAUD; INTENTIONAL MISREPRESENTATION. The limitations set
forth in Sections 7.04(a), (b), and (c) shall not apply to Parent Damages
arising out of (i) fraud or (ii) the breach of any representation or warranty
contained herein or pursuant hereto if such representation or warranty was made
with actual knowledge that it contained an untrue statement of a fact or
omitted to state a fact necessary to make the statements of facts contained
therein not misleading.
7.05. NOTICE OF CLAIMS. If any Parent Indemnitee or Stockholder
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Parent Damages or Stockholder Damages, as the case
may be ("Damages"), for which it is entitled to indemnification under this
Article VII, such Indemnified Party shall so notify the party or parties from
whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly
notify the Indemnifying Party of such action or suit. The failure of an
Indemnified Party to give any notice required by this Section shall not affect
any of such party's rights under this Article VII or otherwise except and to
the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party.
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7.06. THIRD PARTY CLAIMS. The Indemnifying Party shall have the right
at its sole cost and expense to conduct and control, through counsel of its
choosing, the defense of any third party claim, action or suit, and the
Indemnifying Party may compromise or settle the same, provided that the
Indemnifying Party shall give the Indemnified Party advance notice of any
proposed compromise or settlement. The Indemnifying Party shall permit the
Indemnified Party to participate in the defense of any such action or suit
through counsel chosen by the Indemnified Party, provided that the fees and
expenses of such counsel shall be borne by the Indemnified Party. If the
Indemnifying Party shall control the conduct and settlement of such action or
suit, (i) the Indemnifying Party shall not thereby permit to exist any
Encumbrance upon any asset of the Indemnified Party; (ii) the Indemnified Party
shall not consent to any settlement that does not include as an unconditional
term thereof the giving of a complete release from liability with respect to
such action or suit to the Indemnified Party; (iii) the Indemnifying Party
shall permit the Indemnified Party to participate in such conduct or settlement
through counsel chosen by the Indemnified Party; and (iv) the Indemnifying
Party shall agree promptly to reimburse the Indemnified Party for the full
amount of any Damages including fees and expenses of counsel for the
Indemnified Party incurred after giving the foregoing notice to the
Indemnifying Party and prior to the assumption of the conduct and control of
such action or suit by the Indemnifying Party.
ARTICLE VIII
MISCELLANEOUS
8.01 COSTS AND EXPENSES. Subject to Section 6.04, Parent and
Stockholders shall each pay their respective expenses, brokers' fees and
commissions, and Stockholders shall pay all of the preClosing expenses of
National incurred in connection with this Agreement and the transactions
contemplated hereby, including all accounting, legal and appraisal fees and
settlement charges.
8.02 FURTHER ASSURANCES. Stockholders shall, at any time and from time
to time on and after the Closing Date, upon request by Parent and without
further consideration, take or cause to be taken such actions and execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments, documents, transfers, conveyances and assurances as may be
required or desirable for the better conveying, transferring, assigning,
delivering, assuring and confirming the National Stock to Parent or any of the
assets used in the Business.
8.03 NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made (i) the second business day after the date of mailing, if
delivered by registered or certified mail, postage prepaid, (ii) upon delivery,
if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with
a record of receipt, or (iv) the next day after the date of dispatch, if sent
by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, postage prepaid, return receipt requested), to
the parties at the following addresses:
- 34 -
<PAGE> 35
(i) If to Parent, to:
Brad E. Hollinger
Chairman and CEO
Balanced Care Corporation
8507 Market Street, Suite 202
Camp Hill, PA 17011
Telecopy:
with a required copy to:
Kirkpatrick & Lockhart LLP
Attn: John C. Rodney, Esquire
1500 Oliver Building
Pittsburgh, PA 15222
Telecopy: (412) 355-6501
(ii) If to Stockholders, to:
Mr. Billy Ray Foster
President and CEO
Foster Health Care Group
426 S. Jefferson
Springfield, MO 65806
Telecopy: (417) 831-7383
with a required copy to:
Harvey Tettlebaum
Husch & Eppenberger
235 East High Street, Suite 300
Jefferson City, Missouri 65101
Telecopy: (573) 634-7854
Notices to National shall be addressed in care of Stockholders before Closing
and in care of Parent after Closing. Any party hereto may change the address to
which notice to it, or copies thereof, shall be addressed, by giving notice
thereof to the other parties hereto in conformity with the foregoing.
8.04 ASSIGNMENT; GOVERNING LAW. This Agreement and all the rights and
powers granted hereby shall bind and inure to the benefit of the parties hereto
and their respective permitted successors and assigns. This Agreement and the
rights, interests and obligations hereunder may not be assigned by any party
hereto without the prior written consent of the other parties hereto, except
that Parent or Parent Sub may make such assignments to any Affiliate of Parent
provided that Parent remains liable hereunder and provided further that no such
- 35 -
<PAGE> 36
assignment shall cause the Parent Shares to be replaced with stock of another
corporation. This Agreement shall be governed by and construed in accordance
with the laws of the Missouri without regard to its conflict of law doctrines.
8.05 AMENDMENT AND WAIVER; CUMULATIVE EFFECT. To be effective, any
amendment or waiver under this Agreement must be in writing and be signed by
the party against whom enforcement of the same is sought. Neither the failure
of any party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by any other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof shall constitute a waiver by such party of its right to exercise any
such right, power or remedy or to demand such compliance. The rights and
remedies of the parties hereto are cumulative and not exclusive of the rights
and remedies that they otherwise might have now or hereafter, at law, in
equity, by statute or otherwise.
8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
and the Schedules and Exhibits set forth all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with respect
to the subject matter hereof, and supersede all prior or contemporaneous
agreements and understandings, negotiations, inducements or conditions, express
or implied, oral or written, including the letter of intent. This Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder, except the provisions of Sections 7.02 and 7.03 in the
Stock Purchase Agreement as provided for in Section 7.02 of this Agreement
relating to Indemnitees.
8.07 SEVERABILITY. If any term or other provision of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal or incapable
of being enforced under any rule of Law in any particular respect or under any
particular circumstances, such term or provision shall nevertheless remain in
full force and effect in all other respects and under all other circumstances,
and all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
8.08 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
- 36 -
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
STOCKHOLDERS
/s/ Billy Ray Foster, Sr.
---------------------------------
Billy Ray Foster, Sr., both individually
and as Trustee of the Revocable Inter Vivos
Trust agreement of Billy Ray Foster dated
February 4, 1988
/s/ John Douglas Foster
----------------------------------
John Douglas Foster
/s/ Billy Ray Foster, Jr.
----------------------------------
Billy Ray Foster, Jr.
/s/ J. Kaye Foster Gibson
----------------------------------
J. Kaye Foster Gibson
/s/ Robert Anthony Foster
----------------------------------
Robert Anthony Foster
/s/ Mark Bradley Foster
----------------------------------
Mark Bradley Foster
PARENT
Balanced Care Corporation
/s/ Brad E. Hollinger
----------------------------------
By: Brad E. Hollinger,
Chairman and CEO
- 37 -
<PAGE> 38
PARENT SUB
BCC at Republic Park Center, Inc.
By: /s/ Brad E. Hollinger
-------------------------------
Name: Brad E. Hollinger
-----------------------------
Title: President
----------------------------
NATIONAL
National Care Centers of Republic, Inc.
By: /s/ Bill R. Foster
-------------------------------
Name: Bill R. Foster
-----------------------------
Title: President
----------------------------
- 38 -
<PAGE> 39
Schedule 2.02 (a)
NATIONAL CARE CENTERS OF REPUBLIC, INC.
<TABLE>
<CAPTION>
Net Shares of
National as of Shares of
Stockholder Closing Date BCC Stock
----------- ------------ ---------
<S> <C> <C>
Bill R. Foster, Sr. 1, 870 722,698
John Foster 240 92,752
J. Kaye Foster-Gibson 330 127,534
Bill R. Foster, Jr. 240 92,152
Robert A. Foster 330 127,534
Mark B. Foster 240 92,752
----- ---------
Total 3,250 1,256,022
</TABLE>
<PAGE> 1
Exhibit 2.4
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") dated as of July 26, 1996, by and
between Balanced Care Corporation, a Delaware corporation ("Parent"), BCC at
Nevada Park Center, Inc., a Delaware corporation ("Parent Sub"), National Care
Centers of Nevada, Inc., a Missouri corporation, d/b/a Nevada Park Center
("National"), and Billy Ray Foster, Sr., both individually and as Trustee of
the Revocable Inter Vivos Trust Agreement of Billy Ray Foster dated February 4,
1988, John Douglas Foster, Billy Ray Foster, Jr., J. Kaye Foster Gibson, Robert
Anthony Foster, and Mark Bradley Foster, all individual residents of Missouri
(individually referred to as "Stockholder" and collectively the
"Stockholders"), each of whom is a shareholder of National.
WHEREAS, Stockholders are the registered owners and holders of all of
the issued and outstanding shares of stock of National; and
WHEREAS, Parent Sub is the wholly owned subsidiary of Parent; and
WHEREAS, the parties hereto desire to effectuate the merger of
National into Parent Sub ("Merger"); and
WHEREAS, each of the Stockholders have reviewed this Agreement and all
other information deemed necessary or appropriate by such Stockholder to be
reviewed in connection with the Merger and have determined to execute this
Agreement and consummate the transactions contemplated thereby; and
WHEREAS, for federal income tax purposes, it is intended that the
transactions contemplated in this Agreement qualify as tax-free reorganization
under the provisions of Section 368 of the Internal Revenue Code of 1986, as
amended ("Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth in this
Agreement, the parties hereto intending to be legally bound hereby agree as
follows:
<PAGE> 2
ARTICLE I
DEFINITIONS: CONSTRUCTION
1.01 DEFINITIONS. As used in this Agreement, the following terms have
the meanings specified in this Section 1.01. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
"1933 Act" has the meaning given that term in Section 3.28.
"Accounting Principles" means GAAP.
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such Person or any
Family Member of such Person.
"Agreement" means this Exchange Agreement, as it may be
amended from time to time.
"Benefit Plan" has the meaning given that term in Section
3.23(a).
"Business" means the business conducted by National, which
generally includes the ownership and operation of an elderly living center
including a skilled nursing facility, including all activities related to the
foregoing.
"CERCLIS" means the Comprehensive Environmental Response
Compensation Liability Information System Database pursuant to Superfund.
"Certificate" has the meaning given that term in Section
2.02(d).
"Certificate of Merger" has the meaning given that term in
Section 2.01(b).
"Closing" has the meaning given that term in Section 2.04.
"Closing Date" has the meaning given that term in Section
2.04.
"Code" means the Internal Revenue Code of 1986, as amended,
and the applicable rulings and regulations thereunder.
"Company Group" has the meaning given that term in Section
3.23(b).
"Company Plan" has the meaning given that term in Section
3.23(a).
"Contract" and "Contracts" have the respective meanings given
those terms in Section 3.15.
"Defined Benefit Plan" has the meaning given that term in
Section 3.23(e).
"Effective Time" has the meaning given that term in Section
2.01(b).
- 2 -
<PAGE> 3
"Encumbrance" means any liability, debt, mortgage, deed of
trust, pledge, security interest, encumbrance, option, right of first refusal,
agreement of sale, adverse claim, easement, lien, assessment, restrictive
covenant, encroachment, burden or charge of any kind or nature whatsoever or
any item similar or related to the foregoing.
"Environment" means soil, land, surface or subsurface waters,
ground waters, and ambient air.
"Environmental Condition" means any condition with respect to
the Environment relating to or arising out of the use, handling, storage,
transportation, treatment, recycling, release, or threatened release by
National.
"Environmental Law" means any applicable law relating to
public health and safety or protection of the environment, including common law
nuisance, property damage and similar common law theories.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the applicable rulings and regulations thereunder.
"Effective Closing Date" has the meaning given that term in
Section 2.04.
"Estimated Interim Financial Statement" has the meaning given
that term in Section 3.07(b).
"Family Member" means any spouse, sibling, parent, offspring;
personal representatives or heirs of a Person or any spouse of such Family
Member.
"Fiscal Year Financial Statements" has the meaning given that
term in Section 3.07(b).
"GAAP" means United States generally accepted accounting
principles.
"Governing Documents" means, with respect to any Person who
is not a natural Person, the certificate or articles of incorporation, bylaws,
deed of trust, formation or governing agreement and other charter documents or
organization or governing documents or instruments of such Person.
"Governmental Body" means any court, government (federal,
state, local, or foreign department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority or
instrumentality, including, without limitation, any Medicare fiscal
intermediary.
"Hazardous Activity" means the distribution, generation,
handling, storage, treatment, use, transportation, recycling, release or
threatened release of Hazardous Materials.
- 3 -
<PAGE> 4
"Hazardous Materials" means any substance listed, defined,
classified, or determined to be hazardous, radioactive, or toxic contaminant
pursuant to any Environmental Law.
"Intellectual Property" has the meaning given that term in
Section 3.22.
"IRS" means the Internal Revenue Service.
"Law" means any applicable federal, state, municipal, local
or foreign statute, law, ordinance, rule, regulation, policy or order of any
kind or nature whatsoever including any public policy, order of any
Governmental Body or principle of common law.
"Litigation" has the meaning given that term in Section 3.14.
"National Shares" has the meaning given that term in Section
3.03.
"National Stock" has the meaning given that term in Section
3.03.
"Management Agreement" means an agreement in the form
attached hereto as Exhibit 1.01(1) between Parent Sub and Foster Health Care
Group, Inc., a Missouri corporation owned by some or all of the Stockholders.
"Material" means all items which, in the aggregate and
disregarding materiality, shall equal or exceed $100,000.
"Merger" has the meaning given that term in Section 2.01.
"Missouri Act" has the meaning given that term in Section
3.28.
"Multiemployer Plan" has the meaning given that term in
Section 3.23(f).
"Parent" means Balanced Care Corporation, a Delaware
corporation.
"Parent Shares" means shares of common stock of Parent.
"Parent Sub" means BCC at Nevada Park Center, Inc., a
Missouri corporation.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCBs" means polychlorinated biphenyls.
"Permit" and "Permits" have the respective meanings given
those terms in Section 3.16.
"Person" means and includes a natural person, a corporation,
an association, a partnership, a limited liability company, a trust, a joint
venture, an unincorporated organization, a business, any other legal entity,
and a Governmental Body.
- 4 -
<PAGE> 5
"Qualified Plan" has the meaning given that term in Section
3.23(d).
"Real Property" has the meaning given that term in Section
3.17.
"Receivables" has the meaning given that term in Section
3.12.
"Related Party" means (i) National, (ii) any Affiliate of
National, (iii) any officer, director or shareholder or former officer,
director or shareholder of any Person identified in clauses (i) or (ii)
preceding, and (iv) any spouse, sibling, parent, offspring, personal
representative, or heir of any natural Person identified in any one of the
preceding clauses.
"Release" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping into the environment.
"Security Right" means, with respect to any security, any
option, warrant, subscription right, preemptive right, other right, proxy, put,
call, demand, plan, commitment, agreement, understanding or arrangement of any
kind relating to such security, whether issued or unissued, or any other
security convertible into or exchangeable for any such security. "Security
Right" includes any right relating to issuance, sale, assignment, transfer,
purchase, redemption, conversion, exchange, registration or voting and includes
rights conferred by statute, by the issuer's Governing Documents or by
agreement.
"Site Reports" has the meaning given that term in Section
4.06.
"Stockholders" means collectively Billy Ray Foster, Sr., both
individually and as Trustee of the Revocable Inter Vivos Trust Agreement of
Billy Ray Foster dated February 4, 1988, John Douglas Foster, Billy Ray Foster,
Jr., J. Kaye Foster Gibson, Robert Anthony Foster, and Mark Bradley Foster, all
individual residents of Missouri.
"Stockholders' Agent" has the meaning given that term in
Section 5.09.
"Stock Purchase Agreement" means that certain agreement of
even date herewith between Hawthorn Health Properties, Inc. ("HHPI") and
Stockholders pursuant to which HHPI agreed to purchase from Stockholders all of
the capital stock of National Care Centers, Inc., a Missouri corporation, d/b/a
Lebanon Care Center; National Care Centers of Lebanon, Inc., a Missouri
corporation, d/b/a Lebanon Park Manor, d/b/a Fremont Terrace Apts., and d/b/a
Elder Care Home Health Agency; National Care Centers of NIXA, Inc., a Missouri
corporation, d/b/a Nixa Park Care Center, d/b/a Nixa Park Terrace Apts.;
National Care Centers of Hermitage, Inc., a Missouri corporation, d/b/a
Hermitage Park Regional Care Centers; National Care Centers of Springfield,
Inc., a Missouri corporation, d/b/a Springfield Park Care Center, d/b/a Bedford
Park Terrace Apts. (excluding d/b/a Cherokee Residential Care Center); Dixon
Management Inc., a Missouri corporation, d/b/a Dixon Oaks Care Center; Long
Term Pharmaceutical Care, Inc., formerly known as Juan Construction Company, a
Missouri corporation, d/b/a Mt. Vernon Park Pharmacy and d/b/a Long Term
Pharmaceutical Care; Springfield Retirement Village, Inc., d/b/a Mt. Vernon
Park Care Center; and Mt. Vernon Park Care Center West, Inc.
- 5 -
<PAGE> 6
"Superfund" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901, et seq., as
amended.
"Surviving Corporation" has the meaning given that term in
Section 2.01(a).
"Tax" means any domestic or foreign federal, state, county or
local tax, levy, impost or other similar charge of any kind whatsoever,
including any interest or penalty thereon or addition thereto, whether disputed
or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
"Threatened Release" means a substantial likelihood of a
release that requires action to prevent or mitigate damage to the environment
that may result from such release.
1.02 CONSTRUCTION. As used herein, unless the context otherwise
requires: (i) references to "Article" or "Section" are to an article or section
hereof; (ii) all "Exhibits" and "Schedules" referred to herein are to Exhibits
and Schedules attached hereto and are incorporated herein by reference and made
a part hereof; (iii) "include," "includes," and "including" are deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import; and (iv) the headings of the various
articles, sections and other subdivisions hereof are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
ARTICLE II
MERGER; CONVERSION; EXCHANGE
2.01 MERGER.
(a) MERGER OF NATIONAL INTO PARENT SUB. Upon the terms and
subject to the conditions set forth in this Agreement, and in accordance with
applicable law, at the Effective Time (as defined in Section 2.01 (b)),
National shall be merged with and into Parent Sub (the "Merger"). As a result
of the Merger, the separate corporate existence of National shall cease and
Parent Sub shall continue as the surviving corporation of the Merger (the
"Surviving Corporation") and shall continue to be governed by the laws of the
states of Delaware and Missouri, and the separate corporate existence of Parent
Sub with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth below. The name of the
Surviving Corporation shall be BCC at Nevada Park Center, Inc., or such other
name as Parent shall determine.
(b) EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VI, the parties hereto shall cause the Merger to be consummated by filing a
certificate or articles of merger (the "Certificate of Merger") with the
Delaware and Missouri Secretaries of State in such form as required by, and
- 6 -
<PAGE> 7
executed in accordance with the relevant provisions of, the law of the states
of Delaware and Missouri (the date and time of such filing being the "Effective
Time").
(c) EFFECT OF THE MERGER. At the Effective Time, the Merger
shall have the effect set forth in the applicable provisions of the states of
Delaware's and Missouri's corporate law. Without limiting the generality of the
foregoing, and subject thereto, and except as set forth in the Stock Purchase
Agreement, in Schedule 3.06 thereto, in any Schedule or Exhibit to the Stock
Purchase Agreement or in any "Other Agreement" (as defined in the Stock
Purchase Agreement), at the Effective Time, except as otherwise specifically
set forth herein, all the property, rights, privileges, powers and franchises
of Parent Sub and National shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Parent Sub and National shall become the
debts, liabilities and duties of the Surviving Corporation.
(d) CERTIFICATE OF INCORPORATION, BYLAWS. At the Effective
Time, the Certificate of Incorporation and the Bylaws of Parent Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation.
2.02 CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.
(a) NATIONAL SHARES. By virtue of the Merger and without any
action on the part of Parent, Parent Sub, National, or stockholders:
(i) At the Effective Time, the National Shares, as
defined in Section 3.03, issued and outstanding immediately prior to the
Effective Time other than any National Shares to be canceled pursuant to
Section 2.02(a)(ii) hereof, shall be converted, into the right to receive on a
pro rata basis a total of [800,000] Parent Shares as set forth on Schedule
2.02(a) hereto.
(ii) At the Effective Time, all National Shares held in
the treasury of National immediately prior to the Effective Time shall be
canceled and extinguished at the Effective Time without any conversion thereof
and no Parent Shares shall be exchanged with respect thereto.
(iii) At the Effective Time, the National Shares issued
and outstanding immediately prior to the Effective Time shall cease to exist.
(b) As soon as practicable after the Effective Time, each
holder of a certificate that prior thereto represented National Shares shall be
entitled, upon surrender thereof to Parent in the manner set forth in Section
2.02(c) hereof, to receive in exchange therefor, in accordance with Section
2.02(a)(i) hereof and Schedule 2.02(a) hereto, of Parent Shares into which the
National Shares so surrendered shall have been converted as provided in Section
2.02(a)(i) hereof and Schedule 2.02(a) hereto. Until so surrendered, each such
certificate that, prior to the Effective Time, represented National Shares
shall be deemed from and after the Effective Time, for all corporate purposes
to evidence solely the right to receive the pro rata share of the Parent
Shares, into which such National Shares shall have been converted pursuant to
this Section 2.02.
- 7 -
<PAGE> 8
(c) At the Effective Time, Parent will deliver or cause to be
delivered, on behalf of Parent Sub, to the Stockholders' Agent, certificates
for the Parent Shares which each stockholder has the right to receive pursuant
hereto.
2.03 STOCK TRANSFER BOOKS. Upon the execution hereof, the stock
transfer book of National shall be closed and there shall be no further
registration of transfers of National Stock on the records of National unless
and until this Agreement is terminated.
2.04 CLOSING. The consummation of the purchase and sale of the Shares
and the other transactions contemplated hereby (the "Closing") shall take place
at 10:00 a.m., local time, on or before August 19, 1996, at the offices of
[Mercantile Bank of Springfield, 417 St. Louis Street, Springfield, Missouri],
or at such other time, date or place as the parties agree (the "Closing Date"),
provided, however, that the Closing shall be effective as of August 31, 1996
(the "Effective Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As an inducement to Parent to enter into this Agreement and consummate
the transactions contemplated hereby, Stockholders represent and warrant to
Parent, as to National, and, where applicable as to themselves, that each of
the following representations and warranties is true as of the date hereof:
3.01 ORGANIZATION. National is a corporation duly organized, validly
existing and in good standing under the laws of Missouri, and has the corporate
power and authority to own or lease its properties, carry on its business as
now conducted, enter into this Agreement and perform its obligations hereunder.
3.02 AUTHORIZATION; ENFORCEABILITY. This Agreement has been duly
executed and delivered by and constitutes the legal, valid and binding
obligation of National and the Stockholders, enforceable against them in
accordance with their respective terms, except for (i) the effect of
bankruptcy, insolvency, reorganization, moratorium, equity of redemption or
other similar laws now or hereafter in effect relating to or affecting
creditors generally and (ii) the effect of general principles of equity and the
discretion of the court before which any proceeding therefor may be brought.
All actions contemplated by this Agreement have been duly and validly
authorized by all necessary proceedings by the Stockholders and National.
3.03 SHARES, CAPITALIZATION. The authorized capital stock of National
consists solely of the number of shares of common stock at the par value per
share of such common stock identified on Schedule 3.03 (the "National Shares").
Schedule 3.03 identifies the number of National Shares issued and outstanding
and the number of National shares held in the treasury of National. Schedule
3.03 also sets forth truthful and accurate information concerning the issued
and outstanding shares of capital stock of National (the "National Stock". All
of the National Stock is owned of record, legally and beneficially by
Stockholders, except for the National Stock identified on Schedule 3.03 as
treasury stock. Except as may be disclosed on Exhibit 3.03, the National Stock
is free and clear of any and all Encumbrances, including without limitation any
- 8 -
<PAGE> 9
Encumbrance resulting from the acquisition by Stockholders of the National
Stock. There are no Security Rights relating to any of the National Shares
except as disclosed on Exhibit 3.03. All rights and powers to vote the National
Stock are held exclusively by Stockholders. All of the National Stock is
validly issued, fully paid and nonassessable, was not issued in violation of
the terms of any agreement or other understanding, and was issued and acquired
by Stockholders in substantial compliance with all applicable Laws. Any
National Shares that were previously outstanding but that are now owned by
National were acquired by National in substantial compliance with all
applicable Laws.
3.04 SUBSIDIARIES AND FICTITIOUS NAMES. Except as disclosed in
Schedule 3.04, National does not own, nor has it ever owned, any shares of
capital stock of or other equity interest in any corporation, partnership,
joint venture or other entity. Schedule 3.04 discloses all fictitious or other
names under which National does business or ever conducted business.
3.05 QUALIFICATION. National is duly qualified and in good standing as
a foreign corporation and is duly authorized to transact business in each
jurisdiction wherein the character of the properties owned or leased by it or
the nature of the activities conducted by it makes such qualification and good
standing necessary.
3.06 NO VIOLATION OF LAWS OR AGREEMENTS; CONSENTS.
(a) Neither the execution and delivery of this Agreement or any
Other Agreement to which Stockholders or National, or both, is or is to become
a party, the consummation of the transactions contemplated hereby or thereby
nor the compliance with or fulfillment of the terms, conditions or provisions
hereof or thereof by Stockholders or National, or both, will, except as
disclosed in Schedule 3.06: (i) contravene any provision of the Governing
Documents of National, (ii) conflict with, result in a breach of, constitute a
default or an event of default (or an event that might, with the passage of
time or the giving of notice or both, constitute a default or event of default)
under any of the terms of, result in the termination of, result in the loss of
any right under, or give to any other Person the right to cause such a
termination of or loss under, any asset of Stockholders or National, including
any Permit, Intellectual Property, license, franchise, indenture, mortgage or
any other contract, agreement or instrument to which either Stockholders or
National is a party or by which any of their assets may be bound or affected,
(iii) result in the creation, maturation or acceleration of any liability or
obligation of Stockholders or National (or give to any other Person the right
to cause such a creation, maturation or acceleration), (iv) violate any Law or
violate any judgment or order of any Governmental Body to which stockholders or
National is subject or by which any of their respective assets may be bound or
affected, or (v) result in the creation or imposition of any Encumbrance upon
the Stock or any asset of Stockholders or National or give to any other Person
any interest or right therein.
(b) Except as set forth on Schedule 3.06 and in Section 5.05, no
consent, approval or authorization of, or registration or filing with, any
Person is required in connection with the execution or delivery by Stockholders
or National, or both, of this Agreement or any of the Other Agreements to which
either, or both, is or is to become a party pursuant to the
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provisions hereof or the consummation by Stockholders or National, or both, of
the transactions contemplated hereby or thereby.
3.07 FINANCIAL INFORMATION.
(a) RECORDS. The books of account and related records of National
reflect accurately and in detail its assets, liabilities, revenues, expenses
and other transactions.
(b) FINANCIAL STATEMENTS. Attached as Exhibit 3.07(b)(1) are the
audited or reviewed balance sheets, income statements and statements of cash
flows for National's two most recent fiscal years (collectively, the "Fiscal
Year Financial Statements"). Also attached hereto as Exhibit 3.07(b)2 are the
unaudited interim balance sheet and income statement for National as of April
30, 1996, and for the interim periods ended April 30, 1996 (collectively, the
"Estimated Interim Financial Statements"). The Fiscal Year Financial Statements
in all material respects (i) are accurate, correct, and complete in accordance
with the books of account and records of National, (ii) have been prepared in
accordance with Accounting Principles on a consistent basis throughout the
indicated periods, and (iii) present fairly the financial condition, assets and
liabilities and results of operation of National at the dates and for the
relevant periods indicated in accordance with the Accounting Principles. The
Estimated Interim Financial Statements in all material respects (i) are
accurate, correct, and complete in accordance with the books of account and
records of National, (ii) have been prepared in accordance with Accounting
Principles on a consistent basis, except that they contain no footnotes, no
year-end adjustments, including, but not limited to, adjustments for amounts
which may be receivable or payable as a result of any Medicare cost report,
adjustments for uncollectable accounts receivable and adjustments for income
tax accruals, and (iii) present fairly the financial condition, assets and
liabilities, and results of operations of National at the dates and for the
relevant periods indicated in accordance with the Accounting Principles.
(c) STATE SURVEYS AND COST REPORTS. Attached as Exhibit 3.07(c)
are copies of the state surveys completed and cost reports filed by or on
behalf of National for the years 1994 and 1995 and filed for 1996 on or before
April 30, 1996. Each such report was prepared in substantial compliance with
all Laws and is complete and accurate in all material respects.
3.08 UNDISCLOSED LIABILITIES. National has no debt, obligation or
liability, absolute, fixed, contingent or otherwise, of any nature whatsoever,
whether due or to become due, including any unasserted claim, whether incurred
directly or by any predecessor thereto, and whether arising out of any act,
omission, transaction, circumstance, sale of goods or services, state of facts
or other condition, except: (i) those reflected or reserved against its Fiscal
Year Financial Statements and/or its Estimated Interim Financial Statements in
the amounts shown therein; (ii) those not required under GAAP to be reflected
or reserved against in its Fiscal Year Financial statements and/or its
Estimated Interim Financial Statements; (iii) those disclosed on Schedule 3.08;
(iv) those of the same nature as those set forth on its Fiscal Year Financial
Statements and/or its Estimated Interim Financial Statements that have arisen
in the ordinary course of business of National after the effective dates of
each of its Fiscal Year Financial Statements and each of its Estimated Interim
Financial Statements through the date hereof, all of
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which obligations described in this clause (iv) have been consistent in amount
and character with past practice and experience, and none of which,
individually or in the aggregate, has had or will have an adverse effect on the
business, financial condition or prospects of National and none of which is a
liability for breach of contract or warranty or has arisen out of tort,
infringement of any intellectual property rights, or violation of Law or is
claimed in any pending or threatened legal proceeding; (v) those claims which
are (1) first asserted in writing after the date hereof, (2) which an insurance
carrier identified on Schedule 3.20 is obligated to defend, (3) the amount of
the claim is not in excess of the coverage available under such insurance, and
(4) which shall be disclosed by Stockholders to Parent in the Closing
Certificate pursuant to Section 6.02(d); (vi) those claims which are asserted
by employees of National under the Workers' Compensation Law and which would
not have a materially adverse effect on National, and (vii) those which are not
material in the aggregate.
3.09 NO CHANGES. Since April 30, 1996, National has conducted its
business only in-the ordinary course, except for actions taken in compliance
with the terms of this Agreement. Without limiting the generality of the
foregoing sentence, since April 30, 1996, except as otherwise disclosed or
provided for in this Agreement, in Schedule 3.08, in any other Schedule or
Exhibit hereto, or in any other document which Stockholders shall deliver to
Parent on or after the date hereof pursuant to the terms of this Agreement,
there has not been any of the following which are material in the aggregate:
(i) damage or destruction to any asset of National, whether or not covered by
insurance; (ii) strike, work stoppage, slowdown, or similar concerted activity
by employees at National; (iii) creation of any Encumbrance on any asset of
National; (iv) declaration or payment of any dividend or other distribution on
or with respect to or redemption or purchase by National of any shares of
capital stock of National; (v) increase in the salary, wage or bonus of any
employee of National which is not customary in amount; (vi) asset acquisition
or expenditure, including capital expenditure, in excess of $100,000 in the
aggregate, other than the purchase of inventory in the ordinary course of
business; (vii) change in any Company Plan; (viii) change in any method of
accounting; (ix) payment to or transaction with any Related Party, which
payment or transaction is not specifically disclosed on Schedule 3.18 (x);
disposition of any asset (other than inventory in the ordinary course of
business) for more than $100,000 in the aggregate or for less than fair market
value; (xi) payment, prepayment or discharge of any liability other than in the
ordinary course of business; (xii) write-offs or write-downs of any assets of
National in excess of $100,000 in the aggregate; (xiii) creation, termination
or amendment of, or waiver of any right under, any material agreement of
National not in the ordinary course of business; or (xiv) agreement or
commitment to do any of the foregoing.
3.10 TAXES.
(a) TAX RETURNS; PAYMENT. National has filed or caused to be
filed on a timely basis, or will file or cause to be filed on a timely basis,
all Tax Returns that are required to be filed by it prior to or on the
Effective Closing Date, without regard to any extensions, pursuant to the Law
of each governmental authority with taxing power over it. All such Tax Returns
were or will be, as the case may be, correct and complete in all material
respects. National has paid all Taxes that have become due as shown on such Tax
Returns or pursuant to any assessment
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received as an adjustment to such Tax Returns, except (i) such Taxes, if any,
as are being contested in good faith and disclosed on Schedule 3.10, (ii) such
Taxes that are fully reserved against on the Fiscal Year Financial Statements
or the Estimated Interim Financial Statements, (iii) Taxes accruing after the
end of the last fiscal year of National that are not yet due, and (iv) payroll
taxes which have accrued but were not required to have been paid on or before
the Closing and for which Stockholders shall cause National to have cash for
such payments on the Closing date. National is not currently the beneficiary of
any extension of time within which to file any Tax Return, except as disclosed
on Schedule 3.10. No claim has been made by a taxing authority of a
jurisdiction where National does not file Tax Returns that it is or may be
subject to taxation in that jurisdiction. Without limiting the foregoing,
National has no liability for any Tax except Taxes disclosed on Schedule 3.10.
Schedule 3.10 contains a complete and accurate list of each type of Tax paid by
National and each Governmental Body to which such Tax is paid. Stockholders
have no actual knowledge of any proposed change in Law (other than the Code)
that would result in a material increase in Tax payable by National.
(b) WITHHOLDING. National has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
(c) ASSESSMENTS. There is no pending, or, to the knowledge of
Stockholders or National, threatened or anticipated, assessment of any
additional Tax against National. National has not waived any statute of
limitations in respect of any Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency for any taxable period for which the
period of limitations on assessment has not expired, except as disclosed on
Schedule 3.10. No Tax audit or examination is now pending or currently in
progress with respect to National.
(d) OTHER MATTERS. Except as disclosed on Schedule 3.10, National
is not a party to any income Tax allocation or sharing agreement. National has
not filed a consent under Code Section 341(f) concerning collapsible
corporations. National has not made any payment, nor is it obligated to make
any payment, nor is it a party to any agreement that under certain
circumstances could obligate it to make any payment, that will not be
deductible under Code Sections 280G or 162(m). National is not (nor does it
have any liability for unpaid Taxes because it once was) a member of an
affiliated group as defined in Section 1504 of the Code. National is not and
has not been during the applicable period specified in Code Section
897(c)(1)(A)(ii) a United States real property holding corporation as defined
in Code Section 897(c)(2).
(e) DISALLOWED LOSSES. There have been no transactions between
National and any other Person for which a loss has been disallowed or deferred
or which has otherwise been subject to Section 267(a) of the Code.
3.11 INVENTORY. All of the material inventory owned by National is
valued on the books and records of National and in the Fiscal Year Financial
Statements at lower of cost or market, the cost thereof being determined on a
first-in, first-out basis in accordance with GAAP.
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Except to the extent of the reserve in the Fiscal Year Financial Statements,
none of National's inventory is obsolete, has been consigned to others, or is
on consignment from others.
3.12 RECEIVABLES. Schedule 3.12 discloses all trade and other accounts
receivable of National ("Receivables") outstanding as of July 31, 1996,
presented on an aged basis and separately identifies the name of each account
debtor and the total amount of each related Receivable. The term "Receivable"
is further defined to include billing in advance for services to be rendered to
"Private Pay Patients" (as defined in Section 5.06 below) of the Companies and
the Medicaid resource portion of billing for services to be rendered to
patients of the Companies for whom the Companies are entitled to Medicaid
reimbursement. All Receivables, whether reflected on the Fiscal Year Financial
Statements, disclosed on Schedule 3.12, or created after the end of the last
fiscal year of National, arose from bona fide sale or service transactions of
National, and no portion of any Receivable is subject to counterclaim, defense
or set-off or is otherwise in dispute. Except to the extent of the recorded
reserve for doubtful accounts specified on the Fiscal Year Financial
Statements, all of the Receivables are collectible in the ordinary course of
business and will be fully collected within 90 days after having been created
using commercially reasonable efforts.
3.13 CONDITION OF ASSETS; BUSINESS. National is engaged in the
Business and no other business, except as disclosed in Schedule 3.13. The
buildings, fixtures, improvements, machinery, equipment, tools, furniture,
improvements and tangible personal property of National, including those
reflected on the Fiscal Year Financial Statements, are in good operating
condition and repair and are suitable for the purposes for which they are used
in the Business, except (i) minor or routine maintenance, (ii) matters
disclosed on Schedule 3.13, and (iii) conditions which in the aggregate would
cost less than $25,000 to repair or replace. Except for Encumbrances listed on
Schedule 3.13 and those Encumbrances included in the title insurance
commitments received by Parent, National has good and marketable title to all
of its assets; all of such assets are reflected on the Fiscal Year Financial
Statements, or, under GAAP, are not required to be reflected thereon; such
assets include all assets that are necessary for use in and operation of the
Business; and none of such assets is subject to any Encumbrance or impairment,
whether due to its condition, utility, collectability or otherwise.
3.14 NO PENDING LITIGATION OR PROCEEDINGS. Except for those matters
described on Schedule 3.14, no action, suit, investigation, claim or proceeding
of any nature or kind whatsoever, whether civil, criminal or administrative, by
or before any Governmental Body or arbitrator ("Litigation") is pending or, to
the knowledge of Stockholders, threatened against or affecting National, the
Business, any of National's assets, any of the National Shares, or any of the
transactions contemplated by this Agreement. There is presently no outstanding
judgment, decree or order of any Governmental Body against or affecting
National, the Business, any of National's assets, any of the National Shares,
or any of the transactions contemplated by this Agreement. National does not
have pending any Litigation against any third party, except for those matters
described on Schedule 3.14.
3.15 CONTRACTS; COMPLIANCE. Disclosed on Schedule 3.15, 3.21, 3.22, or
3.23 is a brief description of each contract, lease, indenture, mortgage,
instrument, commitment or other
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agreement, arrangement or understanding, oral or written, formal or informal,
to which National is a party or by which it or its assets may be affected and
that (i) is material to the Business or National's assets or operations,
individually or in the aggregate, (ii) involves the purchase, sale or lease of
any asset, materials, supplies, inventory or services in excess of $10,000 per
year, (iii) has an unexpired term of more than six months from the date hereof,
taking into account the effect of any renewal options, (iv) relates to the
borrowing or lending of any money or guarantee of any obligation (other than
the guarantee represented by the endorsement of negotiable instruments
presented for collection), (v) limits the right of National to compete in any
line of business or otherwise restricts any right National may have, (vi) is an
employment or consulting contract (vii) is with a Governmental Body or (viii)
was not entered into in the ordinary course (each, a "Contract" and
collectively, the "Contracts"). Each Contract is a legal, valid and binding
obligation of National and is in full force and effect. National and, to the
best knowledge of Stockholders, each other party to each Contract has performed
substantially all obligations required to be performed by it thereunder and is
not in breach or default, and is not alleged to be in breach or default, in any
respect thereunder, and no event has occurred and no condition or state of
facts exists (or would exist upon the giving of notice or the lapse of time or
both) that would become or cause a breach, default or event of default
thereunder, would give to any Person the right to cause such a termination or
would cause an acceleration of any obligation thereunder. National is not
currently renegotiating any Contract nor has National received any notice of
non-renewal or price increase or sales or production allocation with respect to
any Contract.
3.16 PERMITS; COMPLIANCE WITH LAW. National holds all permits,
certificates, licenses, franchises, privileges, approvals, registrations and
authorizations required under any applicable Law in connection with the
operation of its assets and Business (each, a "Permit" and, collectively,
"Permits"). Each Permit is valid, subsisting and in full force and effect.
National is in substantial compliance with and has fulfilled and performed its
obligations under each Permit, and no event or condition or state of facts
exists (or would exist upon the giving of notice or lapse of time or both) that
could constitute a material breach or default under any Permit. National has
not been since January 1, 1994, nor is it currently in violation of any Law and
has received no notice of any violation of Law, and no event has occurred or
condition or state of facts exists that could give rise to any such violation,
except for notices of deficiencies received from the Missouri Department of
Social Services, Division of Aging, as set out in Schedule 3.16, and the
matters disclosed in Schedule 3.14. National has not received any notice or
non-renewal of any Permit nor will the transactions contemplated hereby result
in the cancellation or increase the likelihood of non-renewal of any Permit.
3.17 REAL PROPERTY. Schedule 3.17 contains a list of all real
properties currently owned, used or leased by National or in which National has
an interest, excluding those properties identified on Schedule 5.10 which
Stockholders shall have a right to convey to other parties prior to the Closing
(collectively, the "Real Property"), and identifies the record title holder of
all of the Real Property, National has good and marketable fee simple title to
all Real Property shown as owned by it on Schedule 3.17, free and clear of all
Encumbrances, other than (i) as indicated on Schedule 3.17, (ii) zoning
restrictions, (iii) liens for current taxes not yet due, and (iv) those
Encumbrances set out in the title insurance commitments received by Parent with
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respect to the Real Estate and which are set out in Schedule 3.17. National has
the right to quiet enjoyment of all Real Property in which it holds a leasehold
interest for the full term, including all renewal rights, of the lease or
similar agreement relating thereto. Schedule 3.17 contains a list of all title
insurance policies held by National. Stockholders have delivered an ALTA
as-built survey for all Real Property owned by National to Parent. National has
not received any written notice of assessments for public improvements or
condemnation against any Real Property.
3.18 TRANSACTIONS WITH RELATED PARTIES. No Related Party is or has
been since January 1, 1992, a party to any transaction, agreement or
understanding with National except pursuant to arrangements disclosed on
Schedule 3.18 and except for dividends properly reflected as such in the Fiscal
Year Financial Statements or the Estimated Interim Financial Statements, except
as set forth in Schedule 3.18. No Related Party uses any assets of National
except directly in connection with the Business, and no Related Party owns any
asset used in the Business. Except as set forth on Schedule 3.18, no Related
Party has any claim of any nature, including any inchoate claim, against
National, and National has no claim of any nature, including any inchoate
claim, against any Related Party. Except as disclosed on Schedule 3.18, as
otherwise expressly provided hereby or by any Other Agreement or as otherwise
may be mutually agreed after Closing, (i) no Related Party will at any time
after Closing for any reason, directly or indirectly, be or become entitled to
receive any payment or transfer of money or other property of any kind from
National, and (ii) National will not at any time after Closing for any reason,
directly or indirectly, be or become subject to any obligation to any Related
Party.
3.19 LABOR RELATIONS. The relations of National with its employees are
good to the best of Stockholders' knowledge. No employee of National is
represented by any union or other labor organization. No representation
election, arbitration proceeding, grievance, labor strike, dispute, slowdown,
stoppage or other concerted activity on the part of National's employees is
pending or, to the knowledge of Stockholders or National, threatened against,
involving, affecting or potentially affecting National. No complaint against
National is pending or, to the knowledge of Stockholders or National,
threatened before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any similar state or local agency, by or on behalf of
any employee of National. National has no contingent liability for sick leave,
vacation time, severance pay or any similar item not fully reserved on the
Fiscal Year Financial Statements and/or the Estimated Interim Financial
Statements. National has no contingent liability for any occupational disease
of any of its employees, former employees or others. Neither the execution and
delivery of this Agreement, the performance of the provisions hereof nor the
consummation of the transactions contemplated hereby will trigger any severance
pay obligation under any contract or under any Law.
3.20 PRODUCTS LIABILITY; WARRANTIES. National shall have no liability
after the Effective Closing Date not fully covered by insurance relating to any
services rendered, or any product manufactured, distributed, or sold by
National prior to the Effective Closing Date, whether or not such liability
relates to products or services that are defective or improperly designed,
manufactured or rendered in breach of any express or implied warranty, Schedule
3.20 discloses and describes the terms of all express product warranties under
which National may have liability after the Effective Closing Date.
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3.21 INSURANCE. Schedule 3.21 discloses all insurance policies with
respect to which National is the owner, insured or beneficiary. National will
not have any liability after the Effective Closing Date for retrospective or
retroactive premium adjustments. Since incorporation, all insurance policies
covering professional liability and general liability maintained by or for the
benefit of National have been "occurrence" policies and not "claims made"
policies. All such liability policies are listed on Schedule 3.21. Schedule
3.21 discloses the manner in which National provides coverage for workers'
compensation claims.
3.22 INTELLECTUAL PROPERTY RIGHTS. Schedule 3.22 discloses all of the
trademark and service mark rights, applications and registrations, trade names,
fictitious names, service marks, logos and brand names, copyrights, copyright
applications, letters patent, patent applications and licenses of any of the
foregoing owned or used by National in or applicable to the Business National
has the entire right, title and interest in and to, or has the exclusive
perpetual royalty-free right to use, the intellectual property rights disclosed
on Schedule 3.22 and all other processes, know-how, show-how, formulae, trade
secrets, inventions, discoveries, improvements, blueprints, specifications,
drawings, designs, and other proprietary rights necessary or applicable to or
advisable for use in the Business ("Intellectual Property"), free and clear of
all Encumbrances, except as disclosed on Schedule 3.22. Schedule 3.22
separately discloses all intellectual property rights to which National holds
rights under any license. The Intellectual Property is valid and not the
subject of any interference, opposition, reexamination or cancellation. To the
knowledge of Stockholders or National, no Person is infringing upon nor has any
Person misappropriated any Intellectual Property. National is not infringing
upon the intellectual property rights of any other Person.
3.23 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS; COMPANY PLANS. Schedule 3.23 (a) discloses all
existing written and unwritten "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and any other written and unwritten profit sharing,
pension, savings, deferred compensation, fringe benefit, insurance, medical,
medical reimbursement, life, disability, accident, post-retirement health or
welfare benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other plan, agreement, contract, policy, trust fund
or arrangement (each, a "Benefit Plan"), whether or not funded and whether or
not terminated, (i) maintained or sponsored by National, or (ii) with respect
to which National (or Stockholders with respect to National) is obligated to
contribute, or (iii) that otherwise covers any of the current or former
employees of National or their beneficiaries, or (iv) as to which any such
current or former employees or their beneficiaries participated or were
entitled to participate or accrue or have accrued any rights thereunder (each,
a "Company Plan").
(b) COMPANY GROUP MATTERS; FUNDING. Neither National nor any
corporation that may be aggregated with National under Sections 414 (b), (c),
(m) or (o) of the Code (the "Company Group") has any obligation to contribute
to or any direct or indirect liability under or with respect to any Benefit
Plan of the type described in Sections 4063 and 4064 of ERISA or Section 413(c)
of the Code. National does not have any liability as a result of delinquent
contributions, distress terminations, fraudulent transfers, failure to pay
premiums to
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the PBGC, or withdrawal liability (as defined in Section 4201 of ERISA).
Following the Closing, National will not have any liability with respect to any
Benefit Plan of any member of the Company Group (other than one of the Combined
Companies as defined in the Stock Purchase Agreement) as a result of delinquent
contributions, distress terminations, fraudulent transfers, failure to pay
premiums to the PBGC, or withdrawal liability (as defined in Section 4201 of
ERISA). No accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code) exists nor has any funding waiver from the IRS
been received or requested with respect to any Company Plan or any Benefit Plan
sponsored or maintained by any member of National Group and no excise or other
Tax is due or owing because of any failure to comply with the minimum funding
standards of the Code or ERISA with respect to any of such plans.
(c) COMPLIANCE. Except as otherwise provided on Schedule 3.23(c),
each of the Company Plans and all related trusts, insurance contracts and funds
have been created, maintained, funded and administered in all respects in
substantial compliance with all applicable Laws and in substantial compliance
with the plan document, trust agreement, insurance policy or other writing
creating the same or applicable thereto. No Company Plan is or is proposed to
be under audit or investigation by the IRS or Department of Labor, and no
completed audit of any Company Plan has resulted in the imposition of any Tax,
fine or penalty.
(d) QUALIFIED PLANS. Schedule 3.23(d) discloses each Company Plan
that purports to be a qualified plan under Section 401(a) of the Code and
exempt from United States federal income tax under Section 501(a) of the Code
(a "Qualified Plan"). With respect to each Qualified Plan, a determination
letter (or opinion or notification letter, if applicable) has been received
from the IRS that such plan is qualified under Section 401(a) of the Code and
exempt from federal income tax under Section 501(a) of the Code. No Qualified
Plan has been amended since the date of the most recent such letter.
No member of Company Group, nor (to the best of Stockholders'
knowledge) any fiduciary of any Qualified Plan, nor (to the best of
Stockholders' knowledge) any agent of any of the foregoing, has done anything
that would adversely affect the qualified status of a Qualified Plan or the
qualified status of any related trust.
(e) NO DEFINED BENEFIT PLANS. No Company Plan is a defined
benefit plan within the meaning of Section 3(35) of ERISA (a "Defined Benefit
Plan"). No Defined Benefit Plan sponsored or maintained by any member of
National Group has been terminated or partially terminated after September 1,
1974, except as set forth on Schedule 3.23(e). Each Defined Benefit Plan
identified as terminated on Schedule 3.23(e) has met the requirement for
standard termination of single-employer plans contained in Section 4041(b) of
ERISA. During the five-year period ending on the Effective Closing Date, no
member of National Group has transferred a Defined Benefit Plan to a
corporation that was not, at the time of transfer, related to the transferor in
any manner described in Sections 414(b), (c), (m) or (o) of the Code.
(f) MULTIEMPLOYER PLANS. No Company Plan is a multiemployer plan
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"). No
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member of Company Group has withdrawn from any Multiemployer Plan or incurred
any withdrawal liability to or under any Multiemployer Plan. No Company Plan
covers any employees of any member of Company Group in any foreign country or
territory.
(g) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES; POST-RETIREMENT
BENEFITS. Except as otherwise provided on Schedule 3.23(g), no prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975 of the
Code) with respect to any Company Plan exists or has occurred that could
subject National to any liability or Tax under Part 5 of Title I of ERISA or
Section 4975 of the Code. To Stockholders' knowledge, no member of Company
Group, nor any administrator or fiduciary of any Company Plan, nor any agent of
any of the foregoing, has engaged in any transaction or acted or failed to act
in a manner that will subject National to any liability for a breach of
fiduciary or other duty under ERISA. With the exception of the requirements of
Section 4980B of the Code, no post-retirement benefits are provided under any
Company Plan that is a welfare benefit plan as described in ERISA Section 3(1).
3.24 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 3.24:
(a) COMPLIANCE; NO LIABILITY. National has operated the Business
and each parcel of Real Property in substantial compliance with all applicable
Environmental Laws. National is not subject to any liability, penalty or
expense (including legal fees) that would have a material adverse effect on the
financial condition of the Stockholders or the Companies and will not hereafter
suffer or incur any loss, liability, penalty or expense (including legal fees)
by virtue of any material violation of any applicable Environmental Law
occurring prior to the Effective Closing Date, any Hazardous Activity conducted
on or with respect to any property at or prior to the Effective Closing Date or
any Environmental Condition existing on or with respect to any property at or
prior to the Effective Closing Date, in each case whether or not National
permitted or participated in such act or omission.
(b) TREATMENT; CERCLIS. National has not treated, stored,
recycled or disposed of any Hazardous Material on any Real Property, and to the
best of Stockholders' knowledge no other Person has treated, stored, recycled
or disposed of any Hazardous Material on any part of the Real Property except
in accordance with Environmental Laws. National has not caused release of any
Hazardous Material at, on, or under any Real Property. National has not
transported any Hazardous Material or arranged for the transportation of any
Hazardous Material to any location that is listed on the National Priorities
List pursuant to Superfund. None of the Real Property is listed or, to the
knowledge of Stockholders or National, proposed for listing on the National
Priorities List or CERCLIS pursuant to Superfund or any state or local list of
sites requiring investigation or cleanup.
(c) NOTICES, EXISTING CLAIMS; HAZARDOUS MATERIALS; STORAGE TANKS.
National has not received any request for information, notice of claim, demand
or other notification that it is or may be potentially responsible with respect
to any investigation, abatement or cleanup of any Threatened Release or Release
of any Hazardous Material. National is not required to place any notice or
restriction relating to the presence of any Hazardous Material at any Real
Property or, if it sold the Real Property, in any deed to any Real Property.
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National has provided to Parent a list of locations to which National has
transported any Hazardous Material for recycling, treatment, disposal, or other
handling. There has been no past, and there is no pending or contemplated,
claim by National under any Environmental Law or Laws based on actions of
others that may have impacted on the Real Property, and National has not
entered into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. No PCBs or
asbestos is present on or in any structure or equipment located on any Real
Property. All storage tanks located on the Real Property, whether underground
or aboveground, are disclosed on Schedule 3.24. Stockholders have no knowledge
of any past or present leak from any such storage tank. Notwithstanding any
provision in this Agreement to the contrary, Stockholders make no
representation or warranty with respect to any occurrence, condition, or state
of facts which is set out in the Site Reports, as defined in Section 4.06 below
or in Schedule 4.06. To the extent the foregoing representations in any of the
subsections of this Section 3.24 relate to matters involving the Real Property
prior to its ownership by National or Stockholders or to matters resulting from
actions of Persons other than National or Stockholders, such representations
are made solely to the best of Stockholder's knowledge.
3.25 FINDERS' FEES. Neither Stockholders nor National nor any of their
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fee, commission or finders' fee in connection
with any of the transactions contemplated hereby.
3.26 DISCLOSURE. None of the representations or warranties of
stockholders and National contained herein and none of the information
contained in the Schedules referred to in Article III is false or misleading in
any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect.
3.27 HART-SCOTT-RODINO. The Stockholders, together with all
corporations, partnerships, or other business entities controlled by the
Stockholders, as of their last regularly prepared financial statements, have
less than $100,000,000 of total assets and, for the last fiscal year of each
such entity, less than $100,000,000 of net revenues. The terms used in this
Section, including, without limitation, controlled, person, hold, voting stock,
entities, total assets and net revenues, shall be defined and interpreted in
accordance with the Premerger Notification Regulations promulgated by the
Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act
of 1974.
3.28 EXEMPTION FROM REGISTRATION; INVESTMENT PURPOSES. Stockholders
understand that the Parent Shares have not been registered under the Securities
Act of 1933 (the "1933 Act") or the ______________________ (the "Missouri Act")
or the _____________________ (the "Delaware Act") by reason of specific
exemptions under the provisions thereof which depend in part upon the
representations made by Stockholders in this Agreement. Stockholders understand
that Parent is relying upon Stockholders' representations and agreements
contained in this Agreement (and any supplemental information furnished by
Stockholders) for the purpose of determining whether this transaction meets the
requirements for such exemptions. Further, Stockholders hereby confirm that
Stockholders are acquiring the Parent Shares for investment
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only and not with a view to or in connection with any resale or distribution of
the Parent Shares, except that Billy Ray Foster, Jr., J. Kaye Foster Gibson,
Robert Anthony Foster, and Mark Bradley Foster intend to sell all of their
Parent Shares to Billy Ray Foster, Sr., either individually or as Trustee of
the Revocable Inter Vivos Trust Agreement of Billy Ray Foster dated February 4,
1988, and John Douglas Foster not later than twelve months after the Effective
Time. Stockholders hereby affirm that Stockholders have no present intention of
making any sale, assignment, pledge, gift, transfer or other disposition of the
Parent Shares or any interest therein, except as otherwise provided in the
preceding sentence.
3.29 BUSINESS EXPERIENCE; FINANCIAL CONDITION. Stockholders have such
knowledge, skill and experience in business, financial and investment matters
so that Stockholders are capable of evaluating the merits and risks of an
investment in the Parent Shares. To the extent that Stockholders have deemed it
appropriate to do so, Stockholders have retained, and relied upon, appropriate
professional advice regarding the tax, legal and financial merits and
consequences of the investment in the Parent Shares. Each Stockholder
represents that he has reviewed his own financial condition and commitments,
alone and together with his advisors, and that, based on such review, each
Stockholder is satisfied that (i) Stockholder has adequate means of providing
for his financial needs and possible contingencies and has assets or sources of
income which, taken together, are more than sufficient so that Stockholder
could bear the risk of loss of Stockholder's entire investment in the Parent
Shares, (ii) Stockholder has no present or contemplated future need to dispose
of all or any portion of the Parent Shares to satisfy any existing or
contemplated undertaking, need or indebtedness, and (iii) Stockholder is
capable of bearing the economic risk of an investment in the Parent Shares for
the indefinite future. Stockholders agree to furnish any additional information
requested by Parent to assure compliance of the transactions contemplated in
this Agreement with applicable federal and state securities laws in connection
with the receipt of the Parent Shares.
3.30 INVESTIGATION. Each Stockholder has made, either alone or
together with advisors (if any), such independent investigation of Parent, its
management, and related matters as the Stockholder deems to be, or such
advisors (if any) have advised to be, necessary or advisable in connection with
an investment in the Parent Shares; and Stockholder and Stockholder's advisors
(if any) have received all information and data which Stockholder and such
advisors (if any) believe to be necessary in order to reach an informed
decision as to the advisability of an investment in the Parent Shares.
Stockholders are satisfied that there are no material facts regarding Parent or
the Parent Shares as to which Stockholders have not been fully informed.
Nothing set out in Section 3.29 or this Section 3.30 shall be interpreted to
limit the representations and warranties of Parent and Parent Sub set forth
herein.
3.31 RESTRICTED SECURITIES. Stockholders understand that the Parent
Shares are "restricted securities" under applicable federal securities laws and
that the 1933 Act and the rules of the Securities and Exchange Commission
provide in substance that Stockholders may dispose of the Parent Shares only
pursuant to an effective registration statement under the 1933 Act or an
exemption from such registration if available. Stockholders further understand
that Parent has no obligation to register any of the Parent Shares under or to
take action so as to permit sales pursuant to the 1933 Act. Accordingly,
Stockholders may dispose of the Parent Shares only in
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certain transactions that are exempt from registration under the 1933 Act,
including "private placements," in which event any transferee will acquire
"restricted securities" subject to the same limitations as in the hands of
Stockholders. Stockholders further understand that the Missouri Act allows
sales of the Parent Shares only if the Parent Shares are registered or the
transaction is subject to an applicable exemption. As a consequence,
Stockholders understand that Stockholders must bear the economic risks of the
investment in the Parent Shares for an indefinite period of time.
3.32 RESTRICTIVE LEGEND. Stockholders understand that the
certificate(s) evidencing the Parent Shares will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT
OF 1933 AND APPLICABLE STATE SECURITIES LAWS.
3.33 NO GENERAL SOLICITATION. Neither Stockholders nor National nor
any of its officers, directors or employees have been provided with any form of
general solicitation, general or public media advertising or mass mailing by
Parent, Parent Sub or any person acting on their behalf in order to entice
Stockholders to acquire the Parent Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
As an inducement to Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, Parent and Parent Sub
represent and warrant to Stockholders as follows:
4.01 ORGANIZATION. Parent and Parent Sub are corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of organization, and have the corporate power and
authority to own or lease their properties, carry on its business, enter into
this Agreement to which they are or are to become a party and perform their
obligations hereunder. Parent and Parent Sub are qualified as foreign
corporations in each jurisdiction where such qualification is required by law.
Parent is a Delaware corporation in good standing. Parent Sub is a Delaware
corporation in good standing and is duly qualified as a foreign corporation in
Missouri and is in good standing as such.
4.02 AUTHORIZATION, ENFORCEABILITY. This Agreement has been duly
executed and delivered by and constitutes the legal, valid and binding
obligations of Parent and Parent Sub, enforceable against them in accordance
with its terms, except for (i) the effect of bankruptcy, insolvency,
reorganization, moratorium, equity of redemption or other similar laws now or
hereafter in effect relating to or affecting creditors generally and (ii) the
effect of general principles of equity and the discretion of the court before
which any proceeding therefor may be
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brought. All actions contemplated by this Section have been duly and validly
authorized by all necessary proceedings by Parent and Parent Sub.
4.03 NO VIOLATION OF LAWS; CONSENTS. Neither the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby nor the compliance with or fulfillment of the terms, conditions or
provisions hereof by Parent or Parent Sub will: (i) contravene any provision of
the Governing Documents of Parent or Parent Sub, or (ii) violate any Law or any
judgment or order of any Governmental Body to which Parent or Parent Sub are
subject or by which any of their assets may be bound or affected. No consent,
approval or authorization of, or registration or filing with, any Person is
required in connection with the execution or delivery by Parent or Parent Sub
of this Agreement pursuant to the provisions hereof or the consummation by
Parent or Parent Sub of the transactions contemplated hereby.
4.04 NO PENDING LITIGATION OR PROCEEDING. No Litigation is pending or,
to the knowledge of Parent, threatened against or affecting Parent or Parent
Sub in connection with any of the transactions contemplated by this Agreement.
There is presently no outstanding judgment, decree or order of any Governmental
Body against or affecting Parent in connection with the transactions
contemplated by this Agreement.
4.05 FINDERS' FEES. Neither Parent nor Parent Sub nor any of their
officers, directors or employees have employed any broker or finder or incurred
any liability for any brokerage fee, commission or finders' fee in connection
with any of the transactions contemplated hereby.
4.06 INSPECTIONS BY PARENT. Parent has inspected the Real Property to
its satisfaction and has independently investigated the Real Property and
analyzed the results of such investigations and is satisfied with same, but
such inspections shall not serve to limit Stockholders' representations set
forth herein relating to the Real Property. Attached hereto as Schedule 4.06 is
a copy of each environmental site report which Parent caused to be prepared for
the Real Property (the "Site Reports").
4.07 HART-SCOTT-RODINO. Parent, together with (a) all corporations,
partnerships, or other business entities controlled by Parent, (b) all persons
who hold, directly or indirectly, 50% or more of the voting stock of Parent,
and (c) all corporations, partnerships or other business entities controlled by
such persons in (b) as of the date of its last regularly prepared financial
statements, have less than $10,000,000 of total assets and, for its fiscal year
ended December 31, 1995, had less than $10,000,000 of net revenues. The terms
used in this Section, including without limitation, controlled, person, hold,
voting stock, entities, total assets and net revenues, shall be defined and
interpreted in accordance with the Premerger Notification Regulations
promulgated by the Federal Trade Commission under the Hart-Scott-Rodino
Antitrust Improvements Act of 1974.
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<PAGE> 23
ARTICLE V
CERTAIN COVENANTS
5.01 CONDUCT OF BUSINESS PENDING CLOSING. From and after the date
hereof and until the Closing Date, unless Parent shall otherwise consent in
writing, National shall, and Stockholders shall cause National to, conduct its
affairs as follows:
(a) ORDINARY COURSE; COMPLIANCE. The Business shall be conducted
only in the ordinary course and consistent with past practice. National shall
maintain its property, equipment and other assets consistent with their present
condition, ordinary wear and tear excepted, and shall comply in a timely
fashion with the provisions of all Contracts, Permits and Laws and its other
agreements and commitments. National shall use its best efforts to keep its
business organization intact, keep available the services of its present
employees and preserve the goodwill of its referring physicians, suppliers,
customers and others having business relations with it. National shall maintain
in full force and effect the policies of insurance disclosed on Schedule 3.21,
subject only to variations required by the ordinary operations of the Business,
or else shall obtain, prior to the lapse of any such policy, substantially
similar coverage with insurers of recognized standing.
(b) TRANSACTIONS. National shall not: (1) amend its Governing
Documents; (ii) change its authorized or issued capital stock or issue any
Security Rights with respect to shares of its capital stock; (iii) enter into
any contract or commitment the performance of which may extend beyond the
Closing, except those made in the ordinary course of business, the terms of
which are consistent with past practice; (iv) enter into any employment or
consulting contract or arrangement that is not terminable at will and without
penalty or continuing obligation; (v) fail to pay any Tax or any other
liability or charge when due, other than charges contested in good faith by
appropriate proceedings; (vi) make, change or revoke any Tax election or make
any agreement or settlement with any taxing authority; (vii) take any action
that is reasonably likely to result in the occurrence of any event set forth in
Section 3.09; (viii) take any action or omit to take any action that will cause
a breach or termination of any Contract, other than termination by fulfillment
of the terms thereunder; or (ix) declare any dividend or make any distribution
with respect to its Shares other than a distribution of the assets, if any, set
forth on Schedule 5.01.
(c) ACCESS, INFORMATION AND DOCUMENTS. Stockholders and National
shall give to Parent and to Parent's employees and representatives and
financial sources (including, without limitation, accountants, actuaries,
attorneys, environmental consultants and engineers) access during normal
business hours to all of the properties, books, Tax Returns, contracts,
commitments, records, officers, personnel and accountants (including
independent public accountants and their audit workpapers concerning National)
of National and shall furnish to Parent all such documents and copies of
documents and all information with respect to the properties, liabilities and
affairs of National as Parent may reasonably request.
5.02 CERTAIN TAX MATTERS.
(a) ALLOCATION OF TAXES FOR PERIODS THROUGH THE EFFECTIVE CLOSING
DATE. The income of National shall be determined for the period up to and
including the Effective
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<PAGE> 24
Closing Date by closing the books of National as of the close of business on
the day before the Effective Closing Date. All Tax liability for taxes due and
payable for the period prior to the Effective Closing Date shall be either paid
by National before the Closing or shall be paid by Stockholders from the
amounts held in escrow as provided for under the Stock Purchase Agreement.
Parent shall cause any refund which may be received by Parent or Surviving
Corporation on behalf of National after the Closing as a result of any short
period tax return to be paid to Stockholders.
(b) TAX RETURNS DUE AFTER THE CLOSING DATE. Parent will file, or
cause Surviving Corporation to file, all Tax Returns that are required to be
filed by Surviving Corporation after the Closing Date, without regard to any
extensions, pursuant to the law of each governmental authority with taxing
power over it.
(c) CARRYBACKS. [Deleted.]
(d) MUTUAL COOPERATION. Parent and Stockholders shall each
provide the other, and Parent shall cause National to provide Stockholders,
with such assistance as may reasonably be requested by any of them in
connection with the preparation of any Tax Return, any Tax audit, or any
judicial or administrative proceedings relating to any Tax, and each will
retain and provide the other with any records or information that may be
relevant to such Tax Return, Tax audit, proceeding or determination. The party
requesting assistance hereunder shall reimburse the other for direct expenses
incurred in providing such assistance.
(e) AUDITS AND REFUND CLAIMS. Upon Stockholders' written request,
Parent shall cause Surviving Corporation to claim on behalf of National any and
all Tax credits and file any and all applications for refunds of Taxes to which
National may from time to time be entitled to claim or recover, and which are
in respect of Taxes paid by National for any taxable period (or partial period)
ending on or prior to the Effective Closing Date, at the earliest date that
such credits and/or refunds become available. In the event that Parent or
Surviving Corporation receives a Tax refund on behalf of National for any
taxable period (or partial period) ending on or prior to the Effective Closing
Date, Parent or Surviving Corporation shall pay such refund to Stockholders
within 10 days of receipt of such refund.
Stockholders shall have the right, at their own expense, to
control any audit or determination by any authority, or the resolution of any
claim for refund or amended return, and contest, resolve, and defend against
any assessment, notice of deficiency, or other adjustment or proposed
adjustment of Taxes for any taxable period (or partial period) ending on or
prior to the Effective Closing Date, provided, however, that Stockholders shall
consult with Parent with respect to the resolution of any issue that would
materially affect Parent for any taxable period (or partial period) ending
after the Effective Closing Date and shall not settle any such issue or file
any amended return relating to such issue without the consent of Parent, which
consent shall not be unreasonably withheld. Where consent to a settlement is
withheld by Parent pursuant to the preceding sentence, Parent may continue or
initiate any further proceedings at its own expense, provided that the
liability of Stockholders, after giving effect to this Agreement, shall not
exceed the liability that would have resulted from the settlement or amended
return. In
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<PAGE> 25
the event any such audit shall occur after any amounts are still held in escrow
under the Stock Purchase Agreement, or in the event the reasonably anticipated
potential liability of National in connection with any such audit shall exceed
the balance of funds held in escrow under the Stock Purchase Agreement after
taking into account pending claims against the Escrow Account from time to time
to post a bond or other security reasonably acceptable to Parent to serve as
security for the reasonably anticipated potential liability related to such
audit. Any such bond or other security shall be released upon resolution of any
such audit and Stockholders' fulfillment of their obligation with regard to
same.
For purposes of this subsection (e), any taxable period
beginning before and ending after the Effective Closing Date shall be treated
as two partial periods, one ending on the Effective Closing Date and the other
beginning on the day after the Effective Closing Date, except that Taxes (such
as property taxes) imposed on a periodic basis shall be allocated on a per diem
basis.
5.03 PUBLICITY. Stockholders and Parent shall not issue any press
release or otherwise make any announcements to the public with respect to this
Agreement without the prior written consent of the other, except as required by
Law. This Section shall expire on the Closing Date.
5.04 FULFILLMENT OF AGREEMENTS. Each party hereto shall use its best
efforts to cause all of those conditions to the obligations of the other under
Article VI that are not beyond reasonable control to be satisfied on or prior
to the Closing and shall use its best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.05 LETTER OF INTENT. Execution of this Agreement shall terminate any
and all obligations of the parties which might otherwise arise under the letter
of intent dated April 19, 1996, between Parent, Foster Health Care Group, Inc.,
and Billy Ray Foster, Sr.
5.06 RECEIVABLES. All payments upon Receivables received by National
on or before the Effective Closing Date shall be a part of the cash of National
which may be removed by Stockholders before the Closing pursuant to Section
5.10 below, except for payments of Receivables of "Private Pay Patients" (as
defined below) for services to be rendered on or after the Closing. "Private
Pay Patients" are defined to be those patients of National for whom no
reimbursement is received from Medicare or Medicaid reimbursement programs or
from any insurance company, except the private resource portion of Medicaid
reimbursement for Medicaid-approved patients. Stockholders represent and
warrant that the aggregate total of all Receivables as of the Effective Closing
Date of National, together with the aggregate total of the Receivables of the
"Combined Companies" (as defined in the Stock Purchase Agreement), shall not be
less than $4,400,000.
5.07 ACCOUNTS PAYABLE. "Accounts Payable" is defined as amounts which
National is required (prior to the Effective Time) to pay for goods received or
services rendered in the ordinary course of business. Stockholders agree to pay
or cause National to pay on or before the Closing all Accounts Payable for all
goods received and for all services rendered on or before July 31, 1996. The
parties agree that Stockholders shall have no obligation with respect to
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<PAGE> 26
Accounts Payable for goods received or services rendered to National from and
after August 1, 1996, except that Stockholders shall pay or cause to be paid
each payroll and the related payroll taxes for salary payments to employees of
National which are paid on or before the Effective Closing Date.
5.08 COST REPORTS. Parent will file, or cause National to file, all
Medicare and Medicaid cost reports that are required to be filed by National
after the Closing Date, without regard to any extensions, pursuant to
applicable law. Any liability of National required to be paid as a result of
any such cost report for any period prior to the Closing Date shall either be
paid by Parent or Surviving Corporation on behalf of National before the
Closing Date or shall be paid by Stockholders from the amounts held in escrow
as provided in the Stock Purchase Agreement. Parent shall cause any refund
which may be received by National after the Closing as a result of any such
cost report to be paid to Stockholders.
5.09 APPOINTMENT OF STOCKHOLDERS' AGENT. Each Stockholder hereby
irrevocably appoints Billy Ray Foster, Sr. (herein called the "Stockholders'
Agent") as such Stockholders' Agent and attorney-in-fact to take any action
required or permitted to be taken by such Stockholders under the terms of this
Agreement, including, without limiting the generality of the foregoing, the
giving and receipt of any notices to be delivered or received by or on behalf
of any or all of the Stockholders, the payment of expenses relating to the
transactions contemplated by this Agreement, the representation of the
Stockholders in indemnification proceedings hereunder, and the right to waive
any of the terms of this Agreement in any respect, whether or not material, and
agrees to be bound by any and all actions taken by the Stockholders' Agent on
his or her behalf. Each Stockholder agrees Jointly and severally to indemnify
the Stockholders' Agent from and against and in respect of any and all
liabilities, damages, claims, costs and expenses, including, but not limited
to, attorneys' fees arising out of or due to any action as the Stockholders'
Agent and any and all actions, proceedings, demands, assessments or judgments,
costs and expenses incidental thereto, except to the extent that the same
result from bad faith or gross negligence on the part of the Stockholders'
Agent. Parent shall be entitled to rely exclusively upon any communications
given by the Stockholders' Agent on behalf of any Stockholders, and shall not
be liable for any action taken or not taken in reliance upon the Stockholders'
Agent. Except for any notice with regard to a replacement for Stockholders'
Agent pursuant to this Section 5.09, Parent shall be entitled to disregard any
notices or communications given or made by Stockholders unless given or made
through the Stockholders' Agent. In the event that Stockholders' Agent dies,
resigns, refuses to act or becomes disabled or unavailable, the Stockholders
shall promptly by majority vote in accordance with their prior ownership of the
National Stock appoint another Stockholder as the substitute Stockholders'
Agent to act under this Agreement; such substitute Stockholders' Agent shall
have all the powers of the initial Stockholders' Agent hereunder; and, the
Stockholders shall promptly deliver a copy of such appointment to the Parent.
5.10 ASSETS TO BE TRANSFERRED BEFORE CLOSING. Stockholders shall have
the right at any time on or before the Closing Date to cause National to
transfer each of the following described assets (the "Excluded Assets") to
Stockholders or other parties for nominal or no consideration: (i) all cash
except for advance payments for services to be rendered to private-pay
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patients after the Closing, resident trust funds, and deposits for Worker's
Compensation contributions and (ii) any assets owned by National which are not
related to the operation of the skilled nursing facility which is described in
the identification of National set out on page 1 of this Agreement; (iii) Billy
Ray Foster's personal assets and furniture, including artwork, office equipment
which is currently used by him; and (iv) certain items of furniture in the
independent living apartments with a value not to exceed $5,000. The assets to
be so transferred shall be identified on Schedule 5.10. Stockholders shall be
obligated to pay to Parent any tax which may be incurred by National as a
result of the foregoing transfer of the Excluded Assets. Such payment shall be
made pursuant to the terms of the Escrow Agreement.
5.11 EXHIBITS, SCHEDULES, AND OTHER AGREEMENTS. The parties
acknowledge that certain of the Exhibits, Schedules, and Other Agreements
contemplated hereunder have not yet been prepared upon the date this Agreement
was executed. Each party agrees to use its best efforts to prepare and to
deliver to the other party each such remaining Exhibit, Schedule, and Other
Agreement which is required under the terms of this Agreement not later than
August 12, 1996. The parties agree to negotiate in good faith to arrive at the
definitive terms and conditions of any such Schedule, Exhibit, and Other
Agreement not later than August 12, 1996.
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION
6.01 CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND PARENT SUB. The
obligation of Parent and Parent Sub to proceed with the Closing under this
Agreement with respect to National is subject to the fulfillment prior to or at
Closing of the following conditions with respect to Stockholders and National,
any one or more of which may be waived in whole or in part by Parent at
Parent's sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each
of the representations and warranties of Stockholders contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Closing Date.
Stockholders shall have performed in all respects all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by them at or before the Closing.
(b) LITIGATION. No Law shall be in effect that restrains or
prohibits the transactions contemplated hereby, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Body challenging the lawfulness of or seeking to prevent or
delay any of the transactions contemplated by this Agreement or the Stock
Purchase Agreement or seeking monetary or other relief by reason of the
consummation of any of such transactions.
(c) NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Effective Closing Date, there shall have been no material adverse change,
regardless of insurance coverage therefor, in the Business or any of the
assets, results of operations, liabilities, or condition, financial or
otherwise, of National.
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<PAGE> 28
(d) CLOSING CERTIFICATE. Stockholders shall have delivered a
certificate, dated the Effective Closing Date, in such detail as Parent shall
reasonably request, certifying to the fulfillment of the conditions set forth
in subparagraphs (a), (b) and (c) of this Section 6.01. Such certificate shall
constitute a representation and warranty of Stockholders with regard to the
matters therein for purposes of this Agreement.
(e) CLOSING DOCUMENTS. Parent and Parent Sub shall have received
the other documents referred to in Section 6.03(a). All agreements,
certificates, opinions and other documents delivered by Stockholders or
National to Parent and Parent Sub hereunder shall be in form and substance
satisfactory to Parent.
(f) CONSENTS. National shall have received the consents,
approvals and actions of the Persons listed on Schedule 6.01.
(g) STOCK PURCHASE AGREEMENT. HHPI and Stockholders shall have
entered into the Stock Purchase Agreement and the transactions contemplated
thereby shall have been consummated.
6.02 CONDITIONS PRECEDENT TO OBLIGATION OF STOCKHOLDERS. The
obligation of Stockholders to proceed with the Closing under this Agreement is
subject to the fulfillment prior to or at Closing of the following conditions,
any one or more of which may be waived in whole or in part by Stockholders at
Stockholders' sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each
of the representations and warranties of Parent and Parent Sub contained in
this Agreement shall be true and correct in all material respects on and as of
the Effective Closing Date, with the same force and effect as though such
representations and warranties had been made on, as of and with reference to
the Effective Closing Date. Parent and Parent Sub shall have performed all of
the covenants and complied in all respects with all of the provisions required
by this Agreement to be performed or complied with by them at or before the
Closing.
(b) LITIGATION. No Law shall be in effect that restrains or
prohibits the transactions contemplated hereby, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Body challenging the lawfulness of or seeking to prevent or
delay any of the transactions contemplated by this Agreement or the Stock
Purchase Agreement or seeking monetary or other relief by reason of the
consummation of such transactions.
(c) NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Effective Closing Date, there shall have been no material adverse change,
regardless of insurance coverage therefor, in the business or any of the
assets, results of operations, liabilities, or condition, financial or
otherwise, of Parent.
(d) CLOSING CERTIFICATE. Parent shall have delivered a
certificate, dated the Effective Closing Date, in such detail as Stockholders
shall request, certifying to the fulfillment of the conditions set forth in
subparagraphs (a), (b), and (c) of this Section 6.02. Such certificate
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shall constitute a representation and warranty of Parent with regard to the
matters therein for purposes of this Agreement.
(e) CLOSING DOCUMENTS. Stockholders shall also have received the
other documents referred to in Section 6.03(b). All agreements, certificates,
opinions and other documents delivered by Parent and Parent Sub to Stockholders
hereunder shall be in form and substance reasonably satisfactory to
Stockholders.
(f) STOCK PURCHASE AGREEMENT. HHPI shall have entered into the
Stock Purchase Agreement and shall have performed all actions necessary on
HHPI's part to consummate the transactions contemplated thereby.
(g) MANAGEMENT AGREEMENT. Parent Sub shall have entered into the
Management Agreement.
(h) EMPLOYMENT AGREEMENTS. Parent shall have executed the
Employment Agreements and such Employment Agreements shall each include the
following:
(i) Parent shall guaranty all obligations of Foster Health
Care Group, Inc. ("FHCG") arising from and after the earlier of eighteen months
after the Closing or the date when the assets of FHCG shall be transferred to
Parent pursuant to the Foster Health Care Group Purchase Agreement (as defined
in the Stock Purchase Agreement).
(ii) FHCG shall agree to assign such Employment Agreement to
Parent and Parent shall agree to accept such assignment and shall agree to take
over and perform all obligations of FHCG from and after the date defined in (i)
above.
(i) SHAREHOLDERS' AGREEMENTS. National and each of the
Stockholders shall execute all documents which are necessary and appropriate in
order to either terminate all agreements entered into between National and
Stockholders or whereby the Stockholders shall waive all of their rights
arising under any such shareholders' agreements.
6.03 DELIVERIES AND PROCEEDINGS AT CLOSING.
(a) DELIVERIES BY STOCKHOLDERS. Stockholders shall deliver or
cause to be delivered to Parent and Parent Sub at the Closing:
(i) Certificates representing the National Stock duly
endorsed in negotiable form or accompanied by stock powers duly executed in
blank, in either case with signatures guaranteed by a commercial bank or
brokerage firm and with all transfer taxes, if any, paid in full.
(ii) Certificates of the appropriate public officials to the
effect that National was a validly existing corporation in good standing in the
State of Missouri as of a date not more than 10 days prior to the Effective
Closing Date.
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<PAGE> 30
(iii) Incumbency and specimen signature certificates dated
the Closing Date, signed by the officers of National and certified by its
Secretary.
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of National as of a date not more than 10 days prior to
the Closing Date, certified by the secretary of State of Missouri and (B) the
bylaws of National as of the Closing Date, certified by its Secretary.
(v) Certificates of the Secretary of National (A) setting
forth all resolutions of the Board of Directors of National authorizing the
execution and delivery of this Agreement and the performance by National of the
transactions contemplated hereby, and (B) to the effect that the Governing
Documents of National delivered pursuant to Section 6.03(a)(iv) were in effect
at the date of adoption of such resolutions, the date of execution of this
Agreement and the Closing Date.
(vi) General releases by all officers and directors of
National and by Stockholders and all Related Parties of all liability of
National to them and of any claim that they or any of them may have against
National (exclusive of pension obligations) in the form of Exhibit 6.03(a)(vi).
(vii) The minute books, stock ledgers and corporate seal of
National.
(viii) The opinion of Husch & Eppenberger, legal counsel to
Stockholders and National, in substantially the form of Exhibit 6.03(a)(viii).
(ix) Resignations of the officers and directors of National
effective at the Closing.
(x) The other named agreements and documents listed on
Schedule 6.03.
(xi) Such other agreements and documents as Parent may
reasonably request.
(b) DELIVERIES BY PARENT AND PARENT SUB. Parent and Parent Sub
shall deliver or Cause to be delivered to Stockholders at the Closing:
(i) Certificates representing [800,000] Parent shares
registered in the names of the Stockholders as set forth on Schedule 2.02.
(ii) Certificates of the appropriate public officials to
the effect that Parent and Parent Sub are validly existing corporations in
their respective states of incorporation and that Parent Sub is duly qualified
as a foreign corporation in the State of Missouri as of a date not more than 10
days prior to the Closing Date.
(iii) Incumbency and specimen signature certificates signed
by the officers of Parent and Parent Sub and certified by their respective
Secretaries.
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<PAGE> 31
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of Parent and Parent Sub as of a date not more than 10
days prior to the Closing Date, certified by the Secretary of State of their
respective states of incorporation and (B) the bylaws of Parent and Parent Sub
as of the Closing Date, certified by their respective Secretaries.
(v) A certificate of the Secretaries of Parent and Parent
Sub (A) setting forth all resolutions of the Board of Directors of Parent
authorizing the execution and delivery of this Agreement and the performance by
Parent and Parent Sub of the transactions contemplated hereby, certified by
their respective secretaries and (B) to the effect that the Governing Documents
of Parent and Parent Sub delivered pursuant to Section 6.03(b)(iv) were in
effect at the date of adoption of such resolutions, the date of execution of
this Agreement and the Closing Date.
(vi) The opinion of Kirkpatrick & Lockhart LLP, Parent's
legal counsel, in substantially the form of Exhibit 6.03(b)(vi).
(vii) The other named agreements and documents listed on
Schedule 6.03.
(viii) Such other agreements and documents as Stockholders
may reasonably request.
6.04 TERMINATION. This Agreement may be terminated at any time prior
to Closing by (i) mutual consent of Parent and Stockholders; (ii) Parent, if
any of the conditions specified in Section 6.01 hereof shall not have been
fulfilled by August 29, 1996, and shall not have been waived by Parent; or
(iii) Stockholders, if any of the conditions specified in Section 6.02 hereof
shall not have been fulfilled by August 29, 1996, and shall not have been
waived by Stockholders. In the event of termination of this Agreement by either
Parent or Stockholders pursuant to clause (ii) or (iii) of the immediately
preceding sentence, Parent, on the one hand, and Stockholders and National, on
the other hand, shall be liable to the other for any breach hereof by such
party, which breach led to such termination, and the rights and obligations of
the parties set forth in Sections 7.02, 7;03 of the Stock Purchase Agreement as
provided for in Section 7.02 hereof and 8.01 hereof shall survive such
termination. Parent, on the one hand, and Stockholders and National, on the
other hand, shall also be entitled to seek any other remedy to which it may be
entitled at law or in equity in the event of such termination, which remedies
shall include injunctive relief and specific performance.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.01 SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall survive
the Closing, but all claims for damages made by virtue of such representations,
warranties and agreements shall be made under, and subject to the limitations
set forth in, this Article VII. The representations and warranties set forth in
Articles III and IV are cumulative, and any limitation or qualification set
forth in any one representation and warranty therein shall not limit or qualify
any other
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<PAGE> 32
representation and warranty therein. After Closing, National shall not have any
liability to Stockholders for any breach of any representation or warranty made
by Stockholders or National to parent in this Agreement, in any certificate or
document furnished pursuant hereto by Stockholders or National to which
Stockholders or National, or both, is or is to become a party.
7.02 INDEMNIFICATION BY STOCKHOLDERS.
(a) BASIC INDEMNIFICATION. Stockholders shall indemnify, defend,
save and hold Parent and its officers, directors, employees, agents and
Affiliates (including, after the Closing, the Surviving Corporation,
collectively, "Parent Indemnitees") harmless from and against all demands,
claims, allegations, assertions, actions or causes of action, assessments,
losses, damages, deficiencies, liabilities, costs and expenses (including
reasonable legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious; collectively, "Parent Damages") asserted against, imposed upon,
resulting to, required to be paid by or incurred by any Parent Indemnitees,
directly or indirectly, in connection with, arising out of, which could result
in, or which would not have occurred but for, (i) a breach of any
representation or warranty made by Stockholders in this Agreement, in any
certificate or document furnished pursuant hereto by Stockholders or National
or any Other Agreement to which Stockholders or National, or both, is or is to
become a party, (ii) a breach or nonfulfillment of any covenant or agreement
made by Stockholders or National in or pursuant to this Agreement or in any
Other Agreement to which Stockholders or National, or both, is or is to become
a party, and (iii) any and all liabilities of National of any nature
whatsoever, whether due or to become due, whether accrued, absolute, contingent
or otherwise, existing on the Effective Closing Date or arising out of any
transaction entered into, or any state of facts existing, prior to the
Effective Closing Date, except for (i) liabilities fully reserved on the Fiscal
Year Financial Statements and/or the Estimated Interim Financial Statements,
but only to the extent reserved therein, (ii) those liabilities not required
under GAAP to be reserved in the Fiscal Year Financial Statements and/or the
Estimated Interim Financial Statements that are expressly quantified and set
forth in the Contracts, and (iii) obligations disclosed in this Agreement or in
any Other Agreement, Schedule, or Exhibit and (iv) obligations for Accounts
Payable which are not the responsibility of Stockholders pursuant to Section
5.07 above.
(b) PAYMENT OF PARENT DAMAGES. To the extent Parent is entitled
to collect Parent Damages, Parent shall, at its option, be entitled to withdraw
sufficient funds pursuant to the Escrow Agreement in lieu of payment directly
from Stockholders, and to the extent the amount due to Parent exceeds the
balance of the funds held under the Escrow Agreement, Parent shall be entitled
to collect such balance owed to Parent directly from Stockholders. [SUBJECT TO
FURTHER AMENDMENT.]
7.03 INDEMNIFICATION BY PARENT. Parent shall indemnify, defend, save
and hold Stockholders and Stockholders' heirs, personal representatives and
assigns (collectively, "Stockholders Indemnitees") harmless from and against
any and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
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<PAGE> 33
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious; collectively, "Stockholder Damages") asserted against, imposed
upon, resulting to, required to be paid by or incurred by any Stockholder
Indemnitee, directly or indirectly, in connection with, arising out of, which
could result in, or which would not have occurred but for, (i) a breach of any
representation or warranty made by Parent in this Agreement or in any
certificate or document furnished pursuant hereto by Parent or any Other
Agreement to which Parent is a party, (ii) a breach or nonfulfillment of any
covenant or agreement made by Parent in or pursuant to this Agreement and in
any Other Agreement to which Parent is a party, and (iii) any and all
liabilities of National of any nature whatsoever arising after the Effective
Closing Date or arising out of any transaction entered into, or any state of
facts which come into existence after the Effective Closing Date, except for
any liability which Stockholders have agreed hereunder to assume.
7.04 LIMITATION OF LIABILITY. Notwithstanding the foregoing,
Stockholders' obligations to indemnify Parent Indemnitees against any Parent
Damages shall be subject to all of the following limitations:
(a) THRESHOLD. No indemnification shall be made under clause (i)
of Section 7.02 until the aggregate amount of Parent Damages thereunder exceeds
$100,000, but if the aggregate amount of Parent Damages thereunder exceeds such
amount, indemnification shall be made by Stockholders thereunder to the full
extent of Parent Damages.
(b) TIME PERIOD. Stockholders shall be obligated to indemnify
Parent Indemnitees by virtue of clause (i) of Section 7.02 only for those
Parent Damages as to which Parent has given Stockholders written notice thereof
within two years after the Closing Date; provided, however, that with respect
to any claim for Parent Damages sustained by reason of a breach of any
representation or warranty relating to those matters governed by Sections 3.10
and 3.24 Stockholders' liability shall be limited to Parent Damages as to which
such written notice shall have been given within the periods of the applicable
federal and state statutes of limitations related to such matters.
Notwithstanding the foregoing, Stockholders shall be obligated to indemnify
Parent Indemnitees for claims of alleged breach of any representation or
warranty of Stockholders with regard to the condition of assets of National
contained in Section 3.13 only if Parent shall have given Stockholders written
notice of facts upon which the claim is based not later than ninety days after
the Closing.
(c) MAXIMUM LIABILITY. Notwithstanding any provision of this
Agreement to the contrary, the aggregate liability of Stockholders under (1)
Section 7.03 above, (2) Section 7.03 of the Stock Purchase Agreement, and (3)
Section 7.03 of that Merger Agreement of even date herewith between Parent, BCC
at Nevada Park Care Center, Inc., shall not in any event exceed $2,400,000,
except for the following: (i) claims as otherwise provided in Section 7.04(d)
below; (ii) claims arising under Sections 3.10 or 5.02 (taxes); and (iii)
claims against National for a refund of any amount previously received by
National for any Medicare reimbursement.
(d) FRAUD; INTENTIONAL MISREPRESENTATION. The limitations set
forth in Sections 7.04(a), (b), and (c) shall not apply to Parent Damages
arising out of (i) fraud or (ii) the
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<PAGE> 34
breach of any representation or warranty contained herein or pursuant hereto if
such representation or warranty was made with actual knowledge that it
contained an untrue statement of a fact or omitted to state a fact necessary to
make the statements of facts contained therein not misleading.
7.05 NOTICE OF CLAIMS. If any Parent Indemnitee or Stockholder
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Parent Damages or Stockholder Damages, as the case
may be ("Damages"), for which it is entitled to indemnification under this
Article VII, such Indemnified Party shall so notify the party or parties from
whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly
notify the Indemnifying Party of such action or suit. The failure of an
Indemnified Party to give any notice required by this Section shall not affect
any of such party's rights under this Article VII or otherwise except and to
the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party.
7.06 THIRD PARTY CLAIMS. The Indemnifying Party shall have the right
at its sole cost and expense to conduct and control, through counsel of its
choosing, the defense of any third party claim, action or suit, and the
Indemnifying Party may compromise or settle the same, provided that the
Indemnifying Party shall give the Indemnified Party advance notice of any
proposed compromise or settlement. The Indemnifying Party shall permit the
Indemnified Party to participate in the defense of any such action or suit
through counsel chosen by the Indemnified Party, provided that the fees and
expenses of such counsel shall be borne by the Indemnified Party. If the
Indemnifying Party shall control the conduct and settlement of such action or
suit, (i) the Indemnifying Party shall not thereby permit to exist any
Encumbrance upon any asset of the Indemnified Party; (ii) the Indemnifying
Party shall not consent to any settlement that does not include as an
unconditional term thereof the giving of a complete release from liability with
respect to such action or suit to the Indemnified Party; (iii) the Indemnifying
Party shall permit the Indemnified Party to participate in such conduct or
settlement through counsel chosen by the Indemnified Party; and (iv) the
Indemnifying Party shall agree promptly to reimburse the Indemnified Party for
the full amount of any Damages including fees and expenses of counsel for the
Indemnified Party incurred after giving the foregoing notice to the
Indemnifying Party and prior to the assumption of the conduct and control of
such action or suit by the Indemnifying Party.
ARTICLE VIII
MISCELLANEOUS
8.01 COSTS AND EXPENSES. Subject to Section 6.04, Parent and
Stockholders shall each pay their respective expenses, brokers' fees and
commissions, and Stockholders shall pay all of the pre-Closing expenses of
National incurred in connection with this Agreement and the transactions
contemplated hereby, including all accounting, legal and appraisal fees and
settlement charges.
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<PAGE> 35
8.02 FURTHER ASSURANCES. Stockholders shall, at any time and from time
to time on and after the Closing Date, upon request by Parent and without
further consideration, take or cause to be taken such actions and execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments, documents, transfers, conveyances and assurances as may be
required or desirable for the better conveying, transferring, assigning,
delivering, assuring and confirming the National Stock to Parent or any of the
assets used in the Business.
8.03 NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made (i) the second business day after the date of mailing, if
delivered by registered or certified mail, postage prepaid, (ii) upon delivery,
if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with
a record of receipt, or (iv) the next day after the date of dispatch, if sent
by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, postage prepaid, return receipt requested), to
the parties at the following addresses:
(i) If to Parent, to:
Brad E. Hollinger
Chairman and CEO
Balanced Care Corporation
8507 Market Street, Suite 202
Camp Hill, PA 17011
Telecopy:
with a required copy to:
Kirkpatrick & Lockhart LLP
Attn: John C. Rodney, Esquire
1500 Oliver Building
Pittsburgh, PA 15222
Telecopy: (412) 355-6501
(ii) If to Stockholders, to:
Mr. Billy Ray Foster
President and CEO
Foster Health Care Group
426 S. Jefferson
Springfield, MO 65806
Telecopy: (417) 831-7383
with a required copy to:
Harvey Tettlebaum
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Husch & Eppenberger
235 East High Street, Suite 300
Jefferson City, Missouri 65101
Telecopy: (573) 634-7854
Notices to National shall be addressed in care of Stockholders before Closing
and in care of Parent after Closing. Any party hereto may change the address to
which notice to it, or copies thereof, shall be addressed, by giving notice
thereof to the other parties hereto in conformity with the foregoing.
8.04 ASSIGNMENT; GOVERNING LAW. This Agreement and all the rights and
powers granted hereby shall bind and inure to the benefit of the parties hereto
and their respective permitted successors and assigns. This Agreement and the
rights, interests and obligations hereunder may not be assigned by any party
hereto without the prior written consent of the other parties hereto, except
that Parent or Parent Sub may make such assignments to any Affiliate of Parent
provided that Parent remains liable hereunder and provided further that no such
assignment shall cause the Parent Shares to be replaced with stock of another
corporation. This Agreement shall be governed by and construed in accordance
with the laws of Missouri without regard to its conflict of law doctrines.
8.05 AMENDMENT AND WAIVER; CUMULATIVE EFFECT. To be effective, any
amendment or waiver under this Agreement must be in writing and be signed by
the party against whom enforcement of the same is sought. Neither the failure
of any party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by any other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof shall constitute a waiver by such party of its right to exercise any
such right, power or remedy or to demand such compliance. The rights and
remedies of the parties hereto are cumulative and not exclusive of the rights
and remedies that they otherwise might have now or hereafter, at law, in
equity, by statute or otherwise.
8.06 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
and the Schedules and Exhibits set forth all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with respect
to the subject matter hereof, and supersede all prior or contemporaneous
agreements and understandings, negotiations, inducements or conditions, express
or implied, oral or written, including the letter of intent. This Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder, except the provisions of Sections 7.02 and 7.03 in the
Stock Purchase Agreement as provided for in Section 7.02 of this Agreement
relating to Indemnitees.
8.07 SEVERABILITY. If any term or other provision of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal or incapable
of being enforced under any rule of Law in any particular respect or under any
particular circumstances, such term or provision shall nevertheless remain in
full force and effect in all other respects and under all other circumstances,
and all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the
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<PAGE> 37
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
8.08 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
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<PAGE> 38
PARENT SUB
BCC at Nevada Park Center, Inc.
By: /s/ Robin L. Barber
---------------------------
Name: Robin L. Barber
-------------------------
Title: Secretary
------------------------
NATIONAL
National Care Centers of Nevada, Inc.
By: /s/ Bill R. Foster
---------------------------
Name: Bill R. Foster
-------------------------
Title: President
------------------------
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<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
STOCKHOLDERS
/s/ Billy Ray Foster, Sr.
--------------------------------
Billy Ray Foster, Sr., both individually and as
Trustee of the Revocable Inter Vivos Trust
agreement of Billy Ray Foster dated February 4,
1988
/s/ John Douglas Foster
--------------------------------
John Douglas Foster
/s/ Billy Ray Foster, Jr.
--------------------------------
Billy Ray Foster, Jr.
/s/ J. Kaye Foster Gibson
--------------------------------
J. Kaye Foster Gibson
/s/ Robert Anthony Foster
--------------------------------
Robert Anthony Foster
/s/ Mark Bradley Foster
--------------------------------
Mark Bradley Foster
PARENT
Balanced Care Corporation
/s/ Brad E. Hollinger
--------------------------------
By: Brad E. Hollinger
Chairman and CEO
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<PAGE> 1
EXHIBIT 2.5
AGREEMENT OF SALE
THIS AGREEMENT, made and entered into as of this 23rd day of February,
1996, by and between MOUNT ROYAL PINES, L.P., a Pennsylvania limited
partnership (hereinafter referred to as "Seller");
AND
BALANCED CARE CORPORATION, or its assigns, a Delaware business
corporation (hereinafter referred to as "Buyer");
W I T N E S S E T H:
That Seller is the owner of that certain assisted living facility
located on Walters Road in Allison Park, Allegheny County, Pennsylvania (the
"Facility"), and desires to sell certain assets used or held for use in the
operation of the Facility to Buyer on the terms and conditions hereinafter set
forth, to which Buyer is agreeable, and accordingly in consideration thereof
and the mutual covenants hereinafter set forth, and for good, valuable and
sufficient consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto, each intending to be legally bound hereby, do
covenant and agree as follows:
SECTION 1. PURCHASE OF ASSETS.
1.1 Included Assets. Under the terms and conditions set forth in this
Agreement, and based upon the representations and warranties of Seller on the
Closing Date (as defined in Section 3.1), Seller shall sell, assign, convey,
transfer and deliver to Buyer, and Buyer shall purchase from Seller, all of
Seller's right, title and interest in and to the following assets, property,
leases, contracts and other rights of Seller (collectively the "Assets"):
(a) All real property owned or leased by Seller or any
affiliated entity used or related to the operation of the Facility or
the Assets, including, without limitation, the real property and
fixtures, Facility and other improvements on the real property
described on Schedule 1.1(a)(1) and all easements and rights of way
(collectively the "Property"), which shall be conveyed to Buyer
subject to no liens, claims, encumbrances, easements or restrictions,
except for (i) easements for public utilities or to provide service to
the Facility and (ii) the permitted exceptions listed on Schedule
1.1(a)(2) (collectively the "Permitted Exceptions").
(b) All tangible personal property used in the operation of
the Facility, other than the leased personal property covered by
Section 1.1(e) below, including all of Seller's furniture, fixtures,
machinery, vehicles, office furnishings and equipment, and
construction in process, if any (collectively the "Personality") used
in the operation of the Facility, whether or not carried on the books
of Seller, all of which, except for individual items the original cost
of which is less than $1,000, are set forth in Schedule 1.1(b)(1). The
Personality shall be conveyed free and clear of any and all claims,
liens, encumbrances, security interests, capital lease obligations,
and restrictions except for those shown on
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<PAGE> 2
Schedule 1.1(b)(2).
(c) The inventories of supplies, drugs, food and other
disposables and consumables which are owned by Seller and on hand at
the Facility on the Closing Date (the "Inventory"). The Inventory
shall be conveyed free and clear of any and all claims, liens,
encumbrances, and security interests except those set forth in
Schedule 1.1(c).
(d) All security deposits and rentals of Seller, together
with all interest, late charges, penalties, collection fees and other
sums that are or may become due and payable with respect thereto.
(e) All resident records, employment records, staff roster
and files, prepaid assets (except for insurance), chooses in action,
financial records, proprietary materials, programs, manuals,
promotional materials and other tangible and intangible property owned
by Seller relating to the Assets, and all rights of Seller in and to
(i) any leases for real or personal property, equipment, furnishings
or furniture (collectively the "Leases") listed on Schedule 1.1(e),
(ii) Contracts (as hereinafter defined in Section 4.18) relating to
the Assets listed on Schedule 1.1(e), (iii) Licenses and Permits (as
hereinafter defined in Section 4.11) used or held or used in the
operation of the Assets as set forth on Schedule 4.11 (to the extent
legally possible) and (iv) express or implied warranties from the
suppliers of Seller with respect to the Assets, in each case to the
extent which transfer is permitted by law. Such items shall be
conveyed free and clear of all claims, liens and encumbrances, subject
to the rights of others under the applicable documents disclosed on
Schedule 1.1(e).
(f) All of Seller's right, title and interest in and to the
trade name "Mt. Royal Pines", or variations thereof, and all other
trade names used exclusively at the Facility, each of which are set
forth in Schedule 1.1(f).
(g) All of Seller's right, title and interest in and to
construction plans, permits, designs or drawings related to the
Facility licenses and permits from State.
1.2 Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, the Assets shall not include, and Seller shall retain as its property,
the assets listed on Schedule 1.2 (collectively the "Excluded Assets").
SECTION 2. ASSUMPTION OF LIABILITIES.
2.1 Assumed Liabilities. Subject to the terms and conditions
set forth in this Agreement, Buyer shall assume and agree to pay,
perform and discharge the following and only the following liabilities
of Seller as the same exist on midnight of the day preceding the
Closing Date (collectively the "Assumed Liabilities"):
(a) Seller's liability after the Closing Date for the Leases
listed on Schedule 1.1(e).
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<PAGE> 3
(b) Seller's liability after the Closing Date for the
Contracts listed on Schedule 1.1(e).
(c) Seller's obligations under open purchase orders as of the
Closing for inventory and supplies to be delivered after the Closing
in the ordinary course of business and which inventory and supplies
are not included in the inventory and supplies purchased by Buyer at
the Closing.
2.2 Excluded Liabilities. Except for the Assumed Liabilities, no
obligation or liability of Seller relating to or arising from the operation of
the business of Seller, the Facility or the Assets prior to the Closing, of any
nature (whether expressed or implied, fixed or contingent, liquidated or
unliquidated, known or unknown, accrued, due or to become due), is to be
assumed by Buyer, nor shall Buyer be liable to pay, perform or discharge any
such obligation or liability, nor shall the Assets be subject to any such
obligation or liability (all such obligations or liabilities other than the
Assumed Liabilities are referred to as the "Excluded Liabilities"). The term
"Excluded Liabilities" includes without limitation, the following to the extent
that such items are not Assumed Liabilities:
(a) Long-term indebtedness and other obligations or guaranties
of Seller.
(b) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to the Closing, and the
transactions contemplated hereunder, including, without limitation,
income taxes payable under the Internal Revenue Code 1986, as amended
("IRC"), any income tax, any franchise tax, any tax recapture, any
accrued ad valorem property taxes, any FICA, workers' compensation and
any and all other taxes or amounts due or payable for a period prior
to the Closing; Sales and use taxes, transfer taxes, and all other
impositions of tax arising solely by reason of the transfers
contemplated by this Agreement (excluding all federal, state and local
income and gross receipt taxes on the earnings or gross receipts of
the Facility prior to the Closing Date, which shall remain the sole
responsibility of Seller) shall be the responsibility of and shall be
borne equally by Seller and Buyer (any real estate and personal
property taxes for the year in which the Closing occurs shall be
pro-rated to the Closing Date (based on a calendar year basis), if the
tax rates for the year in which the Closing occurs shall not be fixed
prior to the Closing Date for a particular item of Assets, the
pro-ration of taxes thereon shall be based upon the tax rate for the
year prior to the Closing applied to the latest assessment valuation;
However, in the event that any such taxes are increased for the year
in which the Closing occurs, Seller shall then reimburse Buyer for
amounts in excess of the proration as determined as of the Closing
Date).
(c) Liability in connection with any employee benefit plan
(as defined in Section 3(3) of the Employer Income Security Act of
1974, as amended ("ERISA")) covering any of Seller's employees and
liability for all employee wages and benefits, including any liability
for workers compensation benefits, of Seller's employees for periods
prior to the Closing.
(d) Liabilities or obligations of Seller for brokerage or
other commissions
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relating to this Agreement or to the transactions contemplated
hereunder.
(e) Liabilities or obligations arising out of any breach by
Seller occurring prior to the Closing of any Contract, Equipment Lease
or any other agreement whether assumed by Buyer.
(f) Any liability arising out of or in connection with
claims, acts or omissions arising from or relating to the ownership or
operation of the Assets by Seller prior to Closing; all meters or
other measures of actual use or consumption of any utility services of
any kind, whether public, quasi-public or private, at or for the
Property shall be read during the daylight hours on the day
immediately preceding the Closing Date, with all charges, costs and
expenses of such utility services so determined by such readings to be
paid by Seller.
(g) Any debt, obligation, expense or liability of Seller
arising out of or incurred in respect of any transaction of Seller for
any violation occurring prior to the Closing by Seller of any federal,
state or local law, statute, rule, regulation, ordinance, order,
judgment or decree.
(h) Any liability or obligation (contingent or otherwise) of
Seller regarding occurrences prior to the Closing arising out of any
threatened or pending litigation or claim (known or unknown).
(i) Any obligation or liability of Seller relating to any
Hazardous Substances (as hereinafter defined in Section 6.2),
including clean-up or other remedial action related thereto, that
arises out of or results from any act, omission or occurrence or state
of facts existing prior to Closing.
(j) Any other liabilities or obligations of Seller
(contingent or otherwise) existing on the Closing Date or based on
facts existing on or prior thereto and not expressly assumed by Buyer
under this Agreement, including but not limited to any workers
compensation claims and all management fees and related expenses
incurred by Seller in the operation of the Facility prior to the
Closing.
2.3 Collection of Rentals. Rentals arising in connection with the
Facility shall be prorated to the Closing Date, and Buyer shall be entitled to
collect the same for the account of Buyer on and as of the Closing; provided,
however, any rentals accruing prior to Closing but received by Buyer shall be
held by Buyer as trustee for the account of Seller.
2.4 No Expansion of Third Party Rights. The assumption by Buyer of the
Assumed Liabilities and the transfer thereof by Seller shall not expand the
rights or remedies of any person or entity against Buyer or Seller as compared
to the rights and remedies that such person or entity would have had against
Seller had Buyer not assumed the Assumed Liabilities. Without limiting the
generality of the foregoing, the assumption by Buyer of the Assumed Liabilities
shall not create any third party beneficiary rights.
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SECTION 3. PURCHASE PRICE, PAYMENT OF PURCHASE PRICE AND CLOSING.
3.1 Purchase Price. The purchase price payable to Seller for the
Assets (the "Price") is and shall be a total of Two Million Five Hundred
Thousand Dollars ($2,500,000.00). The Price shall be allocated in the manner
set out in Schedule 3.1, and the parties agree to report the transaction for
federal tax purposes in accordance with such allocation.
3.2 Payment of Purchase Price. The Price shall be paid to Seller as
follows:
(a) Upon execution and delivery of this Agreement by the
parties hereto, Buyer shall deliver to Seller a good faith deposit in
the sum of Twenty Five Thousand Dollars ($25,000.00) (the "Deposit").
At the Closing, the Deposit shall be against the Price in favor of
Buyer. Except as provided in Paragraph 10.16, if the Closing does not
occur for any other reason, the Deposit shall be retained by Seller.
(b) The balance of the Price shall be paid to Seller at the
Closing by wire transfer, bank cashier's check or certified check, as
may be satisfactory to Seller.
3.3. Closing Date and the Closing. The closing for the sale and
purchase of the Assets hereunder (the "Closing") shall be conducted at a place
mutually acceptable to the parties on the first to occur of (i) a date mutually
agreed upon by the parties or (ii) the date that is ten (10) days after all of
the conditions precedent set forth in this Agreement have been met and
satisfied; however, in no event later than March 29, 1996 (the "Closing Date").
TIME IS AND SHALL BE OF THE ESSENCE WITH RESPECT TO THE CLOSING.
3.4 Closing Documents. At and as of the Closing, Seller and Buyer
shall execute and deliver all such bills of sale, consents, endorsements,
assignments and other instruments of assignment, transfer and conveyance as
shall be necessary to transfer, assign and convey to Buyer all of the Assets to
be transferred, assigned and conveyed under this Agreement, and for Buyer to
assume the Assumed Liabilities hereunder, together with all consents and
certificates required hereunder and all documents otherwise required under this
Agreement, including, but not limited to, the following (collectively the
"Closing Documents"):
(a) A standard common law or statutory special warranty deed
in recordable form, sufficient to convey indefeasible fee simple title
to the Property to Buyer in accordance with the provisions hereof; the
deed shall be deemed to include all appurtenances to the Property,
including all right, title and interest, if any, of the grantor in and
to any land lying in the bed of any street adjoining the Property to
the centerline thereof, and the existing improvements located on the
Property.
(b) A bill of sale in form and substance satisfactory to
Buyer transferring to Buyer all of Seller's right, title and interest
in and to the Personality, and covenanting and warranting that Seller
has good and marketable title to the items thereby transferred, free
and clear of all liens, mortgages, charges, security interests and
other encumbrances and against the acts of Seller.
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(c) An assignment in form and substance satisfactory to Buyer
transferring to Buyer all of Seller's right, title and interest in and
to (i) the Contracts, Leases and Permits and Licenses (to the extent
legally possible) and (ii) all warranties and guarantees by third
persons with respect to (A) any of the property under the Contracts
and Leases or (B) any of the other Assets as provided herein.
(d) Such affidavits and indemnities from Seller as Buyer's
title insurance company may reasonably require in order to omit from
any title insurance policies all exceptions except for the Permitted
Exceptions, including but not limited to exceptions for (i) judgments,
bankruptcies, taxes and municipal claims, (ii) parties in possession
other than current occupants pursuant to agreements with Seller, (iii)
mechanics' or materialmens' liens and (iv) encroachments or survey
discrepancies of any nature.
(e) A certificate in form and substance satisfactory to Buyer
from Seller certifying that all representations and warranties made by
Seller in this Agreement and any of the Closing Documents are and
continue to be true and correct in all respects on and as of the
Closing Date and each and every covenant and agreement of Seller to be
performed prior to or as of Closing Date pursuant to this Agreement or
any of the Closing Documents have been performed.
(f) A "FIRPTA" certificate in form and substance satisfactory
to Buyer and in conformance with Section 1445(b)(2) of the IRC, to the
effect that neither Seller nor any third-party seller/transferor is a
foreign person.
(g) Certification of corporate or partnership existence and
good standing of each entity comprising Seller from the Pennsylvania
Corporation Bureau dated no more than thirty (30) days prior to
Closing.
(h) Such certificates, affidavits and other documents
reflecting the power and authority of Seller to enter into and to
perform its obligations hereunder, and as to the due authorization of
any person acting for Seller at the Closing or otherwise, as legal
counsel for Buyer or any title insurance company may reasonably
request.
(i) Copies of lien searches with respect to Seller and the
Assets conducted in Allegheny County, Pennsylvania and at the Office
of the Secretary of State for the Commonwealth of Pennsylvania.
(j) An opinion of Seller's counsel ("Counsel"), dated as of
the Closing Date, and addressed to Buyer to the effect that (i) Seller
is a limited partnership duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and is
qualified to do business therein; (ii) the execution and delivery of
this Agreement and the Closing Documents by Seller, the performance by
Seller of its obligations hereunder and thereunder and the sale and
purchase of the Assets have been duly authorized by all necessary
partnership action on the part of Seller (including any necessary
approval by Seller's general partner); (iii) this Agreement and the
Closing Documents executed by Seller are valid and binding obligations
of Seller enforceable
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against Seller in accordance with their respective terms; (iv) the
execution and delivery of this Agreement and the Closing Documents,
and the consummation of the transactions hereunder and thereunder, by
Seller, do not and will not constitute an event of default under, or a
violation of, (A) any law, statute, rule or regulation of any court or
governmental authority now in effect applicable to Seller or the
Assets, (B) Seller's partnership agreement or (C) any instrument,
contract or other agreement to which Seller is a party or by which
Seller is bound; (v) there is no pending or, to the best of Counsel's
knowledge, threatened, litigation or other proceeding or governmental
investigation against or relating to Seller or to the Assets or to the
transactions contemplated by this Agreement and the Closing Documents;
(vi) Seller has given all notices required under Paragraph 7.10 of
this Agreement which are in full force and effect and, based on the
representations and warranties of Seller, any other notices to any
other third parties that are necessary to permit the sale, transfer
and conveyance of the Assets in accordance with the provisions of this
Agreement and any applicable laws, statutes and regulations, which are
in full force and effect; (vii) other than the notices referred to in
Subparagraph (vi), to the best of Counsel's knowledge, no consent,
approval or authorization of, or registration or filing with, any
third party is required to permit the sale, transfer and conveyance of
the Assets in accordance with the provisions of this Agreement and any
applicable laws, statutes and regulations; (viii) to the best of
Counsel's knowledge, there are no zoning restrictions, general plans
or other applicable land use regulations or any private covenants,
conditions or restrictions affecting the Property that prohibit the
transfer of the Property or Buyer's intended use thereof as a matter
of right for an unlimited time period and not merely as a legal
non-conforming use and (ix) the Property is taxed as a separate parcel
and, to the best of Counsel's knowledge, there is nothing that
prohibits the Property from being mortgaged, conveyed or otherwise
dealt with as a separate lot or parcel.
(k) All other instruments, certificates, documents and
information to which Buyer may be entitled under any other provisions
of this Agreement or that Buyer may reasonably request in order to
complete the Closing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents, warrants and covenants to and in favor of
Buyer, Buyer's designee(s), nominee(s), and assigns(s) that:
4.1 Organization and Power. Seller is a limited partnership duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, is qualified to do business in the Commonwealth
of Pennsylvania and has the full power, authority and legal right to conduct
the business in which it is engaged, to lease and own the properties leased or
owned by it and to execute and deliver and to perform the provisions of this
Agreement and the Closing Documents to which it is a party. Seller's general
partner is a corporation duly organized, validly existing and in good standing
under the laws of Pennsylvania.
4.2 Authorization. The execution and delivery of this Agreement and
the Closing Documents by Seller, the performance by Seller of its obligations
under this Agreement and the Closing Documents and the sale and purchase of the
Assets have been duly authorized by all
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necessary partnership action on the part of Seller (including any necessary
approval by Seller's general partner). This Agreement has been, and on the
Closing Date the Closing Documents executed by Seller hereunder will have been,
duly executed and delivered by Seller, and constitute and will constitute the
valid and binding obligations of Seller enforceable against Seller in
accordance with their respective terms.
4.3 Solvency. Seller is solvent and is not in default in the payment
of liability or obligation, or subject to any judgment, order, decree, rule or
regulation of any governmental authority that would, in each case or in the
aggregate, adversely affect its condition, financial or otherwise, or the
transactions contemplated under this Agreement.
4.4 Consents. Other than the notices referred to in Paragraph 4.11 and
except as set forth on Schedule 4.4, to the best of Seller's knowledge, no
other consent, approval or other authorization of, or registration, declaration
or filing with, any third party is required to permit the sale, transfer and
conveyance of the Assets in accordance with the provisions of this Agreement or
any applicable laws, statues and regulations.
4.5 Litigation. Except as set forth on Schedule 4.5, there are no
actions, proceedings or investigations, pending or threatened, against or
affecting Seller or the Assets, seeking to enjoin, challenge or collect damages
in connection with the transactions contemplated under this Agreement or which
could reasonably be expected to materially affect the financial condition or
operations of Seller or the Assets or the ability of Seller to carry out the
transactions contemplated hereunder, or which in any way challenge or affect
the sale and purchase of the Assets pursuant to this Agreement.
4.6 No Violation. Except as set forth on Schedule 4.6, the execution
and delivery of this Agreement and the Closing Documents by Seller, compliance
with the provisions hereof and thereof and the consummation of the transactions
contemplated herein and therein will not result in (i) the breach or violation
of (A) any law, statute, rule or regulation of any court or governmental
authority now in effect applicable to Seller or the Assets, (B) the partnership
agreement of Seller, (C) any judgment, order or decree of any court or
governmental authority binding on Seller, (D) any Contract, instrument or other
agreement to which Seller is a party or by which Seller is bound or (E) any
franchise, License or Permit applicable to Seller or the Assets; (ii) the
acceleration of any obligation of Seller or (iii) the creation of any lien upon
the Assets (other than pursuant to this Agreement and the Permitted Exceptions).
4.7 The Property. Seller has good and marketable title to the Property
described on Schedule 1.1(a)(1), free and clear of all liens, restrictions or
encumbrances except for the Permitted Exceptions. A true, correct and complete
copy of each Permitted Exception has heretofore been delivered to Buyer. Except
as set forth on Schedule 4.7:
(a) Prior to Closing, Buyer shall have investigated and
inspected the Property to Buyer's satisfaction. Except as expressly
provided in this Agreement, Seller has not given, and Buyer has not
relied on, any representations, warranties, promises or
understandings, express or implied, of Seller with respect to the
Property, and Buyer is purchasing the Property in its present
condition and state of repair, "as is." Schedule 4.7
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is a copy of all inspections by licensure and health officials, fire
authorities, insurance inspectors or other parties of the Property
which includes all matters that were noted by such party requiring
correction or requested or recommended modifications, and the present
status of each such noted matter.
(b) Seller holds all valid and effective certificates,
approvals and other Permits and Licenses required by applicable law
relating to the operation of the Property, including without
limitation all certificates of occupancy, underwriters' certificates
relating to electrical work, zoning, building, housing, safety, fire
and health approvals.
(c) All public utilities, including telephone, gas, electric
power, sanitary and storm sewer and water, are available at the
Property and, to the best of Seller's knowledge, such utilities are
adequate for Buyer's intended use of the Property.
(d) To the best of Seller's knowledge, there are no zoning
restrictions, general plans or other applicable land use regulations
or any private covenants, conditions or restrictions affecting the
Property that prohibit the transfer of the Property or Buyer's
intended use thereof as a matter of right for an unlimited timeperiod
and not merely as a legal non-conforming use. Seller has not
commenced, nor has Seller received notice of the commencement of any
proceeding that would affect the present zoning classification of the
Property.
(e) To the best of Seller's knowledge, (i) no consent,
approval or other authorization of, or registration, declaration or
filing with, any third party is required to permit the sale, transfer
and conveyance of the Property in accordance with the provisions of
this Agreement or any applicable laws, statutes and regulations and
(ii) the Property is in compliance with all applicable zoning
ordinances and the Permitted Exceptions.
(f) During the period of Seller's ownership of the Property
and, to the best of Seller's knowledge during the period prior to
Seller's ownership, (i) there are no underground tanks or Hazardous
Substances (as hereinafter defined in Section 6.2) located at, in, on,
under, from, over or related to the Property, no such tanks have been
located on the Property and no such Hazardous Substances have been
present, used, stored, treated, released from or disposed of on the
Property; (ii) no enforcement, cleanup, removal or other governmental
or regulatory actions have been instituted, or to the best of Seller's
knowledge, threatened with respect to the Property; (iii) there is no
current or, to the best of Seller's knowledge, prior violation or
state of noncompliance with the Environmental Laws (as hereinafter
defined in Section 6.2) with respect to the Property; (iv) no claims
have been made, or to the best of Seller's knowledge, threatened by
any third party with respect to the Property relating to damage,
contribution, cost recovery, compensation, loss or injury resulting
from or related to any Hazardous Substance; and (v) to the best of
Seller's knowledge, there are no current, and have been no, businesses
engaged in the storage, treatment or disposal of Hazardous Substances
on any property adjacent to the Property.
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(g) To the best of Seller's knowledge, the Property is not
located within an area of special risk with respect to natural or
man-made disasters or hazards, including any flood hazard area.
(h) Other than as may be set forth in Paragraph 4.7(f), to
the best of Seller's knowledge, there are no adverse geological or
soil conditions affecting the Property.
(i) The Property is taxed as a separate parcel and, to the
best of Seller's knowledge, there is nothing that prohibits the
Property form being mortgaged, conveyed or otherwise dealt with as a
separate lot or parcel.
(j) There are no eminent domain or condemnation proceedings
pending or threatened against or affecting the Property.
4.8 Personal Property. Seller has good title to all Personality to be
conveyed to Buyer hereunder, free and clear of all liens, claims, encumbrances
whatsoever, and except as set forth on Schedule 4.8,:
(a) The Personality, together with the leased equipment, in
the aggregate constitutes all of the tangible personal property used
in or related to the conduct by the Facility of its business as now
conducted; and
(b) Except for the Excluded Assets, the Assets (including the
Assets held under leases which are to be transferred to Buyer
hereunder) constitute all of the rights, properties and assets Seller
uses or holds to operate the Facility.
4.9. Financial Statements.
Seller has delivered to Buyer monthly statements of profit and loss
for 1994 the first ten (10) months of 1995 with respect to the operation of the
Facility, and in addition, Seller shall provide to Buyer, as promptly as each
becomes available through the Closing Date, all monthly financial statements of
Seller with respect to the operation of the Facility (collectively, the
"Financial Statements"). The Financial Statements are true, correct and
complete in all material respects, have been prepared in accordance with the
books and records for the Facility and fairly and accurately present the
financial condition of Seller and its operation of the Facility at the dates
and for the periods indicated. Except as set forth on Schedule 4.9, since
November 1, 1995:
(i) There has not been any material adverse change from that
disclosed in the Financial Statements in the financial condition of
Seller, the Assets or Assumed Liabilities, either individually or in
the aggregate.
(ii) Through the date of this Agreement, Seller has not
suffered any casualty loss (whether or not such loss or damage shall
have been covered by insurance) that affects the ability of Seller to
conduct its business.
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(iii) Seller has not incurred any liability or obligation of
any nature (whether absolute, accrued, contingent or otherwise) which
may become an Assumed Liability hereunder except in the ordinary and
regular course of Seller's business.
(iv) Seller has not made any capital expenditure or
commitment for additions to property, plant or equipment in excess of
Five Thousand Dollars ($5,000.00).
(v) Seller has not paid any amount to any federal, state or
local government or authority or any other third party for any claim,
obligation, liability, loss, damage or expense, of whatever kind or
nature, incurred or imposed under any Environmental Law.
(vi) There has not been any increase in the compensation or
benefits to any employee (except in the ordinary course consistent
with past practices).
(vii) There has not been any transaction by Seller relating
to the Facility or its operation outside the ordinary course of
business which materially and adversely affects the Assets or any
Assumed Liability, either individually or in the aggregate.
4.10 Insurance. A complete and accurate list of all insurance policies
(including a statement of policy limits and deductibles) held by Seller
relating to the Facility now in force and effect, including, without
limitation, malpractice, public liability, property damage, business
interruption, product liability and workers compensation or other coverage, is
contained on Schedule 4.10. There are no outstanding requirements or
recommendations by any insurance company that issued any such policy or by any
Board of Fire Underwriters, governmental authority or other similar body
exercising similar functions that require or recommend any changes in the
operation of the Facility, or any repairs or other work to be done on or with
respect to any of the Assets. Seller has not received any notice or other
communication from any such insurance company within three (3) years preceding
the date hereof canceling or amending said insurance policies. There are no
workers compensation claims (actual, or to the best of Seller's knowledge,
threatened or pending) not covered by insurance.
4.11 Compliance with Laws and Licenses. Seller has complied with all
laws, regulations and orders relating to the operation of the Facility. Seller
holds all licenses, permits, registrations, approvals, certificates, contracts,
consents, accreditations and franchises (the "Licenses and Permits") required
to be held by it to own, occupy, lease and use the Assets and to conduct and
operate the Facility in compliance with all applicable laws and regulations,
including, without limitation, all licenses, certificates and permits required
by the Pennsylvania Department of Public Welfare. Without limiting the
generality of the foregoing, the equipment and operations of the Facility
satisfy the applicable licensing requirements of the Commonwealth of
Pennsylvania. Schedule 4.11 describes each License and Permit and a true and
correct copy of each has previously been delivered to Buyer by Seller. Except
as set forth on Schedule 4.11, no notice from any authority in respect of the
revocation, termination, suspension or limitation of any License or Permit has
been issued or given, nor is Seller aware of the proposed or threatened
issuance of any such notice. Seller has given all notices to the Pennsylvania
Department of Public Welfare, the appropriate human service agencies (as that
term is defined by the Pennsylvania Department of Public Welfare), the Facility
residents and any other third parties that are necessary
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to permit the transactions contemplated herein in accordance with the provisions
of this Agreement and any applicable statutes, laws and regulations, all of
which are in full force and effect. Other than the foregoing notices, to the
best of Seller's knowledge, no consents, approvals or authorizations are
required from any third parties that are necessary to permit the transactions
contemplated herein in accordance with the provisions of this Agreement or any
applicable statutes, laws and regulations. Seller has previously delivered to
Buyer true and complete copies of the Facility's most recent survey report and
deficiency list, if any, the Facility's most recent state licensing report and
deficiency list, if any, and the Facility's most recent life-safety inspection
report and deficiency list, if any. The Facility is, and at the Closing Date
will be, licensed by the Pennsylvania Department of Public Welfare for an
aggregate of 101 personal care beds.
4.12 Rentals. Except as set forth on Schedule 4.12, the rentals of
Seller with respect to the Facility on and as of the Closing Date are fully
collectible, valid and existing and there are not, and on the Closing Date will
not be, any refunds, setoffs or other adjustments payable or assessable with
respect to such rentals.
4.13 Inventories. The Inventory of Seller on the Closing Date
constitutes the entire inventory of Seller with respect to the Facility. The
quantities of all Inventory are reasonable and justified under the normal
operations of the Facility.
4.14 Wage Claims. Except as set forth on Schedule 4.14, no present or
former employee of Seller has asserted any claim (whether under federal or
state law, under any employment agreement or otherwise) on account of or for
wages or salary.
4.15 Employment Matters. Except as set forth on Schedule 4.15, (i)
Seller is in compliance with all federal and state laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice; (ii) there is no unfair
labor practice complaint against Seller pending before the National Labor
Relations Board; (iii) there is no labor strike, dispute, slowdowns or stoppage
actually pending or, to the best of Seller's knowledge, threatened against or
involving or affecting Seller; (iv) no grievance or any arbitration proceeding
is pending or, to the best of Seller's knowledge, threatened against or
involving or affecting Seller; (v) there is no collective bargaining agreement
which is binding on Seller and (vi) Seller has not experienced any labor
stoppage during the last five (5) years.
4.16 Leases. Except as set forth on Schedule 1.1(e), neither Seller
nor the Facility is a party to or subject to any Lease relating to the
operations of the Facility. Each Lease described on Schedule 1.1(e) is valid
and in full force and effect and there are no existing defaults by Seller
thereunder. No event has occurred that (whether with notice, lapse of time, or
both) would constitute an existing default by Seller under the Leases. Except
as set forth on Schedule 1.1(e), all of the Leases may be assigned to Buyer
without the consent of any other party thereto.
4.17 Employee Benefit Plans.
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(a) Benefit Plans. For purposes of this Section 4.17, the
term "Benefit Plan" means any plan, program, arrangement, practice or
contract which provides benefits or compensation to or on behalf of
employees or former employees, whether formal or informal, whether or
not written, including, but not limited to, the following types of
Benefit Plans:
(i) Executive and Employee Arrangements. Any
bonus, incentive compensation, stock option, deferred
compensation, commission, severance, golden parachute or
other executive compensation plan, rabbi trust, program,
contract, arrangement or practice;
(ii) ERISA Plans. Any "employee benefit plan" (as
defined in Section 3(1) of ERISA, including, but not limited
to, any multi-employer plan (as defined in Section 3(37) and
Section 4001(a)(3) of ERISA), defined benefit pension plan,
profit sharing plan, money purchase pension plan, savings or
thrift plan, stock bonus plan, employee stock ownership plan
or any plan, fund, program, arrangement of practice providing
for medical (including post-retirement medical),
hospitalization, accident, sickness, disability or life
insurance benefits; and
(iii) Other Employee Fringe Benefits. Any stock
purchase, vacation, scholarship, day care, prepaid legal
services, severance pay or other fringe benefit plan,
program, arrangement, contract or practice.
(b) Identification of Benefit Plans. Except as set forth on
Schedule 4.17 hereto, Seller does not maintain any Benefit Plan and
each such plan is and has been operated and administered in accordance
with the applicable requirements under ERISA and the IRC (including,
but not limited to, the requirements of IRC Section 401(a) for
employer benefit plans intended to be qualified thereunder).
All contributions and other payments required to be made by Seller to
any Benefit Plan, for or on behalf of any employees or former employees of the
Facility have been made or reserves adequate for such purpose have been set
aside therefor in accordance with the terms of each such plan. All
contributions made by Facility employees of Seller as of the date hereof have
been deposited by them with the appropriate funding agency of each Benefit Plan
in accordance with the terms of each such plan, ERISA and the IRC, or reserves
adequate for such purposes have been set aside therefor. There are not
outstanding liabilities of any such Benefit Plan other than liabilities for
benefits to be paid to participants in such plan and their beneficiaries in
accordance with the terms of such plan.
There are no undischarged liabilities of Seller arising under or in
connection with any Benefit Plan which has heretofore covered any of Seller's
Facility employees or former Facility employees which Seller has heretofore
maintained or to which Seller has heretofore contributed other than benefits to
be paid to participants in such plans and their beneficiaries in accordance
with the terms of such plans.
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4.18 Contracts. Except as set forth on Schedule 1.1(e), neither Seller
nor the Facility is a party to or subject to any contract, agreement,
concession or commitment (collectively, the "Contracts") relating to the
operations of the Facility. Each Contract described on Schedule 1.1(e) is valid
and in full force and effect and there are no existing defaults by Seller
thereunder. No event has occurred that (whether with notice, lapse of time, or
both) would constitute an existing default by Seller under the Contracts.
Except as set forth on Schedule 1.1(e), all of the Contracts may be assigned to
Buyer without the consent of any other party thereto.
4.19 Broker's and Finder's Fees. Except as set forth on Schedule 4.19,
neither Seller, nor anyone acting on behalf of Seller, has done anything to
cause or incur any liability for any broker's or finder's fees or the like in
connection with this Agreement or any transaction contemplated hereby.
4.20 Tax Returns. Except as set forth on Schedule 4.20 hereto, Seller
has filed all federal, state, local and other tax returns, reports and
statements required by whatsoever jurisdiction and for whatsoever reason, and
has properly paid all taxes, assessments, fees, charges and other sums so
reported or otherwise due to any government or jurisdiction, or installments or
estimated payments thereof, as of the date hereof (with the exception of matters
to be pro-rated as of the Closing) and as of the Closing Date, including but not
limited to income taxes, capital stock taxes, personal property taxes,
unemployment compensation taxes, charges or contributions, social security
("FICA") contributions, withholding and employment taxes or similar amounts,
sales and use taxes, real estate taxes, workmen's compensation premiums or
assessments and any and all interests, additions and penalties thereon; none of
Seller's federal or state income tax returns, Pennsylvania state sales/use tax
returns or any other tax or similar returns, reports or statements required by
whatsoever jurisdiction have been audited or are currently under audit by the
Internal Revenue Service, the Pennsylvania Department of Revenue or any other
governmental authority, jurisdiction, agency, department or instrumentality; no
action has been taken, no matter exists and no transaction has been completed or
is pending that will or may result in a deficiency for additional taxes,
interest, additions or penalties levied or imposed for any period prior to or
ending as of the date of this Agreement; there are no outstanding agreements or
consents extending the statutory period of limitations applicable to any
federal, state or local tax return, report or statement or the taxes reported
thereon for any period ending on or before the date of this Agreement and there
are no tax petitions, tax settlements, tax assessments or other tax claims or
charges that have been, or to the best of Seller's knowledge and information,
may be or might be assessed against Seller.
4.21 Survival of Representations and Warranties. The representations
and warranties of Seller set forth in this Section 4 as made on the Closing
Date shall survive the Closing as made until the 3rd anniversary of the Closing
Date.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller as follows:
5.1 Corporate Organization; Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified and
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authorized to do business in the Commonwealth of Pennsylvania and has full
power, authority and legal right to execute and deliver and to perform and
observe the provisions of this Agreement and the Closing Documents to which it
is a party and otherwise to carry out the transactions contemplated hereunder
and thereunder.
5.2 Authorization. The execution and delivery of this Agreement and
the Closing Documents by Buyer, the performance by Buyer of its obligations
hereunder and thereunder and the sale and purchase of the Assets have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been, and on the Closing Date the Closing Documents executed by
Buyer hereunder will have been, duly executed and delivered by Buyer, and
constitute and will constitute the valid and binding obligations of Buyer
enforceable against Buyer in accordance with their respective terms.
5.3 Consents. Other than the notices required to be given by Seller as
set forth in Paragraph 4.11 and except as set forth on Schedule 5.3 hereto, to
the best of Buyer's knowledge, no consent, approval or other authorization of,
or registration, declaration or filing with, any third party is required for the
due execution and delivery of this Agreement, for the validity or enforceability
thereof against Buyer or for the performance by Buyer of its obligations
hereunder.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there are
no actions, proceedings or investigations, pending or threatened, against or
affecting Buyer seeking to enjoin, challenge or collect damages in connection
with the transactions contemplated under this Agreement or which could
reasonably be expected to materially affect the financial condition or
operations of Buyer or the ability of Buyer to carry out the transactions
contemplated hereunder, or which in any way challenge or affect the sale and
purchase of the Assets pursuant to this Agreement.
5.5 No Violation. Except as set forth on Schedule 5.5 hereto, the
execution and delivery of this Agreement and the Closing Documents by Buyer,
compliance with the provisions hereof and thereof and the consummation of the
transactions contemplated herein and therein will not result in (i) the breach
or violation of (A) any law, statute, rule or regulation of any court or
governmental authority now in effect applicable to Buyer; (B) the articles of
incorporation and bylaws of Buyer; (C) any judgment, order or decree of any
court or governmental authority binding on Buyer or (D) any instrument,
contract or other agreement to which Buyer is a party or by which Buyer is
bound.
5.6 Broker's and Finder's Fees. Except as set forth on Schedule 5.6
attached hereto, except Neither Buyer, nor anyone acting on behalf of Buyer,
has done anything to cause or incur any liability for any broker's or finder's
fees or the like in connection with this Agreement or any transaction
contemplated hereby.
5.7 Survival of Representations and Warranties. The representations
and warranties of Buyer set forth in this Section 5 as made on the Closing Date
shall survive the Closing as made until the 3rd anniversary of the Closing
Date.
SECTION 6. ENVIRONMENTAL INSPECTION.
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6.1 Inspections. At any time on or after the date of this Agreement,
Buyer or Buyer's agent may make one (1) or more inspections and tests of the
Property for the presence of or contamination by Hazardous Substances (as that
term is defined below). Buyer shall have the absolute right to choose and
determine who shall perform such inspections and tests and when they shall be
performed. Buyer shall be responsible for any cost or expense with regards to
such inspections and tests. If the result or results of such inspections and/or
tests show the presence of or contamination by Hazardous Substances of the
Property or any part thereof, Buyer at its sole and absolute option may
terminate this Agreement without any liability to Seller whatsoever except that
the Deposit shall be retained by Seller.
6.2 Definitions. Where used in this Agreement, the term "Hazardous
Substances" shall mean and include: (a) all hazardous or toxic substances,
wastes or materials, including but not limited to those as now or hereafter
defined by or designated in or pursuant to Environmental Laws (as hereinafter
defined), and further including without limitation petroleum and products and
derivatives thereof and other pollutants or contaminants, whether or not
naturally occurring, including but not limited to asbestos or asbestos
containing materials; (b) any activity now or hereafter undertaken, whether on,
at or off the Property, that would (i) cause the Property to become a hazardous
waste treatment, storage or disposal facility under, or otherwise subject the
Property to the provisions of the Resource Conservation and Recovery Act of
1976, as amended, 42 U.S.C. Section 6901 et seq., (ii) cause a release or
disposal of Hazardous Substances on the Property under, or otherwise subject the
Property to the provisions of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq., the Pennsylvania Hazardous Sites Cleanup Act, 35 P.S. Section 6020.101 et
seq., the Pennsylvania Storage Tank and Spill Prevention Act, 35 P.S.
Section 6021.101 et seq., or any similar state or local law or ordinance, (iii)
cause the discharge of pollutants, contaminants or effluents into any water
source or system, whether surface or subsurface, or of any emissions into the
air, which would require a permit under the Federal Water Pollution Control Act,
33 U.S.C. Section 1251 et seq., or the Clean Air Act, 42 U.S.C. Section 7401 et
seq., or any similar state or local law or ordinance or (iv) cause any
substances or conditions in, on or under the Property which may support a claim,
charge or cause of action under any of the abovementioned laws or any other
federal, state or local environmental laws, ordinances, rules, regulations,
administrative or judicial orders, or any other environmental requirements
(collectively the "Environmental Laws"), including without limitation the
presence of any underground storage tanks or underground deposits located on the
Property, or the presence of asbestos or asbestos containing materials in the
Facility.
SECTION 7. COVENANTS AND AGREEMENTS.
7.1 Pre-Closing Activities. Seller shall, from the date of this
Agreement to the Closing Date, except as otherwise specifically agreed to in
writing by Buyer:
(a) Make no borrowing or hypothecations that would encumber
the Property or any part thereof as of the date of or after the
Closing or incur or agree to incur any liability or obligation of any
material nature (absolute or contemplated) which may become an Assumed
Liability hereunder except in the ordinary and regular course of
Seller's business;
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(b) Not modify, amend or cancel any of the Contracts, Leases
or Permits and Licenses, or enter into any new contracts or leases
with any third party, except on account of a default by any party
(other than Seller) to the same or the normal expiration of the stated
term thereof;
(c) Not authorize or make any non-emergency capital
expenditure in excess of five thousand Dollars ($5,000.00);
(d) Not increase the salary of any employee except in the
ordinary course of business, or pay or agree to pay any bonus to any
employee or adopt any Benefit Plan, except in the ordinary course of
business (and except where required by law);
(e) Not sell, assign, lease or otherwise transfer or dispose
of, or enter into any agreement to sell, assign, lease or transfer,
any property or equipment of Seller relating to the Facility or its
business, except in the normal course of business;
(f) Not merge or consolidate or agree to merge or consolidate
with or into any other entity;
(g) Make such repairs, restorations and replacements as may
be necessary or appropriate to keep and maintain the Property,
Personality and property under the Contracts and Leases in their
present physical condition and state of repair and operation as they
exist and are operated as of the date hereof, reasonable wear and tear
excepted;
(h) Keep and maintain any and all insurance for the Assets in
full force and effect;
(i) Not enter into any agreements or other arrangements that
will or may incur obligations binding upon or against the Assets or
Buyer subsequent to the Closing Date;
(j) Comply with and cure all violations of laws, ordinances,
rules, regulations, orders, decrees or requirements, whether public or
private, affecting the Assets;
(k) Timely pay, satisfy and discharge any amount of
principal, interest, premium or penalty due or becoming due under any
obligation with respect to the Assets and all other bills, charges and
sums due or becoming due prior to the Closing Date with respect
thereto or otherwise, including but not limited to the discharge of
any liens, encumbrances, judgments, taxes, charges, assessments,
security interests or chattel mortgages or any other claims now or
hereafter imposed against the Assets;
(l) Fully perform and observe all requirements, obligations
and provisions of the Contracts, Leases, Permits and Licenses and any
other agreements and arrangements for or relating to the Assets or
operation, occupancy or maintenance thereof and promptly cure any
violation, default or breach by Seller thereunder;
(m) Not undertake any courses of conduct or action, or fail
to do so,
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inconsistent with the requirements of this Agreement and Seller's
obligations, covenants, representations and warranties herein provided,
or that may prevent or hinder Buyer from satisfying its conditions
precedent hereof, consummating the purchase of the Assets hereunder or
fully realizing the acquisition of the Assets as hereby intended;
(n) Use Seller's reasonable efforts to maintain present
employees and maintain Seller's relationship with suppliers, residents
and others having business relations with the Facility;
(o) Permit Buyer to make offers of employment to work at the
Facility after the Closing to any of Seller's personnel who work at
the Facility, which personnel shall be allowed to accept or reject
such offers without penalty;
(p) Permit Buyer and its authorized representatives
(including without limitation, any attorneys or accountants designated
by Buyer) to have access during normal daylight business hours upon
prior notice to Seller to all properties, records and documents with
respect to the Assets for the purpose of making such inspections and
examinations as Buyer shall deem advisable, and furnish to Buyer and
such representatives financial and other information with respect to
the Assets as Buyer may from time to time request. Buyer and its
representative shall not unduly interfere with Seller's normal
business operations in effectuating any of the foregoing. In the event
of termination of this Agreement, Buyer shall return to Seller all
such information and documents including copies thereof made by Buyer;
(q) Permit Buyer to conduct architectural, environmental and
engineering inspections of the Property at reasonable times and upon
prior notice to Seller; and
(r) Permit Buyer to validate Seller's inventory and if Buyer
deems necessary to conduct a physical inventory.
7.2 Pre-Closing Deliveries. In addition to the other documents and
information to be provided by Seller as elsewhere herein provided, within ten
(10) days after the date hereof, Seller shall deliver to Buyer the following
instruments and documents, or true, correct and complete copies thereof, which
shall be reasonably satisfactory to Buyer both as to form and substance:
(a) All Contracts or Leases and other instruments required or
appropriate for the ownership, use, occupancy, operation or maintenance
of the Property or any of the other Assets;
(b) All real estate and personal property tax statements or
bills for or relating to the Property or any of the other Assets for
the applicable current tax year or years, and all tax assessments or
notices thereof upon which such taxes are based;
(c) All plans, specifications and other drawings used in the
construction of the Property or any renovations thereof and all
guarantees and warranties made by third parties with respect to the
Personality, the property under the Contracts and Leases or any
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of the other Assets;
(d) All pleadings, motions and related documents filed in any
pending litigation relating to or affecting any of the Assets;
(e) All building permits, zoning permits, subdivision plans,
surveys and any appraisals prepared within thirty-six (36) months
before the date hereof, for or relating to the Property;
(f) All correspondence, communications or notices, including
but not limited to those asserting default, violation or breach or
declaring a cancellation or termination, relating to any of the
agreements, instruments, documents or other information identified or
set forth in this Section 7, or to any matters affecting the Assets;
(g) All Contracts, Leases, Permits and Licenses or other
instruments or arrangements relating to the ownership, operation, use,
occupancy or maintenance of the Assets currently being negotiated by
Seller or hereafter entered into by Seller (but only with the prior
written consent of Buyer);
(h) Copies of any instruments, documents or any other
information that varies or changes any of the agreements, instruments,
documents or information identified or set forth in this Agreement, or
in the Schedules hereto attached or in any of the Exhibits or other
documents or information to be supplied to Buyer by Seller as
elsewhere herein provided;
(i) A current statement regarding workers' compensation claims
made or threatened against the Facility and the Facility's current
experience rating; and
(j) Reports as provided for in Section 4.11.
7.3 Seller's Best Efforts. Seller covenants and agrees to use all
reasonable efforts to cause all of its covenants and agreements and all
conditions precedent to Seller's obligations to close hereunder to be
performed, satisfied and fulfilled.
7.4 Buyer's Best Efforts. Buyer covenants and agrees to use all
reasonable efforts to cause all of its covenants and agreements and all
conditions precedent to Buyer's obligations to close hereunder to be performed,
satisfied and fulfilled.
7.5 Preservation of Records. After the Closing, Buyer shall keep and
preserve all records and other records of the Facility existing as of the
Closing and which are required to be kept and preserved (i) by any applicable
federal or state law or regulations or (ii) in connection with any claim or
controversy still pending involving Seller. After the Closing, upon reasonable
written notice by Seller to Buyer, Seller, at its own cost and expense, shall
be entitled, during regular business hours, to have access to and make copies
of all records pertaining to the operation of the Facility (other than medical
records which shall be governed by the provisions of
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Section 7.6) prior to the Closing for any lawful corporate purpose.
7.6 Seller's Access to Resident Records. To the extent permitted by
law, Seller, at its own cost and expense, shall be entitled, after the Closing,
during the regular business hours of the Facility, to have access to and make
copies of the resident records. In addition, subject to the prior consent of
Buyer, Seller shall be entitled to copy and remove any such record or chart,
but only for purposes of pending litigation involving a resident to whom such
record or chart refers, as certified in writing prior to removal by an officer
of Seller or counsel retained by Seller in connection with such litigation.
7.7 Casualty. If any part of the Assets are damaged or destroyed in
whole or in part prior to the Closing, and the fair market value of such damage
or destruction is less than One Hundred Thousand Dollars ($100,000.00), Seller
shall, at Buyer's option, either (i) reduce the Price by the fair market value
of the Assets damaged or destroyed, such value to be determined as of the date
immediately prior to such damage or destruction and Seller may keep the
insurance proceeds or (ii) upon the Closing, transfer the proceeds of the
insurance to Buyer, and Buyer may restore the improvements. If any part of the
Assets are damaged or destroyed in whole or in part prior to Closing and the
fair market value of such damage is greater than One Hundred Thousand Dollars
($100,000.00), Buyer may elect either to (i) require Seller upon the Closing to
transfer the proceeds of the insurance to Buyer, and Buyer may restore the
improvements or (ii) terminate this Agreement; provided the Deposit shall be
retained by Seller. At the request of Buyer and at Buyer's sole expense, the
amount of insurance against fire and other casualties that, at the date of this
Agreement, Seller carries with respect to any of the Assets shall be increased
by an amount equal to the Price, provided that it is feasible to obtain such
insurance from Seller's current insurance carrier.
7.8 Paid Time Off. Prior to the Closing, Seller shall provide Buyer
with Schedule 7.8 containing all accrued sick, vacation, holiday and personal
days covering regular full-time and part-time employees of Seller estimated as
of the Closing Date based upon existing employment policies of the Facility.
7.9 Seller's Insurance. After the Closing, Seller's liability for
malpractice claims relating to or arising from acts or omissions prior to the
Closing shall continue to be covered by insurance maintained by or on behalf of
Seller.
7.10 License Reissuance. As set forth in Paragraph 10.5, assurance to
Buyer of the intention of the Pennsylvania Department of Public Welfare to
issue the necessary Licenses and Permits for the operation of the Facility upon
and after Closing hereunder is a condition to Buyer's obligation to close.
Accordingly, Seller shall cooperate with Buyer's efforts to obtain such
assurance by taking all action reasonably required of Seller to assist Buyer.
Upon execution and delivery of this Agreement, Seller shall:
(a) Provide Buyer with copies of all Licenses and Permits;
(b) Notify the Pennsylvania Department of Public Welfare of
the pending change of ownership of the Facility; and
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(c) Provide such other notices as required by law including
(i) notices to residents of the Facility and (ii) notices to human
service agencies (as that term is defined by the Pennsylvania
Department of Public Welfare). Prior to sending the notices, Seller
shall provide copies to Buyer for review and approval, which shall not
be unreasonably withheld.
SECTION 8. TERMINATION.
Anything herein or elsewhere to the contrary notwithstanding, this
Agreement and the obligations of the parties hereunder may be terminated on or
prior to the Closing Date, without any liability to the other, as follows:
(a) By Buyer (i) in the event that the transactions
contemplated hereunder have been prohibited or enjoined by any reason
of any final judgment, decree or order entered or issued by a court of
competent jurisdiction in litigation or proceedings involving either
Buyer or Seller; (ii) in the event the conditions precedent to Buyer's
obligation to close are not reasonably satisfied and performed at or
prior to the Closing; (iii) in the event Seller breaches or violates
any provision of this Agreement in any material respect or fails to
perform any covenant or agreement to be performed by Seller under the
terms of this Agreement in any material respect and such breach,
violation or failure is not waived by Buyer prior to Closing.
(b) By Seller (i) in the event that the transactions
contemplated hereunder have been prohibited or enjoined by reason of
any final judgment, decree or order entered or issued by a court of
competent jurisdiction in litigation or proceedings involving either
Buyer or Seller; (ii) in the event the conditions precedent to
Seller's obligation to close are not reasonably satisfied and
performed at or prior to the Closing; or (iii) in the event Buyer
breaches or violates any provision of this Agreement in any material
respect or fails to perform any covenant or agreement to be performed
by Buyer under the terms of this Agreement in any material respect,
and such breach, violation or failure is not waived by Seller prior to
Closing.
(c) By Buyer or Seller if the Closing hereunder shall not
have taken place by the Closing Date or such later date as shall be
agreed upon by an amendment to this Agreement; provided, however, that
a party shall not have the right to terminate under this Section 8(c)
if the conditions precedent to such party's obligation to close have
been satisfied and such party has failed or refused to close after
being requested in writing to close by the other party.
(d) By Seller and Buyer by mutual agreement.
SECTION 9. AMENDMENT OF AGREEMENT
At any time on or prior to the Closing Date, Buyer or Seller, may, by
written notice to the other (and without a written amendment signed by both
parties):
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(a) Extend the time for performance by the other party:
(b) Waive any inaccuracies in the representations and
warranties of the other party contained in this Agreement or in any
document delivered pursuant hereto; and
(c) Waive compliance by the other party with any of the
covenants or conditions contained in this Agreement (including,
without limitation, a condition precedent to its obligations to
close).
SECTION 10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
The obligation of Buyer to consummate the transactions contemplated by
this Agreement is subject to and contingent upon the satisfaction on or before
the Closing Date of the following express conditions precedent:
10.1 Performance. Seller shall have performed each and every covenant
and obligation required to be performed by it on or prior to the Closing.
10.2 Representations and Warranties. Each and all of the
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing Date in all material respects, as
though given as of the Closing Date, and Seller shall have delivered to Buyer
officers' certificates to that effect.
10.3 Proceedings. Buyer shall have reviewed and approved all
proceedings to be taken by Seller in connection with the transactions
contemplated hereunder and all documents and certificates incident thereto,
including Seller's partnership agreement, resolutions adopted by Seller,
certified by the managing general partner of Seller, approving this Agreement
and the transactions contemplated hereby and such other documents and
certificates as Buyer shall reasonably request.
10.4 The Property. With regard to the Property,
(a) There shall be no pending or threatened condemnation or
eminent domain proceedings.
(b) Buyer shall have obtained a commitment for an owners
title insurance policy on the Property in the face amount of the Price
and in form reasonably satisfactory to Buyer and its lender from a
reputable title insurance company, showing good and indefeasible title
to the Property in fee simple vested in Buyer as of the Closing,
subject only to the Permitted Exceptions. Such policy, when issued,
shall: (i) be current ALTA extended coverage owner's form (but without
a general exception for creditors' rights); (ii) include such
endorsements as Buyer may reasonably require, including without
limitation endorsements 100 (no violations, etc., modified for an
owner), access, survey accuracy and zoning and (iii) insure (A) that
any conditions, covenants and restrictions affecting the Property have
not been violated and that a future violation thereof will not result
in a forfeiture or reversion of title, (B) if obtainable, that all
streets adjoining the Property have
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been completed, dedicated and accepted for public maintenance and use
by the appropriate governmental authorities and that the Property has
access to public streets, (C) if obtainable, that local zoning
ordinances, general plans and all other applicable land use regulations
and all private conditions and restrictions, if any, permit the
transfer and Buyer's intended use of the Property as a matter of right
for an unlimited time period, and not as a legal non-conforming use or
any other legal status which would by its terms or by operation of law
limit the duration of such use and (D) over and against all parties in
possession except current occupants thereof. Buyer shall pay the cost
of such policy.
10.5 Governmental Concurrences. At its own cost and expense, Buyer
shall have obtained and approved copies of (i) the applicable zoning ordinances
and map marked to show the location of the Property and certified by an
appropriate governmental authority to be complete and accurate; (ii) evidence
that such zoning ordinances and the general plans and all other land use
regulations of the municipality having jurisdiction over the Property and all
covenant, conditions and restrictions, if any, affecting the Property permit
the transfer of the Property and Buyer's intended use thereof as a matter of
right for an unlimited time period and not merely as a legal non-conforming
use; (iii) all licenses, certificates, approvals and authorizations, including
plot plan and subdivision approvals, variances, sewer, building and other
permits and all other authorizations required by any governmental authority or
by any applicable covenants, conditions and restrictions for the operation of
the Property for Buyer's intended use thereof, all in accordance with all
applicable governmental requirements; (iv) evidence satisfactory to Buyer that
(A) the Facility holds all licenses, permits, accreditations, authorizations
and certifications required for the operation thereof from any applicable
governmental authority, (B) the Facility is not subject to, or threatened with,
any hold on admissions or other sanction and there are no outstanding, or
threatened, notices of deficiency resulting from any inspection of the Facility
that have not been fully responded to with an acceptable plan of correction
with which the Facility is being operated in compliance, and (C) Buyer shall be
able to obtain all licenses, permits, accreditations, authorizations and
certifications required for the operation of the Facility by Buyer for its
intended use thereof from any applicable governmental authority upon and after
Closing.
10.6 Environmental Report. At its own cost and expense, Buyer shall
have obtained a written report from a qualified geotechnical or engineering
firm, in a form and substance, satisfactory to Buyer, concerning the presence,
handling, treatment and disposal of Hazardous Substances on, in or under the
Property and disclosing (i) the results of a review of prior uses of the
Property disclosed by local public records, including the chain of title, (ii)
contacts with local officials to determine whether any records exist with
respect to the disposal of Hazardous Substances on the Property; and (iii) if
recommended to or required by Buyer, soil samples and groundwater samples
consistent with good engineering practice.
10.7 Survey. At its own cost and expense, Buyer shall have obtained
and approved an ALTA survey of the Property completed in accordance with the
minimum standard detail requirements for ALTA/ACSM Land Title Surveys, with
additional Title A3 survey requirements, jointly established and adopted by ALTA
and ACSM that meet the requirements of a Class A Survey as defined therein, (i)
certified to Buyer and its title insurance company as being true and accurate,
which such certification shall include the acreage of the Property and a
statement that the Property is not located in a flood hazard area; (ii)
identifying thereon all telephone, water,
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sewage, electricity, gas and other utility facilities to the points of
connection; (iii) identifying thereon the relationship between legal setback
requirements and the footprint of the Property; and (iv) showing no
encroachments onto or conflicts with any adjacent property.
10.8 Utilities and Access. Buyer shall have satisfied itself that (i)
all utilities, including telephone, water, sewage, electricity and gas, are
available to service the Property and adequate for Buyer's intended use of the
Property and (ii) all means of ingress and egress, access to public streets and
drainage facilities are available to the Property and adequate for Buyer's
intended use of the Property.
10.9 Physical Inspection. At its own cost and expense, Buyer shall
have inspected and approved the physical condition of the Property including
the improvements and the HVAC, electrical, plumbing and other systems, and
shall receive the written report in form and substance satisfactory to Buyer
from a qualified engineering firm approved by Buyer or any engineer employed by
Buyer to the effect that the improvements on the Property have been constructed
in compliance with, and currently are in compliance with, all governmental
requirements, including without limitation the Americans With Disabilities Act,
and with all restrictions of record applicable thereto which materially affect
the Buyer's intended use of the Property.
10.10 Financing Commitment. Buyer shall have received a written
binding commitment from a real estate investment trust or other financing
source(s) to provide the necessary financing for Buyer's acquisition of the
Assets under terms and conditions satisfactory to Buyer in its sole and
absolute discretion.
10.11 Litigation. No action or proceeding shall have been instituted
and no order, decree or judgment of any court, agency, commission or authority
shall be in affect questioning the validity of this Agreement or seeking to
restrain the consummation thereof which would in Buyer's good faith opinion
render it impossible or inadvisable to consummate the transactions provided for
in this Agreement.
10.12 Opinion of Counsel. Buyer shall have received an opinion of
counsel of Seller, acceptable to Buyer's Counsel, substantially in the form as
set forth in Section 3.4(j).
10.13 Notices; Consents. Seller shall give all notices required under
Section 7.10 and obtain all required consents (if any) for assignment of the
Contracts, Leases, Permits and Licenses in compliance with all applicable laws,
statutes and regulations.
10.14 Schedules and Other Instruments. Each certificate and
Schedule to this Agreement shall be considered a part hereof as if set forth
herein in full. Each Schedule shall be updated by Seller and approved by Buyer
as of Closing. Notwithstanding any other provision herein to the contrary, all
certificates, Schedules or other instruments provided for herein and not
delivered at the time of execution of this Agreement or which are incomplete at
the time of execution of this Agreement shall be delivered or completed as soon
as practicable, in any event on or before Closing; and it shall be deemed a
condition precedent to the Closing hereunder that each such certificate,
Schedule or other instrument shall meet with the reasonable approval of Buyer.
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10.15 Due Diligence. Buyer shall be reasonably satisfied with the
completion of such other due diligence terms as are customary in a transaction
of this type.
10.16 Loans at Closing by Seller. At Closing, Buyer shall have
received a loan from Seller in an amount equal to One Hundred Thousand Dollars
($100,000), which loan shall be represented by two identical notes each in the
amount of Fifty Thousand Dollars ($50,000) substantially in the form of Exhibit
A attached hereto and incorporated herein. If the condition set forth in this
Paragraph 10.16 is not satisfied or waived by Buyer on or prior to Closing,
Buyer at its sole and absolute option may terminate this Agreement without any
liability to Seller whatsoever and the Deposit shall be retained by Buyer.
SECTION 11. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER TO CLOSE.
The obligation of Seller to consummate the transaction contemplated by
this Agreement is subject to and contingent upon the satisfaction on or before
the Closing Date of the following express conditions precedent:
11.1 Performance. Buyer shall have performed each and every covenant
and obligation required to be performed by it on or prior to the Closing.
11.2 Representations and Warranties. Each and all of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date in all material respects, as
though given as of the Closing Date.
11.3 Litigation. No action or proceeding shall have been instituted
and no order, decree or judgment of any court, agency, commission or authority
shall be in affect questioning the validity of this Agreement or seeking to
restrain the consummation thereof which would in Seller's good faith opinion
render it impossible or inadvisable to consummate the transactions provided for
in this Agreement.
SECTION 12. INDEMNIFICATION.
12.1 Indemnification by Seller.
From and after the Closing Date, Seller agrees to and does hereby
indemnify and hold Buyer, its successors and assigns, harmless at all times
from and against and in respect of any of the following, to the extent that
they are in existence at the Closing Date or arise after the Closing Date based
upon facts, circumstances or conditions existing prior to the Closing or on the
Closing Date (regardless of the date of discovery):
(a) Any and all damages, claims, deficiencies, liabilities,
losses or costs resulting from any Excluded Liability, or from any
breach of any representation or warranty of Seller or from any breach
of any covenant or agreement of Seller under this Agreement, or from
the ownership, lease, management, operations and interests of Seller
in or to the Assets prior to Closing, and from any act or omission of
Seller, its agents or employees prior to Closing.
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(b) All demands, assessments, judgments, costs and legal or
other expenses (including reasonable attorneys' fees, penalties and
interest) incurred by Buyer arising from or in connection with any
action, suit, proceeding or claim incident to any of the matters set
forth in (a) above.
(c) Subject to the provisions of clause (d) below, Buyer
shall be reimbursed on demand for loss, damage, cost or expense
suffered by it in connection with any action, suit, proceeding or
claim incident to any of the matters set forth in (a) or (b) above.
(d) Should any claim be made by a person or entity not a
party to this Agreement with respect to any matter to which the
foregoing indemnity and hold harmless agreement relates, Buyer shall,
promptly after its receipt of notice of the commencement of any
action, suit or proceeding relating to such claim, give written notice
to Seller of the commencement thereof ("Buyer's Notice"), but the
failure to notify Seller shall not relieve Seller of any liability
that it may have to Buyer hereunder, except to the extent Seller
demonstrates that the defense of such action, suit or proceeding is
prejudiced thereby. Within fifteen (15) days of the date of Buyer's
Notice, Seller shall, at it own cost and expense, assume the defense
of such action, suit or proceeding with counsel reasonably acceptable
to Buyer. If Seller fails to assume the defense within the applicable
time period, Buyer may, at it option, assume the defense or make
settlement of such claim, and such settlement shall be binding on
Seller for the purposes of this Agreement.
12.2 Indemnification by Buyer.
From and after the Closing Date, Buyer agrees to and does hereby
indemnify and hold Seller, its successors and assigns, harmless at all time
from and against and in respect of any of the following, to the extent that
they are in existence at the Closing Date or arise after the Closing Date based
upon facts, circumstances or conditions arising prior to the Closing, on or
after the Closing Date (regardless of the date of discovery):
(a) Any and all damages, claims, deficiencies, liabilities,
losses or costs resulting from any Assumed Liability, or from any
breach of any representation or warranty of Buyer or agreement on the
part of Buyer under this Agreement, or from the ownership, lease,
management, operations and interests of Buyer in or to the Assets after
the Closing, and from any act or omission of Buyer, its agents and
employees, after the Closing.
(b) All demands, assessments, judgments, costs and legal or
other expenses (including reasonable attorneys' fees, penalties and
interest) incurred by Seller arising from or in connection with any
action, suit, proceeding or claim incident to any of the matters set
forth in (a) above.
(c) Seller shall be reimbursed on demand for loss, damage,
cost or expense suffered by it in connection with any action, suit,
proceeding or claim incident to any of the matters set forth in (a) or
(b) above.
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12.3 Covenant-Not-To Compete. For a period of three (3) years after
the Closing, neither Seller, any entity controlled by Seller, nor any partner
of Seller, directly or indirectly, shall own or operate an assisted living
facility within a radius of seven (7) miles from the Facility. This restrictive
covenant shall be specifically enforceable by a preliminary and/or permanent
injunction issued by a court sitting in equity, in addition to all other
remedies that may be available for its violation; it being acknowledged,
understood and agreed that the violation of such covenant will cause immediate
and irreparable harm and injury to Buyer.
SECTION 13. DEFAULT
13.1 Seller Default. If Seller defaults under any of the terms or
provisions of this Agreement or in the observance or performance of any
Seller's obligations hereunder, Buyer shall be entitled to pursue and enforce
any and all of Buyer's rights and remedies, whether at law, in equity or
otherwise, including without limitation the right to seek a decree of specific
performance or appropriate injunctive relief, as Buyer in its sole discretion
may determine.
13.2 Buyer Default. If Buyer defaults under any of the terms or
provisions of this Agreement or in the observance or performance of any Buyer's
obligations hereunder, Seller shall be entitled to pursue and enforce any and
all of Seller's rights and remedies, whether at law, in equity or otherwise,
except any right to seek a decree of specific performance or appropriate
injunctive relief, as Seller in its sole discretion may determine.
SECTION 14. ASSIGNMENT
Neither this Agreement nor any of the rights, interests or obligations
herein shall be transferred or assigned by either party without the prior
written consent of the other party (not to be unreasonably withheld). The
preceding sentence shall not apply to or limit Buyer's right to assign this
Agreement to any entity which is (i) controlled by Buyer or (ii) a real estate
investment trust which will provide the financing for Buyer to acquire and take
title to the Assets hereunder. Nothing expressed or referred to in this
Agreement is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors or permitted assigns
any legal or equitable right, benefit, remedy or claim under or in respect of
this Agreement or any provision contained herein.
SECTION 15. NOTICE.
All notices given under or with respect to the provisions of this
Agreement shall be sent either by first class, certified or registered mail,
with return receipt requested and postage prepaid, or by independent courier
service, in either case properly addressed to the intended party as follows and
shall be deemed to have been given as of the date received:
If to Seller: Mount Royal Pines, L.P.
c/o Spectrum Management, Inc.
Robert E. Shee, President
1315 Fox Avenue
Beaver Falls, PA 15010
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With a copy to:
Edward A. Gamble, Esq.
Gamble Mojock Piccione Acker & Palmer
Suite 500
First Federal Plaza
25 North Mill Street
New Castle, PA 16101
If to Buyer: Balanced Care Corporation
Attn: Brad Hollinger, President
3507 Market Street, Suite 202
Camp Hill, PA 17011
With a copy to:
Robin L. Barber, Esq.
Balanced Care Corporation
3507 Market Street, Suite 202
Camp Hill, PA 17011
SECTION 16. COOPERATION.
Each of the parties hereto shall cooperate fully with the other party,
both before and after the Closing, in performing their respective obligations
and consummating the sale and purchase of the Facility and the Assets,
including but not limited to supplying any additional information or documents
reasonably requested by the other party, and the execution, acknowledgment,
delivery, filing and recording of statements, certificates, memoranda,
instruments and other documents as may be necessary or appropriate to evidence
or perfect Buyer's purchase and ownership of the Facility and Assets and carry
out the provisions of this Agreement.
SECTION 17. PAYMENT OF EXPENSES.
Legal, accountings and other expenses incident to this Agreement
incurred by Seller shall be paid by Seller; legal, accounting and other
expenses incurred by Buyer shall be paid by Buyer.
SECTION 18. PUBLIC ANNOUNCEMENTS.
Seller and Buyer mutually agree that no party hereto shall make any
release, publish or otherwise make available to the public in any manner
whatsoever any announcement regarding the transactions herein contemplated
without the prior written consent of Seller and Buyer, except for information
reasonably necessary to be directed to governmental agencies to fully and
lawfully effect the transactions herein contemplated.
SECTION 19. CONSTRUCTION.
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This Agreement constitutes and is the complete and final integration
embodying the entire agreement between the parties hereto, and no promise,
representation, agreement, condition or term not herein expressly set forth
shall be deemed or permitted to vary, modify or otherwise change any of the
provisions hereof unless made in writing after the date hereof and signed by
both of the parties hereto. Nothing in this Agreement shall be construed to be
or create an employment agreement between Buyer and any employee of Buyer after
this Closing. The terms and provisions of a certain letter of intent dated
December 13, 1995 (as modified by letter dated January 24, 1996), between
Seller and Buyer are incorporated herein by reference. The waiver by either
party of breach or violation of any provision of this Agreement shall not
operate as, or be construed to be, a waiver of any subsequent breach of the
same or other provision hereof. The captions of the several paragraphs herein
contained are inserted solely for the purpose of convenience, and shall not
limit, influence or affect the meaning or construction of any of the provisions
hereof. Where herein used, the words "hereof", "hereunder", "hereto", and other
similar compounds of the word "here" shall refer to this entire Agreement,
unless the context otherwise clearly requires, and the singular shall include
the plural and vice versa. This Agreement and each provision hereof shall be
construed under and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, and shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
SECTION 20. CONSTRUCTION.
This Agreement may be executed in one (1) or more counterparts. Each
full counterpart shall be deemed an original, but all such counterparts
together shall constitute one and the same instrument.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, Seller and Buyer, each intending to be legally
bound hereby, have duly executed this Agreement on this day, month and year
first above written.
SELLER:
MOUNT ROYAL PINES, L.P.
By: Spectrum Management, Inc.,
ATTEST: General Partner
/s/ [Illegible]
- ------------------------ By: /s/ Robert E. Shee
Assistant Secretary ----------------------------
Robert E. Shee, President
BUYER:
WITNESS: BALANCED CARE CORPORATION
/s/ Robin L. Barber
- ------------------------ By: /s/ Robert J. Sutton, Sr.
----------------------------
Robert J. Sutton, Sr. Vice President
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<PAGE> 1
EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") made and entered into
as of this 28th day of February, 1996, by and between SENIOR CARE OF WISCONSIN,
INC., a Wisconsin corporation (hereinafter referred to as "Seller"),
AND
BALANCED CARE CORPORATION, or its assigns, a Delaware corporation
(hereinafter referred to as "Buyer").
W I T N E S S E T H:
WHEREAS, Seller is the owner of certain residential facilities that
are operated under the name "Harmony Manor" and located in Portage,
Pardeeville, Waupun, Mauston, Beloit, Monroe and Tomah, Wisconsin
(collectively, the "Facilities"); and
WHEREAS, Seller desires to sell certain assets used or held for use in
the operation of each of the Facilities to Buyer on the terms and conditions
hereinafter set forth, to which Buyer is agreeable.
NOW, THEREFORE, in consideration thereof and the mutual covenants
hereinafter set forth, and for good, valuable and sufficient consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
each intending to be legally bound hereby, do covenant and agree as follows:
SECTION 1. PURCHASE OF ASSETS.
1.1 Included Assets. Under the terms and conditions set forth in this
Agreement, and based upon the representations and warranties of Seller on the
Closing Date (as defined in Paragraph 3.3), Seller shall sell, assign, convey,
transfer and deliver to Buyer, and Buyer shall purchase from Seller, free and
clear of any and all interests, claims, liens and encumbrances, all of Seller's
right, title and interest in and to the following assets, property, leases,
leasehold improvements, contracts, licenses, permits and other rights of Seller
(collectively, the "Assets"):
(a) All inventories of supplies, drugs, food, beverages,
medical supplies, linens and other similar disposables and consumables
which are owned by Seller and are usable and on hand at each of the
Facilities on the Closing Date (collectively, the "Inventory").
(b) All Facility leases and other leases for real or personal
property, equipment, furnishings, furniture or other improvements
arising in connection with or relating to the operation of each of the
Facilities as listed on Schedule 1.1(b)
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(collectively, the "Leases").
(c) All contracts, agreements, management agreement,
concessions, purchase orders, sales orders, supply contracts, service
agreements or other commitments arising in connection with or relating
to the operation of each of the Facilities as listed on Schedule
1.1(c), including but not limited to contracts arising under or in
connection with the Community Option Program (collectively, the
"Contracts").
(d) All licenses, permits, registrations, approvals,
certificates, consents, accreditations, entitlements, memberships,
franchises and other authorizations arising in connection with or
relating to the operation of each of the Facilities, if any, as listed
on Schedule 1.1(d) (collectively, the "Licenses and Permits").
(e) All resident records, resident agreements, resident care
policies, admission agreements, third-party payor agreements, employee
rosters, employee records, employee files, employment agreements,
confidentiality agreements, medical staff rosters and files, financial
records, advertising materials, proprietary materials, programs,
manuals, handbooks and promotional materials arising in connection
with or relating to the operation of each of the Facilities.
(f) All rights under express or implied warranties,
representations or guarantees vested in or that may be asserted by or
on behalf of Seller with respect to any of the Assets, including but
not limited to any of the foregoing arising under the Community Option
Program.
(g) All claims, rights and choses in action that are being or
may be asserted by or on behalf of Seller with respect to any of the
Assets.
(h) All of Seller's right, title and interest in and to the
trade names "Harmony Manor," "Harmony Manor II" or variations thereof,
and all other trade names used at each of the Facilities, each of
which are set forth on Schedule 1.1(h); provided, however, Seller
shall be permitted to use the name "Harmony" in connection with
Seller's facilities located in Dane County and Manitowac County,
Wisconsin, and at such other locations that are not in conflict with
Seller's covenant-not-to-compete set forth in Paragraph 12.5 of this
Agreement. In addition, Buyer shall be permitted to use the trade
names set forth on Schedule 1.1(h) with respect to any additional
facilities with Seller's prior approval, which approval may be
withheld in Seller's sole and absolute discretion.
(i) All other tangible or intangible property owned by Seller
arising in connection with or relating to the operation of each of the
Facilities as listed in Schedule 1.1(i).
(j) All of Seller rights and interests in and to all
employees employed at any
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of the Facilities who elect, in their sole and absolute discretion,
to be employed by Buyer on and as of the Closing Date.
SECTION 2. ASSUMPTION OF LIABILITIES.
2.1 Assumed Liabilities. Subject to the terms and conditions
set forth in this Agreement, Buyer shall assume and agree to pay,
perform and discharge the following and only the following liabilities
of Seller as the same exist at 12:01 a.m on the Closing Date
(collectively, the "Assumed Liabilities"):
(a) Seller's liability after the Closing Date for the Leases
listed on Schedule 1.1(b).
(b) Seller's liability after the Closing Date for the
Contracts listed on Schedule 1.1(c).
(c) Seller's obligations as of the Closing for inventory and
supplies to be delivered after the Closing in the ordinary course of
business and which inventory and supplies are not included in the
Inventory purchased by Buyer at the Closing.
(d) Seller's obligations under its Benefit Plan as set forth
on Schedule 4.14 as of the Closing and continuing for the 1996
calendar year for continuation of the employee benefits for all
employees retained by Buyer.
Buyer shall not be liable for, and Seller shall indemnify and hold
Buyer harmless from and against, any asserted liability directly relating to a
defect in the assignment of the Assumed Liabilities from Seller to Buyer
resulting from any act or failure to act on the part of Seller, which shall
include penalties, premiums, termination or the like resulting from such
assignment.
2.2 Excluded Liabilities. Except for the Assumed Liabilities, no
obligation or liability of Seller relating to or arising from the operation of
each of the Facilities or the other Assets on or prior to the Closing, of any
nature (whether expressed or implied, fixed or contingent, liquidated or
unliquidated, known or unknown, accrued, due or to become due), is to be
assumed by Buyer, nor shall Buyer be liable to pay, perform or discharge any
such obligation or liability, nor shall the Assets be subject to any such
obligation or liability (all such obligations or liabilities other than the
Assumed Liabilities are referred to as the "Excluded Liabilities"). Subject to
the limitations set forth in Paragraph 4.7, the term "Excluded Liabilities"
includes among others, the following to the extent that such items are in
existence on the Closing Date or arise after the Closing Date based on facts,
circumstances or conditions existing prior to or on the Closing Date and to the
extent they are not Assumed Liabilities:
(a) Long-term indebtedness and other obligations or
guaranties of Seller.
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(b) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to the Closing, and the
transactions contemplated hereunder, including, without limitation,
income taxes payable under the Internal Revenue Code 1986, as amended
("IRC"), any income tax, any franchise tax, any tax recapture, any
accrued ad valorem property taxes, any FICA, workers' compensation and
any and all other taxes or amounts due or payable for a period prior
to the Closing. Sales and use taxes, transfer taxes, and all other
impositions of tax arising solely by reason of the transfers
contemplated by this Agreement (excluding all federal, state and local
income and gross receipt taxes on the earnings or gross receipts of
each of the Facilities through the Closing Date, which shall remain
the sole responsibility of Seller) shall be the responsibility of and
shall be borne equally by Seller and Buyer (any real estate and
personal property taxes for the year in which the Closing occurs shall
be pro-rated to the Closing Date, if the tax rates for the year in
which the Closing occurs shall not be fixed prior to the Closing Date
for a particular item of Assets, the pro-ration of taxes thereon shall
be based upon the tax rate for the year prior to the Closing applied
to the latest assessment valuation. However, in the event that any
such taxes are increased for the year in which the Closing occurs,
Seller shall then reimburse Buyer for amounts in excess of the
proration as determined as of the Closing Date).
(c) Liabilities or obligations of Seller for brokerage or
other commissions relating to this Agreement or to the transactions
contemplated hereunder.
(d) Liabilities or obligations arising out of any breach by
Seller of any Contract, Lease or any other agreement whether assumed
by Buyer.
(e) Any liability arising out of or in connection with
claims, acts or omissions arising from or relating to the ownership or
operation of the Assets by Seller prior to Closing; all meters or
other measures of actual use or consumption of any utility services of
any kind, whether public, quasi-public or private, at or for each of
the Facilities shall be read during the daylight hours on the day
immediately preceding the Closing Date, with all charges, costs and
expenses of such utility services so determined by such readings to be
paid by Seller.
(f) Any debt, obligation, expense or liability of Seller
arising out of or incurred in respect of any transaction of Seller
occurring after the Closing or for any violation by Seller of any
federal, state or local law, statute, rule, regulation, ordinance,
order, judgment or decree.
(g) Any liability or obligation (contingent or otherwise) of
Seller arising out of any threatened or pending litigation or claim
(known or unknown).
(h) Any obligation or liability of Seller relating to any
Hazardous Substances (as hereinafter defined in Section 6.2),
including clean-up or other remedial action related thereto, that
arises out of or results from any act, omission or occurrence or
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state of facts existing prior to Closing.
(i) Any other liabilities or obligations of Seller
(contingent or otherwise) existing on the Closing Date or based on
facts existing on or prior thereto and not expressly assumed by Buyer
under this Agreement, including but not limited to any workers'
compensation claims, insurance claims and all management fees and
related expenses incurred by Seller in the operation of each of the
Facilities.
2.3 Adjustments to be Made at Closing. Operation of the Facilities
until 12:01 a.m. on the Closing Date shall be for the account of Seller, and
thereafter for the account of Buyer. The items of accrued liabilities and
prepaid expenses set forth on Schedule 2.3 shall be prorated and/or adjusted
between Buyer and Seller on and as of the Closing Date, and shall include, but
not be limited to, employee wages, the credit for employee benefits (as more
specifically set forth below), accounts receivable, advance resident fees and
security deposits (together with any interest, late charges, penalties,
collection fees and other sums that are or may become due and payable with
respect thereto). Either party collecting any item that exceeds its proration
of such item after the Closing Date shall remit the same to the other party
within ten (10) days of the collection thereof. A credit for employee benefits
shall be made in Buyer's favor in the amount set forth on Schedule 2.3 in
consideration for Buyer's obligation to continue Seller's Benefit Plan as set
forth on Schedule 4.14 for the calendar year of 1996 for all employees retained
by Buyer.
2.4 No Expansion of Third Party Rights. The assumption by Buyer of the
Assumed Liabilities and the transfer thereof by Seller shall not expand the
rights or remedies of any person or entity against Buyer or Seller as compared
to the rights and remedies that such person or entity would have had against
Seller had Buyer not assumed the Assumed Liabilities. Without limiting the
generality of the foregoing, the assumption by Buyer of the Assumed Liabilities
shall not create any third party beneficiary rights.
SECTION 3. PURCHASE PRICE, PAYMENT OF PURCHASE PRICE AND CLOSING.
3.1 Purchase Price.
(a) The purchase price payable to Seller for the Assets (the
"Price") is and shall be a total of One Million Eight Hundred
Thousand Dollars ($1,800,000.00), subject to the adjustments, if any,
to be made pursuant to Paragraph 3.1(b). The Price shall be allocated
in the manner set out in Schedule 3.1, and the parties agree to
report the transaction for federal tax purposes in accordance with
such allocation. In consideration of an amount equal to Ten Thousand
Dollars ($10,000.00), which amount is included in the Price and
hereby acknowledged to be adequate and sufficient, Seller covenants
not to compete with Buyer and not to solicit the contractors or
employees of any of the Facilities, as more particularly set forth in
Section 12.5 of this Agreement.
(b) The prorations made in connection with Schedule 2.3 shall
be subtracted
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from, or added to, the Price at Closing, as the case may be.
3.2. Payment of Purchase Price. The Price shall be paid to Seller as
follows:
(a) Pursuant to that certain Letter of Intent executed and
delivered by and between Buyer and Seller on January 19, 1996 (the
"Letter of Intent"), Buyer has heretofore delivered to Grant Kief of
Marcus & Millichap, as escrow agent for the parties (the "Escrow
Agent"), an option payment in the sum of Five Thousand Dollars
($5,000.00) (the "Option Payment"), the receipt and sufficiency of
which are hereby acknowledged by Seller, which Option Payment shall be
held in escrow in accordance with the terms and conditions of the
Escrow Agreement attached hereto as Exhibit "A" and by this reference
incorporated herein (the "Escrow Agreement").
(b) Upon execution and delivery of this Agreement by the
parties hereto, Buyer shall deliver to Escrow Agent a good faith
deposit in the sum of Forty Five Thousand Dollars ($45,000.00) (the
"Initial Deposit"), to be held in escrow in accordance with the terms
and conditions of the Escrow Agreement.
(c) Provided the Closing has not previously occurred and
neither party has terminated this Agreement in accordance with its
terms, on March 19, 1996, Buyer shall deliver to Escrow Agent a good
faith deposit in the sum of Fifty Thousand Dollars ($50,000.00) (the
"Final Deposit"), to be held in escrow in accordance with the terms
and conditions of the Escrow Agreement.
Hereinafter, the Option Payment, the Initial Deposit and the Final
Deposit may be collectively referred to as the "Deposits." At the
Closing, the Deposits previously made by Buyer shall be paid to Seller
and all interest, if any, earned thereon shall be returned to Buyer.
If the Closing does not occur, the Deposits previously made by Buyer
shall be distributed in accordance with the terms and conditions of
the Escrow Agreement and this Agreement
(d) The balance of the Price shall be paid to Seller at the
Closing in accordance with Section 3.4 (m) below.
3.3. Closing Date and the Closing. The closing for the sale and
purchase of the Assets hereunder (the "Closing") shall be conducted at the
offices of Seller in Madison, Wisconsin or at such other location as may be
mutually agreed upon by the parties hereto on the first to occur of (i) a date
mutually agreed upon by the parties or (ii) the date that is ten (10) days
after all of the conditions precedent set forth in this Agreement have been met
and satisfied; however, in no event later than April 18, 1996 (the "Closing
Date"), which date may be extended by the mutual agreement of the parties. TIME
IS AND SHALL BE OF THE ESSENCE WITH RESPECT TO THE CLOSING.
3.4 Closing Documents. At and as of the Closing, Seller and Buyer
shall execute and deliver all such bills of sale, consents, endorsements,
assignments and other instruments of
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assignment, transfer and conveyance as shall be necessary to transfer, assign
and convey to Buyer all of the Assets to be transferred, assigned and conveyed
under this Agreement, and for Buyer to assume the Assumed Liabilities
hereunder, together with all consents and certificates required hereunder and
all documents otherwise required under this Agreement, including, but not
limited to, the following (collectively, the "Closing Documents"):
(a) A bill of sale in form and substance satisfactory to
Buyer transferring to Buyer all of Seller's right, title and interest
in and to the Assets, as applicable, and covenanting and warranting
that Seller has good and marketable title to the items thereby
transferred, free and clear of all liens, mortgages, charges, security
interests and other encumbrances and against the acts of Seller.
(b) An assignment in form and substance satisfactory to Buyer
transferring to Buyer all of Seller's right, title and interest in and
to the Assets, as applicable, including but not limited to (i) the
Contracts, Leases, Permits and Licenses and (ii) all warranties,
representations and guarantees by third persons with respect to any of
the Assets.
(c) A certificate in form and substance satisfactory to Buyer
from Seller certifying that all representations and warranties made by
Seller in this Agreement and any of the Closing Documents are and
continue to be true and correct in all respects on and as of the
Closing Date and each and every covenant and agreement of Seller to be
performed prior to or as of the Closing Date pursuant to this
Agreement or any of the Closing Documents have been performed in all
respects.
(d) Copies of Seller articles of incorporation and bylaws,
certified by Seller's corporate secretary.
(e) A certificate in form and substance satisfactory to Buyer
from Seller's corporate secretary certifying as to duly adopted
resolutions of Seller's board of directors and shareholders (if
necessary), authorizing the execution and delivery of this Agreement
and the Closing Documents, the transactions contemplated herein and
therein, and the performance by Seller of its obligations hereunder
and thereunder, together with a certificate of incumbency of the
officers of Seller authorized to execute this Agreement and all
documents related hereto.
(f) A certificate of status regarding Seller from the
Secretary of State of Wisconsin dated no more than thirty (30) days
prior to Closing.
(g) Copies of lien searches with respect to Seller and the
Assets conducted in the appropriate counties of Wisconsin and at the
Office of the Secretary of State of Wisconsin.
(h) An opinion of Seller's counsel ("Seller's Counsel"),
dated as of the Closing Date, and addressed to Buyer to the effect
that (i) Seller is a corporation duly
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organized, validly existing and in good standing under the laws of
the State of Wisconsin and is qualified to do business therein; (ii)
the execution and delivery of this Agreement and the Closing
Documents by Seller, the performance by Seller of its obligations
hereunder and thereunder and the sale and purchase of the Assets have
been duly authorized by all necessary corporate action on the part of
Seller (including any necessary approval by Seller's shareholders);
(iii) this Agreement and the Closing Documents executed by Seller are
valid and binding obligations of Seller enforceable against Seller in
accordance with their respective terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights and debtors' obligations generally;
(iv) the execution and delivery of this Agreement and the Closing
Documents, and the consummation of the transactions hereunder and
thereunder by Seller, do not and will not constitute an event of
default under, or a violation of, (A) Seller's articles of
incorporation and bylaws, (B) to the best of Seller's Counsel's
knowledge, any law, statute, rule or regulation of any court or
governmental authority now in effect applicable to Seller or the
Assets, or (C) to the best of Seller's Counsel's knowledge, any
instrument, contract or other agreement to which Seller is a party or
by which Seller is bound; (v) there is no pending or, to the best of
Seller's Counsel's knowledge, threatened, litigation or other
proceeding or governmental investigation against or relating to
Seller or to the Assets or to the transactions contemplated by this
Agreement and the Closing Documents; (vi) Seller has given all
required notices (if any) to the Wisconsin Department of Health and
Social Services, the appropriate human service agencies, the
Facilities' residents and all other governmental authorities or other
third parties that are necessary to permit the sale, transfer and
conveyance of the Assets in accordance with the terms and conditions
of this Agreement and all Department of Health and Social Services'
laws, regulations and orders, all of which are in full force and
effect and (viii) other than the notices referred to in Subparagraph
(vi), no consents, authorizations, approvals or authorizations of, or
registrations with, any governmental authorities or other third
parties are necessary to permit the sale, transfer and conveyance of
the Assets in accordance with the provisions of this Agreement or any
applicable laws, statutes and regulations, all of which are in full
force and effect. In connection with the foregoing opinion, Seller's
Counsel shall be entitled to rely upon the genuineness of signatures
(other than Seller's), the authenticity of original documents and the
conformity to authentic originals of documents submitted as copies.
As to factual matters, Seller's Counsel shall be entitled to rely on
Seller's certification as to the truthfulness of statements of fact.
(i) A "FIRPTA" certificate in form and substance satisfactory
to Buyer and in conformance with Section 1445(b)(2) of the IRC, to the
effect that neither Seller nor any third-party seller/transferor is a
foreign person.
(j) Seller's financial statements as required by Section 4.9.
(k) All other instruments, certificates, documents and
information to which Buyer may be entitled under any other provisions
of this Agreement or that Buyer may
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reasonably request in order to complete the Closing.
(l) An opinion of Buyer's counsel ("Buyer's Counsel"), dated
as of the Closing Date, and addressed to Seller to the effect that (i)
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is (or on the
Closing Date will be) qualified to do business in the State of
Wisconsin; (ii) the execution and delivery of this Agreement and the
Closing Documents by Buyer, the performance by Buyer of its
obligations hereunder and thereunder and the sale and purchase of the
Assets have been duly authorized by all necessary corporate action on
the part of Buyer (including any necessary approval by Seller's
shareholders); (iii) this Agreement and the Closing Documents executed
by Buyer are valid and binding obligations of Buyer enforceable
against Buyer in accordance with their respective terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium and
other laws applicable to creditors' rights and debtors' obligations
generally and (iv) the execution and delivery of this Agreement and
the Closing Documents, and the consummation of the transactions
hereunder and thereunder by Buyer, do not and will not constitute an
event of default under, or a violation of, (A) Buyer's articles of
incorporation and bylaws, (B) to the best of Buyer's Counsel's
knowledge, any law, statute, rule or regulation of any court or
governmental authority now in effect applicable to Buyer or the Assets
or (C) to the best of Buyer's Counsel's knowledge, any instrument,
contract or other agreement to which Buyer is a party or by which
Buyer is bound. In connection with the foregoing opinion, Buyer's
Counsel shall be entitled to rely upon the genuineness of signatures
(other than Buyer's), the authenticity of original documents and the
conformity to authentic originals of documents submitted as copies. As
to factual matters, Buyer's Counsel shall be entitled to rely on
Buyer's certification as to the truthfulness of statements of fact.
(m) Buyer shall tender to Seller the Price (subject to any
adjustments pursuant to Paragraph 3.1(b)), less the Deposits
previously made by Buyer, by wire transfer, bank cashier's check or
certified check, as may be satisfactory to Seller, and said Deposits
shall be paid to Seller with any accrued interest to be returned to
Buyer.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents, warrants and covenants to and in favor of
Buyer, Buyer's designee(s), nominee(s), and assigns(s) that:
4.1 Organization, Power and Ownership. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin, is qualified to do business in the State of Wisconsin and has the
full power, authority and legal right to lease, own and operate the Assets
leased or owned by it and to execute and deliver and to perform the provisions
of this Agreement and the Closing Documents to which it is a party. Seller's
shareholders are the only shareholders of Seller, collectively owning all of
the issued and outstanding capital shares of Seller, and no other party has any
right to vote or acquire any
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shares of Seller.
4.2 Authorization. The execution and delivery of this Agreement and
the Closing Documents by Seller, the performance by Seller of its obligations
under this Agreement and the Closing Documents and the sale and purchase of the
Assets have been duly authorized by all necessary corporate action on the part
of Seller (including any necessary approval by Seller's shareholders). This
Agreement has been, and on the Closing Date the Closing Documents executed by
Seller hereunder will have been, duly executed and delivered by Seller, and
constitute and will constitute the valid and binding obligations of Seller
enforceable against Seller in accordance with their respective terms.
4.3 Solvency. Seller is solvent and is not in default in the payment
of liability or obligation, or subject to any judgment, order, decree, rule or
regulation of any governmental authority that would, in each case or in the
aggregate, adversely affect any of the Assets or the transactions contemplated
under this Agreement. As used herein, "solvent" means that on a given date (i)
the fair market value of the Assets of Seller is greater than the total amount
of liabilities, including contingent liabilities of Seller, (ii) the present
fair salable value of the Assets of Seller is not less than the amount that
will be required to pay the probable liability of Seller on its debts as they
become absolute and matured, (iii) Seller does not intend to, and does not
believe that it will, incur debts or liabilities beyond Seller's ability to pay
as such debts and liabilities mature, (iv) Seller is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which Seller's Assets would constitute an unreasonably small capital and (v)
Seller has sufficient cash flow to enable it to pay its debts as they mature.
4.4 Consents. Other than the notices referred to in Paragraph 4.11, no
other consents, authorizations, approvals or authorizations of, or
registrations with, any governmental authorities or other third parties are
necessary to permit the sale, transfer and conveyance of the Assets in
accordance with the provisions of this Agreement or any applicable laws,
statutes and regulations, all of which are in full force and effect.
4.5 Litigation. There are no actions, proceedings or investigations,
pending or threatened, against or affecting Seller or the Assets, seeking to
enjoin, challenge or collect damages in connection with the transactions
contemplated under this Agreement or which could reasonably be expected to
materially affect the financial condition or operations of Seller with respect
to each of the Facilities or the Assets or the ability of Seller to carry out
the transactions contemplated hereunder.
4.6 No Violation. Except as set forth on Schedule 4.6 attached hereto,
the execution and delivery of this Agreement and the Closing Documents by
Seller, compliance with the provisions hereof and thereof and the consummation
of the transactions contemplated herein and therein will not result in (i) the
acceleration of any obligation of Seller with respect to any of the Assets,
(ii) the creation of any lien upon any of the Assets (other than pursuant to
this Agreement) or (iii) the breach or violation of (A) any law, statute, rule
or regulation of any court or governmental authority now in effect and
applicable to Seller or the Assets, (B)
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the articles of incorporation or bylaws of Seller, (C) any judgment, order or
decree of any court or governmental authority binding on Seller, (D) any
Contract, instrument or other agreement to which Seller is a party or by which
Seller is bound or (E) any License or Permit applicable to Seller or the
Assets.
4.7 The Facilities.
(a) Schedule 4.7 accurately describes all inspections by
licensure and health officials, fire authorities and insurance
inspectors of each of the Facilities in possession of Seller at the
time of Closing that have been conducted by or on behalf of Seller by
any governmental agency or any consultant since the last such
inspection completed by or on behalf of Seller, and includes all
matters that were noted by such governmental agency or consultant
requiring correction or requested or recommended modifications, and
the present status of each such noted matter.
(b) All Permits and Licenses required by applicable law
relating to the operation of each of the Facilities are held by or on
behalf of Seller and are valid and effective.
(c) All public utilities, including telephone, gas, electric
power, sanitary and storm sewer and water are available to Seller as
tenant under the Leases for each of the Facilities and, to the best of
Seller's knowledge, such utilities are and have been adequate for
Seller's operation of each of the Facilities.
(d) (i) Seller has not installed or caused to be installed
any underground tanks or allowed the presence or disposal of, or
caused to be allowed the presence or disposal of, any Hazardous
Substances (as hereinafter defined in Section 6.2) in, on, under,
from, over or related to any of the Facilities in violation of any
Environmental Laws; (ii) no enforcement, cleanup, removal or other
governmental or regulatory actions have been instituted against Seller
or, to the best of Seller's knowledge, threatened against Seller or
any of the Facilities; (iii) there is no current or, to the best of
Seller's knowledge, prior violation or state of noncompliance with the
Environmental Laws (as hereinafter defined in Section 6.2) by Seller
with respect to any of the Facilities; (iv) no claims have been made
against Seller, or to the best of Seller's knowledge, threatened
against Seller by any third party with respect to any of the
Facilities relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from or related to any
Hazardous Substance and (v) to the best of Seller's knowledge, there
are no current, and have been no, businesses engaged in the storage,
treatment or disposal of Hazardous Substances on any property adjacent
to any of the Facilities.
(e) To the best of Seller's knowledge, there are no eminent
domain or condemnation proceedings pending or threatened against or
affecting any of the Facilities.
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Prior to the Closing Date unless otherwise specified, Buyer shall have made an
on-site physical and environmental investigation of each of the Facilities.
Buyer expressly acknowledges that Buyer has not relied on any warranties,
promises, understandings, or representations, express or implied, of Seller or
any agent of Seller relating to any of the Facilities which are not contained
in this Agreement, and that BUYER IS TAKING POSSESSION OF THE FACILITIES IN
THEIR PRESENT CONDITION AND STATE OF REPAIR, "As Is." Except as expressly set
forth in this Agreement, Buyer acknowledges that any and all engineering data
or other information regarding the physical and environmental condition of the
Facilities which Buyer has received or may receive from Seller or Seller's
agents is furnished without any warranty whatsoever. By closing the
transactions contemplated herein, Buyer will be deemed to have waived any and
all objections, claims or causes of action against Seller with respect to the
physical and environmental condition of the Facilities that are not based on,
or that do not arise out of, the warranties, promises, understandings or
representations of Seller specifically contained Paragraph 4.7 and Paragraph
4.11, including without limitation, any objections, claims or causes of action
pursuant to Paragraphs 2.2, 4.11, 12.1 of this Agreement.
4.8 Personal Property. Seller has good title to all of the Assets
consisting of personality to be conveyed to Buyer hereunder, free and clear of
all liens, claims, security interests and encumbrances whatsoever and, except
for the personalty set forth on Schedule 4.8:
(a) The Assets consisting of the personalty, together with
the property subject to the Leases, in the aggregate constitutes all
of the tangible personal property used in or related to the operation
of each of the Facilities as now operated by Seller.
(b) The Assets (including the Assets held under Leases which
are to be transferred to Buyer hereunder) constitute all of the
rights, properties and assets that Seller uses or holds to operate
each of the Facilities.
4.9. Financial Statements. Seller has provided Buyer with final,
audited income statements, detailed for each of the Facilities, for the fiscal
years ending December 31 for 1993 and 1994, together with a tentative year-end
income statement for 1995 (which statement indicates that the net operating
income of Seller, defined as net revenues less employee wages and benefits,
occupancy costs [including lease expense] and other operating expenses
[excluding depreciation and interest], but not including corporate
administrative expenses is at least Six Hundred Fifteen Thousand Dollars
($615,000.00)); and, in addition to the foregoing, Seller shall deliver to
Buyer a final financial statement for 1995, audited by a certified public
accountant acceptable to Buyer, as soon as the same become available to Seller
(collectively, the "Financial Statements"). The Financial Statements are, or
upon completion will be, (i) true, correct and complete in all material
respects, (ii) prepared in accordance with generally accepted accounting
principles and the books and records for each of the Facilities and (iii)
fairly and accurately present the financial condition of Seller and its
operation of each of the Facilities for the dates and periods covered thereby.
Since December 31, 1995:
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(a) There has not been any material adverse change from that
disclosed in the final, audited Financial Statements in the financial
condition of Seller with respect to any of the Facilities, the Assets
or the Assumed Liabilities, either individually or in the aggregate.
(b) Through the date of this Agreement, Seller has not
suffered any casualty loss (whether or not such loss or damage shall
have been covered by insurance) that affects the ability of Seller to
operate any of the Facilities.
(c) Seller has not incurred any liability or obligation of
any nature (whether absolute, accrued, contingent or otherwise) which
may become an Assumed Liability hereunder except in the ordinary and
regular course of Seller's operation of each of the Facilities.
(d) Seller has not made any capital expenditure or commitment
for additions to property, plant or equipment in excess of Five
Thousand Dollars ($5,000.00) for any of the Facilities.
(e) Seller has not paid any amount to any federal, state or
local government or authority or any other third party for any claim,
obligation, liability, loss, damage or expense, of whatever kind or
nature, incurred or imposed under any Environmental Law in connection
with any of the Facilities.
(f) There has not been any increase in the compensation or
benefits to any employee at any of the Facilities (except in the
ordinary course consistent with past practices).
(g) There has not been any transaction by Seller relating to
any of the Facilities or their operation outside the ordinary course
of business which materially and adversely affects the Assets or any
Assumed Liability, either individually or in the aggregate.
4.10 Insurance. A complete and accurate list of all insurance policies
(including a statement of policy limits and deductibles) held by Seller
relating to each of the Facilities now in force and effect, including, without
limitation, professional liability, public liability, property damage, business
interruption, product liability and workers' compensation or other coverage, is
contained on Schedule 4.10. There are no outstanding requirements or
recommendations that have been directed to Seller by any insurance company that
issued any such policy or by any Board of Fire Underwriters, governmental
authority or other similar body exercising similar functions that require or
recommend any changes in the operation of any of the Facilities, or any repairs
or other work to be done on or with respect to any of the Assets. Schedule 4.10
contains a letter from Seller's insurer certifying that Seller has maintained
continuous insurance coverage in appropriate amounts with respect to each of
the Facilities for the past three (3) years. There are no workers' compensation
claims (actual, threatened or pending) not covered by insurance.
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4.11 Compliance with Laws and Licenses. Seller has operated each of
the Facilities in accordance with all Department of Health and Social Services'
laws, regulations and orders except for minor deficiencies that have been
corrected or that have been noted on Schedule 4.11. Any deficiencies identified
by the Department of Health and Social Services licensure inspections that have
not been corrected by Closing and are a result of Seller's operation of the
Facilities shall be corrected at Seller's cost and expense or identified on
Schedule 2.3 as an accrued liability and deducted from the Price pursuant to
Paragraph 3.1(b). Seller holds all the Licenses and Permits required to be held
by it to operate each of the Facilities in compliance with all Department of
Health and Social Services' laws, regulations and orders. Schedule 1.1(d)
describes each License and Permit and a true and correct copy of each has
previously been delivered to Buyer by Seller. No notice from any authority in
respect to the revocation, termination, suspension or limitation of any License
or Permit has been issued or given to Seller, nor is Seller aware of the
proposed or threatened issuance of any such notice. Seller has or will give all
notices to the Wisconsin Department of Health and Social Services, the
appropriate human service agencies, the Facilities' residents and all other
governmental authorities or other third parties that are necessary to permit
the sale, transfer and conveyance of the Assets in accordance with the terms
and conditions of this Agreement and all Department of Health and Social
Services' laws, regulations and orders, all of which are or shall be in full
force and effect. Seller has previously delivered to Buyer true and complete
copies, if any, of each of the Facilities' most recent (i) survey report and
deficiency list, (ii) state licensing report and deficiency list and (iii)
life-safety inspection report and deficiency list. The Facilities are, and at
the Closing Date will be, licensed by the Wisconsin Department of Health and
Social Services for an aggregate of 158 community-based residential facility
beds.
4.12 Inventories. All items of Inventory of Seller to be on hand on
the Closing Date and included in the Price, consist and will consist, of items
of a quality usable or salable in the ordinary course of Seller's operation of
each of the Facilities. The quantities of all Inventory are reasonable and
justified under the normal operations of each of the Facilities.
4.13 Leases. Except as set forth on Schedule 1.1(b), neither Seller
nor any of the Facilities is a party to or subject to any other Lease relating
to the operation of each of the Facilities. Each Lease described on Schedule
1.1(b) is valid and in full force and effect. Except as set forth on Schedule
1.1(b), all of the Leases may be terminated by Seller or assigned to Buyer
without the consent of any other party thereto.
4.14 Employee Benefit Plans. Seller maintains only the benefit plan
(the "Benefit Plan") as set forth on Schedule 4.14. Except to the extent set
forth on Schedule 4.14, Seller does not maintain any of the following:
(a) Executive and Employee Arrangements. Any bonus, incentive
compensation, stock option, deferred compensation, commission,
severance, golden parachute or other executive compensation plan,
rabbi trust program, contract, arrangement or practice;
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(b) ERISA Plans. Any "employee benefit plan" (as defined in
Section 3(1) of ERISA, including, but not limited to, any
multi-employer plan (as defined in Section 3(37) and Section
4001(a)(3) of ERISA), defined benefit pension plan, profit sharing
plan, money purchase pension plan, savings or thrift plan, stock
bonus plan, employee stock ownership plan or any plan, fund, program,
arrangement of practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness,
disability or life insurance benefits; and
(c) Other Employee Fringe Benefits. Any stock purchase,
scholarship, day care, prepaid legal services and severance pay.
4.15 Contracts. Except as set forth on Schedule 1.1(c), neither Seller
nor any of the Facilities is a party to or subject to any Contract relating to
the operation of each of the Facilities. Each Contract described on Schedule
1.1(c) is valid and in full force and effect and there are no existing defaults
by Seller thereunder. No event has occurred that (whether with notice, lapse of
time, or both) would constitute an existing default by Seller under any of the
Contracts. Except as set forth on Schedule 1.1(c), all of the Contracts may be
assigned to Buyer without the consent of any other party thereto.
4.16 Broker's and Finder's Fees. Neither Seller, nor anyone acting on
behalf of Seller, has dealt with any finder, real estate broker or other person
who is entitled to claim a fee or commission based upon the actions of Buyer,
except for Marcus and Millichap ("Broker"), and Seller shall pay Broker's fee
or commission and any other costs in connection therewith. If any other person
shall assert a claim to a finder's fee or broker's fee or commission or other
costs on account of any alleged employment as a finder or broker in connection
with the sale and purchase of the Assets, Seller shall defend, indemnify and
save the Buyer harmless from any such claim or proceeding thereon, and all
costs, expenses, and liabilities arising in connection therewith, including but
not limited to attorneys' fees and costs. The indemnity obligations of this
Paragraph shall survive termination or expiration of this Agreement and
Closing.
4.17 Tax Returns. Seller has filed all federal, state, local and other
tax returns, reports and statements required by whatsoever jurisdiction and for
whatsoever reason required to be filed on or before the Closing Date, and has
properly paid all taxes, assessments, fees, charges and other sums so reported
or otherwise due to any government or jurisdiction, or installments or
estimated payments thereof that are required to be paid on or before the
Closing Date, including but not limited to income taxes, capital stock taxes,
personal property taxes, unemployment compensation taxes, charges or
contributions, social security ("FICA") contributions, withholding and
employment taxes or similar amounts, sales and use taxes, real estate taxes,
workmen's compensation premiums or assessments and any and all interests,
additions and penalties thereon; none of Seller's federal or state income tax
returns, Wisconsin state sales/use tax returns or any other tax or similar
returns, reports or statements required by whatsoever jurisdiction have been
audited or are currently under audit by the Internal Revenue Service, the
Wisconsin Department of Revenue or any other governmental authority,
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jurisdiction, agency, department or instrumentality; no action has been taken,
no matter exists and no transaction has been completed or is pending that will
or may result in a deficiency for additional taxes, interest, additions or
penalties levied or imposed for any period prior to or ending as of the date of
this Agreement; there are no outstanding agreements or consents extending the
statutory period of limitations applicable to any federal, state or local tax
return, report or statement or the taxes reported thereon for any period ending
on or before the date of this Agreement and there are no tax petitions, tax
settlements, tax assessments or other tax claims or charges that have been, or
to the best of Seller's knowledge and information, may be or might be assessed
against Seller.
4.18 Survival of Representations and Warranties. The representations
and warranties of Seller set forth in this Section 4 shall survive the Closing.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller as follows:
5.1 Corporate Organization; Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified and authorized to do business in the Commonwealth
of Pennsylvania and has full power, authority and legal right to execute and
deliver and to perform and observe the provisions of this Agreement and the
Closing Documents to which it is a party and otherwise to carry out the
transactions contemplated hereunder and thereunder.
5.2 Authorization. The execution and delivery of this Agreement and
the Closing Documents by Buyer, the performance by Buyer of its obligations
hereunder and thereunder and the sale and purchase of the Assets have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been, and on the Closing Date the Closing Documents executed by
Buyer hereunder will have been, duly executed and delivered by Buyer, and
constitute and will constitute the valid and binding obligations of Buyer
enforceable against Buyer in accordance with their respective terms.
5.3 No Violation. The execution and delivery of this Agreement and the
Closing Documents by Buyer, compliance with the provisions hereof and thereof
and the consummation of the transactions contemplated herein and therein will
not result in (i) the breach or violation of (A) any law, statute, rule or
regulation of any court or governmental authority now in effect applicable to
Buyer; (B) the articles of incorporation and bylaws of Buyer; (C) any judgment,
order or decree of any court or governmental authority binding on Buyer or (D)
any instrument, contract or other agreement to which Buyer is a party or by
which Buyer is bound.
5.4 Broker's and Finder's Fees. Neither Buyer, nor anyone acting on
behalf of Buyer, has done anything to cause or incur any liability for any
broker's or finder's fees or the like in connection with this Agreement or any
transaction contemplated hereby.
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5.6 Survival of Representations and Warranties. The representations
and warranties of Buyer set forth in this Section 5 shall survive the Closing.
SECTION 6. ENVIRONMENTAL INSPECTION.
6.1 Inspections. At any time on or before March 19, 1996, Buyer or
Buyer's agent may make one (1) or more inspections and tests of each of the
Facilities for the presence of or contamination by Hazardous Substances (as
that term is defined below). Buyer shall have the absolute right to choose and
determine who shall perform such inspections and tests and when they shall be
performed. Buyer shall be responsible for any cost or expense with regards to
any inspections and tests ordered by Buyer. If the result or results of Buyer's
inspections and/or tests show the presence of, or contamination by, Hazardous
Substances, or the need for any type of remediation at any of the Facilities,
Buyer may terminate this Agreement without any liability to Seller whatsoever
and receive a return of the Deposits previously made by Buyer in accordance
with the terms and conditions of the Escrow Agreement and this Agreement.
6.2 Definitions. Where used in this Agreement, the term "Hazardous
Substances" shall mean and include: (a) all hazardous or toxic substances,
wastes or materials, including but not limited to those as now or hereafter
defined by or designated in or pursuant to Environmental Laws (as hereinafter
defined), and further including without limitation petroleum and products and
derivatives thereof and other pollutants or contaminants, whether or not
naturally occurring, including but not limited to asbestos or asbestos
containing materials; (b) any activity now or hereafter undertaken, whether on,
at or off the premises of any of the Facilities, that would (i) cause any of
the Facilities to become a hazardous waste treatment, storage or disposal
facility under, or otherwise subject any of the Facilities to the provisions
of, the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C.
Section 6901 et seq., (ii) cause a release or disposal of Hazardous Substances
on the premises of any of the Facilities under, or otherwise subject any of the
Facilities to, the provisions of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq. or any similar state or local law or ordinance, (iii) cause the discharge
of pollutants, contaminants or effluents into any water source or system,
whether surface or subsurface, or of any emissions into the air, which would
require a permit under the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq., or the Clean Air Act, 42 U.S.C. Section 7401 et seq. or
any similar state or local law or ordinance or (iv) cause any substances or
conditions in, on or under the premises of any of the Facilities which may
support a claim, charge or cause of action under any of the abovementioned laws
or any other federal, state or local environmental laws, ordinances, rules,
regulations, administrative or judicial orders, or any other environmental
requirements (collectively, the "Environmental Laws"), including without
limitation the presence of any underground storage tanks or underground
deposits located on the premises of any of the Facilities, or the presence of
asbestos or asbestos containing materials in any of the Facilities.
SECTION 7. COVENANTS AND AGREEMENTS.
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7.1 Pre-Closing Activities. With respect to each of the Facilities,
Seller shall, from the date of this Agreement to the Closing Date, except as
otherwise specifically agreed to in writing by Buyer:
(a) Make no borrowing or hypothecations that would encumber any of the
Assets as of the date of or after the Closing or incur or agree to incur any
liability or obligation of any material nature (absolute or contemplated) which
may become an Assumed Liability hereunder except in the ordinary course of
business;
(b) Not modify, amend or cancel any of the Contracts, Leases, Permits
or Licenses, or enter into any new contracts or leases with respect to any of
the Assets with any third party, except on account of a default by any party
(other than Seller) to the same or the normal expiration of the stated term
thereof;
(c) Not authorize or make any non-emergency capital expenditure that
would affect the Assets;
(d) Not increase the salary of any employee except in the ordinary
course of business, or pay or agree to pay any bonus to any employee or adopt
any other Benefit Plan, except in the ordinary course of business (and except
where required by law);
(e) Not sell, assign, lease or otherwise transfer or dispose of, or
enter into any agreement to sell, assign, lease or transfer, any of the Assets,
except in the ordinary course of business;
(f) Not merge or consolidate or agree to merge or consolidate with or
into any other entity;
(g) Make such repairs, restorations and replacements as may be
necessary or appropriate to keep and maintain the Assets in their present
physical condition and state of repair and operation as they exist and are
operated as of the date hereof, reasonable wear and tear excepted;
(h) Keep and maintain any and all insurance for the Assets in full
force and effect;
(i) Not enter into any agreements or other arrangements that will or
may incur obligations binding upon or against the Assets or Buyer subsequent to
the Closing Date;
(j) Comply with and cure all violations of laws, ordinances, rules,
regulations, orders, decrees or requirements, whether public or private,
affecting the Assets of which Seller has knowledge;
(k) Timely pay, satisfy and discharge any amount of principal,
interest, premium or penalty due or becoming due under any obligation with
respect to the Assets and all other bills, charges and sums due or becoming due
prior to the Closing Date with respect thereto or
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otherwise, including but not limited to the discharge of any liens,
encumbrances, judgments, taxes, charges, assessments, security interests or
chattel mortgages or any other claims now or hereafter imposed against the
Assets;
(l) Fully perform and observe all requirements, obligations and
provisions of the Contracts, Leases, Permits and Licenses and any other
agreements and arrangements for or relating to the Assets or operation,
occupancy or maintenance thereof and promptly cure any violation, default or
breach by Seller thereunder;
(m) Not undertake any courses of conduct or action, or fail to do so,
inconsistent with the requirements of this Agreement and Seller's obligations,
covenants, representations and warranties herein provided, or that may prevent
or hinder Buyer from satisfying its conditions precedent hereof, consummating
the purchase of the Assets hereunder or fully realizing the acquisition of the
Assets as hereby intended;
(n) Use Seller's best efforts to maintain present employees and
maintain Seller's relationship with suppliers, residents and others having
business relations with Seller;
(o) Upon Buyer's satisfaction or waiver in writing of the contingency
set forth in Section 10 having a satisfaction date of April 2, 1996 and with
Seller's prior consent, permit Buyer to contact any of Seller's personnel and
make offers of employment to work at each of the Facilities after the Closing,
which personnel shall be allowed to accept or reject such offers without
penalty from Seller;
(p) Upon Buyer's satisfaction or waiver in writing of the contingency
set forth in Section 10 having a satisfaction date of April 2, 1996 and with
Seller's prior consent, permit Buyer to contact any of Seller's residents and
make offers for continued residency after the Closing, which residents shall be
allowed to accept or reject such offers without penalty from Seller;
(q) Permit Buyer and its authorized representatives (including without
limitation, any attorneys or accountants designated by Buyer) to complete a
review and to have access upon prior notice to Seller, at reasonable times that
will allow Buyer to comply with the provisions of Section 10.1, to all
properties, records and documents with respect to the Assets for the purpose of
making such inspections and examinations as Buyer shall deem advisable, and
furnish to Buyer and such representatives financial and other information with
respect to the Assets as Buyer may from time to time request; provided,
however, Buyer shall not have access to documents pertaining to resident
records or operational policies, such as employee handbooks, procedure manuals
and forms, until all of Buyer's contingency set forth in Section 10 having a
satisfaction date of April 2, 1996 is satisfied or waived in writing by Buyer.
Buyer agrees not to indicate to any third party (except for financing purposes
or as required by law) the potential sale by Seller when obtaining any of the
foregoing information and in the event of termination of this Agreement, Buyer
shall return to Seller all such information and documents including copies
thereof made by Buyer;
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(r) Permit Buyer to conduct architectural and engineering inspections
of each of the Facilities, in the presence of Seller or Seller's agent, at
reasonable times that will allow Buyer to comply with the provisions of Section
10.2 and Section 10.3; and
(s) Permit Buyer to validate Seller's Inventory and if Buyer deems
necessary to conduct a physical inventory.
7.2 Pre-Closing Deliveries. Except as may otherwise be provided in
Section 7.1(q), within ten (10) days after the date hereof, Seller shall
deliver to Buyer the following instruments and documents, or true, correct and
complete copies thereof, which shall be satisfactory to Buyer both as to form
and substance:
(a) All Contracts or Leases and other instruments required or
appropriate for the use, occupancy, operation or maintenance of each
of the Facilities or any of the other Assets, including but not
limited to regulations on Community-Based Residential Facilities (as
that term is defined in the applicable sections of the Wisconsin
Statutes ("CBRF")).
(b) All real estate and personal property tax statements or
bills for or relating to each of the Facilities or any of the other
Assets for the applicable current tax year or years, and all tax
assessments or notices thereof upon which such taxes are based.
(c) All warranties, representations and guarantees made by
third parties with respect to any of the Assets that are currently in
possession of Seller.
(d) All pleadings, motions and related documents filed in any
pending litigation relating to or affecting any of the Assets.
(e) All building permits, zoning permits, subdivision plans,
surveys and appraisals prepared within thirty-six (36) months before
the date hereof, for or relating to any of the Facilities that are
currently in possession of Seller.
(f) All correspondence, communications or notices, including
but not limited to those asserting default, violation or breach or
declaring a cancellation or termination, relating to any of the
agreements, instruments, documents or other information identified or
set forth in this Section 7, or to any matters affecting the Assets.
(g) All Contracts, Leases, Permits and Licenses or other
instruments or arrangements relating to the ownership, operation, use,
occupancy or maintenance of the Assets currently being negotiated by
Seller or hereafter entered into by Seller (but only with the prior
written consent of Buyer).
(h) Copies of any instruments, documents or any other
information that
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varies or changes any of the agreements, instruments, documents or
information identified or set forth in this Agreement, or in the
Schedules hereto attached or in any of the Exhibits or other documents
or information to be supplied to Buyer by Seller as elsewhere herein
provided.
(i) A current statement regarding workers' compensation
claims made or threatened against Seller with respect to each of the
Facilities and the current experience rating therefor.
(j) All survey reports as provided for in Section 4.11.
(k) A list containing the names for all regular full-time and
part-time employees of Seller currently employed at each of the
Facilities.
7.3 Seller's Best Efforts. Seller covenants and agrees to use its best
and most diligent efforts to cause all of its covenants and agreements and all
conditions precedent to Seller's obligations to close hereunder to be
performed, satisfied and fulfilled.
7.4 Buyer's Best Efforts. Buyer covenants and agrees to use its best
and most diligent efforts to cause all of its covenants and agreements and all
conditions precedent to Buyer's obligations to close hereunder to be performed,
satisfied and fulfilled.
7.5 Preservation of Records. After the Closing, Buyer shall keep and
preserve all medical records and other records of each of the Facilities
existing as of the Closing and which are required to be kept and preserved (i)
by any applicable federal or state law or regulations or (ii) in connection
with any claim or controversy still pending involving Seller. After the
Closing, upon reasonable written notice by Seller to Buyer, Seller, at its own
cost and expense, shall be entitled, during regular business hours, to have
access to and make copies of all records pertaining to the operation of each of
the Facilities (other than medical records which shall be governed by the
provisions of Section 7.6) prior to the Closing for any lawful corporate
purpose.
7.6 Seller's Access to Resident Records. To the extent permitted by
law, Seller, at its own cost and expense, shall be entitled, after the Closing,
during the regular business hours of each of the Facilities, to have access to
and make copies of the resident records, including the medical records and
medical charts of any resident admitted to each of the Facilities on or before
the Closing. In addition, subject to the prior consent of Buyer, Seller shall
be entitled to copy and remove any such record or chart, but only for purposes
of pending litigation involving a resident to whom such record or chart refers,
as certified in writing prior to removal by an officer of Seller or counsel
retained by Seller in connection with such litigation.
7.7 Casualty. If any part of the Assets are damaged or destroyed in
whole or in part prior to the Closing, and the fair market value of such damage
or destruction is less than Two Hundred Fifty Thousand Dollars ($250,000.00),
Seller shall, at Buyer's option, either (i) reduce the Price by the fair market
value of the Assets damaged or destroyed, such value to be
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determined as of the date immediately prior to such damage or destruction and
Seller may keep the insurance proceeds or (ii) upon the Closing, transfer the
proceeds of the insurance (together with the amount of any deductible paid by
Seller) to Buyer, and Buyer may restore the damaged Assets. If any part of the
Assets are damaged or destroyed in whole or in part prior to Closing and the
fair market value of such damage is greater than Two Hundred Fifty Thousand
Dollars ($250,000.00), Buyer may elect either to (i) require Seller upon the
Closing to transfer the proceeds of the insurance to Buyer (together with the
amount of any deductible paid by Seller), and Buyer may restore the damaged
Assets or (ii) terminate this Agreement and receive a return of the Deposits
previously made by Buyer in accordance with the terms and conditions of the
Escrow Agreement and this Agreement. At the request of Buyer and at Buyer's
sole expense, the amount of insurance against fire and other casualties that,
at the date of this Agreement, Seller carries with respect to any of the Assets
shall be increased by an amount equal to the Price, provided that it is
feasible to obtain such insurance from Seller's current insurance carrier.
7.8 Seller's Insurance. After the Closing, Seller's liability for
professional liability claims relating to or arising from acts or omissions
prior to the Closing shall continue to be covered by Seller's insurance.
7.9 License Reissuance. As set forth in Paragraph 10.9, assurance to
Buyer of the intention of the Wisconsin Department of Health and Social
Services to issue the necessary Licenses and Permits for the operation of the
Facility upon and after Closing hereunder is a condition to Buyer's obligation
to close. Accordingly, Seller shall cooperate with Buyer's efforts to obtain
such assurance by taking all action reasonably required of Seller to assist
Buyer. Upon execution of this Agreement, Seller shall:
(a) Provide Buyer with copies of all Licenses and Permits;
(b) Notify the Wisconsin Department of Health and Social
Services of the pending change of ownership of the Facility (if
required by the Department of Health and Social Services); and
(c) Provide such other notices (if required by the Department
of Health and Social Services) including (i) notices to residents of
the Facility and (ii) notices to human service agencies. Prior to
sending any of the foregoing notices, Seller shall provide copies to
Buyer for review and approval, which approval shall not be
unreasonably withheld.
7.10 Wage Claims. Seller shall provide Buyer at Closing with notices,
if any, of existing claims against Seller as of the Closing Date (whether under
federal or state law, under any employment agreement or otherwise) on account
of or for wages, salary, insurance, paid time-off, holiday pay or bonuses of
any present or former employee.
7.11 Employment Matters. From the date hereof until the Closing Date,
with respect to each of the Facilities, Seller shall operate each of the
Facilities in compliance with all
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federal and state laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and shall not engage in any unfair
labor practice that may result in (A) an unfair labor practice complaint against
Seller before the National Labor Relations Board; (B) a labor strike, dispute,
slowdown or stoppage against or involving or affecting Seller or (C) a grievance
or any arbitration proceeding against or involving or affecting Seller.
SECTION 8. TERMINATION.
Anything else to the contrary notwithstanding in this Agreement, on or
prior to the specified date or the Closing Date, as the case may be, the
obligations of the parties hereunder may be terminated by written notice from
the terminating party to the non-terminating party, which written notice shall
contain a brief statement regarding the reason(s) for termination, as follows:
(a) By Buyer (i) in the event that the transactions
contemplated hereunder have been prohibited or enjoined by any reason
of any final judgment, decree or order entered or issued by a court of
competent jurisdiction in litigation or proceedings involving either
Buyer or Seller; (ii) in the event the conditions precedent to Buyer's
obligation to close are not satisfied and performed in full in
accordance with the terms of this Agreement; (iii) in the event Seller
breaches or violates any provision of this Agreement in any respect or
fails to perform any covenant or agreement to be performed by Seller
under the terms of this Agreement in any respect and if such failure
continues for ten (10) days after written notice is given by Buyer to
Seller regarding the breach or violation or the demand for the
performance of such covenant or agreement and such breach, violation
or failure is not waived in writing by Buyer after the applicable cure
period and prior to Closing. If the cure period extends beyond the
Closing Date, the Closing Date shall automatically be extended until
the first business day after expiration of the cure period.
(b) By Seller (i) in the event that the transactions
contemplated hereunder have been prohibited or enjoined by reason of
any final judgment, decree or order entered or issued by a court of
competent jurisdiction in litigation or proceedings involving either
Buyer or Seller; (ii) in the event the conditions precedent to
Seller's obligation to close are not satisfied and performed in full
in accordance with the terms of this Agreement; or (iii) in the event
Buyer breaches or violates any provision of this Agreement in any
respect or fails to perform any covenant or agreement to be performed
by Buyer under the terms of this Agreement in any respect and if such
failure continues for ten (10) days after written notice is given by
Seller to Buyer regarding the breach or violation or the demand for
the performance of such covenant or agreement and such breach,
violation or failure is not waived in writing by Buyer after the
applicable cure period and prior to Closing. If the cure period
extends beyond the Closing Date, the Closing Date shall automatically
be extended until the first business day after expiration of the cure
period.
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(c) By Buyer or Seller if the Closing hereunder shall not
have taken place by the Closing Date or such later date as shall be
agreed upon by an amendment to this Agreement, and any such
termination shall not affect the rights of the parties hereunder.
(d) By Seller and Buyer by mutual agreement.
In the event of termination by Buyer or Seller, as the case may be, under
Section 8(a)(i), 8(a)(iii) or 8(b)(i), Buyer shall be entitled to a return of
the Deposits. Disbursement of the Deposits to Buyer or Seller, as the case may
be, shall be made by Escrow Agent pursuant to the terms and conditions of the
Escrow Agreement and this Agreement.
SECTION 9. AMENDMENT OF AGREEMENT
At any time on or prior to the Closing Date, Buyer or Seller, may, by
written notice to the other (and without a written amendment signed by both
parties):
(a) Extend the time for performance by the other party of any
of the obligations or other actions of the parties hereto:
(b) Waive any inaccuracies in the representations and
warranties of the other party contained in this Agreement or in any
document delivered pursuant hereto; and
(c) Waive compliance by the other party with any of the
covenants or conditions contained in this Agreement (including,
without limitation, a condition precedent to its obligations to
close).
SECTION 10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
The obligation of Buyer to consummate the transactions contemplated by
this Agreement is subject to and contingent upon the satisfaction on or before
the specified date or the Closing Date, as the case may be, of the following
express conditions precedent:
10.1 Initial Review. On or before February 18, 1996, Buyer shall have
completed its initial review of Seller's operations as contemplated in
Paragraphs 6 and 7 of the Letter of Intent, the results of which shall be
satisfactory to Buyer in its sole and absolute discretion.
10.2 Environmental Report. On or before March 19, 1996, at Buyer's
option and expense, Buyer shall have received a written report from a qualified
geotechnical or engineering firm, in a form and substance, satisfactory to
Buyer, concerning the presence, handling, treatment and disposal of Hazardous
Substances on, in or under any of the Facilities and disclosing (i) the results
of a review of prior uses of each of the Facilities disclosed by local public
records, including the chain of title, (ii) contacts with local officials to
determine whether any records exist with respect to the disposal of Hazardous
Substances at any of the Facilities, (iii) the necessity and nature of any soil
samples and groundwater samples that need
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to be taken consistent with good engineering practice and (iv) the necessity
and nature of any remedial action that need to be taken. The results of the
environmental inspection shall be satisfactory to Buyer in its sole and
absolute discretion.
10.3 Physical Inspection. On or before March 19, 1996, Buyer shall
have inspected the physical condition of each of the Facilities including the
improvements and the HVAC, electrical, plumbing and other systems, and, at
Buyer's option and expense, shall receive the written report in form and
substance satisfactory to Buyer from a qualified engineering firm approved by
Buyer or any engineer employed by Buyer to the effect that the improvements at
each of the Facilities have been constructed in compliance with, and currently
are in compliance with, all governmental requirements, including without
limitation the Americans With Disabilities Act, and with all restrictions of
record applicable thereto which materially affect the Buyer's intended use of
each of the Facilities. The results of the physical inspections shall be
satisfactory to Buyer in its sole and absolute discretion.
10.4 Financing Commitment. On or before April 2, 1996, Buyer shall
have received a written binding commitment from a real estate investment trust
or other financing source(s) to provide the necessary financing for Buyer's
acquisition of the Assets under this Agreement upon terms and conditions
satisfactory to Buyer in its sole and absolute discretion. .
10.5 Authorization. On or before March 19, 1996, Buyer shall have
received authorization by all necessary corporate action on the part of Buyer,
including but not limited to approval by its board of directors, of the
execution and delivery of this Agreement by Buyer, the performance by Buyer of
its obligations hereunder and the sale and purchase of the Assets.
10.6 Performance. Seller shall have performed each and every covenant
and obligation required to be performed by it on or prior to the Closing.
10.7 Representations and Warranties. Each and all of the
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing Date, as though given as of the
Closing Date, and Seller shall have delivered to Buyer officers' certificates
to that effect.
10.8 Proceedings. Buyer shall have reviewed and approved all
proceedings to be taken by Seller in connection with the transactions
contemplated hereunder and all documents and certificates incident thereto,
including Seller's articles of incorporation and bylaws, a good standing
certificate for Seller issued by the Secretary of the State of Wisconsin, dated
no more than thirty (30) days prior to the Closing, resolutions adopted by
Seller and its shareholders (if necessary), certified by the corporate
secretary of Seller, approving this Agreement and the transactions contemplated
hereby and such other documents and certificates as Buyer shall reasonably
request.
10.9 Governmental Concurrences. On or before March 31, 1996 (which
date shall automatically be extended until April 10, 1996 if Buyer has not
received the following), Buyer
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shall have received and approved evidence satisfactory to Buyer in its sole and
absolute discretion that (i) Seller has operated each of the Facilities in
accordance with all Department of Health and Social Services' laws, regulations
and orders, except for minor deficiencies that have been corrected or that have
been noted on Schedule 4.11, (ii) none of the Facilities are subject to, or to
the best of Seller's knowledge threatened with, any hold on admissions or other
sanction and there are no outstanding, or threatened, notices of deficiency
resulting from any inspection of any of the Facilities that have not been
provided for by Seller and (iii) Buyer shall be able to obtain all licenses,
permits, accreditations, authorizations and certifications required for the
operation of the Facilities by Buyer for its intended use thereof from all
applicable governmental authorities and other third parties upon and after
Closing.
10.10 Contracts and Leases. On or before March 31, 1996, Buyer shall
have received evidence satisfactory to Buyer that all of the Contracts and
Leases to be transferred hereunder will either be (i) validly assigned or (ii)
terminated and renegotiated on terms and conditions reasonably acceptable to
Buyer.
10.11 Notices. On or before March 31, 1996, Buyer shall have received
evidence satisfactory to Buyer that Seller has given all notices (if any)
required under Paragraph 7.9 in compliance with all Department of Health and
Social Services' laws, regulations and orders.
10.12 Litigation. No action or proceeding shall have been instituted
and no order, decree or judgment of any court, agency, commission or authority
shall be in affect questioning the validity of this Agreement or seeking to
restrain the consummation thereof which would in Buyer's good faith opinion
render it impossible or inadvisable to consummate the transactions provided for
in this Agreement.
10.13 Opinion of Counsel. Buyer shall have received an opinion of
counsel to Seller, reasonably acceptable to Buyer's Counsel, substantially in
the form as set forth in Section 3.4(h).
10.14 Schedules and Other Instruments. On or before March 31, 1996,
Buyer shall have reviewed and approved each Schedule to this Agreement to be
provided by Seller. Each Schedule to this Agreement shall be considered a part
hereof as if set forth herein in full. Any Schedules provided for herein that
are revised after March 31, 1996 and that indicate an additional obligation or
liability of Buyer arising on or after the Closing shall be subject to the
approval of Buyer.
If any of the foregoing express conditions precedent are not satisfied on or
before the specified date or the Closing Date, as the case may be, Buyer may,
in the exercise of its sole and absolute discretion, terminate this Agreement
without any liability to Seller whatsoever and receive a return of the Deposits
previously made by Buyer in accordance with the terms and conditions of the
Escrow Agreement and this Agreement. In the event Buyer fails to provide
written notice of termination pursuant to Section 8 or written notice of waiver
with respect to the foregoing conditions precedent, said conditions precedent
shall be deemed satisfied.
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SECTION 11. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER TO CLOSE.
The obligation of Seller to consummate the transaction contemplated by
this Agreement is subject to and contingent upon the satisfaction on or before
the specified date or the Closing Date, as the case may be, of the following
express conditions precedent:
11.1 Contracts. On or before March 19, 1996, Seller shall have
received evidence satisfactory to Seller that, on and as of the Closing Date,
Seller's landlords under the Leases will either (i) release Seller from all
liability as tenant thereunder and consent to the assignment of said Leases to
Buyer as tenant or (ii) terminate the Leases with Seller and enter into new
leases with Buyer for each of the Facilities. If this condition precedent is
not satisfied or waived in writing by Seller, Seller may, in the exercise of
its sole and absolute discretion, terminate this Agreement and Buyer shall
receive a return of the Deposits previously made by Buyer in accordance with
the terms and conditions of the Escrow Agreement and this Agreement and Seller
shall have no other liability to Buyer.
11.2 Performance. Buyer shall have performed each and every covenant
and obligation required to be performed by it on or prior to the Closing. If
this condition precedent is not satisfied or waived in writing by Seller,
Seller may, in the exercise of its sole and absolute discretion, terminate this
Agreement and the Deposits previously made by Buyer shall be released in favor
of Seller in accordance with the terms and conditions of the Escrow Agreement
and this Agreement without any other liability to Buyer.
11.3 Representations and Warranties. Each and all of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date, as though given as of the
Closing Date. If this condition precedent is not satisfied or waived in writing
by Seller, Seller may, in the exercise of its sole and absolute discretion,
terminate this Agreement and the Deposits previously made by Buyer shall be
released in favor of Seller in accordance with the terms and conditions of the
Escrow Agreement and this Agreement without any other liability to Buyer.
11.4 Opinion of Counsel. Seller shall have received an opinion of
counsel to Buyer, reasonably acceptable to Seller's counsel, substantially in
the form as set forth in Paragraph 3.4(l). If this condition precedent is not
satisfied or waived in writing by Seller, Seller may, in the exercise of its
sole and absolute discretion, terminate this Agreement and the Deposits
previously made by Buyer shall be released in favor of Seller in accordance
with the terms and conditions of the Escrow Agreement and this Agreement
without any other liability to Buyer. In the event Seller fails to provide
written notice of termination pursuant to Section 8 or written notice of waiver
with respect to the foregoing conditions precedent, said conditions precedent
shall be deemed satisfied.
SECTION 12. INDEMNIFICATION.
12.1 Indemnification by Seller.
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Subject to the limitations set forth in Paragraph 12.3, from and after
the Closing Date, Seller agrees to and does hereby indemnify and hold Buyer,
its successors and assigns, harmless at all times from and against and in
respect of any of the following, to the extent that they are in existence at
the Closing Date or arise after the Closing Date based upon facts,
circumstances or conditions existing prior to the Closing or on the Closing
Date (regardless of the date of discovery):
(a) Any and all damages, claims, deficiencies, liabilities,
losses or costs resulting from any Excluded Liability, or from any
breach of any representation or warranty of Seller or from any breach
of any covenant or agreement of Seller under this Agreement, or from
the ownership, lease, management, operations and interests of Seller
in or to the Assets prior to Closing, and from any act or omission of
Seller, its agents or employees prior to Closing.
(b) All demands, assessments, judgments, costs and legal or
other expenses (including attorneys' fees, penalties and interest)
incurred by Buyer arising from or in connection with any action, suit,
proceeding or claim incident to any of the matters set forth in (a)
above.
(c) Subject to the provisions of Paragraph 12.4 below, Buyer
shall be reimbursed on demand for loss, damage, cost or expense
suffered by it in connection with any action, suit, proceeding or
claim incident to any of the matters set forth in (a) or (b) above.
12.2 Indemnification by Buyer.
Subject to the limitations set forth in Paragraph 12.3, from and after
the Closing Date, Buyer agrees to and does hereby indemnify and hold Seller,
its successors and assigns, harmless at all time from and against and in
respect of any of the following, to the extent that they are in existence at
the Closing Date or arise after the Closing Date based upon facts,
circumstances or conditions arising prior to the Closing or on the Closing Date
the Closing Date (regardless of the date of discovery):
(a) Any and all damages, claims, deficiencies, liabilities,
losses or costs resulting from any Assumed Liability, or from any
breach of any representation or warranty of Buyer or agreement on the
part of Buyer under this Agreement, or from the ownership, lease,
management, operations and interests of Buyer in or to the Assets
after the Closing, and from any act or omission of Buyer, its agents
and employees, after the Closing.
(b) All demands, assessments, judgments, costs and legal or
other expenses (including attorneys' fees, penalties and interest)
incurred by Seller arising from or in connection with any action,
suit, proceeding or claim incident to any of the matters set forth in
(a) above.
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(c) Subject to the provisions of Paragraph 12.4 below, Seller
shall be reimbursed on demand for loss, damage, cost or expense
suffered by it in connection with any action, suit, proceeding or
claim incident to any of the matters set forth in (a) or (b) above.
12.3 Limitation of Liability. Notwithstanding the foregoing, Seller's
and Buyer's indemnification obligations set forth in Paragraphs 12.1
and 12.2, respectively, shall be subject to the following limitations:
(a) Except as set forth in Subparagraph (c) below,
no indemnification shall be made under Paragraph 12.1 or
Paragraph 12.2 until the aggregate amount of the indemnified
parties' claims thereunder exceeds the amount of Ten Thousand
Dollars ($10,000.00), but if the aggregate amount of the
claims thereunder exceeds the amount of Ten Thousand Dollars
($10,000.00), indemnification shall be made by the
indemnifying party thereunder to the full extent of the
damages.
(b) Except as set forth in Subparagraph (c) below,
the indemnifying party shall be obligated to indemnify the
indemnified party by virtue of Paragraph 12.1 or Paragraph
12.2 only for those claims as to which the indemnifying party
has received written notice thereof from the indemnified
party within two (2) years after the Closing Date; provided,
however, that with respect to any claim relating to an
Assumed Liability or Excluded Liability, the indemnifying
party's liability under Paragraph 12.1 or Paragraph 12.2, as
the case may be, shall not be limited as to time or amount.
(c) The indemnifying party's liability under
Paragraph 12.1 and 12.2, as the case may be, shall not be
limited as to time or amount with respect to any claim
relating to an Assumed Liability or an Excluded Liability.
(d) The limitations set forth herein shall not apply
to claims arising out of (i) fraud or (ii) the breach of any
representation or warranty contained herein or pursuant
hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a
fact or omitted to state a fact necessary to make the
statement of fact contained therein not misleading.
12.4. Third Party Claims. The indemnified party shall have the right
to conduct and control, through counsel of its choosing, the defense
of any third party claim, action or suit, and the indemnified party
may compromise or settle the same; provided, that the indemnified
party shall give the indemnifying party advance notice of any proposed
compromise or settlement. The indemnified party shall permit the
indemnifying party to participate in the defense of any such action or
suit through counsel chosen by the indemnifying party, provided that
the fees and expenses of such counsel shall be borne by the
indemnifying party to undertake, conduct and control the conduct and
settlement of such action or suit, (iv) the indemnifying party shall
not thereby permit to exist any encumbrance upon any asset of the
indemnified party; (v) the indemnifying party shall
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not consent to any settlement that does not include as an
unconditional term thereof the giving of a complete release form
liability with respect to such action or suit to the indemnified
party; (vi) the indemnifying party shall permit the indemnified party
to participate in such conduct or settlement through counsel chosen by
the indemnified party and (vii) the indemnifying party shall agree
promptly to reimburse the indemnified party for the full amount of any
damages including fees and expenses of counsel for the indemnified
party incurred after giving the foregoing notice to the indemnifying
party and prior to the assumption of the conduct and control of such
action or suit by the indemnifying party.
12.5 Covenant-Not-To Compete and Not-To Solicit.
(a) For a period of five (5) years after the Closing, neither
Seller, nor any entity controlled by Seller, directly or indirectly,
shall own, operate, manage, provide consulting services to, finance or
invest in any CBRF or other related business or operation within a
radius of ten (10) miles from any of the Facilities.
(b) For a period of two (2) years after the Closing, neither
Seller, nor any entity controlled by Seller, directly or indirectly,
shall, (i) on a full-time or part-time basis, employ or contract with
employee retained by Buyer on and as of the Closing Date who provides,
or who has provided, services to any of the Facilities or (ii)
otherwise induce any employee or contractor to terminate his or her
relationship with Buyer.
(c) Other than the Facilities' employees employed by Buyer on
and as of the Closing Date, for a period of two (2) years after the
Closing, neither Buyer, nor any entity controlled by Buyer, directly
or indirectly, shall, (i) on a full-time or part-time basis, employ or
contract with any of Seller's employees or (ii) otherwise induce any
employee or contractor to terminate his or her relationship with
Seller, unless authorized in advance by Seller (specifically by
Rebecca C. Collins, President) in the exercise of its sole and
absolute discretion.
The restrictive covenants set forth in this Paragraph 12.5 shall be
specifically enforceable by a preliminary and/or permanent injunction issued by
a court sitting in equity, in addition to all other remedies that may be
available for its violation; it being acknowledged, understood and agreed that
the violation of such covenants will cause immediate and irreparable harm and
injury to Buyer and/or Seller, as the case may be.
SECTION 13. DEFAULT
13.1 Seller's Default. If Seller defaults under any of the terms or
provisions of this Agreement or in the observance or performance of any of
Seller's obligations hereunder after any applicable cure period, Buyer shall be
entitled to pursue and enforce any and all of Buyer's rights and remedies,
whether at law, in equity or otherwise, including without limitation for a
decree of specific performance or appropriate injunctive relief, as Buyer in
its
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sole discretion may determine.
13.2 Buyer's Default. If Buyer defaults under any of the terms or
provisions of this Agreement or in the observance or performance of any of
Buyer's obligations hereunder after any applicable cure period in accordance
with the terms and conditions of this Agreement (other than the conditions
precedent to Buyer's obligation to close set forth in Section 10), Seller shall
be entitled to demand, receive and retain the Deposits previously made by Buyer
as liquidated damages in accordance with the terms of the Escrow Agreement and
this Agreement, and shall have no other remedy, right or recourse against Buyer
for such default.
SECTION 14. ASSIGNMENT
Neither this Agreement nor any of the rights, interests or obligations
herein shall be transferred or assigned by either party without the prior
written consent of the other party (not to be unreasonably withheld). The
preceding sentence shall not apply to or limit Buyer's right to assign this
Agreement to any entity which is (i) controlled by Buyer or (ii) a real estate
investment trust which will provide the financing for Buyer to acquire and take
title to the Assets hereunder. Nothing expressed or referred to in this
Agreement is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors or permitted assigns
any legal or equitable right, benefit, remedy or claim under or in respect of
this Agreement or any provision contained herein.
SECTION 15. NOTICE.
All notices given under or with respect to the provisions of this
Agreement shall be sent either by certified or registered mail, with return
receipt requested and postage prepaid, or by independent courier service, in
either case properly addressed to the intended party as follows and shall be
deemed to have been given as of the date received:
<TABLE>
<S> <C>
If to Seller: Senior Care of Wisconsin, Inc.
100 Wilburn Road, Suite 207
Sun Prairie, WI 53590
Attn: Michael S. Collins,
Chief Financial Officer
Phone: (608) 825-4507
Fax: (608) 825-4506
With a copy to: Axley Brynelson
Manchester Place
2 East Mifflin Street
P.O. Box 1767
Attn: Bruce L. Harms, Esq.
Madison, WI 53701-1767
Phone: (608) 257-5661
Fax: (608) 257-5444
If to Buyer: Balanced Care Corporation
</TABLE>
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<TABLE>
<S> <C>
3507 Market Street, Suite 202
Camp Hill, PA 17011
Attn: Brad Hollinger, President
and CEO
Phone: (717) 731-8464
Fax: (717) 731-9179
With a copy to:
Balanced Care Corporation
3507 Market Street, Suite 202
Camp Hill, PA 17011
Attn: Robin L. Barber, Esq.
Phone: (717) 731-8464
Fax: (717) 731-9179
</TABLE>
SECTION 16. COOPERATION.
Each of the parties hereto shall cooperate fully with the other party,
both before and after the Closing, in performing their respective obligations
and consummating the sale and purchase of the Assets, including but not limited
to supplying any additional information or documents reasonably requested by
the other party, and the execution, acknowledgment, delivery, filing and
recording of statements, certificates, memoranda, instruments and other
documents as may be necessary or appropriate to evidence or perfect Buyer's
purchase and ownership of the Assets and carry out the provisions of this
Agreement.
SECTION 17. PAYMENT OF EXPENSES.
Legal, accountings and other expenses incident to this Agreement
incurred by Seller shall be paid by Seller; legal, accounting and other
expenses incurred by Buyer shall be paid by Buyer.
SECTION 18. PUBLIC ANNOUNCEMENTS.
Except as may otherwise be provided herein, Seller and Buyer mutually
agree that no party hereto shall make any release, publish or otherwise make
available to the public in any manner whatsoever any announcement regarding the
transactions herein contemplated without the prior written consent of Seller
and Buyer, except for information reasonably necessary to be directed to
governmental agencies to fully and lawfully effect the transactions herein
contemplated.
SECTION 19. CONSTRUCTION.
This Agreement constitutes and is the complete and final integration
embodying the entire agreement between the parties hereto, and no promise,
representation, agreement, condition or term not herein expressly set forth
shall be deemed or permitted to vary, modify
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or otherwise change any of the provisions hereof unless made in writing after
the date hereof and signed by both of the parties hereto. Nothing in this
Agreement shall be construed to be or create an employment agreement between
Buyer and any employee of Buyer after this Closing. The terms and provisions of
the Letter of Intent between Seller and Buyer are incorporated herein by
reference. The waiver by either party of breach or violation of any provision
of this Agreement shall not operate as, or be construed to be, a waiver of any
subsequent breach of the same or other provision hereof. The captions of the
several paragraphs herein contained are inserted solely for the purpose of
convenience, and shall not limit, influence or affect the meaning or
construction of any of the provisions hereof. Where herein used, the words
"hereof", "hereunder", "hereto", and other similar compounds of the word "here"
shall refer to this entire Agreement, unless the context otherwise clearly
requires, and the singular shall include the plural and vice versa. This
Agreement and each provision hereof shall be construed under and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, and shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, Seller and Buyer, each intending to be legally
bound hereby, have duly executed this Agreement on this day, month and year
first above written.
SELLER:
WITNESS/ATTEST: SENIOR CARE OF WISCONSIN, INC.
[Illegible] By: /s/ Rebecca C. Collins
- ------------------------ ----------------------------------
Rebecca C. Collins, President
BUYER:
WITNESS/ATTEST: BALANCED CARE CORPORATION
/s/ Robin L. Barber By: /s/ Robert J. Sutton, Sr.
- ------------------------ ----------------------------------
Robert J. Sutton, Sr. Vice President
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<PAGE> 1
EXHIBIT 2.7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
27th day of December, 1996, by and between Balanced Care Corporation, a
Delaware corporation ("Purchaser"), and Bloomsburg Manor Personal Care and
Retirement Center, Inc., a Pennsylvania corporation ("Seller").
RECITALS:
Seller owns a personal care home located at 420 Shaffer Road,
Bloomsburg, PA 17815 (the "Facility"). Purchaser desires to purchase
substantially all of the assets of Seller and the Business (as hereinafter
defined) related thereto and Seller desires to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Health, the Department of Welfare and all other Persons having jurisdiction
over the accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of the Business as of such date prepared in accordance with
GAAP consistently applied, including those described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute
control.
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1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the bill of sale, assignment and assumption
described in Section 5.2.2, the Escrow Agreement described in Section 14.2 and
the Employment Agreements described in Section 10.9 .
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Blumer" shall mean James J. Blumer, Jr.
1.9 "Books and Records" shall have the meaning given to it in
Section 6.15.
1.10 "Business" shall mean the operation of a personal care home and
any other ancillary health care services owned, operated, delivered, managed,
developed, constructed, maintained, used, occupied or possessed by Seller in
connection therewith (including, without limitation, any outpatient and
contract rehab therapy services or any Alzheimer's units).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section 5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident/Patient's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, franchises and books and records of account benefiting,
relating to the Purchased Assets or the operation of the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy,
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possession or operation thereof, or the operation of any of the programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, issued by any Governmental Authority, Accreditation Body
or Third Party Payor or maintained or used by Seller with any third Person.
1.18 "Current Liabilities" shall mean all liabilities
classified as current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to such term in Section
14.4.
1.20 "Department of Health" shall mean the Commonwealth of
Pennsylvania, Department of Health.
1.21 "Department of Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.21a "Deposit Fund" shall mean $30,000 to be paid by Purchaser and
held by the Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement.
1.22 "Due Diligence Date" shall mean January 15, 1997.
1.23 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.23 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's business consistent with past
practices).
1.24 "Employment Agreements" shall mean the contracts entered into
between Purchaser and each of Kelly and Blumer in substantially the form of
Exhibit 1.24.
1.25 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.26 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Sections 136 et seq.)], other Legal Requirements, any common law doctrine and
any provision or condition of any permit, license or other operating
authorization relating to (i) the protection of the environment or the public
welfare from actual or potential exposure (or the effects of exposure) to any
actual or potential release, discharge, disposal or emission (whether past or
present) of any Regulated Substance or
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(ii) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of any Regulated Substance.
1.27 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.28 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.29 "Escrow Agent" shall mean Mellon Bank, N.A., Mellon Independence
Center, 701 Market Street, Philadelphia, PA 19106.
1.30 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.30.
1.31 "Escrow Fund" shall mean $50,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
1.32 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.32a "Facility" shall have the meaning given to such term in the
Recitals of this Agreement.
1.33 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.38 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.39 "Kelly" shall mean Michael P. Kelly.
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1.39a "Keystone Management Services" shall mean Keystone Management
Services, a Pennsylvania general partnership, consisting of its general
partners, Kelly and Blumer.
1.40 "Knowledge" and words of similar import shall mean, with respect
to Purchaser, actual knowledge of a particular fact or other matter being
possessed by an officer or other individual now or formerly having principal
responsibility for a business or administrative function of such Party,
including individuals serving in such a capacity in or for the Business, and
the knowledge that reasonably could be expected to be obtained in the course of
conducting a reasonably comprehensive investigation concerning the subject
matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program
established by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et
seq.) and any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Other Agreements" shall mean the agreements set forth on
Schedule 1.46, including any other agreements executed and delivered under or
in connection therewith.
1.47 "Other Companies" shall mean the companies identified on Schedule
1.47.
1.48 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.49 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
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1.50 "Payroll Practice/Employee Arrangement" shall have the meaning
given to such term in Section 6.18.
1.51 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licences, permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under, any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, now or hereafter required or issued by any Governmental
Authority, Accreditation Body or Third Party Payor.
1.52 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.52 hereto.
1.53 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.54 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.55 [RESERVED].
1.56 "Proprietary Rights" shall have the meaning given to such term in
Section 6.9.1.
1.57 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.58 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.59 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.60 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.61 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.61a "Purchaser's Due Diligence" shall have the meaning given to such
term in Section 9.2.
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1.62 "Purchaser Indemnitees" shall have the meaning given to such term
in Section 14.2.
1.63 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
1.64 "Real Property Leased" shall mean the real property leased by
Seller in connection with the Business as more fully described in Schedule 1.64
hereto.
1.65 "Real Property Owned" shall mean the real property owned by
Seller, and used in connection with the Business as more fully described in
Schedule 1.65 hereto.
1.66 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.67 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv) any spouse, sibling, ancestor or lineal
descendant of any natural Person identified in any one of the preceding
clauses.
1.68 "Resident/Patient's Agreements" shall mean all contracts,
agreements and consents executed by or on behalf of any resident, patient or
other Person seeking services at the Facility as more fully described in
Schedule 1.68 hereto, including, without limitation, assignments of benefits
and guarantees, and such resident/patient's related medical and/or other
records.
1.69 "Retained Liabilities" has the meaning given that term in Section
4.2.
1.70 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.71 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually and collectively, as the context may
require.
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1.72 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.73 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.74 "Seller's Accountants" shall mean Snyder & Clemente, certified
public accountants.
1.74a "Seller's Knowledge" and words of similar import shall mean,
with respect to Seller, actual knowledge of a particular fact or other matter
being possessed by Kelly and/or Blumer and the knowledge that reasonably could
be expected to be obtained concerning the subject matter by Kelly and Blumer in
the ordinary course of their ownership and operation of the Business.
1.74b "Survival Date" shall have the meaning given to such term in
Section 14.1.
1.75 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.76 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.77 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.78 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
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2.1.1 Real Property Owned. The Real Property Owned, together
with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto;
2.1.2 Real Property. Leased Seller's interest, as lessee, in
the Real Property Leased;
2.1.3 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements,
automobiles, supplies, office furniture and office equipment,
computing and telecommunications equipment and other items of personal
property that are owned by Seller and used in connection with the
Business, including those described in Schedule 2.1.3 hereto;
2.1.4 Contracts Relating to the Business. All of the interest
of Seller in all Contracts relating to the acquisition or ownership by
Seller of any of the Purchased Assets or the operation of the
Business, the Resident/Patient's Agreements listed on Schedule 1.68
hereto and those Contracts not required to be listed on 2.1.4 by
reason of the provisions of Section 6.10.
2.1.5 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations material and advertising material used in the Business,
whether in electronic form or otherwise;
2.1.6 Permits, Licenses. All of Seller's interest in Permits
relating to the Business, including those listed in Schedule 2.1.6
hereto, to the extent such Permits are transferrable to Purchaser;
2.1.7 Trade Secrets. All policies and procedures, methods of
delivery of services, trade secrets, designs, drawings and
specifications, market studies, consultants' reports, prototypes, and
all similar property of any nature, tangible or intangible, of Seller
used in the Business;
2.1.8 Intellectual Property. All right, title and interest of
Seller in the patents, trademarks, trademark registrations, trade
names, service marks, copyrights and copyright registrations described
in Schedule 2.1.8;
2.1.9 [RESERVED];
2.1.10 Goodwill. All of the interest of Seller in and to the
goodwill incident to the Business, including but not limited to the
value of the Facility name associated with the Business and the value
of good customer relations;
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2.1.11 Inventory. All Closing Inventory;
2.1.12 Resident/Patient Funds. All deposits and escrow
accounts of, or for the benefit of, any of Seller's resident/patients
at the Closing Date;
2.1.13 Prepaid Expenses. All Seller's Prepaid Expenses of, or
for the benefit of, the Business at the Closing Date including those
described in Schedule 2.1.13, to the extent the benefits thereof are
transferable to Purchaser;
2.1.14 Computer Software. All computer applications software,
owned or licensed, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.), or
specific, unique-to-the-business usage, and all computer operating,
security or programming software, owned or licensed by Seller and used
in the operation of the Business; and
2.1.15 Other Intangible Assets All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
2.2 Excluded Assets Notwithstanding Section 2.1, the following
assets (collectively, the "Excluded Assets") shall be excluded from
this Agreement, and shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable. All Accounts Receivable of Seller
existing on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees
up through and including the Closing Date;
2.2.3 Consideration. The consideration paid to Seller pursuant
to this Agreement;
2.2.4 Pensions. Assets constituting any pension or other funds
for the benefit of Employees existing on the Closing Date;
2.2.5 Corporate Books. Corporate minute books and stock books
of Seller;
2.2.6 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the
extent they relate to liabilities or obligations that are not assumed
by Purchaser hereunder (except the amount of costs and expenses
Purchaser shall have incurred with respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority; and
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2.2.8 Other Assets. Assets listed on Schedule 2.2.8.
2.3 License to Use Certain Assets. To the extent that there are any
tangible or intangible assets used by Seller in connection with the Business
that are not specifically designated as Excluded Assets by Section 2.2 (without
reference to this Section), the Purchased Assets shall include an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferrable license to
utilize such assets in connection with the operation of the Business after the
Closing Date. To the extent that any such assets may not be licensed, Seller
shall take all steps required to assure that Purchaser obtains the benefit of
such assets.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the
"Purchase Price") shall be in the amount of $2,814,000, plus an amount
not to exceed $425,000 for the costs and expenses actually incurred
and documented by Seller in connection with the expansion of the
Facility prior to Closing, to be paid by certified or cashier's check
drawn on a national bank or by wire transfer as follows:
(i) the Purchase Price less the sum of the Deposit Fund
and the Escrow Fund to Seller at the time of Closing;
(ii) the Escrow Fund to Escrow Agent at the time of
Closing to be held in escrow pursuant to the Escrow
Agreement; and
(iii) upon execution and delivery hereof, the Deposit Fund
to Escrow Agent to be held in escrow pursuant to the
Escrow Agreement.
3.1.2 Other Consideration. As additional consideration,
Purchaser shall also assume the Assumed Liabilities at the time of
Closing.
3.3 Allocation of Purchase Price. Allocation of Purchase
Price. The Purchase Price shall be allocated among the Purchased Assets
and the Business in accordance with the allocation set forth in
Schedule 3.3. Purchaser and Seller shall report the federal, state and
local income and other tax consequences of the purchase and sale
contemplated hereby in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the
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Purchased Assets, assume or become responsible for any liabilities or
obligations of Seller or any other Person. For purposes of this Section 4.1 the
phrase "liabilities and obligations" shall include, without limitation, any
direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known
or unknown, asserted or unasserted, choate or inchoate, liquidated or
unliquidated, secured or unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date,
Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
(i) all obligations of Seller accruing subsequent to the Closing
Date under the Contracts contemplated by Section 2.1.4,
including, without limitation, those set forth in Schedule
1.68 and Schedule 2.1.4, provided that the rights thereunder
have been duly and effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing after the Closing Date
under the Permits described in Section 2.1.6, provided that
the rights thereunder have been duly and effectively assigned
to Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or obligations
incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or
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the indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or the
contract of indemnity) or had committed fraud in the insurance
application;
(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to Closing, and the
transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing; notwithstanding the foregoing, all sales and use
taxes, transfer taxes, and all other impositions of tax
arising solely by reason of the transfers contemplated by this
Agreement (excluding all federal, state and local income and
gross receipt taxes on the earnings or gross receipts of
Seller prior to the Closing Date, which shall remain the sole
responsibility of Seller) shall be the responsibility of and
shall be borne equally by Seller and Purchaser (any real
estate and personal property taxes for the year in which
Closing occurs shall be pro-rated to the Closing Date (based
on a calendar year or fiscal year for which such taxes are
levied basis), if the tax rates for the year in which Closing
occurs shall not be fixed prior to the Closing Date for a
particular item of the Purchased Assets, the pro-ration of
taxes thereon shall be based upon the tax rate for the year
prior to Closing applied to the latest assessment valuation;
however, in the event that any such taxes are increased or
decreased for the year in which Closing occurs, Seller or
Purchaser shall then reimburse the other party for amounts in
excess of or less than the proration as determined as of the
Closing Date);
(x) for long term indebtedness and other obligations or
guarantees of Seller;
(xi) for Current Liabilities reflected on the books of Seller at
the Closing Date; and
(xii) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date.
4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees (except as indicated on Schedule
1.23) in substantially similar jobs, at the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
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4.4.1 Seller's Liability. Seller shall remain liable for all
liability for all accrued vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Seller's Employees attributable to entitlements, injuries, claims,
conditions, events and occurrences occurring on or before the Closing
Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for all
liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Employees of Seller hired by Purchaser attributable to entitlements,
injuries, claims, conditions, events and occurrences first occurring
after the Closing Date.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place on or after January 2, 1997, but in any event
not later than March 15, 1997 (the "Closing"). The date of the Closing shall be
referred to as the "Closing Date." The Closing shall take place at such time,
date and place as may be mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deeds. Duly executed special warranty deeds, in
recordable form, transferring good and marketable fee simple title to
the Real Property Owned, subject only to Permitted Encumbrances, and
such affidavits or other instruments as Purchaser's title insurance
company may reasonably request, including but not limited to (i)
exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants pursuant
to agreements with Seller and (C) mechanics' or materialmens' liens and
(ii) payoff letters, lien releases and satisfaction pieces and (iii)
gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that Seller has been able to obtain that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the Purchased Assets with assignments to
Purchaser;
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5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property
or any of the other Purchased Assets for the applicable current tax
year or years, and all tax assessments or notices thereof upon which
such taxes are based;
5.2.5 Plans and Specifications. To the extent not delivered
prior to Closing, all plans, specifications and other drawings in
Seller's possession or reasonably obtainable by Seller and used in the
construction of the Facility or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty, the
property under the Contracts or any of the other Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's
possession or reasonably obtainable by Seller, surveys and hazardous
waste studies prepared within 36 months before the date hereof, for or
relating to the Purchased Assets;
5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements relating to the ownership, operation, use,
occupancy, licensure, accreditation or maintenance of the Business; and
5.2.8 Rent Roll. The rent roll of Seller listing all
resident/patients and their respective rent payments current as of two
days prior to the Closing.
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
5.3 Reasonable Steps. Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and has all requisite corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and
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thereby and to perform all the terms and conditions hereof and thereof and to be
performed by it.
6.2 Authorization of Agreement and Enforceability Seller has taken all
necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party, the performance
by it of all terms and conditions hereof and thereof to be performed by it and
the consummation of the transactions contemplated hereby and thereby,
including, without limitation, obtaining such shareholder's consents as is
required under the Pennsylvania Business Corporation Law. This Agreement
constitutes, and the Ancillary Agreements to which Seller is party, upon
Seller's execution and delivery thereof, will constitute the legal, valid and
binding obligations of Seller, enforceable in accordance with their terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
respect to notices and consents required to be given by Seller to any
Accreditation Body or Governmental Authority in connection with the sale and
change of ownership of the Purchased Assets and the Business, violate or
require any consent, authorization or approval of, or exemption by, or filing
under any provision of any law, statute, rule or regulation to which Seller,
the Business or the Purchased Assets are subject, (iii) violate any judgment,
order, writ or decree of any court applicable to Seller, the Business or the
Purchased Assets, (iv) except with respect to agreements with Seller's lender
and except as identified on Schedule 2.1.4, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any agreement, Contract, commitment, lease or other instrument, document
or undertaking to which Seller is a party or any of the Purchased Assets is
bound or (v) result in the creation or imposition of any Encumbrances upon the
Purchased Assets.
6.4 Financial Statements. Seller has delivered to Purchaser true and
complete copies of the monthly statements of profit and loss with respect to
the operation of the Facility ending October 31, 1996. True and correct copies
of such financial statements are attached hereto as Schedule 6.4. The foregoing
financial statements have been prepared from the Books and Records of Seller in
accordance with GAAP consistently applied throughout the periods involved
except as may be noted therein. Such financial statements, including the
related notes, are materially true and correct and fairly present the financial
position of the Business at the dates indicated and the results of operations
and cash flows of the Business for the periods then ended in accordance with
GAAP. The most recent interim financial statements provided to Purchaser dated
October 31, 1996 reflect all material liabilities of Seller and there has been
no material adverse change with respect to the matters contained therein since
the date thereof.
6.5 [RESERVED].
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6.6 Inventory. The level of Inventory maintained by Seller and included
in the Purchased Assets is sufficient to carry on the Business as historically
conducted.
6.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.7 hereto, since October 31, 1996, in connection with the Business,
Seller has not:
(i) amended in any material respect or terminated any
Contract other than in the ordinary course of
Seller's business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on the Purchased Assets or the results of
operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the
results of operations of the Business by fire, storm
or similar casualty, whether or not covered by
insurance;
(iv) sold, transferred, replaced or leased any of the
Purchased Assets or sold any Inventory at a
discount, except for transactions in the ordinary
course of Seller's business consistent with past
practice;
(v) waived or released any material rights with
respect to the Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than
in the ordinary course of Seller's business
consistent with past practice;
(viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except
following normal review procedures or as reasonably
deemed necessary in the ordinary course of Seller's
business consistent with past practice;
(x) suffered any major or key personnel changes; or
(xi) materially altered its conduct in its relations with
suppliers, residents and patients.
6.8 Title to Properties; Absence of Liens and Encumbrances. Seller
owns and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased Assets subject to Closing, including
without limitation the Real Property (except as disclosed in
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Schedule 6.8 or except as sold or otherwise disposed of by Seller in the
ordinary course of Seller's business consistent with past practice), free and
clear of all Encumbrances, other than Permitted Encumbrances. Seller has the
right to quiet enjoyment of all Real Property Leased in which it holds a
leasehold interest for the full term, including all renewal rights, of the lease
or similar agreement relating thereto. Copies of all existing title insurance
policies written in favor of Seller and all surveys relating to the Real
Property in Seller's possession or reasonably obtainable by Seller have been
delivered to Purchaser. Except as set forth on Schedule 6.8, all structures and
other improvements on the Real Property are in good order and repair and free
from any structural defects and are within the lot lines and do not encroach on
the properties of any other Person, and the use and operation of the Real
Property conforms to all applicable building, zoning, safety and subdivision
laws, Environmental Laws and other Legal Requirements, and all restrictive
covenants and restrictions and conditions affecting title. Except as disclosed
on Schedule 6.8, no portion of the Real Property is located in a flood plain,
flood hazard area or designated wetlands area. Seller has not received any
written or oral notice of assessments for public improvements against the Real
Property or any written or oral notice or order by any Governmental Authority,
any insurance company that has issued a policy with respect to any of such
properties or any board of fire underwriters or other body exercising similar
functions that relates to violations of building, safety or fire ordinances or
regulations, claims any defect or deficiency with respect to any of such
properties or requests the performance of any repairs, alterations or other work
to or in any of such properties or in the streets bounding the same. Except as
disclosed on Schedule 6.8, each parcel of Real Property is considered a separate
parcel of land for taxing and conveyancing purposes. There is no pending
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of the Real Property. All public utilities (including water,
gas, electric, storm and sanitary sewage, and telephone utilities) required to
operate the Facility of Seller are available to such Facility and such utilities
enter the boundaries of such Facility through adjoining public streets,
permanent easements or rights-of-way of record in favor of Seller. Such public
utilities are all connected pursuant to valid permits, are all in good working
order and are adequate to service the operations of such Facility as currently
conducted and to the best of Seller's Knowledge permit full compliance with all
Legal Requirements. Seller has not received any written notice of any proposed,
planned or actual curtailment of service of any utility supplied to any Facility
of Seller. Except as disclosed on Schedule 6.8 all present driveways and other
access routes to the Real Property are from public streets and no other Person
has any right to use any such driveways or other access routes.
6.9 Proprietary Rights.
6.9.1 Logos and Tradenames. Schedule 2.1.8 hereto sets forth
a correct and complete list of all patents, logos, trademarks, trade
names, service marks, copyrights and applications or registrations
therefor used in and material to the Business (collectively, the
"Proprietary Rights").
6.9.2 Licenses. Except as disclosed in Schedule 2.1.8.: (i)
Seller owns or possesses adequate licenses or other valid rights to
use (without the making of any
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payment to others or the obligation or grant rights to others in
exchange) all the Proprietary Rights material to the Business; (ii) the
Proprietary Rights included in the Purchased Assets constitute all the
material rights necessary to conduct the Business in accordance with
past practice and are being conveyed to Purchaser together with the
other Purchased Assets; (iii) the validity of the Proprietary Rights
and the rights therein of Seller have not been questioned in any
litigation to which Seller is a party, nor, to Seller's Knowledge, is
any such litigation threatened; and (iv) to the best of Seller's
Knowledge, the conduct of the Business does not conflict with patent
rights, licenses, trademark rights, trade name rights, copyrights or
other intellectual property rights of others.
6.9.3 Infringement. Except as disclosed in Schedule 2.1.8
hereto, to Seller's Knowledge, no material use of any Proprietary
Rights owned by Seller has heretofore been, or is now being, made by
any Person other than Seller, and to Seller's Knowledge, there is no
infringement of any Proprietary Rights owned or licensed by Seller. No
present or former director, officer, Employee or consultant of Seller
has any interest in any of the Proprietary Rights.
6.10 Contracts and Commitments. Except as listed and described on
Schedule 1.68 and Schedule 2.1.4, neither Seller nor any party acting on behalf
of Seller with Seller's Knowledge and consent is a party to any written or oral
(for which Purchaser shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment
for, supplies or products, or for the performance
of services by another party, involving in any one
case $10,000 or more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident/Patient's Agreement);
(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in
value (except for any Resident/Patient's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee
other than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit
agreement, loan agreement or other Contract or for
the borrowing or lending of money (including without
limitation loans to or from Employees) or guarantee,
pledge or undertaking of the indebtedness of any
other Person;
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(vii) Contract for any charitable or political
contribution;
(viii) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in
any likeness of business with any Person;
(ix) license, franchise, distributorship or other
agreement, including those that relate in whole or
in part to any patent, trademark, trade name,
service mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business; or
(x) any other material Contract not made in the ordinary
course of Seller's business consistent with past
practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.68 and Schedule 2.1.4 is valid and
enforceable in accordance with its terms, Seller and, to Seller's Knowledge any
other party thereto, are in compliance with the provisions thereof, Seller and,
to Seller's Knowledge any other party thereto, are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and no event has occurred that with or without the
giving of notice or lapse of time, or both, would constitute a default by
Seller thereunder and, to Seller's Knowledge, a default by any other party
thereto; (ii) except as set forth on Schedule 1.68 and Schedule 2.1.4 no
advance payments have been received by Seller by or on behalf of any party to
any of the Contracts, commitments, leases and other instruments listed on
Schedule 1.68 and Schedule 2.1.4 for services to be rendered or products to be
delivered to such party after the Closing Date; and (iii) no consent or
approval of any party to any Contract, commitment, lease or other instrument,
document or undertaking listed on Schedule 1.68 and Schedule 2.1.4 is required
for the execution of this Agreement or the consummation of the transactions
contemplated hereby.
6.11 Permits, Licenses. Seller has all Permits that are required to
operate the Business (including without limitation those required under any
Environmental Law) and, Seller is in material compliance with the terms and
conditions of the Permits. Schedule 2.1.6 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.6 hereto as nontransferable
or requiring such consent or approval.
6.12 Compliance with Laws. Except as described in Schedule 6.12
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.13 Legal Proceedings. Except as described in Schedule 6.13 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any Governmental Authority or, to Seller's Knowledge, threatened against
Seller with respect to the Business or any
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of the Purchased Assets, or relating to the transactions contemplated by this
Agreement, nor to Seller's Knowledge is there any basis for any such claim,
action, suit, proceeding, investigation, or inquiry. Except as set forth on
Schedule 6.13 hereto, Seller is not a party to or subject to the provisions of
any judgment, order, writ, injunction, decree or award of any court, arbitrator
or governmental, regulatory or administrative official, body or authority that
relates to the Purchased Assets or the Business or that might affect the
transactions contemplated by this Agreement.
6.14 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.14, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the financial statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.4 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's business consistent with past practice since the
financial statements dated October 31, 1996 provided to Purchaser.
6.15 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
6.16 Employees. Schedule 1.23 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.23, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
6.17 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.23,
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of the
transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
6.18 Payroll Practice/Employee Arrangement.
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6.18.1 Benefit Plans. Schedule 6.18 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has
any liability or obligation, whether actual or contingent, with
respect to the Employees or their respective beneficiaries.
6.18.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.18.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.19 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in relation
to, or in connection with, the transactions contemplated by this Agreement.
6.20 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.21 Condition of Assets. Except as set forth on Schedule 6.21, all
buildings, structures and equipment that are part of the Purchased Assets are
structurally sound, are in generally good operating condition and repair
(subject only to routine maintenance and repair) and are usable in the conduct
of the Business consistent with past practice and conform to all applicable
Legal Requirements.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability. Seller has operated the
Business and each parcel of Real Property in material compliance with
all applicable Environmental Laws. Seller is not subject to any
liability, penalty or expense (including legal fees), and Purchaser
will not suffer or incur any loss, liability, penalty or expense
(including legal fees) by virtue of any violation of any Environmental
Law occurring prior to the Closing, any environmental activity
conducted on or with respect to any property at or prior to the
Closing or any environmental condition existing on or with respect to
any property at or prior to the Closing, in each case whether or not
Seller permitted or participated in such act or omission.
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6.23.2 Treatment; CERCLIS. Except in material compliance with
all applicable Environmental Laws, Seller has not treated, stored,
recycled or disposed of any hazardous material, and to Seller's
Knowledge no other Person has treated, stored, recycled or disposed of
any hazardous material on any part of the Real Property. There has
been no release of any hazardous material at, on or under any Real
Property. Seller has not transported any hazardous material or
arranged for the transportation of any hazardous material to any
location that is listed or proposed for listing on the National
Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of federal, state or local enforcement
action or other investigation that may lead to claims against Seller
for cleanup costs, remedial action, damages to natural resources, to
other property or for personal injury including claims under
Superfund. None of the Real Property is listed or, to Seller's
Knowledge, proposed for listing on the National Priorities List
pursuant to Superfund, CERCLIS or any state or local list of sites
requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation, abatement
or cleanup of any threatened or actual release of any hazardous
material. Seller is not required to place any notice or restriction
relating to the presence of any hazardous material at any Real
Property or in any deed to any Real Property. Seller has provided to
Purchaser a list of all sites to which, to Seller's Knowledge, Seller
has transported any hazardous material for recycling, treatment,
disposal, other handling or otherwise. There has been no past, and
there is no pending or contemplated, claim by Seller under any
Environmental Law or Legal Requirement based on actions of others that
may have impacted on the Real Property, and Seller has not entered
into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. All
storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 6.23, and, to Seller's
Knowledge, all such tanks and associated piping are in sound condition
and are not leaking and have not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business in
respect of claims or occurrences concerning Seller prior to the Closing, (i)
take no action to eliminate or reduce such coverage, other than normal
elimination or reduction of coverage as they occur by virtue of the filing of
claims in the ordinary course under such insurance policies, (ii) pay when due
any premiums under such policies for periods, including retrospective or
retroactive premium adjustments and (iii) provided Purchaser
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maintains Seller's insurance policies or otherwise is entitled to make a claim
against Seller's insurance policies pursuant to the terms of this Agreement, use
its best efforts to assist in filing and processing claims under, and otherwise
cooperate with Purchaser to allow Purchaser, in its own name, or on behalf of
Seller, to obtain all coverage benefits applicable to the Business under such
insurance policies, including the execution of assignments or powers of attorney
for the benefit of Purchaser. Any proceeds of insurance paid by an insurer to
Seller for claims of Purchaser made in accordance with this Section shall be
promptly paid to Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.26. Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. [RESERVED]
6.28. Occupancy Reports Seller has provided Purchaser with copies of
Seller's occupancy reports for the Facility for the last year. Each such
occupancy report was prepared based on the number of operational beds (i.e.,
double occupancy rooms were only counted as such when both beds were occupied).
6.29. Tax Returns Seller has filed or caused to be filed, or will file
or cause to be filed, all Tax Returns that are required to be filed by it prior
to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) such Taxes that are fully reserved
against on the financial statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.29,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
6.30 Completeness and Accuracy All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under
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which they were made, not misleading. All Contracts, Permits and other documents
and instruments furnished or made available to Purchaser by Seller are or will
be true, complete and accurate originals or copies of originals and include all
amendments, supplements, waivers and modifications thereto.
6.31 Seller's Assets Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss. 801.1
et seq) had: (i) annual net sales of $100,000,000 or more as stated on its last
regularly prepared statement of income and expenses; or (ii) total assets of
$100,000,000 or more as stated on its last regularly prepared balance sheet.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict
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with, result in a breach of, constitute a default under, or accelerate or permit
the acceleration of the performance required by, or require any consent,
authorization or approval under any agreement, contract, commitment, lease or
other instrument, document or undertaking to which Purchaser is a party or (v)
result in the creation or imposition of any Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss.
801.1 et seq) had: (i) annual net sale of $100,000,000 or more as stated on its
last regularly prepared statement of income and expenses; or (ii) total assets
of $100,000,000 or more as stated on its last regularly prepared balance sheet.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in its conduct of the Business,
except as otherwise agreed by Purchaser in writing:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access, during normal
business hours, to such of the properties, books, accounts, Contracts
and records of Seller as are relevant to the Purchased Assets and the
Business, and furnish or otherwise make available to Purchaser all
such information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide
Purchaser with the following:
(i) Seller's occupancy reports for the Facility, as soon
as the same become available through the Closing
Date, but no later than ten days after the last day
of any given month (which reports shall be prepared
based on the number of operational beds);
(ii) Seller's federal and/or state surveys or inspections
and any plans of correction for the Facility, as
soon as the same become available through the
Closing Date, but no later than ten days after
received by Seller;
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(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule
for such Facility;
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the Closing Date, but no later than 21 days
after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to
the date hereof and, to the extent consistent with such operation, use
its best efforts until the Closing Date to (i) preserve and keep
intact the Business, (ii) keep available the services of the
Employees; (iii) preserve its relationships with residents, patients,
suppliers and others having business dealings with Seller in
connection with the Business and (iv) maintain current marketing
activities;
8.1.3 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in their present order and condition,
in accordance with Seller's past practices, reasonable wear and tear
excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books and
Records in the usual, regular and ordinary manner, on a basis
consistent with past practice;
8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased Assets
and to the conduct of the Business;
8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the Business
in accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial
efforts to obtain in writing as promptly as possible any approvals and
consents as required to be obtained by Seller in order to effectuate
the transactions contemplated hereby and deliver to Purchaser copies
of such approvals and consents. Accordingly, Seller shall cooperate
with Purchaser's efforts to obtain the necessary licenses to operate
the Facility from the appropriate Accreditation Bodies, including,
without limitation, the Department of Welfare and the Department of
Health. Upon execution and delivery of this Agreement, Seller shall
promptly:
(i) provide Purchaser with copies of all Permits;
(ii) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
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(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
Seller's residents/patients of the Facility and (ii)
notices to human service agencies (as that term is
defined by the Department of Welfare). Prior to
sending the notices, Seller shall provide copies to
Purchaser for review and approval, which approval
shall not be unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.9 Surveys. Execute such affidavits or other instruments as
are commercially reasonable and necessary in order for Purchaser to
remove title exceptions for encroachments or survey discrepancies
relating to the Real Property;
8.1.10 Pay Employees to Closing Date. Pay all wages,
salaries and other sums due Employees through the close of business
on the day prior to the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary
steps to transfer to Purchaser the employment of all Employees electing
to continue their employ with Purchaser as of the Closing Date;
8.1.12 Appointment of Seller's Agent. Irrevocably appoint
Blumer or Kelly ("Seller's Agent"), as Seller's agent and
attorney-in-fact to take any action required or permitted to be taken
hereunder by Seller, including without limitation, the giving and
receipt of notices to be delivered or received by or on behalf of
Seller, the payment of expenses relating to the transactions
contemplated under this Agreement, the representation of Seller in
indemnification proceedings hereunder, and the right to waiver of any
of the terms of this Agreement in any respect, and agree to be bound
by any and all actions taken by Seller's Agent. Purchaser shall be
entitled to rely exclusively on any communications given by Seller's
Agent on behalf of Seller, and shall not be liable for any action
taken or not taken in reliance on Seller's Agent. In the event that
Seller's Agent resigns or refuses to act, Seller shall promptly
appoint another Seller as the substitute Sellers' Agent to act under
this Agreement, and Seller shall promptly deliver a copy of such
appointment to Purchaser; and
8.1.13 Compliance with Agreement. Not undertake any course of
action materially inconsistent with satisfaction of the conditions
applicable to it set forth in this Agreement, and use all reasonable
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement.
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8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage statements/affidavits
in form and substance satisfactory to Purchaser's title insurer
regarding title, mechanic's liens and such other customary matters as
may be reasonably requested by Purchaser or Purchaser's title insurer;
and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller under penalties of perjury, in the
form prescribed by Treasury Regulation Section 1.1445-2(b)(2)(iii),
stating Seller's name, address and Federal tax identification number,
and that it is not a "foreign person" within the meaning of Section
1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign, lease,
encumber or otherwise dispose of any of the Purchased Assets other than
in the ordinary course of Seller's business consistent with past
practices;
8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of Seller's
business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security interest
or any other Encumbrance, other than Permitted Encumbrances, any of the
Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase
the rate of compensation paid, or pay any bonus, to anyone connected
with the Business, except for those increases or bonuses planned, in
the ordinary course of Seller's business consistent with past
practices, or establish or adopt any new pension or profit-sharing
plan, deferred compensation agreement or employee benefit arrangement
of any kind whatsoever covering or affecting Employees.
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8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.68 or
Schedule 2.1.4 or other authorization or agreement affecting the
Business or the Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of
any fact that, if known at the Closing Date, would have been required
to be set forth or disclosed in or pursuant to this Agreement, or
which would result in the breach by Purchaser of any of its
representations, warranties, covenants or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and Purchaser shall use its best
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement; and
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business.
9.1.4 Seller's Employees. Take all reasonable steps to ensure
that the transfer of employment of all of the Employees electing to
continue their employ with Purchaser as are able to be accomplished
prior to or on the Closing Date.
9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the
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Employees, residents, patients and suppliers of Seller, which investigation
shall include such due diligence as is customary for transactions of the type
contemplated herein ("Purchaser's Due Diligence").
9.3 Approvals, Consents. Use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate the Facility from the Department of Welfare and the Department of
Health, as applicable, including:
(i) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(ii) provide such other notices as required by all Legal
Requirements including (i) notices to Seller's
residents/patients of the Facility and (ii) notices
to human service agencies (as that term is defined
by the Department of Welfare). Prior to sending the
notices, Purchaser shall provide copies to Seller
for review and approval, which approval shall not be
unreasonably withheld.
9.4 Publicity; Advertisement. Except as required by law, publicize,
advertise or announce to any third-party, except as required pursuant to this
Agreement to obtain the consent of such third-party, the entering into of this
Agreement, the terms of this Agreement or the transactions contemplated hereby;
provided, however, the foregoing shall not be applicable to disclosures made by
Purchaser to Purchaser's lender in response to such lender's reasonable
requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party
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to be performed or complied with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the incumbency and specimen signature of
each officer or representative of Seller executing this Agreement, the
certificate referred to in Section 10.3 and the Ancillary Agreements to which
Seller is a party.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 [RESERVED]
10.7 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions contemplated
thereby shall have been consummated.
10.8 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.9 Arrangements with Employees. Subject to the provisions of
Sections 4.3 and 9.1.4, substantially all of the Employees shall have accepted
employment with Purchaser effective on the Closing Date.
10.10 Employment Agreements. Kelly and Blumer shall have executed and
delivered the Employment Agreements with Purchaser.
10.11 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to Purchaser
and Purchaser's lender,
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reasonably satisfactory to Purchaser and its counsel as to the matters set forth
in Sections 6.1, 6.2 and 6.3 hereof .
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement, the
certificate referred to in Section 11.3 and the Ancillary Agreements to which
Purchaser is a party.
11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted,
threatened or anticipated which questions the validity or legality of the
transactions contemplated hereby.
11.6 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions contemplated
thereby shall have been consummated.
11.7 Employment Agreements. Purchaser shall have executed and delivered
the Employment Agreements with Kelly and Blumer.
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ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of five (5) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of five years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
12.5.1 Transfer of Assets. Seller agrees that Purchaser, from
and after the Closing, shall have the right and authority to collect
for Purchaser's own account all items which shall be transferred to
Purchaser as provided herein.
12.5.2 Endorsement of Checks. From and after the Closing,
Purchaser shall have the right and authority to retain and endorse
without recourse the name of Seller on any check or any other
evidences of indebtedness received by Purchaser on account of any of
the Business and Purchased Assets transferred to Purchaser hereunder.
12.5.3 Seller's Remittance of Funds. After the Closing,
Seller shall promptly transfer and deliver to Purchaser any cash or
other property, if any, that Seller may receive related to the
Business or the Purchased Assets other than the Excluded Assets.
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12.5.4 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or
other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.5.5 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving,
any Assumed Liability, and Purchaser shall have the right to conduct
and control all negotiations and proceedings with respect thereto.
Seller shall notify Purchaser promptly of any claim made with respect
to any Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any Assumed
Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's Accountants to cooperate at Purchaser's cost and expense, with
Purchaser and its auditors in the preparation of combined audited financial
statements of Seller and each of the Other Companies for the years ended
December 31, 1996, 1995 and 1994 to the extent required in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. As used herein, the term "combined audited
financial statements" shall mean the audited financial statements of Seller and
each of the Other Companies, combined.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any Books and
Records relating to the Business that Seller may retain as may reasonably be
required in connection with the preparation of financial information or tax
returns of Purchaser.
12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial account closing and reporting and claims and
litigation asserted by or against third parties, including, but not limited to,
making employees available at reasonable times to assist with, or provide
information in connection with financial account closing and reporting and
claims and litigation, provided that Seller reimburses Purchaser for its
reasonable out-of-pocket expenses
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(including costs of employees so assisting) in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and
Purchaser;
(ii) by Seller or Purchaser if Closing has not
taken place on or before March 15, 1997;
provided however, that no Party then in
material breach of any of its obligations
hereunder shall have the right to
terminate;
(iii) by Purchaser upon notice to Seller if any
of the conditions set forth in Article X
hereof have not been satisfied or become
impossible to satisfy by the Closing Date
(other than by reason of the material
failure of Purchaser to fulfill its
obligations under this Agreement);
(iv) by Seller upon notice to Purchaser if any
of the conditions set forth in Article XI
hereof have not been satisfied or become
impossible to satisfy by the Closing Date
(other than by reason of the material
failure of Seller to fulfill its
obligations under this Agreement);
(v) by Seller if Purchaser materially breaches
or fails to fulfill its obligations under
this Agreement, which failure continues and
remains uncured for 30 consecutive calendar
days after Seller gives written notice of
such failure to Purchaser;
(vi) by Purchaser if Seller materially breaches
or fails to fulfill its obligations under
this Agreement, which failure continues and
remains uncured for 30 consecutive calendar
days after Purchaser gives written notice
of such failure to Seller; and
(vii) by Purchaser upon notice to Seller if any
of the conditions set forth below have not
been satisfied or become impossible to
satisfy by the Due Diligence Date (other
than by reason of the material failure of
Purchaser to fulfill its obligations under
this Agreement):
(a) the results of Purchaser's Due Diligence
shall not be satisfactory to Purchaser in
its sole discretion;
(b) Purchaser shall not have secured a
commitment for financing the transaction
contemplated by this Agreement on terms and
conditions satisfactory to Purchaser in its
sole discretion;
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(c) the results of an inspection of the
physical condition of the Real Property,
including the improvements and the HVAC,
electrical, plumbing and other systems, by a
qualified engineering firm engaged by
Purchaser, at its cost and expense, are not
satisfactory to Purchaser in its sole
discretion; and
(d) the results of an environmental report
on the Purchased Assets and the Business
from a qualified geotechnical or engineering
firm engaged by Purchaser, at its cost and
expense, are not satisfactory to Purchaser
in its sole discretion.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Deposit Fund. Upon termination of this Agreement, the Deposit Fund
shall be disbursed as follows and in accordance with the terms and conditions of
the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13.1(iii) or Section 13.1(vi), the
Parties agree to instruct Escrow Agent to release
the entire amount of the Deposit Fund to Purchaser;
(ii) if this Agreement is terminated by Purchaser
pursuant to Section 13.1(vii) on or before the Due
Diligence Date, the Parties agree to instruct Escrow
Agent to release one-half of the amount of the
Deposit Fund to Purchaser and the balance of the
Deposit Fund to Seller; and
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the
Parties agree to instruct Escrow Agent to release
the entire amount of the Deposit Fund to Seller.
13.4 Remedies.
13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the Deposit Fund
as set forth in Section 13.3 shall be the sole and exclusive remedy of Seller
as liquidated damages, and shall be in lieu of all other rights and remedies
which may otherwise be available at law or in equity.
13.4.2 Purchaser's Remedies. If Purchaser has the right to
terminate this Agreement pursuant to Section 13.1(vi), in addition to
Purchaser's right to receive the Deposit Fund as permitted under Section 13.3,
Purchaser may seek any other remedies that may
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otherwise be available at law or in equity, including, without limitation, an
action for specific performance and reimbursement from Seller for all expenses
incurred by Purchaser in connection with this Agreement and the transactions
contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive until October 31, 1997 (the
"Survival Date"); provided, however, that all representations and warranties of
Seller with respect to any environmental matters set forth in Section 6.23 of
this Agreement shall survive for two years after the Closing Date.
Notwithstanding the foregoing, there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of the other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only and
shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall, indemnify, defend, save
and hold Purchaser, any assignee of Purchaser and their respective officers,
directors, employees, agents and Affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller or any Ancillary Agreement to which Seller is or is
to become a party, a breach or nonfulfillment of any covenant or agreement made
by any Seller in this Agreement or in any Ancillary Agreement to which Seller
is or is to become a party, and any and all liabilities of Seller of any nature
whatsoever, whether due or to become due, whether accrued, absolute, contingent
or otherwise, existing on the Closing Date or arising out of any transaction
entered into, or any state of facts existing, prior to the Closing Date, except
for any Assumed Liability. To the extent any Purchaser Indemnitee is entitled
to collect Purchaser Damages, Purchaser shall, at its option and subject to the
terms of the Escrow Agreement, be entitled to withdraw sufficient funds from
the Escrow Fund pursuant to the Escrow Agreement in lieu of payment directly
from Seller, and to the extent the amount due any Purchaser Indemnitee exceeds
the balance of the funds held under the Escrow Agreement,
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Purchaser shall be entitled to collect such balance owned to Purchaser
Indemnitee directly from Seller.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, Affiliates and
agents (collectively, "Seller Indemnitees") harmless from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, a breach of any representation or warranty made by Purchaser
in this Agreement or in any certificate or document furnished pursuant hereto
by Purchaser or any Ancillary Agreement to which Purchaser is a party, a breach
or nonfulfillment of any covenant or agreement made by Purchaser in this
Agreement or in any Ancillary Agreement to which Purchaser is a party, any
Assumed Liability and any and all liabilities of any nature whatsoever arising
out of Purchaser's operation of the Business after the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
Notwithstanding the foregoing, any Purchaser Indemnitee shall be required to
notify Seller's Agent of any claim for Purchaser Damages as required herein
even though the same may be included in the $25,000 threshold set forth in
Section 14.6, and Seller shall have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement. The Indemnified Party
shall permit the Indemnifying Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnifying Party, provided that
the fees and expenses of such counsel shall be borne by the Indemnifying Party.
If the Indemnified Party permits the Indemnifying Party to undertake, conduct
and control the conduct and settlement of such action or suit, the Indemnifying
Party shall not thereby permit to exist any Encumbrance
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upon any asset of the Indemnified Party; the Indemnifying Party shall not
consent to any settlement that does not include as an unconditional term thereof
the giving of a complete release from liability with respect to such action or
suit to the Indemnified Party; the Indemnifying Party shall permit the
Indemnified Party to participate in such conduct or settlement through counsel
chosen by the Indemnified Party; and the Indemnifying Party shall agree promptly
to reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving the
foregoing notice to the Indemnifying Party and prior to the assumption of the
conduct and control of such action or suit by the Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under
Section 14.2 until the aggregate amount of Purchaser Damages thereunder exceeds
$25,000, but if the aggregate amount of Purchaser Damages thereunder exceeds
$25,000 in the aggregate, then indemnification shall be made by Seller
thereunder to the full extent of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those Purchaser
Damages as to which Purchaser has given Seller's Agent written notice thereof
on or before the Survival Date; provided, however, that with respect to any
claim for Purchaser Damages sustained by reason of a breach of any
representation or warranty relating to those matters governed by Section 6.23,
Seller's liability shall be limited to Purchaser Damages as to which such
written notice shall have been given to Seller's Agent within two years of the
Closing Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser Damages
arising out of fraud, the breach of any representation or warranty contained
herein or pursuant hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a fact or omitted to
state a fact necessary to make the statements of facts contained therein not
misleading or misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with respect
to the Retained Liabilities.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
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15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller
If to Seller, to:
Sellers' Agent:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
Scranton, PA 18505
Fax: (717) 963-1601
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With a required copy to:
Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof shall thereof be binding upon
any Party unless set forth in an instrument in writing signed by the Party to
be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
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15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through a
sale-leaseback. Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide Seller with a copy of any
such assignment, and Seller agrees to execute and deliver any consents
reasonably required by Purchaser's lender in connection therewith, provided
such assignment does not expand any of Seller's obligations and liabilities
hereunder. Notwithstanding any permitted assignment of this Agreement by
Purchaser, Purchaser shall remain liable to Seller for all obligations and
liabilities to be performed by or on behalf of Purchaser hereunder.
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[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
---------------------------------
Name: Brian L. Barth
Title: Vice President
BLOOMSBURG MANOR PERSONAL CARE AND
RETIREMENT CENTER, INC.
By: /s/ James J. Blumer, Jr.
----------------------------------
Name: James J. Blumer, Jr.
Title: President
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EXHIBIT 2.8
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
27th day of December, 1996, by and between Balanced Care Corporation, a
Delaware corporation ("Purchaser"), and Kingston Health Care Center, Inc., a
Pennsylvania corporation ("Seller").
RECITALS:
Seller owns a skilled nursing facility located at 702 Third Avenue,
Kingston, PA 18704 (the "Facility"). Purchaser desires to purchase
substantially all of the assets of Seller and the Business (as hereinafter
defined) related thereto and Seller desires to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Health, the Department of Welfare and all other Persons having jurisdiction
over the accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of the Business as of such date prepared in accordance with
GAAP consistently applied, including those described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute
control.
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1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the bill of sale, assignment and assumption
described in Section 5.2.2, the Escrow Agreement described in Section 14.2 and
the Employment Agreements described in Section 10.9 .
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Blumer" shall mean James J. Blumer, Jr.
1.9 "Books and Records" shall have the meaning given to it in Section
6.15.
1.10 "Business" shall mean the operation of a skilled nursing facility
and any other ancillary health care services owned, operated, delivered,
managed, developed, constructed, maintained, used, occupied or possessed by
Seller in connection therewith (including, without limitation, any outpatient
and contract rehab therapy services or any Alzheimer's units).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section 5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident/Patient's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, franchises and books and records of account benefiting,
relating to the Purchased Assets or the operation of the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy, possession or operation thereof, or the operation of any of the
programs or services in
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conjunction with the Business and all renewals, replacements and substitutions
therefor, issued by any Governmental Authority, Accreditation Body or Third
Party Payor or maintained or used by Seller with any third Person.
1.18 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to such term in Section
14.4.
1.20 "Department of Health" shall mean the Commonwealth of
Pennsylvania, Department of Health.
1.21 "Department of Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.21a "Deposit Fund" shall mean $30,000 to be paid by Purchaser and
held by the Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement.
1.22 "Due Diligence Date" shall mean January 15, 1997
1.23 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.23 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's business consistent with past
practices).
1.24 "Employment Agreements" shall mean the contracts entered into
between Purchaser and each of Kelly and Blumer in substantially the form of
Exhibit 1.24.
1.25 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.26 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Sections 136 et seq.)], other Legal Requirements, any common law doctrine and
any provision or condition of any permit, license or other operating
authorization relating to (i) the protection of the environment or the public
welfare from actual or potential exposure (or the effects of exposure) to any
actual or potential release, discharge, disposal or emission (whether past or
present) of any Regulated Substance or (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
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handling of any Regulated Substance.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.28 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.29 "Escrow Agent" shall mean Mellon Bank, N.A., Mellon Independence
Center, 701 Market Street, Philadelphia, PA 19106.
1.30 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.30.
1.31 "Escrow Fund" shall mean $125,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
1.32 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.32a "Facility" shall have the meaning given to such term in the
Recitals of this Agreement.
1.33 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.38 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.39 "Kelly" shall mean Michael P. Kelly.
1.39a "Keystone Management Services" shall mean Keystone Management
Services, a
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Pennsylvania general partnership, consisting of its general partners, Kelly and
Blumer.
1.40 "Knowledge" and words of similar import shall mean, with respect
to Purchaser, actual knowledge of a particular fact or other matter being
possessed by an officer or other individual now or formerly having principal
responsibility for a business or administrative function of such Party,
including individuals serving in such a capacity in or for the Business, and
the knowledge that reasonably could be expected to be obtained in the course of
conducting a reasonably comprehensive investigation concerning the subject
matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Other Agreements" shall mean the agreements set forth on
Schedule 1.46, including any other agreements executed and delivered under or
in connection therewith.
1.47 "Other Companies" shall mean the companies identified on Schedule
1.47."Other Companies" shall mean the companies identified on Schedule 1.47.
1.48 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.49 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
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1.50 "Payroll Practice / Employee Arrangement" shall have the meaning
given to such term in Section 6.18.
1.51 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licences, permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under, any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, now or hereafter required or issued by any Governmental
Authority, Accreditation Body or Third Party Payor.
1.52 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.52 hereto.
1.53 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.54 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.55 [RESERVED].
1.56 "Proprietary Rights" shall have the meaning given to such term in
Section 6.9.1.
1.57 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.58 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.59 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.60 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.61 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.61a "Purchaser's Due Diligence" shall have the meaning given to such
term in Section 9.2.
1.62 "Purchaser Indemnitees" shall have the meaning given to such term
in Section
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14.2.
1.63 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
1.64 "Real Property Leased" shall mean the real property leased by
Seller in connection with the Business as more fully described in Schedule 1.64
hereto.
1.65 "Real Property Owned" shall mean the real property owned by
Seller, and used in connection with the Business as more fully described in
Schedule 1.65 hereto.
1.66 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.67 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv) any spouse, sibling, ancestor or lineal
descendant of any natural Person identified in any one of the preceding
clauses.
1.68 "Resident/Patient's Agreements" shall mean all contracts,
agreements and consents executed by or on behalf of any resident, patient or
other Person seeking services at the Facility as more fully described in
Schedule 1.68 hereto, including, without limitation, assignments of benefits
and guarantees, and such resident/patient's related medical and/or other
records.
1.69 "Retained Liabilities" has the meaning given that term in Section
4.2.
1.70 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.71 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually and collectively, as the context may
require.
1.72 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
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1.73 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.74 "Seller's Accountants" shall have the meaning given to it in
Section 6.4.
1.74a "Seller's Knowledge" and words of similar import shall mean,
with respect to Seller, actual knowledge of a particular fact or other matter
being possessed by Kelly and/or Blumer and the knowledge that reasonably could
be expected to be obtained concerning the subject matter by Kelly and Blumer in
the ordinary course of their ownership and operation of the Business.
1.74b "Survival Date" shall have the meaning given to such term in
Section 14.1.
1.75 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.76 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.77 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.78 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
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2.1.1 Real Property Owned. The Real Property Owned, together
with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto;
2.1.2 Real Property Leased. Seller's interest, as lessee, in
the Real Property Leased;
2.1.3 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements,
automobiles, supplies, office furniture and office equipment,
computing and telecommunications equipment and other items of personal
property that are owned by Seller and used in connection with the
Business, including those described in Schedule 2.1.3 hereto;
2.1.4 Contracts Relating to the Business. All of the interest
of Seller in all Contracts relating to the acquisition or ownership by
Seller of any of the Purchased Assets or the operation of the
Business, the Resident/Patient's Agreements listed on Schedule 1.68
hereto and those Contracts not required to be listed on 2.1.4 by
reason of the provisions of Section 6.10.
2.1.5 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations material and advertising material used in the Business,
whether in electronic form or otherwise;
2.1.6 Permits, Licenses. All of Seller's interest in Permits
relating to the Business, including those listed in Schedule 2.1.6
hereto, to the extent such Permits are transferrable to Purchaser;
2.1.7 Trade Secrets. All policies and procedures, methods of
delivery of services, trade secrets, designs, drawings and
specifications, market studies, consultants' reports, prototypes, and
all similar property of any nature, tangible or intangible, of Seller
used in the Business;
2.1.8 Intellectual Property. All right, title and interest of
Seller in the patents, trademarks, trademark registrations, trade
names, service marks, copyrights and copyright registrations described
in Schedule 2.1.8;
2.1.9 [RESERVED];
2.1.10 Goodwill. All of the interest of Seller in and to the
goodwill incident to the Business, including but not limited to the
value of the Facility name associated with the Business and the value
of good customer relations;
2.1.11 Inventory. All Closing Inventory;
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2.1.12 Resident/Patient Funds. All deposits and escrow
accounts of, or for the benefit of, any of Seller's resident/patients
at the Closing Date;
2.1.13 Prepaid Expenses. All Seller's Prepaid Expenses of, or
for the benefit of, the Business at the Closing Date including those
described in Schedule 2.1.13, to the extent the benefits thereof are
transferable to Purchaser;
2.1.14 Computer Software. All computer applications software,
owned or licensed, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.), or
specific, unique-to-the-business usage, and all computer operating,
security or programming software, owned or licensed by Seller and used
in the operation of the Business; and
2.1.15 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following assets
(collectively, the "Excluded Assets") shall be excluded from this Agreement,
and shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable. All Accounts Receivable of Seller
existing on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees
up through and including the Closing Date;
2.2.3 Consideration. The consideration paid to Seller
pursuant to this Agreement;
2.2.4 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.2.5 Corporate Books. Corporate minute books and stock books
of Seller;
2.2.6 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the
extent they relate to liabilities or obligations that are not assumed
by Purchaser hereunder (except the amount of costs and expenses
Purchaser shall have incurred with respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority; and
2.2.8 Other Assets. Assets listed on Schedule 2.2.8.
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2.3 License to Use Certain Assets. To the extent that there are any
tangible or intangible assets used by Seller in connection with the Business
that are not specifically designated as Excluded Assets by Section 2.2 (without
reference to this Section), the Purchased Assets shall include an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferrable license to
utilize such assets in connection with the operation of the Business after the
Closing Date. To the extent that any such assets may not be licensed, Seller
shall take all steps required to assure that Purchaser obtains the benefit of
such assets.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the
"Purchase Price") shall be in the amount of $3,900,000, to be paid by
certified or cashier's check drawn on a national bank or by wire
transfer as follows:
(i) the Purchase Price less the sum of the Deposit Fund
and the Escrow Fund to Seller at the time of Closing;
(ii) the Escrow Fund to Escrow Agent at the time of
Closing to be held in escrow pursuant to the Escrow
Agreement; and
(iii) upon execution and delivery hereof, the Deposit Fund
to Escrow Agent to be held in escrow pursuant to the
Escrow Agreement.
3.1.2 Other Consideration. As additional consideration,
Purchaser shall also assume the Assumed Liabilities at the time of
Closing.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the Business in accordance with the
allocation set forth in Schedule 3.3. Purchaser and Seller shall report the
federal, state and local income and other tax consequences of the purchase and
sale contemplated hereby in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim,
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loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date,
Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
(i) all obligations of Seller accruing subsequent to the Closing
Date under the Contracts contemplated by Section 2.1.4,
including, without limitation, those set forth in Schedule
1.68 and Schedule 2.1.4, provided that the rights thereunder
have been duly and effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing after the Closing Date
under the Permits described in Section 2.1.6, provided that
the rights thereunder have been duly and effectively assigned
to Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or
obligations incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the
indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or
the contract of indemnity) or had committed fraud in the
insurance application;
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(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to Closing, and the
transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing; notwithstanding the foregoing, all sales and use
taxes, transfer taxes, and all other impositions of tax
arising solely by reason of the transfers contemplated by
this Agreement (excluding all federal, state and local income
and gross receipt taxes on the earnings or gross receipts of
Seller prior to the Closing Date, which shall remain the sole
responsibility of Seller) shall be the responsibility of and
shall be borne equally by Seller and Purchaser (any real
estate and personal property taxes for the year in which
Closing occurs shall be pro-rated to the Closing Date (based
on a calendar year or fiscal year for which such taxes are
levied basis), if the tax rates for the year in which Closing
occurs shall not be fixed prior to the Closing Date for a
particular item of the Purchased Assets, the pro-ration of
taxes thereon shall be based upon the tax rate for the year
prior to Closing applied to the latest assessment valuation;
however, in the event that any such taxes are increased or
decreased for the year in which Closing occurs, Seller or
Purchaser shall then reimburse the other party for amounts in
excess of or less than the proration as determined as of the
Closing Date);
(x) for long term indebtedness and other obligations or
guarantees of Seller;
(xi) for Current Liabilities reflected on the books of Seller at
the Closing Date; and
(xii) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date.
4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees (except as indicated on Schedule
1.23) in substantially similar jobs, at the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain liable for all
liability for all accrued vacation entitlements, workers'
compensation, disability and occupational diseases of or with respect
to all of Seller's Employees attributable to entitlements, injuries,
claims,
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conditions, events and occurrences occurring on or before the Closing
Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Employees of Seller hired by Purchaser attributable to entitlements,
injuries, claims, conditions, events and occurrences first occurring
after the Closing Date.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place on or after January 2, 1997, but in any event
not later than March 15, 1997 (the "Closing"). The date of the Closing shall be
referred to as the "Closing Date." The Closing shall take place at such time,
date and place as may be mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deeds. Duly executed special warranty deeds, in
recordable form, transferring good and marketable fee simple title to
the Real Property Owned, subject only to Permitted Encumbrances, and
such affidavits or other instruments as Purchaser's title insurance
company may reasonably request, including but not limited to (i)
exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants
pursuant to agreements with Seller and (C) mechanics' or materialmens'
liens and (ii) payoff letters, lien releases and satisfaction pieces
and (iii) gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that Seller has been able to obtain that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the Purchased Assets with assignments to
Purchaser;
5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property
or any of the other Purchased Assets for the applicable current tax
year or years, and all tax assessments or notices
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thereof upon which such taxes are based;
5.2.5 Plans and Specifications. To the extent not delivered
prior to Closing, all plans, specifications and other drawings in
Seller's possession or reasonably obtainable by Seller and used in the
construction of the Facility or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty, the
property under the Contracts or any of the other Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's
possession or reasonably obtainable by Seller, surveys and hazardous
waste studies prepared within 36 months before the date hereof, for or
relating to the Purchased Assets;
5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements relating to the ownership, operation, use,
occupancy, licensure, accreditation or maintenance of the Business;
and
5.2.8 Census. The census of Seller current as of two days
prior to the Closing Date.
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
5.3 Reasonable Steps. Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof and to be performed by
it.
6.2 Authorization of Agreement and Enforceability. Seller has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary
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Agreements to which it is a party, the performance by it of all terms and
conditions hereof and thereof to be performed by it and the consummation of the
transactions contemplated hereby and thereby, including, without limitation,
obtaining such shareholder's consents as is required under the Pennsylvania
Business Corporation Law. This Agreement constitutes, and the Ancillary
Agreements to which Seller is party, upon Seller's execution and delivery
thereof, will constitute the legal, valid and binding obligations of Seller,
enforceable in accordance with their terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
respect to notices and consents required to be given by Seller to any
Accreditation Body or Governmental Authority in connection with the sale and
change of ownership of the Purchased Assets and the Business, violate or
require any consent, authorization or approval of, or exemption by, or filing
under any provision of any law, statute, rule or regulation to which Seller,
the Business or the Purchased Assets are subject, (iii) violate any judgment,
order, writ or decree of any court applicable to Seller, the Business or the
Purchased Assets, (iv) except with respect to agreements with Seller's lender
and except as identified on Schedule 2.1.4, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any agreement, Contract, commitment, lease or other instrument, document
or undertaking to which Seller is a party or any of the Purchased Assets is
bound or (v) result in the creation or imposition of any Encumbrances upon the
Purchased Assets.
6.4 Financial Statements. Seller has delivered to Purchaser true and
complete copies of the (i) audited balance sheets of Seller at December 31,
1995, 1994 and 1993 and the related statements of income and cash flows for the
years then ended, certified by Snyder & Clemente, independent public
accountants ("Seller's Accountants") and (ii) monthly statements of profit and
loss for the first 10 months of 1996 with respect to the operation of the
Facility. True and correct copies of such financial statements are attached
hereto as Schedule 6.4. The foregoing financial statements have been prepared
from the Books and Records of Seller in accordance with GAAP consistently
applied throughout the periods involved except as may be noted therein. Such
financial statements, including the related notes, are materially true and
correct and fairly present the financial position of the Business at the dates
indicated and the results of operations and cash flows of the Business for the
periods then ended in accordance with GAAP. The most recent interim financial
statements provided to Purchaser dated October 31, 1996 reflect all material
liabilities of Seller and there has been no material adverse change with
respect to the matters contained therein since the date thereof.
6.5 [RESERVED].
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6.6 Inventory. The level of Inventory maintained by Seller and
included in the Purchased Assets is sufficient to carry on the Business as
historically conducted.
6.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.7 hereto, since October 31, 1996, in connection with the Business,
Seller has not:
(i) amended in any material respect or terminated any
Contract other than in the ordinary course of
Seller's business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on the Purchased Assets or the results of
operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the results
of operations of the Business by fire, storm or
similar casualty, whether or not covered by
insurance;
(iv) sold, transferred, replaced or leased any of the
Purchased Assets or sold any Inventory at a discount,
except for transactions in the ordinary course of
Seller's business consistent with past practice;
(v) waived or released any material rights with respect
to the Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than in
the ordinary course of Seller's business consistent
with past practice;
viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except
following normal review procedures or as reasonably
deemed necessary in the ordinary course of Seller's
business consistent with past practice;
(x) suffered any major or key personnel changes; or
(xi) materially altered its conduct in its relations with
suppliers, residents and patients.
6.8 Title to Properties; Absence of Liens and Encumbrances. Seller
owns and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased Assets subject to Closing, including
without limitation the Real Property (except as disclosed in
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Schedule 6.8 or except as sold or otherwise disposed of by Seller in the
ordinary course of Seller's business consistent with past practice), free and
clear of all Encumbrances, other than Permitted Encumbrances. Seller has the
right to quiet enjoyment of all Real Property Leased in which it holds a
leasehold interest for the full term, including all renewal rights, of the
lease or similar agreement relating thereto. Copies of all existing title
insurance policies written in favor of Seller and all surveys relating to the
Real Property in Seller's possession or reasonably obtainable by Seller have
been delivered to Purchaser. Except as set forth on Schedule 6.8, all
structures and other improvements on the Real Property are in good order and
repair and free from any structural defects and are within the lot lines and do
not encroach on the properties of any other Person, and the use and operation
of the Real Property conforms to all applicable building, zoning, safety and
subdivision laws, Environmental Laws and other Legal Requirements, and all
restrictive covenants and restrictions and conditions affecting title. Except
as disclosed on Schedule 6.8, no portion of the Real Property is located in a
flood plain, flood hazard area or designated wetlands area. Seller has not
received any written or oral notice of assessments for public improvements
against the Real Property or any written or oral notice or order by any
Governmental Authority, any insurance company that has issued a policy with
respect to any of such properties or any board of fire underwriters or other
body exercising similar functions that relates to violations of building,
safety or fire ordinances or regulations, claims any defect or deficiency with
respect to any of such properties or requests the performance of any repairs,
alterations or other work to or in any of such properties or in the streets
bounding the same. Except as disclosed on Schedule 6.8, each parcel of Real
Property is considered a separate parcel of land for taxing and conveyancing
purposes. There is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of the Real Property. All
public utilities (including water, gas, electric, storm and sanitary sewage,
and telephone utilities) required to operate the Facility of Seller are
available to such Facility and such utilities enter the boundaries of such
Facility through adjoining public streets, permanent easements or rights-of-way
of record in favor of Seller. Such public utilities are all connected pursuant
to valid permits, are all in good working order and are adequate to service the
operations of such Facility as currently conducted and to the best of Seller's
Knowledge permit full compliance with all Legal Requirements. Seller has not
received any written notice of any proposed, planned or actual curtailment of
service of any utility supplied to any Facility of Seller. Except as disclosed
on Schedule 6.8 all present driveways and other access routes to the Real
Property are from public streets and no other Person has any right to use any
such driveways or other access routes.
6.9 Proprietary Rights.
6.9.1 Logos and Tradenames. Schedule 2.1.8 hereto sets forth
a correct and complete list of all patents, logos, trademarks, trade
names, service marks, copyrights and applications or registrations
therefor used in and material to the Business (collectively, the
"Proprietary Rights").
6.9.2 Licenses. Except as disclosed in Schedule 2.1.8.: (i)
Seller owns or possesses adequate licenses or other valid rights to
use (without the making of any
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payment to others or the obligation or grant rights to others in
exchange) all the Proprietary Rights material to the Business; (ii)
the Proprietary Rights included in the Purchased Assets constitute all
the material rights necessary to conduct the Business in accordance
with past practice and are being conveyed to Purchaser together with
the other Purchased Assets; (iii) the validity of the Proprietary
Rights and the rights therein of Seller have not been questioned in
any litigation to which Seller is a party, nor, to Seller's Knowledge,
is any such litigation threatened; and (iv) to the best of Seller's
Knowledge, the conduct of the Business does not conflict with patent
rights, licenses, trademark rights, trade name rights, copyrights or
other intellectual property rights of others.
6.9.3 Infringement. Except as disclosed in Schedule 2.1.8
hereto, to Seller's Knowledge, no material use of any Proprietary
Rights owned by Seller has heretofore been, or is now being, made by
any Person other than Seller, and to Seller's Knowledge, there is no
infringement of any Proprietary Rights owned or licensed by Seller. No
present or former director, officer, Employee or consultant of Seller
has any interest in any of the Proprietary Rights.
6.10 Contracts and Commitments. Except as listed and described on
Schedule 1.68 and Schedule 2.1.4, neither Seller nor any party acting on behalf
of Seller with Seller's Knowledge and consent is a party to any written or oral
(for which Purchaser shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of
services by another party, involving in any one case
$10,000 or more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident/Patient's Agreement);
(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in
value (except for any Resident/Patient's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee
other than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit
agreement, loan agreement or other Contract or for
the borrowing or lending of money (including without
limitation loans to or from Employees) or guarantee,
pledge or undertaking of the indebtedness of any
other Person;
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(vii) Contract for any charitable or political
contribution;
(viii) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in any
likeness of business with any Person;
(ix) license, franchise, distributorship or other
agreement, including those that relate in whole or in
part to any patent, trademark, trade name, service
mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business; or
(x) any other material Contract not made in the ordinary
course of Seller's business consistent with past
practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.68 and Schedule 2.1.4 is valid and
enforceable in accordance with its terms, Seller and, to Seller's Knowledge any
other party thereto, are in compliance with the provisions thereof, Seller and,
to Seller's Knowledge any other party thereto, are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and no event has occurred that with or without the
giving of notice or lapse of time, or both, would constitute a default by
Seller thereunder and, to Seller's Knowledge, a default by any other party
thereto; (ii) except as set forth on Schedule 1.68 and Schedule 2.1.4 no
advance payments have been received by Seller by or on behalf of any party to
any of the Contracts, commitments, leases and other instruments listed on
Schedule 1.68 and Schedule 2.1.4 for services to be rendered or products to be
delivered to such party after the Closing Date; and (iii) no consent or
approval of any party to any Contract, commitment, lease or other instrument,
document or undertaking listed on Schedule 1.68 and Schedule 2.1.4 is required
for the execution of this Agreement or the consummation of the transactions
contemplated hereby.
6.11 Permits, Licenses. Seller has all Permits that are required to
operate the Business (including without limitation those required under any
Environmental Law) and, Seller is in material compliance with the terms and
conditions of the Permits. Schedule 2.1.6 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.6 hereto as nontransferable
or requiring such consent or approval.
6.12 Compliance with Laws. Except as described in Schedule 6.12
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.13 Legal Proceedings. Except as described in Schedule 6.13 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any Governmental
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Authority or, to Seller's Knowledge, threatened against Seller with respect to
the Business or any of the Purchased Assets, or relating to the transactions
contemplated by this Agreement, nor to Seller's Knowledge is there any basis
for any such claim, action, suit, proceeding, investigation, or inquiry. Except
as set forth on Schedule 6.13 hereto, Seller is not a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental, regulatory or administrative official, body
or authority that relates to the Purchased Assets or the Business or that might
affect the transactions contemplated by this Agreement.
6.14 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.14, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the financial statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.4 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's business consistent with past practice since the
financial statements dated October 31, 1996 provided to Purchaser.
6.15 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
6.16 Employees. Schedule 1.23 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.23, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
6.17 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.23
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of the
transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
6.18 Payroll Practice/Employee Arrangement.
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6.18.1 Benefit Plans. Schedule 6.18 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has
any liability or obligation, whether actual or contingent, with
respect to the Employees or their respective beneficiaries.
6.18.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.18.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.19 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
6.20 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.21 Condition of Assets. Except as set forth on Schedule 6.21, all
buildings, structures and equipment that are part of the Purchased Assets are
structurally sound, are in generally good operating condition and repair
(subject only to routine maintenance and repair) and are usable in the conduct
of the Business consistent with past practice and conform to all applicable
Legal Requirements.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability. Seller has operated the
Business and each parcel of Real Property in material compliance with
all applicable Environmental Laws. Seller is not subject to any
liability, penalty or expense (including legal fees), and Purchaser
will not suffer or incur any loss, liability, penalty or expense
(including legal fees) by virtue of any violation of any Environmental
Law occurring prior to the Closing, any environmental activity
conducted on or with respect to any property at or prior to the
Closing or any environmental condition existing on or with respect to
any property at or prior to the Closing, in each case whether or not
Seller permitted or participated in such act or omission.
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6.23.2 Treatment; CERCLIS. Except in material compliance with
all applicable Environmental Laws, Seller has not treated, stored,
recycled or disposed of any hazardous material, and to Seller's
Knowledge, no other Person has treated, stored, recycled or disposed
of any hazardous material on any part of the Real Property. There has
been no release of any hazardous material at, on or under any Real
Property. Seller has not transported any hazardous material or
arranged for the transportation of any hazardous material to any
location that is listed or proposed for listing on the National
Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of federal, state or local enforcement
action or other investigation that may lead to claims against Seller
for cleanup costs, remedial action, damages to natural resources, to
other property or for personal injury including claims under
Superfund. None of the Real Property is listed or, to Seller's
Knowledge, proposed for listing on the National Priorities List
pursuant to Superfund, CERCLIS or any state or local list of sites
requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation, abatement
or cleanup of any threatened or actual release of any hazardous
material. Seller is not required to place any notice or restriction
relating to the presence of any hazardous material at any Real
Property or in any deed to any Real Property. Seller has provided to
Purchaser a list of all sites to which, to Seller's Knowledge, Seller
has transported any hazardous material for recycling, treatment,
disposal, other handling or otherwise. There has been no past, and
there is no pending or contemplated, claim by Seller under any
Environmental Law or Legal Requirement based on actions of others that
may have impacted on the Real Property, and Seller has not entered
into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. All
storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 6.23, and, to Seller's
Knowledge, all such tanks and associated piping are in sound condition
and are not leaking and have not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business in
respect of claims or occurrences concerning Seller prior to the Closing, (i)
take no action to eliminate or reduce such coverage, other than normal
elimination or reduction of coverage as they occur by virtue of the filing of
claims in the ordinary course under such insurance policies, (ii) pay when due
any premiums under such policies for periods, including retrospective or
retroactive premium adjustments and (iii) provided Purchaser
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maintains Seller's insurance policies or otherwise is entitled to make a claim
against Seller's insurance policies pursuant to the terms of this Agreement,
use its best efforts to assist in filing and processing claims under, and
otherwise cooperate with Purchaser to allow Purchaser, in its own name, or on
behalf of Seller, to obtain all coverage benefits applicable to the Business
under such insurance policies, including the execution of assignments or powers
of attorney for the benefit of Purchaser. Any proceeds of insurance paid by an
insurer to Seller for claims of Purchaser made in accordance with this Section
shall be promptly paid to Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.26. Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. Cost Reports. Seller has provided Purchaser with copies of all
Seller's cost reports and rate schedules for the current year and the two
immediately preceding years for the Facility. Each such cost report was
prepared in material compliance with all applicable Legal Requirements.
6.28. Occupancy Reports. Seller has provided Purchaser with copies of
Seller's occupancy reports for the Facility for the last year. Each such
occupancy report was prepared based on the number of operational beds (i.e.,
double occupancy rooms were only counted as such when both beds were occupied).
6.29. Tax Returns. Seller has filed or caused to be filed, or will
file or cause to be filed, all Tax Returns that are required to be filed by it
prior to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) such Taxes that are fully reserved
against on the financial statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.29,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
6.30 Completeness and Accuracy. All information set forth on any
Schedule hereto is
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true, correct and complete. No representation or warranty of Seller contained
in this Agreement contains or will contain any untrue statement of material
fact, or omits or will omit to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. All Contracts, Permits and other documents and
instruments furnished or made available to Purchaser by Seller are or will be
true, complete and accurate originals or copies of originals and include all
amendments, supplements, waivers and modifications thereto.
6.31 Seller's Assets Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, Section
801.1 et seq) had: (i) annual net sales of $100,000,000 or more as stated on
its last regularly prepared statement of income and expenses; or (ii) total
assets of $100,000,000 or more as stated on its last regularly prepared
balance sheet.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in
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connection with the sale and change of ownership of the Purchased Assets and
the Business, violate, or require any consent, authorization or approval of, or
exemption by, or filing under any provision of any contract, law, statute, rule
or regulation to which Purchaser is subject, (iii) violate any judgment, order,
writ or decree of any court applicable to Purchaser, (vi) conflict with, result
in a breach of, constitute a default under, or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under any agreement, contract, commitment, lease or
other instrument, document or undertaking to which Purchaser is a party or (v)
result in the creation or imposition of any Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H,
Section 801.1 et seq) had: (i) annual net sale of $100,000,000 or more as
stated on its last regularly prepared statement of income and expenses; or
(ii) total assets of $100,000,000 or more as stated on its last regularly
prepared balance sheet.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in its conduct of the Business,
except as otherwise agreed by Purchaser in writing:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access, during normal
business hours, to such of the properties, books, accounts, Contracts
and records of Seller as are relevant to the Purchased Assets and the
Business, and furnish or otherwise make available to Purchaser all
such information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide
Purchaser with the following:
(i) Seller's occupancy reports for the Facility, as soon
as the same become available through the Closing
Date, but no later than ten days after the last day
of any given month (which reports shall be prepared
based on the number of operational beds);
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(ii) Seller's federal and/or state surveys or inspections
and any plans of correction for the Facility, as soon
as the same become available through the Closing
Date, but no later than ten days after received by
Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule for
such Facility;
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the Closing Date, but no later than 21 days
after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to
the date hereof and, to the extent consistent with such operation, use
its best efforts until the Closing Date to (i) preserve and keep
intact the Business, (ii) keep available the services of the
Employees; (iii) preserve its relationships with residents, patients,
suppliers and others having business dealings with Seller in
connection with the Business and (iv) maintain current marketing
activities;
8.1.3 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in their present order and condition,
in accordance with Seller's past practices, reasonable wear and tear
excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books
and Records in the usual, regular and ordinary manner, on a basis
consistent with past practice;
8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased
Assets and to the conduct of the Business;
8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the
Business in accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial
efforts to obtain in writing as promptly as possible any approvals and
consents as required to be obtained by Seller in order to effectuate
the transactions contemplated hereby and deliver to Purchaser copies
of such approvals and consents. Accordingly, Seller shall cooperate
with Purchaser's efforts to obtain the necessary licenses to operate
the Facility from the appropriate Accreditation Bodies, including,
without limitation, the Department of Welfare and the Department of
Health. Upon execution and delivery of this Agreement, Seller shall
promptly:
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(i) provide Purchaser with copies of all Permits;
(ii) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
Seller's residents/patients of the Facility and (ii)
notices to human service agencies (as that term is
defined by the Department of Welfare). Prior to
sending the notices, Seller shall provide copies to
Purchaser for review and approval, which approval
shall not be unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.9 Surveys. Execute such affidavits or other instruments
as are commercially reasonable and necessary in order for Purchaser to
remove title exceptions for encroachments or survey discrepancies
relating to the Real Property;
8.1.10 Pay Employees to Closing Date. Pay all wages, salaries
and other sums due Employees through the close of business on the day
prior to the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary
steps to transfer to Purchaser the employment of all Employees
electing to continue their employ with Purchaser as of the Closing
Date;
8.1.12 Appointment of Seller's Agent. Irrevocably appoint
Blumer or Kelly ("Seller's Agent"), as Seller's agent and
attorney-in-fact to take any action required or permitted to be taken
hereunder by Seller, including without limitation, the giving and
receipt of notices to be delivered or received by or on behalf of
Seller, the payment of expenses relating to the transactions
contemplated under this Agreement, the representation of Seller in
indemnification proceedings hereunder, and the right to waiver of any
of the terms of this Agreement in any respect, and agree to be bound
by any and all actions taken by Seller's Agent. Purchaser shall be
entitled to rely exclusively on any communications given by Seller's
Agent on behalf of Seller, and shall not be liable for any action
taken or not taken in reliance on Seller's Agent. In the event that
Seller's Agent resigns or refuses to act, Seller shall promptly
appoint another Seller as the substitute Sellers' Agent to act under
this Agreement, and Seller shall promptly deliver a copy of such
appointment to Purchaser; and
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8.1.13 Compliance with Agreement. Not undertake any course of
action materially inconsistent with satisfaction of the conditions
applicable to it set forth in this Agreement, and use all reasonable
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement.
8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to
Purchaser's title insurer regarding title, mechanic's liens and such
other customary matters as may be reasonably requested by Purchaser or
Purchaser's title insurer; and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller under penalties of perjury, in
the form prescribed by Treasury Regulation Section
1.1445-2(b)(2)(iii), stating Seller's name, address and Federal tax
identification number, and that it is not a "foreign person" within
the meaning of Section 1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the Purchased Assets
other than in the ordinary course of Seller's business consistent with
past practices;
8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of Seller's
business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security interest
or any other Encumbrance, other than Permitted Encumbrances, any of
the Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase
the rate of compensation paid, or pay any bonus, to anyone connected
with the Business, except for
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those increases or bonuses planned, in the ordinary course of Seller's
business consistent with past practices, or establish or adopt any new
pension or profit-sharing plan, deferred compensation agreement or
employee benefit arrangement of any kind whatsoever covering or
affecting Employees;
8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.68 or
Schedule 2.1.4 or other authorization or agreement affecting the
Business or the Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of
any fact that, if known at the Closing Date, would have been required
to be set forth or disclosed in or pursuant to this Agreement, or
which would result in the breach by Purchaser of any of its
representations, warranties, covenants or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and Purchaser shall use its best
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement; and
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business.
9.1.4 Seller's Employees. Take all reasonable steps to ensure
that the transfer of employment of all of the Employees electing to
continue their employ with Purchaser as are able to be accomplished
prior to or on the Closing Date.
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9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the Employees, residents, patients and suppliers
of Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein ("Purchaser's Due Diligence").
9.3 Approvals, Consents. Use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate the Facility from the Department of Welfare and the Department of
Health, as applicable, including:
(i) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(ii) provide such other notices as required by all Legal
Requirements including (i) notices to Seller's
residents/patients of the Facility and (ii) notices
to human service agencies (as that term is defined by
the Department of Welfare). Prior to sending the
notices, Purchaser shall provide copies to Seller for
review and approval, which approval shall not be
unreasonably withheld.
9.4 Publicity; Advertisement. Except as required by law, publicize,
advertise or announce to any third-party, except as required pursuant to this
Agreement to obtain the consent of such third-party, the entering into of this
Agreement, the terms of this Agreement or the transactions contemplated hereby;
provided, however, the foregoing shall not be applicable to disclosures made by
Purchaser to Purchaser's lender in response to such lender's reasonable
requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
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10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party to be performed or complied
with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the incumbency and specimen signature of
each officer or representative of Seller executing this Agreement, the
certificate referred to in Section 10.3 and the Ancillary Agreements to which
Seller is a party.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 [RESERVED].
10.7 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated. Other Agreements. Each of the
Other Agreements shall have been executed and delivered by the parties thereto,
and the transactions contemplated thereby shall have been consummated.
10.8 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.9 Arrangements with Employees. Subject to the provisions of
Sections 4.3 and 9.1.4, substantially all of the Employees shall have accepted
employment with Purchaser effective on the Closing Date.
10.10 Employment Agreements. Kelly and Blumer shall have executed and
delivered the Employment Agreements with Purchaser.
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10.11 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to Purchaser
and Purchaser's lender, reasonably satisfactory to Purchaser and its counsel as
to the matters set forth in Sections 6.1, 6.2 and 6.3 hereof .
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement, the
certificate referred to in Section 11.3 and the Ancillary Agreements to which
Purchaser is a party.
11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted,
threatened or anticipated which questions the validity or legality of the
transactions contemplated hereby.
11.6 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
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11.7 Employment Agreements. Purchaser shall have executed and
delivered the Employment Agreements with Kelly and Blumer.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of five (5) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of five years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
12.5.1 Transfer of Assets. Seller agrees that Purchaser, from
and after the Closing, shall have the right and authority to collect
for Purchaser's own account all items which shall be transferred to
Purchaser as provided herein.
12.5.2 Endorsement of Checks. From and after the Closing,
Purchaser shall have the right and authority to retain and endorse
without recourse the name of Seller on any check or any other
evidences of indebtedness received by Purchaser on account of any of
the Business and Purchased Assets transferred to Purchaser hereunder.
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12.5.3 Seller's Remittance of Funds. After the Closing,
Seller shall promptly transfer and deliver to Purchaser any cash or
other property, if any, that Seller may receive related to the
Business or the Purchased Assets other than the Excluded Assets.
12.5.4 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or
other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.5.5 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving,
any Assumed Liability, and Purchaser shall have the right to conduct
and control all negotiations and proceedings with respect thereto.
Seller shall notify Purchaser promptly of any claim made with respect
to any Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any Assumed
Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's Accountants to cooperate at Purchaser's cost and expense, with
Purchaser and its auditors in the preparation of combined audited financial
statements of Seller and each of the Other Companies for the years ended
December 31, 1996, 1995 and 1994 to the extent required in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. As used herein, the term "combined audited
financial statements" shall mean the audited financial statements of Seller and
each of the Other Companies, combined.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any Books and
Records relating to the Business that Seller may retain as may reasonably be
required in connection with the preparation of financial information or tax
returns of Purchaser.
12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial
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account closing and reporting and claims and litigation asserted by or against
third parties, including, but not limited to, making employees available at
reasonable times to assist with, or provide information in connection with
financial account closing and reporting and claims and litigation, provided
that Seller reimburses Purchaser for its reasonable out-of-pocket expenses
(including costs of employees so assisting) in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and Purchaser;
(ii) by Seller or Purchaser if Closing has not taken place
on or before March 15, 1997; provided however, that no
Party then in material breach of any of its
obligations hereunder shall have the right to
terminate;
(iii) by Purchaser upon notice to Seller if any of the
conditions set forth in Article X hereof have not been
satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Purchaser to fulfill its obligations under
this Agreement);
(iv) by Seller upon notice to Purchaser if any of the
conditions set forth in Article XI hereof have not
been satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Seller to fulfill its obligations under
this Agreement);
(v) by Seller if Purchaser materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Seller gives written
notice of such failure to Purchaser;
(vi) by Purchaser if Seller materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Purchaser gives
written notice of such failure to Seller; and
(vii) by Purchaser upon notice to Seller if any of the
conditions set forth below have not been satisfied or
become impossible to satisfy by the Due Diligence Date
(other than by reason of the material failure of
Purchaser to fulfill its obligations under this
Agreement):
(a) the results of Purchaser's Due Diligence shall not
be satisfactory to Purchaser in its sole discretion;
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(b) Purchaser shall not have secured a commitment for
financing the transaction contemplated by this
Agreement on terms and conditions satisfactory to
Purchaser in its sole discretion;
(c) the results of an inspection of the physical
condition of the Real Property, including the
improvements and the HVAC, electrical, plumbing and
other systems, by a qualified engineering firm engaged
by Purchaser, at its cost and expense, are not
satisfactory to Purchaser in its sole discretion; and
(d) the results of an environmental report on the
Purchased Assets and the Business from a qualified
geotechnical or engineering firm engaged by Purchaser,
at its cost and expense, are not satisfactory to
Purchaser in its sole discretion.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Deposit Fund. Upon termination of this Agreement, the Deposit
Fund shall be disbursed as follows and in accordance with the terms and
conditions of the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13.1(iii) or Section 13.1(vi), the
Parties agree to instruct Escrow Agent to release the
entire amount of the Deposit Fund to Purchaser;
(ii) if this Agreement is terminated by Purchaser pursuant
to Section 13.1(vii) on or before the Due Diligence
Date, the Parties agree to instruct Escrow Agent to
release one-half of the amount of the Deposit Fund to
Purchaser and the balance of the Deposit Fund to
Seller; and
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the
Parties agree to instruct Escrow Agent to release the
entire amount of the Deposit Fund to Seller.
13.4 Remedies.
13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the Deposit Fund
as set forth in Section 13.3 shall be the sole and exclusive remedy of Seller
as liquidated damages, and shall be in lieu of all other rights
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and remedies which may otherwise be available at law or in equity.
13.4.2 Purchaser's Remedies. If Purchaser has the right to
terminate this Agreement pursuant to Section 13.1(vi), in addition to
Purchaser's right to receive the Deposit Fund as permitted under Section 13.3,
Purchaser may seek any other remedies that may otherwise be available at law or
in equity, including, without limitation, an action for specific performance
and reimbursement from Seller for all expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive until October 31, 1997 (the
"Survival Date"); provided, however, that all representations and warranties of
Seller with respect to any environmental matters set forth in Section 6.23 of
this Agreement shall survive for two years after the Closing Date.
Notwithstanding the foregoing, there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of the other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only and
shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall, indemnify, defend, save
and hold Purchaser, any assignee of Purchaser and their respective officers,
directors, employees, agents and Affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller or any Ancillary Agreement to which Seller is or is
to become a party, a breach or nonfulfillment of any covenant or agreement made
by any Seller in this Agreement or in any Ancillary Agreement to which Seller
is or is to become a party, and any and all liabilities of Seller of any nature
whatsoever, whether due or to become due, whether accrued, absolute, contingent
or otherwise, existing on the Closing Date or arising out of any transaction
entered into, or any state of facts existing, prior to the Closing Date, except
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for any Assumed Liability. To the extent any Purchaser Indemnitee is entitled
to collect Purchaser Damages, Purchaser shall, at its option and subject to the
terms of the Escrow Agreement, be entitled to withdraw sufficient funds from
the Escrow Fund pursuant to the Escrow Agreement in lieu of payment directly
from Seller, and to the extent the amount due any Purchaser Indemnitee exceeds
the balance of the funds held under the Escrow Agreement, Purchaser shall be
entitled to collect such balance owned to Purchaser Indemnitee directly from
Seller.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, Affiliates and
agents (collectively, "Seller Indemnitees") harmless from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, a breach of any representation or warranty made by Purchaser
in this Agreement or in any certificate or document furnished pursuant hereto
by Purchaser or any Ancillary Agreement to which Purchaser is a party, a breach
or nonfulfillment of any covenant or agreement made by Purchaser in this
Agreement or in any Ancillary Agreement to which Purchaser is a party, any
Assumed Liability and any and all liabilities of any nature whatsoever arising
out of Purchaser's operation of the Business after the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
Notwithstanding the foregoing, any Purchaser Indemnitee shall be required to
notify Seller's Agent of any claim for Purchaser Damages as required herein
even though the same may be included in the $25,000 threshold set forth in
Section 14.6, and Seller shall have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement.
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The Indemnified Party shall permit the Indemnifying Party to participate in the
defense of any such action or suit through counsel chosen by the Indemnifying
Party, provided that the fees and expenses of such counsel shall be borne by
the Indemnifying Party. If the Indemnified Party permits the Indemnifying Party
to undertake, conduct and control the conduct and settlement of such action or
suit, the Indemnifying Party shall not thereby permit to exist any Encumbrance
upon any asset of the Indemnified Party; the Indemnifying Party shall not
consent to any settlement that does not include as an unconditional term
thereof the giving of a complete release from liability with respect to such
action or suit to the Indemnified Party; the Indemnifying Party shall permit
the Indemnified Party to participate in such conduct or settlement through
counsel chosen by the Indemnified Party; and the Indemnifying Party shall agree
promptly to reimburse the Indemnified Party for the full amount of any Damages
including fees and expenses of counsel for the Indemnified Party incurred after
giving the foregoing notice to the Indemnifying Party and prior to the
assumption of the conduct and control of such action or suit by the
Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under
Section 14.2 until the aggregate amount of Purchaser Damages thereunder exceeds
$25,000, but if the aggregate amount of Purchaser Damages thereunder exceeds
$25,000 in the aggregate, then indemnification shall be made by Seller
thereunder to the full extent of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those Purchaser
Damages as to which Purchaser has given Seller's Agent written notice thereof
on or before the Survival Date; provided, however, that with respect to any
claim for Purchaser Damages sustained by reason of a breach of any
representation or warranty relating to those matters governed by Section 6.23,
Seller's liability shall be limited to Purchaser Damages as to which such
written notice shall have been given to Seller's Agent within two years of the
Closing Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser Damages
arising out of fraud, the breach of any representation or warranty contained
herein or pursuant hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a fact or omitted to
state a fact necessary to make the statements of facts contained therein not
misleading or misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with respect
to the Retained Liabilities.
ARTICLE XV. GENERAL
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15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller.
If to Seller, to:
Sellers' Agent:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
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Scranton, PA 18505
Fax: (717) 963-1601
With a required copy to:
Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof shall thereof be binding upon
any Party unless set forth in an instrument in writing signed by the Party to
be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are
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for reference purposes only and shall not be deemed to be a part of this
Agreement or to affect the meaning or interpretation of this Agreement.
15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through a
sale-leaseback. Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide Seller with a copy of any
such assignment, and Seller agrees to execute and deliver any consents
reasonably required by Purchaser's lender in connection therewith, provided
such assignment does not expand any of Seller's obligations and liabilities
hereunder. Notwithstanding any permitted assignment of this Agreement by
Purchaser, Purchaser shall remain liable to Seller for all obligations and
liabilities to be performed by or on behalf of
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Purchaser hereunder.
[THIS PORTION OF THE PAGE INTENTIONALLY LEFT BLANK]
[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
----------------------------
Name: Brian L. Barth
Title: Vice President
KINGSTON HEALTH CARE CNETER, INC.
By: /s/ Michael P. Kelly
-----------------------------
Name: Michael P. Kelly
Title: President
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EXHIBIT 2.9
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
27th day of December, 1996, by and between Balanced Care Corporation, a
Delaware corporation ("Purchaser"), and Kingston Manor Personal Care and
Retirement Center, Inc., a Pennsylvania corporation ("Seller").
RECITALS:
Seller owns a personal care home located at 700 Third Avenue,
Kingston, PA 18704 (the "Facility"). Purchaser desires to purchase
substantially all of the assets of Seller and the Business (as hereinafter
defined) related thereto and Seller desires to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Health, the Department of Welfare and all other Persons having jurisdiction over
the accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of the Business as of such date prepared in accordance with
GAAP consistently applied, including those described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute control.
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1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the bill of sale, assignment and assumption
described in Section 5.2.2, the Escrow Agreement described in Section 14.2 and
the Employment Agreements described in Section 10.9 .
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Blumer" shall mean James J. Blumer, Jr.
1.9 "Books and Records" shall have the meaning given to it in Section
6.15.
1.10 "Business" shall mean the operation of a personal care home and
any other ancillary health care services owned, operated, delivered, managed,
developed, constructed, maintained, used, occupied or possessed by Seller in
connection therewith (including, without limitation, any outpatient and
contract rehab therapy services or any Alzheimer's units).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section
5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time, and any successor thereto. Any reference herein
to a specific section or sections of the Code shall be deemed to include a
reference to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident/Patient's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, franchises and books and records of account benefiting,
relating to the Purchased Assets or the operation of the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy,
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possession or operation thereof, or the operation of any of the programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, issued by any Governmental Authority, Accreditation
Body or Third Party Payor or maintained or used by Seller with any third
Person.
1.18 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to such term in Section
14.4.
1.20 "Department of Health" shall mean the Commonwealth of
Pennsylvania, Department of Health.
1.21 "Department of Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.21a "Deposit Fund" shall mean $30,000 to be paid by Purchaser and
held by the Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement.
1.22 "Due Diligence Date" shall mean January 15, 1997."Due Diligence
Date" shall mean January 15, 1997.
1.23 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.23 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's business consistent with past
practices).
1.24 "Employment Agreements" shall mean the contracts entered into
between Purchaser and each of Kelly and Blumer in substantially the form of
Exhibit 1.24.
1.25 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.26 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Sections 136 et seq.)], other Legal Requirements, any common law doctrine and
any provision or condition of any permit, license or other operating
authorization relating to (i) the protection of the environment or the public
welfare from actual or potential exposure (or the effects of exposure) to any
actual or potential release, discharge, disposal or emission (whether past or
present) of any Regulated Substance or
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(ii) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of any Regulated Substance.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.28 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.29 "Escrow Agent" shall mean Mellon Bank.
1.30 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.30.
1.31 "Escrow Fund" shall mean $50,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
1.32 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.32a "Facility" shall have the meaning given to such term in the
Recitals of this Agreement.
1.33 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.38 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.39 "Kelly" shall mean Michael P. Kelly.
1.39a "Keystone Management Services" shall mean Keystone Management
Services, a
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Pennsylvania general partnership, consisting of its general partners, Kelly and
Blumer.
1.40 "Knowledge" and words of similar import shall mean, with respect
to Purchaser, actual knowledge of a particular fact or other matter being
possessed by an officer or other individual now or formerly having principal
responsibility for a business or administrative function of such Party,
including individuals serving in such a capacity in or for the Business, and
the knowledge that reasonably could be expected to be obtained in the course of
conducting a reasonably comprehensive investigation concerning the subject
matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Other Agreements" shall mean the agreements set forth on
Schedule 1.46, including any other agreements executed and delivered under or
in connection therewith.
1.47 "Other Companies" shall mean the companies identified on Schedule
1.47."Other Companies" shall mean the companies identified on Schedule 1.47.
1.48 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.49 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
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1.50 "Payroll Practice/Employee Arrangement" shall have the meaning
given to such term in Section 6.18.
1.51 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licences, permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under, any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, now or hereafter required or issued by any Governmental
Authority, Accreditation Body or Third Party Payor.
1.52 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.52 hereto.
1.53 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.54 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.55 [RESERVED].
1.56 "Proprietary Rights" shall have the meaning given to such term in
Section 6.9.1.
1.57 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.58 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.59 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.60 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.61 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.61a "Purchaser's Due Diligence" shall have the meaning given to such
term in Section 9.2.
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1.62 "Purchaser Indemnitees" shall have the meaning given to such term
in Section 14.2.
1.63 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
1.64 "Real Property Leased" shall mean the real property leased by
Seller in connection with the Business as more fully described in Schedule 1.64
hereto.
1.65 "Real Property Owned" shall mean the real property owned by
Seller, and used in connection with the Business as more fully described in
Schedule 1.65 hereto.
1.66 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.67 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv) any spouse, sibling, ancestor or lineal
descendant of any natural Person identified in any one of the preceding
clauses.
1.68 "Resident/Patient's Agreements" shall mean all contracts,
agreements and consents executed by or on behalf of any resident, patient or
other Person seeking services at the Facility as more fully described in
Schedule 1.68 hereto, including, without limitation, assignments of benefits
and guarantees, and such resident/patient's related medical and/or other
records.
1.69 "Retained Liabilities" has the meaning given that term in Section
4.2.
1.70 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.71 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually and collectively, as the context may
require.
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1.72 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.73 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.74 "Seller's Accountants" shall have the meaning given to it in
Section 6.4.
1.74a "Seller's Knowledge" and words of similar import shall mean,
with respect to Seller, actual knowledge of a particular fact or other matter
being possessed by Kelly and/or Blumer and the knowledge that reasonably could
be expected to be obtained concerning the subject matter by Kelly and Blumer in
the ordinary course of their ownership and operation of the Business.
1.74b "Survival Date" shall have the meaning given to such term in
Section 14.1.
1.75 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.76 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.77 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.78 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
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2.1.1 Real Property Owned. The Real Property Owned, together with the
buildings, structures, improvements and fixtures located thereon, and all
rights, privileges, easements, licenses, hereditaments and other appurtenances
relating thereto;
2.1.2 Real Property Leased. Seller's interest, as lessee, in the Real
Property Leased;
2.1.3 Equipment, Machinery and Other Tangible Personal Property. All
machinery, equipment, leasehold improvements, automobiles, supplies, office
furniture and office equipment, computing and telecommunications equipment and
other items of personal property that are owned by Seller and used in
connection with the Business, including those described in Schedule 2.1.3
hereto;
2.1.4 Contracts Relating to the Business. All of the interest of
Seller in all Contracts relating to the acquisition or ownership by Seller of
any of the Purchased Assets or the operation of the Business, the
Resident/Patient's Agreements listed on Schedule 1.68 hereto and those
Contracts not required to be listed on 2.1.4 by reason of the provisions of
Section 6.10.
2.1.5 Sales, Rental and Marketing Materials, Manuals. All sales data,
rental data, catalogs, brochures, reference sources, suppliers' names, mailing
lists, art work, photographs, public relations material and advertising
material used in the Business, whether in electronic form or otherwise;
2.1.6 Permits, Licenses. All of Seller's interest in Permits relating
to the Business, including those listed in Schedule 2.1.6 hereto, to the extent
such Permits are transferrable to Purchaser;
2.1.7 Trade Secrets. All policies and procedures, methods of delivery
of services, trade secrets, designs, drawings and specifications, market
studies, consultants' reports, prototypes, and all similar property of any
nature, tangible or intangible, of Seller used in the Business;
2.1.8 Intellectual Property. All right, title and interest of Seller
in the patents, trademarks, trademark registrations, trade names, service
marks, copyrights and copyright registrations described in Schedule 2.1.8;
2.1.9 [RESERVED];
2.1.10 Goodwill. All of the interest of Seller in and to the goodwill
incident to the Business, including but not limited to the value of the
Facility name associated with the Business and the value of good customer
relations;
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2.1.11 Inventory. All Closing Inventory;
2.1.12 Resident/Patient Funds. All deposits and escrow accounts of, or
for the benefit of, any of Seller's resident/patients at the Closing Date;
2.1.13 Prepaid Expenses. All Seller's Prepaid Expenses of, or for the
benefit of, the Business at the Closing Date including those described in
Schedule 2.1.13, to the extent the benefits thereof are transferable to
Purchaser;
2.1.14 Computer Software. All computer applications software, owned or
licensed, whether for general business usage (e.g., accounting, word
processing, graphics, spreadsheet analysis, etc.), or specific,
unique-to-the-business usage, and all computer operating, security or
programming software, owned or licensed by Seller and used in the operation of
the Business; and
2.1.15 Other Intangible Assets. All other intangible assets (including
all causes of action, rights of action, contract rights and warranty and
product liability claims against third parties) relating to the Purchased
Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following assets
(collectively, the "Excluded Assets") shall be excluded from this Agreement,
and shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable All Accounts Receivable of Seller existing
on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in bank
accounts, short-term notes receivable and unbilled costs and fees up through
and including the Closing Date;
2.2.3 Consideration. The consideration paid to Seller pursuant to this
Agreement;
2.2.4 Pensions. Assets constituting any pension or other funds for the
benefit of Employees existing on the Closing Date;
2.2.5 Corporate Books. Corporate minute books and stock books of
Seller;
2.2.6 Third Party Claims. Any claims and rights against third parties
(including, without limitation, insurance carriers) to the extent they relate
to liabilities or obligations that are not assumed by Purchaser hereunder
(except the amount of costs and expenses Purchaser shall have incurred with
respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges imposed by
any Governmental Authority; and
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2.2.8 Other Assets. Assets listed on Schedule 2.2.8.
2.3 License to Use Certain Assets. To the extent that there are any
tangible or intangible assets used by Seller in connection with the Business
that are not specifically designated as Excluded Assets by Section 2.2 (without
reference to this Section), the Purchased Assets shall include an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferrable license to
utilize such assets in connection with the operation of the Business after the
Closing Date. To the extent that any such assets may not be licensed, Seller
shall take all steps required to assure that Purchaser obtains the benefit of
such assets.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the
"Purchase Price") shall be in the amount of $3,192,000, to be paid by
certified or cashier's check drawn on a national bank or by wire
transfer as follows:
(i) the Purchase Price less the sum of the Deposit Fund and
the Escrow Fund to Seller at the time of Closing;
(ii) the Escrow Fund to Escrow Agent at the time of Closing
to be held in escrow pursuant to the Escrow Agreement;
and
(iii) upon execution and delivery hereof, the Deposit Fund to
Escrow Agent to be held in escrow pursuant to the
Escrow Agreement.
3.1.2 Other Consideration. As additional consideration,
Purchaser shall also assume the Assumed Liabilities at the time of
Closing.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the Business in accordance with the
allocation set forth in Schedule 3.3. Purchaser and Seller shall report the
federal, state and local income and other tax consequences of the purchase and
sale contemplated hereby in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations"
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shall include, without limitation, any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, choate or inchoate, liquidated or unliquidated, secured or
unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date,
Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
(i) all obligations of Seller accruing subsequent to the Closing
Date under the Contracts contemplated by Section 2.1.4,
including, without limitation, those set forth in Schedule
1.68 and Schedule 2.1.4, provided that the rights thereunder
have been duly and effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing after the Closing Date
under the Permits described in Section 2.1.6, provided that
the rights thereunder have been duly and effectively assigned
to Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or
obligations incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the
indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or
the contract of indemnity) or had committed fraud in the
insurance application;
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(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to Closing, and the
transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing; notwithstanding the foregoing, all sales and use
taxes, transfer taxes, and all other impositions of tax
arising solely by reason of the transfers contemplated by
this Agreement (excluding all federal, state and local income
and gross receipt taxes on the earnings or gross receipts of
Seller prior to the Closing Date, which shall remain the sole
responsibility of Seller) shall be the responsibility of and
shall be borne equally by Seller and Purchaser (any real
estate and personal property taxes for the year in which
Closing occurs shall be pro-rated to the Closing Date (based
on a calendar year or fiscal year for which such taxes are
levied basis), if the tax rates for the year in which Closing
occurs shall not be fixed prior to the Closing Date for a
particular item of the Purchased Assets, the pro-ration of
taxes thereon shall be based upon the tax rate for the year
prior to Closing applied to the latest assessment valuation;
however, in the event that any such taxes are increased or
decreased for the year in which Closing occurs, Seller or
Purchaser shall then reimburse the other party for amounts in
excess of or less than the proration as determined as of the
Closing Date);
(x) for long term indebtedness and other obligations or
guarantees of Seller;
(xi) for Current Liabilities reflected on the books of Seller at
the Closing Date; and
(xii) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date.
4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees (except as indicated on Schedule
1.23) in substantially similar jobs, at the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain liable for all
liability for all accrued vacation entitlements as indicated on
Schedule 12.3, workers' compensation, disability
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and occupational diseases of or with respect to all of Seller's
Employees attributable to entitlements, injuries, claims, conditions,
events and occurrences occurring on or before the Closing Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for all
liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Employees of Seller hired by Purchaser attributable to entitlements,
injuries, claims, conditions, events and occurrences first occurring
after the Closing Date.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place on or after January 2, 1997, but in any event
not later than March 15, 1997 (the "Closing"). The date of the Closing shall be
referred to as the "Closing Date." The Closing shall take place at such time,
date and place as may be mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deeds. Duly executed special warranty deeds, in recordable
form, transferring good and marketable fee simple title to the Real
Property Owned, subject only to Permitted Encumbrances, and such
affidavits or other instruments as Purchaser's title insurance company
may reasonably request, including but not limited to (i) exceptions
for (A) judgments, bankruptcies, taxes and municipal claims, (B)
parties in possession other than current occupants pursuant to
agreements with Seller and (C) mechanics' or materialmens' liens and
(ii) payoff letters, lien releases and satisfaction pieces and (iii)
gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that Seller has been able to obtain that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all vehicles
included in the Purchased Assets with assignments to Purchaser;
5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property
or any of the other Purchased Assets for the applicable current tax
year or years, and all tax assessments or notices thereof upon which
such taxes are based;
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5.2.5 Plans and Specifications. To the extent not delivered prior
to Closing, all plans, specifications and other drawings in Seller's
possession or reasonably obtainable by Seller and used in the
construction of the Facility or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty, the
property under the Contracts or any of the other Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's
possession or reasonably obtainable by Seller, surveys and hazardous
waste studies prepared within 36 months before the date hereof, for or
relating to the Purchased Assets;
5.2.7 Contracts and Other Permits. To the extent not delivered
prior to Closing, all Contracts, Permits, or other instruments or
agreements relating to the ownership, operation, use, occupancy,
licensure, accreditation or maintenance of the Business; and
5.2.8 Rent Roll. The rent roll of Seller listing all
resident/patients and their respective rent payments current as of two
days prior to the Closing.
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
5.3 Reasonable Steps. Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the
Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof and to be performed by
it.
6.2 Authorization of Agreement and Enforceability. Seller has taken
all necessary
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corporate action to authorize the execution and delivery of this Agreement and
the Ancillary Agreements to which it is a party, the performance by it of all
terms and conditions hereof and thereof to be performed by it and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, obtaining such shareholder's consents as is required under
the Pennsylvania Business Corporation Law. This Agreement constitutes, and the
Ancillary Agreements to which Seller is party, upon Seller's execution and
delivery thereof, will constitute the legal, valid and binding obligations of
Seller, enforceable in accordance with their terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
respect to notices and consents required to be given by Seller to any
Accreditation Body or Governmental Authority in connection with the sale and
change of ownership of the Purchased Assets and the Business, violate or
require any consent, authorization or approval of, or exemption by, or filing
under any provision of any law, statute, rule or regulation to which Seller,
the Business or the Purchased Assets are subject, (iii) violate any judgment,
order, writ or decree of any court applicable to Seller, the Business or the
Purchased Assets, (iv) except with respect to agreements with Seller's lender
and except as identified on Schedule 2.1.4, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any agreement, Contract, commitment, lease or other instrument, document
or undertaking to which Seller is a party or any of the Purchased Assets is
bound or (v) result in the creation or imposition of any Encumbrances upon the
Purchased Assets.
6.4 Financial Statements. Seller has delivered to Purchaser true and
complete copies of the (i) audited balance sheets of Seller at December 31,
1995 and the reviewed balanced sheets of Seller at December 31, 1994 and 1993,
together with the related statements of income and cash flows for the years
then ended, certified by Snyder & Clemente, independent public accountants
("Seller's Accountants") and (ii) monthly statements of profit and loss for the
first 10 months of 1996 with respect to the operation of the Facility. True and
correct copies of such financial statements are attached hereto as Schedule
6.4. The foregoing financial statements have been prepared from the Books and
Records of Seller in accordance with GAAP consistently applied throughout the
periods involved except as may be noted therein. Such financial statements,
including the related notes, are materially true and correct and fairly present
the financial position of the Business at the dates indicated and the results
of operations and cash flows of the Business for the periods then ended in
accordance with GAAP. The most recent interim financial statements provided to
Purchaser dated October 31, 1996 reflect all material liabilities of Seller and
there has been no material adverse change with respect to the matters contained
therein since the date thereof.
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6.5 [RESERVED].
6.6 Inventory. The level of Inventory maintained by Seller and
included in the Purchased Assets is sufficient to carry on the Business as
historically conducted.
6.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.7 hereto, since October 31, 1996, in connection with the Business,
Seller has not:
(i) amended in any material respect or terminated any
Contract other than in the ordinary course of Seller's
business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on the Purchased Assets or the results of
operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the results
of operations of the Business by fire, storm or similar
casualty, whether or not covered by insurance;
(iv) sold, transferred, replaced or leased any of the
Purchased Assets or sold any Inventory at a discount,
except for transactions in the ordinary course of
Seller's business consistent with past practice;
(v) waived or released any material rights with respect to
the Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than in
the ordinary course of Seller's business consistent
with past practice;
(viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except
following normal review procedures or as reasonably
deemed necessary in the ordinary course of Seller's
business consistent with past practice;
(x) suffered any major or key personnel changes; or
(xi) materially altered its conduct in its relations with
suppliers, residents and patients.
6.8 Title to Properties; Absence of Liens and Encumbrances. Seller
owns and will
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transfer to Purchaser at Closing good, marketable and indefeasible title to all
of the Purchased Assets subject to Closing, including without limitation the
Real Property (except as disclosed in Schedule 6.8 or except as sold or
otherwise disposed of by Seller in the ordinary course of Seller's business
consistent with past practice), free and clear of all Encumbrances, other than
Permitted Encumbrances. Seller has the right to quiet enjoyment of all Real
Property Leased in which it holds a leasehold interest for the full term,
including all renewal rights, of the lease or similar agreement relating
thereto. Copies of all existing title insurance policies written in favor of
Seller and all surveys relating to the Real Property in Seller's possession or
reasonably obtainable by Seller have been delivered to Purchaser. Except as set
forth on Schedule 6.8, all structures and other improvements on the Real
Property are in good order and repair and free from any structural defects and
are within the lot lines and do not encroach on the properties of any other
Person, and the use and operation of the Real Property conforms to all
applicable building, zoning, safety and subdivision laws, Environmental Laws
and other Legal Requirements, and all restrictive covenants and restrictions
and conditions affecting title. Except as disclosed on Schedule 6.8, no portion
of the Real Property is located in a flood plain, flood hazard area or
designated wetlands area. Seller has not received any written or oral notice of
assessments for public improvements against the Real Property or any written or
oral notice or order by any Governmental Authority, any insurance company that
has issued a policy with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions that relates to
violations of building, safety or fire ordinances or regulations, claims any
defect or deficiency with respect to any of such properties or requests the
performance of any repairs, alterations or other work to or in any of such
properties or in the streets bounding the same. Except as disclosed on Schedule
6.8, each parcel of Real Property is considered a separate parcel of land for
taxing and conveyancing purposes. There is no pending condemnation,
expropriation, eminent domain or similar proceeding affecting all or any
portion of the Real Property. All public utilities (including water, gas,
electric, storm and sanitary sewage, and telephone utilities) required to
operate the Facility of Seller are available to such Facility and such
utilities enter the boundaries of such Facility through adjoining public
streets, permanent easements or rights-of-way of record in favor of Seller.
Such public utilities are all connected pursuant to valid permits, are all in
good working order and are adequate to service the operations of such Facility
as currently conducted and to the best of Seller's Knowledge permit full
compliance with all Legal Requirements. Seller has not received any written
notice of any proposed, planned or actual curtailment of service of any utility
supplied to any Facility of Seller. Except as disclosed on Schedule 6.8 all
present driveways and other access routes to the Real Property are from public
streets and no other Person has any right to use any such driveways or other
access routes.
6.9 Proprietary Rights.
6.9.1 Logos and Tradenames. Schedule 2.1.8 hereto sets forth a
correct and complete list of all patents, logos, trademarks, trade
names, service marks, copyrights and applications or registrations
therefor used in and material to the Business (collectively, the
"Proprietary Rights").
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6.9.2 Licenses. Except as disclosed in Schedule 2.1.8.: (i)
Seller owns or possesses adequate licenses or other valid rights to
use (without the making of any payment to others or the obligation or
grant rights to others in exchange) all the Proprietary Rights
material to the Business; (ii) the Proprietary Rights included in the
Purchased Assets constitute all the material rights necessary to
conduct the Business in accordance with past practice and are being
conveyed to Purchaser together with the other Purchased Assets; (iii)
the validity of the Proprietary Rights and the rights therein of
Seller have not been questioned in any litigation to which Seller is a
party, nor, to Seller's Knowledge, is any such litigation threatened;
and (iv) to the best of Seller's Knowledge, the conduct of the
Business does not conflict with patent rights, licenses, trademark
rights, trade name rights, copyrights or other intellectual property
rights of others.
6.9.3 Infringement. Except as disclosed in Schedule 2.1.8 hereto,
to Seller's Knowledge, no material use of any Proprietary Rights owned
by Seller has heretofore been, or is now being, made by any Person
other than Seller, and to Seller's Knowledge, there is no infringement
of any Proprietary Rights owned or licensed by Seller. No present or
former director, officer, Employee or consultant of Seller has any
interest in any of the Proprietary Rights.
6.10 Contracts and Commitments. Except as listed and described on
Schedule 1.68 and Schedule 2.1.4, neither Seller nor any party acting on behalf
of Seller with Seller's Knowledge and consent is a party to any written or oral
(for which Purchaser shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services
by another party, involving in any one case $10,000 or
more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident/Patient's Agreement);
(iii) Contract continuing over a period of more than six months
from the date hereof or exceeding $10,000 in value
(except for any Resident/Patient's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee other
than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement,
loan agreement or other Contract or for the borrowing or
lending of money (including without limitation loans to
or from Employees) or guarantee, pledge or
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undertaking of the indebtedness of any other Person;
(vii) Contract for any charitable or political contribution;
(viii) Contract limiting or restraining Seller or any successor
or assign from engaging or competing in any likeness of
business with any Person;
(ix) license, franchise, distributorship or other agreement,
including those that relate in whole or in part to any
patent, trademark, trade name, service mark or copyright
or to any ideas, technical assistance or other know-how of
or used by the Business; or
(x) any other material Contract not made in the ordinary course
of Seller's business consistent with past practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.68 and Schedule 2.1.4 is valid and
enforceable in accordance with its terms, Seller and, to Seller's Knowledge any
other party thereto, are in compliance with the provisions thereof, Seller and,
to Seller's Knowledge any other party thereto, are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and no event has occurred that with or without the
giving of notice or lapse of time, or both, would constitute a default by
Seller thereunder and, to Seller's Knowledge, a default by any other party
thereto; (ii) except as set forth on Schedule 1.68 and Schedule 2.1.4 no
advance payments have been received by Seller by or on behalf of any party to
any of the Contracts, commitments, leases and other instruments listed on
Schedule 1.68 and Schedule 2.1.4 for services to be rendered or products to be
delivered to such party after the Closing Date; and (iii) no consent or
approval of any party to any Contract, commitment, lease or other instrument,
document or undertaking listed on Schedule 1.68 and Schedule 2.1.4 is required
for the execution of this Agreement or the consummation of the transactions
contemplated hereby.
6.11 Permits, Licenses. Seller has all Permits that are required to
operate the Business (including without limitation those required under any
Environmental Law) and, Seller is in material compliance with the terms and
conditions of the Permits. Schedule 2.1.6 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.6 hereto as nontransferable
or requiring such consent or approval.
6.12 Compliance with Laws. Except as described in Schedule 6.12 hereto,
Seller has at all times conducted, and is presently conducting, the Business so
as to comply in all material respects with all Legal Requirements applicable to
the conduct of operation of the Business or the ownership or use of the
Purchased Assets.
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6.13 Legal Proceedings. Except as described in Schedule 6.13 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any Governmental Authority or, to Seller's Knowledge, threatened against
Seller with respect to the Business or any of the Purchased Assets, or relating
to the transactions contemplated by this Agreement, nor to Seller's Knowledge
is there any basis for any such claim, action, suit, proceeding, investigation,
or inquiry. Except as set forth on Schedule 6.13 hereto, Seller is not a party
to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental, regulatory or
administrative official, body or authority that relates to the Purchased Assets
or the Business or that might affect the transactions contemplated by this
Agreement.
6.14 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.14, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the financial statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.4 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's business consistent with past practice since the
financial statements dated October 31, 1996 provided to Purchaser.
6.15 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
6.16 Employees. Schedule 1.23 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.23, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
6.17 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.23,
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of the
transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
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6.18 Payroll Practice/Employee Arrangement.
6.18.1 Benefit Plans. Schedule 6.18 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has any
liability or obligation, whether actual or contingent, with respect to
the Employees or their respective beneficiaries.
6.18.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.18.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.19 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
6.20 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.21 Condition of Assets. Except as set forth on Schedule 6.21, all
buildings, structures and equipment that are part of the Purchased Assets are
structurally sound, are in generally good operating condition and repair
(subject only to routine maintenance and repair) and are usable in the conduct
of the Business consistent with past practice and conform to all applicable
Legal Requirements.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability. Seller has operated the
Business and each parcel of Real Property in material compliance with
all applicable Environmental Laws. Seller is not subject to any
liability, penalty or expense (including legal fees), and Purchaser
will not suffer or incur any loss, liability, penalty or expense
(including legal fees) by virtue of any violation of any Environmental
Law occurring prior to the Closing, any environmental activity
conducted on or with respect to any property at or prior to the Closing
or any environmental condition existing on or with respect to any
property at or prior to the Closing, in each case whether or not Seller
permitted or participated in such
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act or omission.
6.23.2 Treatment; CERCLIS. Except in material compliance with
all applicable Environmental Laws, Seller has not treated, stored,
recycled or disposed of any hazardous material, and to Seller's
Knowledge no other Person has treated, stored, recycled or disposed of
any hazardous material on any part of the Real Property. There has
been no release of any hazardous material at, on or under any Real
Property. Seller has not transported any hazardous material or arranged
for the transportation of any hazardous material to any location that
is listed or proposed for listing on the National Priorities List
pursuant to Superfund, on CERCLIS or any other location that is the
subject of federal, state or local enforcement action or other
investigation that may lead to claims against Seller for cleanup costs,
remedial action, damages to natural resources, to other property or for
personal injury including claims under Superfund. None of the Real
Property is listed or, to Seller's Knowledge, proposed for listing on
the National Priorities List pursuant to Superfund, CERCLIS or any
state or local list of sites requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation, abatement
or cleanup of any threatened or actual release of any hazardous
material. Seller is not required to place any notice or restriction
relating to the presence of any hazardous material at any Real
Property or in any deed to any Real Property. Seller has provided to
Purchaser a list of all sites to which, to Seller's Knowledge, Seller
has transported any hazardous material for recycling, treatment,
disposal, other handling or otherwise. There has been no past, and
there is no pending or contemplated, claim by Seller under any
Environmental Law or Legal Requirement based on actions of others that
may have impacted on the Real Property, and Seller has not entered
into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. All
storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 6.23, and, to Seller's
Knowledge, all such tanks and associated piping are in sound condition
and are not leaking and have not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business in
respect of claims or occurrences concerning Seller prior to the Closing, (i)
take no action to eliminate or reduce such coverage, other than normal
elimination or reduction of coverage as they occur by virtue of the filing of
claims in the ordinary course under
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<PAGE> 24
such insurance policies, (ii) pay when due any premiums under such policies for
periods, including retrospective or retroactive premium adjustments and (iii)
provided Purchaser maintains Seller's insurance policies or otherwise is
entitled to make a claim against Seller's insurance policies pursuant to the
terms of this Agreement, use its best efforts to assist in filing and
processing claims under, and otherwise cooperate with Purchaser to allow
Purchaser, in its own name, or on behalf of Seller, to obtain all coverage
benefits applicable to the Business under such insurance policies, including
the execution of assignments or powers of attorney for the benefit of
Purchaser. Any proceeds of insurance paid by an insurer to Seller for claims of
Purchaser made in accordance with this Section shall be promptly paid to
Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.26. Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. [RESERVED]
6.28. Occupancy Reports. Seller has provided Purchaser with copies of
Seller's occupancy reports for the Facility for the last year. Each such
occupancy report was prepared based on the number of operational beds (i.e.,
double occupancy rooms were only counted as such when both beds were occupied).
6.29. Tax Returns. Seller has filed or caused to be filed, or will
file or cause to be filed, all Tax Returns that are required to be filed by it
prior to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) such Taxes that are fully reserved
against on the financial statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.29,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
6.30 Completeness and Accuracy. All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement
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contains or will contain any untrue statement of material fact, or omits or
will omit to state any material fact necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. All Contracts, Permits and other documents and instruments
furnished or made available to Purchaser by Seller are or will be true,
complete and accurate originals or copies of originals and include all
amendments, supplements, waivers and modifications thereto.
6.31 Seller's Assets. Seller nor Seller's "ultimate parent entity" (as
such term is defined in 16 CFR, Chapter 1, Subchapter H, ss. 801.1 et seq) had:
(i) annual net sales of $100,000,000 or more as stateD on its last regularly
prepared statement of income and expenses; or (ii) total assets of $100,000,000
or more as stated on its last regularly prepared balance sheet.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASERNS
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business,
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violate, or require any consent, authorization or approval of, or exemption by,
or filing under any provision of any contract, law, statute, rule or regulation
to which Purchaser is subject, (iii) violate any judgment, order, writ or
decree of any court applicable to Purchaser, (vi) conflict with, result in a
breach of, constitute a default under, or accelerate or permit the acceleration
of the performance required by, or require any consent, authorization or
approval under any agreement, contract, commitment, lease or other instrument,
document or undertaking to which Purchaser is a party or (v) result in the
creation or imposition of any Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss.
801.1 et seq) had: (i) annual net sale of $100,000,000 or morE as stated on its
last regularly prepared statement of income and expenses; or (ii) total assets
of $100,000,000 or more as stated on its last regularly prepared balance sheet.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in its conduct of the Business,
except as otherwise agreed by Purchaser in writing:
8.1.1 Access to Information. Give to Purchaser and its counsel,
accountants, consultants and other representatives, for the purpose of
audit, review and copying, reasonable access, during normal business
hours, to such of the properties, books, accounts, Contracts and
records of Seller as are relevant to the Purchased Assets and the
Business, and furnish or otherwise make available to Purchaser all
such information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide
Purchaser with the following:
(i) Seller's occupancy reports for the Facility, as soon
as the same become available through the Closing
Date, but no later than ten days after the last day
of any given month (which reports shall be prepared
based on the number of operational beds);
(ii) Seller's federal and/or state surveys or inspections
and any plans of
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correction for the Facility, as soon as the asme
become available through the Closing Date, but no
later than ten days after received by Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule
for such Facility;
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the Closing Date, but no later than 21 days
after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to
the date hereof and, to the extent consistent with such operation,
use its best efforts until the Closing Date to (i) preserve and keep
intact the Business, (ii) keep available the services of the
Employees; (iii) preserve its relationships with residents, patients,
suppliers and others having business dealings with Seller in
connection with the Business and (iv) maintain current marketing
activities;
8.1.3 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in their present order and
condition, in accordance with Seller's past practices, reasonable
wear and tear excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books
and Records in the usual, regular and ordinary manner, on a basis
consistent with past practice;
8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased
Assets and to the conduct of the Business;
8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the
Business in accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial
efforts to obtain in writing as promptly as possible any approvals
and consents as required to be obtained by Seller in order to
effectuate the transactions contemplated hereby and deliver to
Purchaser copies of such approvals and consents. Accordingly, Seller
shall cooperate with Purchaser's efforts to obtain the necessary
licenses to operate the Facility from the appropriate Accreditation
Bodies, including, without limitation, the Department of Welfare and
the Department of Health. Upon execution and delivery of this
Agreement, Seller shall promptly:
(i) provide Purchaser with copies of all Permits;
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(ii) notify each Accreditation Body and Third Party Payor as
required by any Legal Requirement of the pending change
of ownership of the Facility; and
(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
Seller's residents/patients of the Facility and (ii)
notices to human service agencies (as that term is
defined by the Department of Welfare). Prior to sending
the notices, Seller shall provide copies to Purchaser
for review and approval, which approval shall not be
unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt notice
in writing of any fact that, if known on the date hereof, would have
been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.9 Surveys. Execute such affidavits or other instruments as
are commercially reasonable and necessary in order for Purchaser to
remove title exceptions for encroachments or survey discrepancies
relating to the Real Property;
8.1.10 Pay Employees to Closing Date. Pay all wages, salaries and
other sums due Employees through the close of business on the day
prior to the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary steps
to transfer to Purchaser the employment of all Employees electing to
continue their employ with Purchaser as of the Closing Date;
8.1.12 Appointment of Seller's Agent. Irrevocably appoint Blumer
or Kelly ("Seller's Agent"), as Seller's agent and attorney-in-fact to
take any action required or permitted to be taken hereunder by Seller,
including without limitation, the giving and receipt of notices to be
delivered or received by or on behalf of Seller, the payment of
expenses relating to the transactions contemplated under this
Agreement, the representation of Seller in indemnification proceedings
hereunder, and the right to waiver of any of the terms of this
Agreement in any respect, and agree to be bound by any and all actions
taken by Seller's Agent. Purchaser shall be entitled to rely
exclusively on any communications given by Seller's Agent on behalf of
Seller, and shall not be liable for any action taken or not taken in
reliance on Seller's Agent. In the event that Seller's Agent resigns
or refuses to act, Seller shall promptly appoint another Seller as the
substitute Sellers' Agent to act under this Agreement, and Seller
shall promptly deliver a copy of such appointment to Purchaser; and
8.1.13 Compliance with Agreement. Not undertake any course of
action
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materially inconsistent with satisfaction of the conditions applicable
to it set forth in this Agreement, and use all reasonable efforts to
do all such acts and take all such measures as may be reasonably
necessary to comply with the representations, agreements, conditions
and other provisions of this Agreement.
8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage statements/affidavits in
form and substance satisfactory to Purchaser's title insurer regarding
title, mechanic's liens and such other customary matters as may be
reasonably requested by Purchaser or Purchaser's title insurer; and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller under penalties of perjury, in
the form prescribed by Treasury Regulation Section
1.1445-2(b)(2)(iii), stating Seller's name, address and Federal tax
identification number, and that it is not a "foreign person" within
the meaning of Section 1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign, lease,
encumber or otherwise dispose of any of the Purchased Assets other
than in the ordinary course of Seller's business consistent with past
practices;
8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of Seller's
business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security interest or
any other Encumbrance, other than Permitted Encumbrances, any of the
Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase the
rate of compensation paid, or pay any bonus, to anyone connected with
the Business, except for
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those increases or bonuses planned, in the ordinary course of Seller's
business consistent with past practices, or establish or adopt any new
pension or profit-sharing plan, deferred compensation agreement or
employee benefit arrangement of any kind whatsoever covering or
affecting Employees;
8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.68 or
Schedule 2.1.4 or other authorization or agreement affecting the
Business or the Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of any
fact that, if known at the Closing Date, would have been required to
be set forth or disclosed in or pursuant to this Agreement, or which
would result in the breach by Purchaser of any of its representations,
warranties, covenants or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and Purchaser shall use its best
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement; and
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business.
9.1.4 Seller's Employees. Take all reasonable steps to ensure
that the transfer of employment of all of the Employees electing to
continue their employ with Purchaser as are able to be accomplished
prior to or on the Closing Date.
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9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the Employees, residents, patients and suppliers
of Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein ("Purchaser's Due Diligence").
9.3 Approvals, Consents. Use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate the Facility from the Department of Welfare and the Department of
Health, as applicable, including:
(i) notify each Accreditation Body and Third Party Payor as
required by any Legal Requirement of the pending change of
ownership of the Facility; and
(ii) provide such other notices as required by all Legal
Requirements including (i) notices to Seller's
residents/patients of the Facility and (ii) notices to human
service agencies (as that term is defined by the Department
of Welfare). Prior to sending the notices, Purchaser shall
provide copies to Seller for review and approval, which
approval shall not be unreasonably withheld.
9.4 Publicity; Advertisement. Except as required by law, publicize,
advertise or announce to any third-party, except as required pursuant to this
Agreement to obtain the consent of such third-party, the entering into of this
Agreement, the terms of this Agreement or the transactions contemplated hereby;
provided, however, the foregoing shall not be applicable to disclosures made by
Purchaser to Purchaser's lender in response to such lender's reasonable
requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
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10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party to be performed or complied
with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the incumbency and specimen signature of
each officer or representative of Seller executing this Agreement, the
certificate referred to in Section 10.3 and the Ancillary Agreements to which
Seller is a party.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 [RESERVED].
10.7 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
10.8 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.9 Arrangements with Employees. Subject to the provisions of
Sections 4.3 and 9.1.4, substantially all of the Employees shall have accepted
employment with Purchaser effective on the Closing Date.
10.10 Employment Agreements. Kelly and Blumer shall have executed and
delivered the Employment Agreements with Purchaser.
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10.11 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to Purchaser
and Purchaser's lender, reasonably satisfactory to Purchaser and its counsel as
to the matters set forth in Sections 6.1, 6.2 and 6.3 hereof .
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement, the
certificate referred to in Section 11.3 and the Ancillary Agreements to which
Purchaser is a party.
11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted,
threatened or anticipated which questions the validity or legality of the
transactions contemplated hereby.
11.6 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
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11.7 Employment Agreements. Purchaser shall have executed and
delivered the Employment Agreements with Kelly and Blumer.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of five (5) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of five years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
12.5.1 Transfer of Assets. Seller agrees that Purchaser, from and
after the Closing, shall have the right and authority to collect for
Purchaser's own account all items which shall be transferred to
Purchaser as provided herein.
12.5.2 Endorsement of Checks. From and after the Closing,
Purchaser shall have the right and authority to retain and endorse
without recourse the name of Seller on any check or any other
evidences of indebtedness received by Purchaser on account of any of
the Business and Purchased Assets transferred to Purchaser hereunder.
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12.5.3 Seller's Remittance of Funds. After the Closing, Seller
shall promptly transfer and deliver to Purchaser any cash or other
property, if any, that Seller may receive related to the Business or
the Purchased Assets other than the Excluded Assets.
12.5.4 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or
other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.5.5 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving,
any Assumed Liability, and Purchaser shall have the right to conduct
and control all negotiations and proceedings with respect thereto.
Seller shall notify Purchaser promptly of any claim made with respect
to any Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any Assumed
Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's Accountants to cooperate at Purchaser's cost and expense, with
Purchaser and its auditors in the preparation of combined audited financial
statements of Seller and each of the Other Companies for the years ended
December 31, 1996, 1995 and 1994 to the extent required in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. As used herein, the term "combined audited
financial statements" shall mean the audited financial statements of Seller and
each of the Other Companies, combined.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any Books and
Records relating to the Business that Seller may retain as may reasonably be
required in connection with the preparation of financial information or tax
returns of Purchaser.
12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial
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account closing and reporting and claims and litigation asserted by or against
third parties, including, but not limited to, making employees available at
reasonable times to assist with, or provide information in connection with
financial account closing and reporting and claims and litigation, provided
that Seller reimburses Purchaser for its reasonable out-of-pocket expenses
(including costs of employees so assisting) in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and Purchaser;
(ii) by Seller or Purchaser if Closing has not taken place
on or before March 15, 1997; provided however, that no
Party then in material breach of any of its obligations
hereunder shall have the right to terminate;
(iii) by Purchaser upon notice to Seller if any of the
conditions set forth in Article X hereof have not been
satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Purchaser to fulfill its obligations under
this Agreement);
(iv) by Seller upon notice to Purchaser if any of the
conditions set forth in Article XI hereof have not been
satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Seller to fulfill its obligations under this
Agreement);
(v) by Seller if Purchaser materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Seller gives written
notice of such failure to Purchaser;
(vi) by Purchaser if Seller materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Purchaser gives written
notice of such failure to Seller; and
(vii) by Purchaser upon notice to Seller if any of the
conditions set forth below have not been satisfied or
become impossible to satisfy by the Due Diligence Date
(other than by reason of the material failure of
Purchaser to fulfill its obligations under this
Agreement):
(a) the results of Purchaser's Due Diligence shall not
be satisfactory to Purchaser in its sole discretion;
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(b) Purchaser shall not have secured a commitment for
financing the transaction contemplated by this
Agreement on terms and conditions satisfactory to
Purchaser in its sole discretion;
(c) the results of an inspection of the physical
condition of the Real Property, including the
improvements and the HVAC, electrical, plumbing and
other systems, by a qualified engineering firm engaged
by Purchaser, at its cost and expense, are not
satisfactory to Purchaser in its sole discretion; and
(d) the results of an environmental report on the
Purchased Assets and the Business from a qualified
geotechnical or engineering firm engaged by Purchaser,
at its cost and expense, are not satisfactory to
Purchaser in its sole discretion.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Deposit Fund. Upon termination of this Agreement, the Deposit
Fund shall be disbursed as follows and in accordance with the terms and
conditions of the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13.1(iii) or Section 13.1(vi), the Parties
agree to instruct Escrow Agent to release the entire amount
of the Deposit Fund to Purchaser;
(ii) if this Agreement is terminated by Purchaser pursuant to
Section 13.1(vii) on or before the Due Diligence Date, the
Parties agree to instruct Escrow Agent to release one-half
of the amount of the Deposit Fund to Purchaser and the
balance of the Deposit Fund to Seller; and
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the Parties
agree to instruct Escrow Agent to release the entire amount
of the Deposit Fund to Seller.
13.4 Remedies.
13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the Deposit Fund
as set forth in Section 13.3 shall be the sole and exclusive remedy of Seller
as liquidated damages, and shall be in lieu of all other rights and remedies
which may otherwise be available at law or in equity.
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13.4.2 Purchaser's Remedies. If Purchaser has the right to
terminate this Agreement pursuant to Section 13.1(vi), in addition to
Purchaser's right to receive the Deposit Fund as permitted under Section 13.3,
Purchaser may seek any other remedies that may otherwise be available at law or
in equity, including, without limitation, an action for specific performance
and reimbursement from Seller for all expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive until October 31, 1997 (the
"Survival Date"); provided, however, that all representations and warranties of
Seller with respect to any environmental matters set forth in Section 6.23 of
this Agreement shall survive for two years after the Closing Date.
Notwithstanding the foregoing, there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of the other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only and
shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall, indemnify, defend, save
and hold Purchaser, any assignee of Purchaser and their respective officers,
directors, employees, agents and Affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller or any Ancillary Agreement to which Seller is or is
to become a party, a breach or nonfulfillment of any covenant or agreement made
by any Seller in this Agreement or in any Ancillary Agreement to which Seller
is or is to become a party, and any and all liabilities of Seller of any nature
whatsoever, whether due or to become due, whether accrued, absolute, contingent
or otherwise, existing on the Closing Date or arising out of any transaction
entered into, or any state of facts existing, prior to the Closing Date, except
for any Assumed Liability. To the extent any Purchaser Indemnitee is entitled
to collect
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Purchaser Damages, Purchaser shall, at its option and subject to the terms of
the Escrow Agreement, be entitled to withdraw sufficient funds from the Escrow
Fund pursuant to the Escrow Agreement in lieu of payment directly from Seller,
and to the extent the amount due any Purchaser Indemnitee exceeds the balance of
the funds held under the Escrow Agreement, Purchaser shall be entitled to
collect such balance owned to Purchaser Indemnitee directly from Seller.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, Affiliates and
agents (collectively, "Seller Indemnitees") harmless from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, a breach of any representation or warranty made by Purchaser
in this Agreement or in any certificate or document furnished pursuant hereto
by Purchaser or any Ancillary Agreement to which Purchaser is a party, a breach
or nonfulfillment of any covenant or agreement made by Purchaser in this
Agreement or in any Ancillary Agreement to which Purchaser is a party, any
Assumed Liability and any and all liabilities of any nature whatsoever arising
out of Purchaser's operation of the Business after the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
Notwithstanding the foregoing, any Purchaser Indemnitee shall be required to
notify Seller's Agent of any claim for Purchaser Damages as required herein
even though the same may be included in the $25,000 threshold set forth in
Section 14.6, and Seller shall have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement. The Indemnified Party
shall permit the Indemnifying Party to participate in the defense of any
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such action or suit through counsel chosen by the Indemnifying Party, provided
that the fees and expenses of such counsel shall be borne by the Indemnifying
Party. If the Indemnified Party permits the Indemnifying Party to undertake,
conduct and control the conduct and settlement of such action or suit, the
Indemnifying Party shall not thereby permit to exist any Encumbrance upon any
asset of the Indemnified Party; the Indemnifying Party shall not consent to any
settlement that does not include as an unconditional term thereof the giving of
a complete release from liability with respect to such action or suit to the
Indemnified Party; the Indemnifying Party shall permit the Indemnified Party to
participate in such conduct or settlement through counsel chosen by the
Indemnified Party; and the Indemnifying Party shall agree promptly to reimburse
the Indemnified Party for the full amount of any Damages including fees and
expenses of counsel for the Indemnified Party incurred after giving the
foregoing notice to the Indemnifying Party and prior to the assumption of the
conduct and control of such action or suit by the Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under
Section 14.2 until the aggregate amount of Purchaser Damages thereunder exceeds
$25,000, but if the aggregate amount of Purchaser Damages thereunder exceeds
$25,000 in the aggregate, then indemnification shall be made by Seller
thereunder to the full extent of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those Purchaser
Damages as to which Purchaser has given Seller's Agent written notice thereof
on or before the Survival Date; provided, however, that with respect to any
claim for Purchaser Damages sustained by reason of a breach of any
representation or warranty relating to those matters governed by Section 6.23,
Seller's liability shall be limited to Purchaser Damages as to which such
written notice shall have been given to Seller's Agent within two years of the
Closing Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser Damages
arising out of fraud, the breach of any representation or warranty contained
herein or pursuant hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a fact or omitted to
state a fact necessary to make the statements of facts contained therein not
misleading or misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with respect
to the Retained Liabilities.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not
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the transactions herein contemplated shall be consummated, Purchaser and Seller
shall pay their own fees, expenses and disbursements, including the fees and
expenses of their respective counsel, accountants and other experts in
connection with the subject matter of this Agreement and all other costs and
expenses incurred in performing and complying with all conditions to be
performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller.Notice to Seller.
If to Seller, to:
Sellers' Agent:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
Scranton, PA 18505
Fax: (717) 963-1601
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With a required copy to:
Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
15.5.2 Notice to PurchaserNotice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof shall thereof be binding upon
any Party unless set forth in an instrument in writing signed by the Party to
be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
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15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through a
sale-leaseback. Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide Seller with a copy of any
such assignment, and Seller agrees to execute and deliver any consents
reasonably required by Purchaser's lender in connection therewith, provided
such assignment does not expand any of Seller's obligations and liabilities
hereunder. Notwithstanding any permitted assignment of this Agreement by
Purchaser, Purchaser shall remain liable to Seller for all obligations and
liabilities to be performed by or on behalf of Purchaser hereunder.
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[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
------------------------------
Name: Brian L. Barth
Title: Vice President
KINGSTON MANOR PERSONAL CARE AND
RETIREMENT CENTER, INC.
By: /s/ Michael P. Kelly
------------------------------
Name: Michael P. Kelly
Title: President
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EXHIBIT 2.10
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
27th day of December, 1996, by and between Balanced Care Corporation, a
Delaware corporation ("Purchaser"), and Keystone Health Ventures, Inc., a
Pennsylvania corporation ("Seller").
RECITALS:
Seller owns a personal care home located at P.O. Box 160, Sturges
Road, Peckville, PA 18452 (the "Facility"). Purchaser desires to purchase
substantially all of the assets of Seller and the Business (as hereinafter
defined) related thereto and Seller desires to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Health, the Department of Welfare and all other Persons having jurisdiction
over the accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of the Business as of such date prepared in accordance with
GAAP consistently applied, including those described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute
control.
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1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the bill of sale, assignment and assumption
described in Section 5.2.2, the Escrow Agreement described in Section 14.2 and
the Employment Agreements described in Section 10.9 .
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Blumer" shall mean James J. Blumer, Jr.
1.9 "Books and Records" shall have the meaning given to it in Section
6.15.
1.10 "Business" shall mean the operation of a personal care home and
any other ancillary health care services owned, operated, delivered, managed,
developed, constructed, maintained, used, occupied or possessed by Seller in
connection therewith (including, without limitation, any outpatient and
contract rehab therapy services or any Alzheimer's units).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section 5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident/Patient's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, franchises and books and records of account benefiting,
relating to the Purchased Assets or the operation of the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy, possession or operation thereof, or the operation of any of the
programs or services in
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conjunction with the Business and all renewals, replacements and substitutions
therefor, issued by any Governmental Authority, Accreditation Body or Third
Party Payor or maintained or used by Seller with any third Person.
1.18 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to such term in Section
14.4.
1.20 "Department of Health" shall mean the Commonwealth of
Pennsylvania, Department of Health.
1.21 "Department of Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.21a "Deposit Fund" shall mean $30,000 to be paid by Purchaser and
held by the Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement.
1.22 "Due Diligence Date" shall mean January 15, 1997
1.23 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.23 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's business consistent with past
practices).
1.24 "Employment Agreements" shall mean the contracts entered into
between Purchaser and each of Kelly and Blumer in substantially the form of
Exhibit 1.24.
1.25 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.26 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Sections 136 et seq.)], other Legal Requirements, any common law doctrine and
any provision or condition of any permit, license or other operating
authorization relating to (i) the protection of the environment or the public
welfare from actual or potential exposure (or the effects of exposure) to any
actual or potential release, discharge, disposal or emission (whether past or
present) of any Regulated Substance or (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
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handling of any Regulated Substance.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.28 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.29 "Escrow Agent" shall mean Mellon Bank.
1.30 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.30.
1.31 "Escrow Fund" shall mean $50,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
1.32 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.32a "Facility" shall have the meaning given to such term in the
Recitals of this Agreement.
1.33 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.38 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.39 "Kelly" shall mean Michael P. Kelly.
1.39a "Keystone Management Services" shall mean Keystone Management
Services, a Pennsylvania general partnership, consisting of its general
partners, Kelly and Blumer.
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1.40 "Knowledge" and words of similar import shall mean, with respect
to Purchaser, actual knowledge of a particular fact or other matter being
possessed by an officer or other individual now or formerly having principal
responsibility for a business or administrative function of such Party,
including individuals serving in such a capacity in or for the Business, and
the knowledge that reasonably could be expected to be obtained in the course of
conducting a reasonably comprehensive investigation concerning the subject
matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Other Agreements" shall mean the agreements set forth on
Schedule 1.46, including any other agreements executed and delivered under or
in connection therewith.
1.47 "Other Companies" shall mean the companies identified on Schedule
1.47.
1.48 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.49 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
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1.50 "Payroll Practice / Employee Arrangement" shall have the meaning
given to such term in Section 6.18.
1.51 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licences, permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under, any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, now or hereafter required or issued by any Governmental
Authority, Accreditation Body or Third Party Payor.
1.52 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.52 hereto.
1.53 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.54 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.55 [RESERVED].
1.56 "Proprietary Rights" shall have the meaning given to such term in
Section 6.9.1.
1.57 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.58 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.59 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.60 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.61 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.61a "Purchaser's Due Diligence" shall have the meaning given to such
term in Section 9.2.
1.62 "Purchaser Indemnitees" shall have the meaning given to such term
in Section
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14.2
1.63 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
1.64 "Real Property Leased" shall mean the real property leased by
Seller in connection with the Business as more fully described in Schedule 1.64
hereto.
1.65 "Real Property Owned" shall mean the real property owned by
Seller, and used in connection with the Business as more fully described in
Schedule 1.65 hereto.
1.66 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.67 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv) any spouse, sibling, ancestor or lineal
descendant of any natural Person identified in any one of the preceding
clauses.
1.68 "Resident/Patient's Agreements" shall mean all contracts,
agreements and consents executed by or on behalf of any resident, patient or
other Person seeking services at the Facility as more fully described in
Schedule 1.68 hereto, including, without limitation, assignments of benefits
and guarantees, and such resident/patient's related medical and/or other
records.
1.69 "Retained Liabilities" has the meaning given that term in Section
4.2.
1.70 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.71 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually and collectively, as the context may
require.
1.72 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
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1.73 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.74 "Seller's Accountants" shall have the meaning given to it in
Section 6.4.
1.74a "Seller's Knowledge" and words of similar import shall mean,
with respect to Seller, actual knowledge of a particular fact or other matter
being possessed by Kelly and/or Blumer and the knowledge that reasonably could
be expected to be obtained concerning the subject matter by Kelly and Blumer in
the ordinary course of their ownership and operation of the Business.
1.74b "Survival Date" shall have the meaning given to such term in
Section 14.1.
1.75 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.76 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.77 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.78 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
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2.1.1 Real Property Owned. The Real Property Owned, together
with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto;
2.1.2 Real Property Leased. Seller's interest, as lessee, in
the Real Property Leased;
2.1.3 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements,
automobiles, supplies, office furniture and office equipment,
computing and telecommunications equipment and other items of personal
property that are owned by Seller and used in connection with the
Business, including those described in Schedule 2.1.3 hereto;
2.1.4 Contracts Relating to the Business. All of the interest
of Seller in all Contracts relating to the acquisition or ownership by
Seller of any of the Purchased Assets or the operation of the
Business, the Resident/Patient's Agreements listed on Schedule 1.68
hereto and those Contracts not required to be listed on 2.1.4 by
reason of the provisions of Section 6.10.
2.1.5 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations material and advertising material used in the Business,
whether in electronic form or otherwise;
2.1.6 Permits, Licenses. All of Seller's interest in Permits
relating to the Business, including those listed in Schedule 2.1.6
hereto, to the extent such Permits are transferrable to Purchaser;
2.1.7 Trade Secrets. All policies and procedures, methods of
delivery of services, trade secrets, designs, drawings and
specifications, market studies, consultants' reports, prototypes, and
all similar property of any nature, tangible or intangible, of Seller
used in the Business;
2.1.8 Intellectual Property. All right, title and interest of
Seller in the patents, trademarks, trademark registrations, trade
names, service marks, copyrights and copyright registrations described
in Schedule 2.1.8;
2.1.9 [RESERVED];
2.1.10 Goodwill. All of the interest of Seller in and to the
goodwill incident to the Business, including but not limited to the
value of the Facility name associated with the Business and the value
of good customer relations;
2.1.11 Inventory. All Closing Inventory;
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2.1.12 Resident/Patient Funds. All deposits and escrow
accounts of, or for the benefit of, any of Seller's resident/patients
at the Closing Date;
2.1.13 Prepaid Expenses. All Seller's Prepaid Expenses of, or
for the benefit of, the Business at the Closing Date including those
described in Schedule 2.1.13, to the extent the benefits thereof are
transferable to Purchaser;
2.1.14 Computer Software. All computer applications software,
owned or licensed, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.), or
specific, unique-to-the-business usage, and all computer operating,
security or programming software, owned or licensed by Seller and used
in the operation of the Business; and
2.1.15 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following assets
(collectively, the "Excluded assets") shall be excluded from this Agreement,
and shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable. All Accounts Receivable of Seller
existing on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees
up through and including the Closing Date;
2.2.3 Consideration. The consideration paid to Seller
pursuant to this Agreement;
2.2.4 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.2.5 Corporate Books. Corporate minute books and stock books
of Seller;
2.2.6 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the
extent they relate to liabilities or obligations that are not assumed
by Purchaser hereunder (except the amount of costs and expenses
Purchaser shall have incurred with respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority; and
2.2.8 Other Assets. Assets listed on Schedule 2.2.8.
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2.3 License to Use Certain Assets. To the extent that there are any
tangible or intangible assets used by Seller in connection with the Business
that are not specifically designated as Excluded Assets by Section 2.2 (without
reference to this Section), the Purchased Assets shall include an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferrable license to
utilize such assets in connection with the operation of the Business after the
Closing Date. To the extent that any such assets may not be licensed, Seller
shall take all steps required to assure that Purchaser obtains the benefit of
such assets.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the
"Purchase Price") shall be in the amount of $3,024,000, to be paid by
certified or cashier's check drawn on a national bank or by wire
transfer as follows:
(i) the Purchase Price less the sum of the Deposit Fund
and the Escrow Fund to Seller at the time of Closing;
(ii) the Escrow Fund to Escrow Agent at the time of Closing
to be held in escrow pursuant to the Escrow Agreement;
and
(iii) upon execution and delivery hereof, the Deposit Fund
to Escrow Agent to be held in escrow pursuant to the
Escrow Agreement.
3.1.2 Other Consideration. As additional consideration, Purchaser
shall also assume the Assumed Liabilities at the time of Closing.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the Business in accordance with the
allocation set forth in Schedule 3.3. Purchaser and Seller shall report the
federal, state and local income and other tax consequences of the purchase and
sale contemplated hereby in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim,
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loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date,
Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
(i) all obligations of Seller accruing subsequent to the Closing
Date under the Contracts contemplated by Section 2.1.4,
including, without limitation, those set forth in Schedule
1.68 and Schedule 2.1.4, provided that the rights thereunder
have been duly and effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing after the Closing Date
under the Permits described in Section 2.1.6, provided that
the rights thereunder have been duly and effectively assigned
to Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or
obligations incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the
indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or
the contract of indemnity) or had committed fraud in the
insurance application;
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(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to Closing, and the
transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing; notwithstanding the foregoing, all sales and use
taxes, transfer taxes, and all other impositions of tax
arising solely by reason of the transfers contemplated by
this Agreement (excluding all federal, state and local income
and gross receipt taxes on the earnings or gross receipts of
Seller prior to the Closing Date, which shall remain the sole
responsibility of Seller) shall be the responsibility of and
shall be borne equally by Seller and Purchaser (any real
estate and personal property taxes for the year in which
Closing occurs shall be pro-rated to the Closing Date (based
on a calendar year or fiscal year for which such taxes are
levied basis), if the tax rates for the year in which Closing
occurs shall not be fixed prior to the Closing Date for a
particular item of the Purchased Assets, the pro-ration of
taxes thereon shall be based upon the tax rate for the year
prior to Closing applied to the latest assessment valuation;
however, in the event that any such taxes are increased or
decreased for the year in which Closing occurs, Seller or
Purchaser shall then reimburse the other party for amounts in
excess of or less than the proration as determined as of the
Closing Date);
(x) for long term indebtedness and other obligations or
guarantees of Seller;
(xi) for Current Liabilities reflected on the books of Seller at
the Closing Date; and
(xii) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date.
4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees (except as indicated on Schedule
1.23) in substantially similar jobs, at the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain liable for all
liability for all accrued vacation entitlements as indicated on
Schedule 12.3, workers' compensation, disability and occupational
diseases of or with respect to all of Seller's Employees attributable
to
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entitlements, injuries, claims, conditions, events and occurrences
occurring on or before the Closing Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Employees of Seller hired by Purchaser attributable to entitlements,
injuries, claims, conditions, events and occurrences first occurring
after the Closing Date.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place on or after January 2, 1997, but in any event
not later than March 15, 1997 (the "Closing"). The date of the Closing shall be
referred to as the "Closing Date." The Closing shall take place at such time,
date and place as may be mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deeds. Duly executed special warranty deeds, in
recordable form, transferring good and marketable fee simple title to
the Real Property Owned, subject only to Permitted Encumbrances, and
such affidavits or other instruments as Purchaser's title insurance
company may reasonably request, including but not limited to (i)
exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants
pursuant to agreements with Seller and (C) mechanics' or materialmens'
liens and (ii) payoff letters, lien releases and satisfaction pieces
and (iii) gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that Seller has been able to obtain that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the Purchased Assets with assignments to
Purchaser;
5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property
or any of the other Purchased Assets for the applicable current tax
year or years, and all tax assessments or notices thereof upon which
such taxes are based;
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5.2.5 Plans and Specifications. To the extent not delivered
prior to Closing, all plans, specifications and other drawings in
Seller's possession or reasonably obtainable by Seller and used in the
construction of the Facility or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty, the
property under the Contracts or any of the other Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's
possession or reasonably obtainable by Seller, surveys and hazardous
waste studies prepared within 36 months before the date hereof, for or
relating to the Purchased Assets;
5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements relating to the ownership, operation, use,
occupancy, licensure, accreditation or maintenance of the Business;
and
5.2.8 Rent Roll. The rent roll of Seller listing all
resident/patients and their respective rent payments current as of two
days prior to the Closing.
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
5.3 Reasonable Steps. Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof and to be performed by
it.
6.2 Authorization of Agreement and Enforceability. Seller has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary
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Agreements to which it is a party, the performance by it of all terms and
conditions hereof and thereof to be performed by it and the consummation of the
transactions contemplated hereby and thereby, including, without limitation,
obtaining such shareholder's consents as is required under the Pennsylvania
Business Corporation Law. This Agreement constitutes, and the Ancillary
Agreements to which Seller is party, upon Seller's execution and delivery
thereof, will constitute the legal, valid and binding obligations of Seller,
enforceable in accordance with their terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
respect to notices and consents required to be given by Seller to any
Accreditation Body or Governmental Authority in connection with the sale and
change of ownership of the Purchased Assets and the Business, violate or
require any consent, authorization or approval of, or exemption by, or filing
under any provision of any law, statute, rule or regulation to which Seller,
the Business or the Purchased Assets are subject, (iii) violate any judgment,
order, writ or decree of any court applicable to Seller, the Business or the
Purchased Assets, (iv) except with respect to agreements with Seller's lender
and except as identified on Schedule 2.1.4, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any agreement, Contract, commitment, lease or other instrument, document
or undertaking to which Seller is a party or any of the Purchased Assets is
bound or (v) result in the creation or imposition of any Encumbrances upon the
Purchased Assets.
6.4 Financial Statements. Seller has delivered to Purchaser true and
complete copies of the (i) audited balance sheets of Seller at December 31,
1995 and the reviewed balanced sheets of Seller at December 31, 1994 and 1993,
together with the related statements of income and cash flows for the years
then ended, certified by Snyder & Clemente, independent public accountants
("Seller's Accountants") and (ii) monthly statements of profit and loss for the
first 10 months of 1996 with respect to the operation of the Facility. True and
correct copies of such financial statements are attached hereto as Schedule
6.4. The foregoing financial statements have been prepared from the Books and
Records of Seller in accordance with GAAP consistently applied throughout the
periods involved except as may be noted therein. Such financial statements,
including the related notes, are materially true and correct and fairly present
the financial position of the Business at the dates indicated and the results
of operations and cash flows of the Business for the periods then ended in
accordance with GAAP. The most recent interim financial statements provided to
Purchaser dated October 31, 1996 reflect all material liabilities of Seller and
there has been no material adverse change with respect to the matters contained
therein since the date thereof.
6.5 [RESERVED].
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6.6 Inventory. The level of Inventory maintained by Seller and
included in the Purchased Assets is sufficient to carry on the Business as
historically conducted.
6.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.7 hereto, since October 31, 1996, in connection with the Business,
Seller has not:
(i) amended in any material respect or terminated any
Contract other than in the ordinary course of Seller's
business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on the Purchased Assets or the results of
operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the results
of operations of the Business by fire, storm or
similar casualty, whether or not covered by insurance;
(iv) sold, transferred, replaced or leased any of the
Purchased Assets or sold any Inventory at a discount,
except for transactions in the ordinary course of
Seller's business consistent with past practice;
(v) waived or released any material rights with respect to
the Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than in
the ordinary course of Seller's business consistent
with past practice;
viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except
following normal review procedures or as reasonably
deemed necessary in the ordinary course of Seller's
business consistent with past practice;
(x) suffered any major or key personnel changes; or
(xi) materially altered its conduct in its relations with
suppliers, residents and patients.
6.8 Title to Properties; Absence of Liens and Encumbrances. Seller
owns and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased
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Assets subject to Closing, including without limitation the Real Property
(except as disclosed in Schedule 6.8 or except as sold or otherwise disposed of
by Seller in the ordinary course of Seller's business consistent with past
practice), free and clear of all Encumbrances, other than Permitted
Encumbrances. Seller has the right to quiet enjoyment of all Real Property
Leased in which it holds a leasehold interest for the full term, including all
renewal rights, of the lease or similar agreement relating thereto. Copies of
all existing title insurance policies written in favor of Seller and all
surveys relating to the Real Property in Seller's possession or reasonably
obtainable by Seller have been delivered to Purchaser. Except as set forth on
Schedule 6.8, all structures and other improvements on the Real Property are in
good order and repair and free from any structural defects and are within the
lot lines and do not encroach on the properties of any other Person, and the
use and operation of the Real Property conforms to all applicable building,
zoning, safety and subdivision laws, Environmental Laws and other Legal
Requirements, and all restrictive covenants and restrictions and conditions
affecting title. Except as disclosed on Schedule 6.8, no portion of the Real
Property is located in a flood plain, flood hazard area or designated wetlands
area. Seller has not received any written or oral notice of assessments for
public improvements against the Real Property or any written or oral notice or
order by any Governmental Authority, any insurance company that has issued a
policy with respect to any of such properties or any board of fire underwriters
or other body exercising similar functions that relates to violations of
building, safety or fire ordinances or regulations, claims any defect or
deficiency with respect to any of such properties or requests the performance
of any repairs, alterations or other work to or in any of such properties or in
the streets bounding the same. Except as disclosed on Schedule 6.8, each
parcel of Real Property is considered a separate parcel of land for taxing and
conveyancing purposes. There is no pending condemnation, expropriation, eminent
domain or similar proceeding affecting all or any portion of the Real Property.
All public utilities (including water, gas, electric, storm and sanitary
sewage, and telephone utilities) required to operate the Facility of Seller are
available to such Facility and such utilities enter the boundaries of such
Facility through adjoining public streets, permanent easements or rights-of-way
of record in favor of Seller. Such public utilities are all connected pursuant
to valid permits, are all in good working order and are adequate to service the
operations of such Facility as currently conducted and to the best of Seller's
Knowledge permit full compliance with all Legal Requirements. Seller has not
received any written notice of any proposed, planned or actual curtailment of
service of any utility supplied to any Facility of Seller. Except as disclosed
on Schedule 6.8 all present driveways and other access routes to the Real
Property are from public streets and no other Person has any right to use any
such driveways or other access routes.
6.9 Proprietary Rights.
6.9.1 Logos and Tradenames. Schedule 2.1.8 hereto sets forth
a correct and complete list of all patents, logos, trademarks, trade
names, service marks, copyrights and applications or registrations
therefor used in and material to the Business (collectively, the
"Proprietary Rights").
6.9.2 Licenses. Except as disclosed in Schedule 2.1.8.: (i)
Seller owns or
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possesses adequate licenses or other valid rights to use (without the
making of any payment to others or the obligation or grant rights to
others in exchange) all the Proprietary Rights material to the
Business; (ii) the Proprietary Rights included in the Purchased Assets
constitute all the material rights necessary to conduct the Business
in accordance with past practice and are being conveyed to Purchaser
together with the other Purchased Assets; (iii) the validity of the
Proprietary Rights and the rights therein of Seller have not been
questioned in any litigation to which Seller is a party, nor, to
Seller's Knowledge, is any such litigation threatened; and (iv) to the
best of Seller's Knowledge, the conduct of the Business does not
conflict with patent rights, licenses, trademark rights, trade name
rights, copyrights or other intellectual property rights of others.
6.9.3 Infringement. Except as disclosed in Schedule 2.1.8
hereto, to Seller's Knowledge, no material use of any Proprietary
Rights owned by Seller has heretofore been, or is now being, made by
any Person other than Seller, and to Seller's Knowledge, there is no
infringement of any Proprietary Rights owned or licensed by Seller. No
present or former director, officer, Employee or consultant of Seller
has any interest in any of the Proprietary Rights.
6.10 Contracts and Commitments. Except as listed and described on
Schedule 1.68 and Schedule 2.1.4, neither Seller nor any party acting on behalf
of Seller with Seller's Knowledge and consent is a party to any written or oral
(for which Purchaser shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of
services by another party, involving in any one case
$10,000 or more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident/Patient's Agreement);
(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in
value (except for any Resident/Patient's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee
other than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement,
loan agreement or other Contract or for the borrowing
or lending of money (including without limitation
loans to or from Employees) or guarantee, pledge or
undertaking of the indebtedness of any other Person;
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(vii) Contract for any charitable or political contribution;
(viii) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in any
likeness of business with any Person;
(ix) license, franchise, distributorship or other
agreement, including those that relate in whole or in
part to any patent, trademark, trade name, service
mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business; or
(x) any other material Contract not made in the ordinary
course of Seller's business consistent with past
practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.68 and Schedule 2.1.4 is valid and
enforceable in accordance with its terms, Seller and, to Seller's Knowledge any
other party thereto, are in compliance with the provisions thereof, Seller and,
to Seller's Knowledge any other party thereto, are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and no event has occurred that with or without the
giving of notice or lapse of time, or both, would constitute a default by
Seller thereunder and, to Seller's Knowledge, a default by any other party
thereto; (ii) except as set forth on Schedule 1.68 and Schedule 2.1.4 no
advance payments have been received by Seller by or on behalf of any party to
any of the Contracts, commitments, leases and other instruments listed on
Schedule 1.68 and Schedule 2.1.4 for services to be rendered or products to be
delivered to such party after the Closing Date; and (iii) no consent or
approval of any party to any Contract, commitment, lease or other instrument,
document or undertaking listed on Schedule 1.68 and Schedule 2.1.4 is required
for the execution of this Agreement or the consummation of the transactions
contemplated hereby.
6.11 Permits, Licenses. Seller has all Permits that are required to
operate the Business (including without limitation those required under any
Environmental Law) and, Seller is in material compliance with the terms and
conditions of the Permits. Schedule 2.1.6 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.6 hereto as nontransferable
or requiring such consent or approval.
6.12 Compliance with Laws. Except as described in Schedule 6.12
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.13 Legal Proceedings. Except as described in Schedule 6.13 hereto,
there is no
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claim, action, suit, proceeding, investigation or inquiry pending before any
Governmental Authority or, to Seller's Knowledge, threatened against Seller
with respect to the Business or any of the Purchased Assets, or relating to the
transactions contemplated by this Agreement, nor to Seller's Knowledge is there
any basis for any such claim, action, suit, proceeding, investigation, or
inquiry. Except as set forth on Schedule 6.13 hereto, Seller is not a party to
or subject to the provisions of any judgment, order, writ, injunction, decree
or award of any court, arbitrator or governmental, regulatory or administrative
official, body or authority that relates to the Purchased Assets or the
Business or that might affect the transactions contemplated by this Agreement.
6.14 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.14, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the financial statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.4 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's business consistent with past practice since the
financial statements dated October 31, 1996 provided to Purchaser.
6.15 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
6.16 Employees. Schedule 1.23 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.23, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
6.17 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.23,
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of the
transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
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6.18 Payroll Practice/Employee Arrangement.
6.18.1 Benefit Plans. Schedule 6.18 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has
any liability or obligation, whether actual or contingent, with
respect to the Employees or their respective beneficiaries.
6.18.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.18.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.19 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
6.20 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.21 Condition of Assets. Except as set forth on Schedule 6.21, all
buildings, structures and equipment that are part of the Purchased Assets are
structurally sound, are in generally good operating condition and repair
(subject only to routine maintenance and repair) and are usable in the conduct
of the Business consistent with past practice and conform to all applicable
Legal Requirements.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability. Seller has operated the
Business and each parcel of Real Property in material compliance with
all applicable Environmental Laws. Seller is not subject to any
liability, penalty or expense (including legal fees), and Purchaser
will not suffer or incur any loss, liability, penalty or expense
(including legal fees) by virtue of any violation of any Environmental
Law occurring prior to the Closing, any environmental activity
conducted on or with respect to any property at or prior to the
Closing or any environmental condition existing on or with respect to
any property at or prior to the Closing, in each case whether or not
Seller permitted or participated in such act or omission.
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6.23.2 Treatment; CERCLIS. Except in material compliance with
all applicable Environmental Laws, Seller has not treated, stored,
recycled or disposed of any hazardous material, and to Seller's
Knowledge no other Person has treated, stored, recycled or disposed of
any hazardous material on any part of the Real Property. There has
been no release of any hazardous material at, on or under any Real
Property. Seller has not transported any hazardous material or
arranged for the transportation of any hazardous material to any
location that is listed or proposed for listing on the National
Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of federal, state or local enforcement
action or other investigation that may lead to claims against Seller
for cleanup costs, remedial action, damages to natural resources, to
other property or for personal injury including claims under
Superfund. None of the Real Property is listed or, to Seller's
Knowledge, proposed for listing on the National Priorities List
pursuant to Superfund, CERCLIS or any state or local list of sites
requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation, abatement
or cleanup of any threatened or actual release of any hazardous
material. Seller is not required to place any notice or restriction
relating to the presence of any hazardous material at any Real
Property or in any deed to any Real Property. Seller has provided to
Purchaser a list of all sites to which, to Seller's Knowledge, Seller
has transported any hazardous material for recycling, treatment,
disposal, other handling or otherwise. There has been no past, and
there is no pending or contemplated, claim by Seller under any
Environmental Law or Legal Requirement based on actions of others that
may have impacted on the Real Property, and Seller has not entered
into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. All
storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 6.23, and, to Seller's
Knowledge, all such tanks and associated piping are in sound condition
and are not leaking and have not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business in
respect of claims or occurrences concerning Seller prior to the Closing, (i)
take no action to eliminate or reduce such coverage, other than normal
elimination or reduction of coverage as they occur by virtue of the filing of
claims in the ordinary course under such insurance policies, (ii) pay when due
any premiums under such policies for periods,
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including retrospective or retroactive premium adjustments and (iii) provided
Purchaser maintains Seller's insurance policies or otherwise is entitled to
make a claim against Seller's insurance policies pursuant to the terms of this
Agreement, use its best efforts to assist in filing and processing claims
under, and otherwise cooperate with Purchaser to allow Purchaser, in its own
name, or on behalf of Seller, to obtain all coverage benefits applicable to the
Business under such insurance policies, including the execution of assignments
or powers of attorney for the benefit of Purchaser. Any proceeds of insurance
paid by an insurer to Seller for claims of Purchaser made in accordance with
this Section shall be promptly paid to Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.26. Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. [RESERVED]
6.28. Occupancy Reports. Seller has provided Purchaser with copies of
Seller's occupancy reports for the Facility for the last year. Each such
occupancy report was prepared based on the number of operational beds (i.e.,
double occupancy rooms were only counted as such when both beds were occupied).
6.29. Tax Returns. Seller has filed or caused to be filed, or will
file or cause to be filed, all Tax Returns that are required to be filed by it
prior to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) such Taxes that are fully reserved
against on the financial statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.29,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
6.30 Completeness and Accuracy. All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any
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material fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. All Contracts,
Permits and other documents and instruments furnished or made available to
Purchaser by Seller are or will be true, complete and accurate originals or
copies of originals and include all amendments, supplements, waivers and
modifications thereto.
6.31 Seller's Assets Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, Section
801.1 et seq) had: (i) annual net sales of $100,000,000 or more as stated on
its last regularly prepared statement of income and expenses; or (ii) total
assets of $100,000,000 or more as stated on its last regularly prepared
balance sheet.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any
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provision of any contract, law, statute, rule or regulation to which Purchaser
is subject, (iii) violate any judgment, order, writ or decree of any court
applicable to Purchaser, (vi) conflict with, result in a breach of, constitute
a default under, or accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under any
agreement, contract, commitment, lease or other instrument, document or
undertaking to which Purchaser is a party or (v) result in the creation or
imposition of any Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H,
Section 801.1 et seq) had: (i) annual net sale of $100,000,000 or more as
stated on its last regularly prepared statement of income and expenses; or
(ii) total assets of $100,000,000 or more as stated on its last regularly
prepared balance sheet.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in its conduct of the Business,
except as otherwise agreed by Purchaser in writing:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access, during normal
business hours, to such of the properties, books, accounts, Contracts
and records of Seller as are relevant to the Purchased Assets and the
Business, and furnish or otherwise make available to Purchaser all
such information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide
Purchaser with the following:
(i) Seller's occupancy reports for the Facility, as soon
as the same become available through the Closing Date,
but no later than ten days after the last day of any
given month (which reports shall be prepared based on
the number of operational beds);
(ii) Seller's federal and/or state surveys or inspections
and any plans of correction for the Facility, as soon
as the same become available through
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the Closing Date, but no later than ten days after
received by Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule for
such Facility;
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the Closing Date, but no later than 21 days
after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to
the date hereof and, to the extent consistent with such operation, use
its best efforts until the Closing Date to (i) preserve and keep
intact the Business, (ii) keep available the services of the
Employees; (iii) preserve its relationships with residents, patients,
suppliers and others having business dealings with Seller in
connection with the Business and (iv) maintain current marketing
activities;
8.1.3 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in their present order and condition,
in accordance with Seller's past practices, reasonable wear and tear
excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books
and Records in the usual, regular and ordinary manner, on a basis
consistent with past practice;
8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased
Assets and to the conduct of the Business;
8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the
Business in accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial
efforts to obtain in writing as promptly as possible any approvals and
consents as required to be obtained by Seller in order to effectuate
the transactions contemplated hereby and deliver to Purchaser copies
of such approvals and consents. Accordingly, Seller shall cooperate
with Purchaser's efforts to obtain the necessary licenses to operate
the Facility from the appropriate Accreditation Bodies, including,
without limitation, the Department of Welfare and the Department of
Health. Upon execution and delivery of this Agreement, Seller shall
promptly:
(i) provide Purchaser with copies of all Permits;
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(ii) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
Seller's residents/patients of the Facility and (ii)
notices to human service agencies (as that term is
defined by the Department of Welfare). Prior to
sending the notices, Seller shall provide copies to
Purchaser for review and approval, which approval
shall not be unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.9 Surveys. Execute such affidavits or other instruments
as are commercially reasonable and necessary in order for Purchaser to
remove title exceptions for encroachments or survey discrepancies
relating to the Real Property;
8.1.10 Pay Employees to Closing Date. Pay all wages, salaries
and other sums due Employees through the close of business on the day
prior to the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary
steps to transfer to Purchaser the employment of all Employees
electing to continue their employ with Purchaser as of the Closing
Date;
8.1.12 Appointment of Seller's Agent. Irrevocably appoint
Blumer or Kelly ("Seller's Agent"), as Seller's agent and
attorney-in-fact to take any action required or permitted to be taken
hereunder by Seller, including without limitation, the giving and
receipt of notices to be delivered or received by or on behalf of
Seller, the payment of expenses relating to the transactions
contemplated under this Agreement, the representation of Seller in
indemnification proceedings hereunder, and the right to waiver of any
of the terms of this Agreement in any respect, and agree to be bound
by any and all actions taken by Seller's Agent. Purchaser shall be
entitled to rely exclusively on any communications given by Seller's
Agent on behalf of Seller, and shall not be liable for any action
taken or not taken in reliance on Seller's Agent. In the event that
Seller's Agent resigns or refuses to act, Seller shall promptly
appoint another Seller as the substitute Sellers' Agent to act under
this Agreement, and Seller shall promptly deliver a copy of such
appointment to Purchaser; and
8.1.13 Compliance with Agreement. Not undertake any course of
action materially inconsistent with satisfaction of the conditions
applicable to it set forth in this
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Agreement, and use all reasonable efforts to do all such acts and take
all such measures as may be reasonably necessary to comply with the
representations, agreements, conditions and other provisions of this
Agreement.
8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to
Purchaser's title insurer regarding title, mechanic's liens and such
other customary matters as may be reasonably requested by Purchaser or
Purchaser's title insurer; and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller under penalties of perjury, in
the form prescribed by Treasury Regulation Section
1.1445-2(b)(2)(iii), stating Seller's name, address and Federal tax
identification number, and that it is not a "foreign person" within
the meaning of Section 1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the Purchased Assets
other than in the ordinary course of Seller's business consistent with
past practices;
8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of Seller's
business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security interest
or any other Encumbrance, other than Permitted Encumbrances, any of
the Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase
the rate of compensation paid, or pay any bonus, to anyone connected
with the Business, except for those increases or bonuses planned, in
the ordinary course of Seller's business consistent
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with past practices, or establish or adopt any new pension or
profit-sharing plan, deferred compensation agreement or employee
benefit arrangement of any kind whatsoever covering or affecting
Employees;
8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.68 or
Schedule 2.1.4 or other authorization or agreement affecting the
Business or the Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of
any fact that, if known at the Closing Date, would have been required
to be set forth or disclosed in or pursuant to this Agreement, or
which would result in the breach by Purchaser of any of its
representations, warranties, covenants or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and Purchaser shall use its best
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement; and
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business.
9.1.4 Seller's Employees. Take all reasonable steps to ensure
that the transfer of employment of all of the Employees electing to
continue their employ with Purchaser as are able to be accomplished
prior to or on the Closing Date.
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9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the Employees, residents, patients and suppliers
of Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein ("Purchaser's Due Diligence").
9.3 Approvals, Consents. Use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate the Facility from the Department of Welfare and the Department of
Health, as applicable, including:
(i) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(ii) provide such other notices as required by all Legal
Requirements including (i) notices to Seller's
residents/patients of the Facility and (ii) notices to
human service agencies (as that term is defined by the
Department of Welfare). Prior to sending the notices,
Purchaser shall provide copies to Seller for review
and approval, which approval shall not be unreasonably
withheld.
9.4 Publicity; Advertisement. Except as required by law, publicize,
advertise or announce to any third-party, except as required pursuant to this
Agreement to obtain the consent of such third-party, the entering into of this
Agreement, the terms of this Agreement or the transactions contemplated hereby;
provided, however, the foregoing shall not be applicable to disclosures made by
Purchaser to Purchaser's lender in response to such lender's reasonable
requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
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10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party to be performed or complied
with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the incumbency and specimen signature of
each officer or representative of Seller executing this Agreement, the
certificate referred to in Section 10.3 and the Ancillary Agreements to which
Seller is a party.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 [RESERVED].
10.7 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated. Other Agreements. Each of the
Other Agreements shall have been executed and delivered by the parties thereto,
and the transactions contemplated thereby shall have been consummated.
10.8 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.9 Arrangements with Employees. Subject to the provisions of
Sections 4.3 and 9.1.4, substantially all of the Employees shall have accepted
employment with Purchaser effective on the Closing Date.
10.10 Employment Agreements. Kelly and Blumer shall have executed and
delivered the Employment Agreements with Purchaser.
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10.11 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to Purchaser
and Purchaser's lender, reasonably satisfactory to Purchaser and its counsel as
to the matters set forth in Sections 6.1, 6.2 and 6.3 hereof .
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement, the
certificate referred to in Section 11.3 and the Ancillary Agreements to which
Purchaser is a party.
11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted,
threatened or anticipated which questions the validity or legality of the
transactions contemplated hereby.
11.6 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
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11.7 Employment Agreements. Purchaser shall have executed and
delivered the Employment Agreements with Kelly and Blumer.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of five (5) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of five years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
12.5.1 Transfer of Assets. Seller agrees that Purchaser, from
and after the Closing, shall have the right and authority to collect
for Purchaser's own account all items which shall be transferred to
Purchaser as provided herein.
12.5.2 Endorsement of Checks. From and after the Closing,
Purchaser shall have the right and authority to retain and endorse
without recourse the name of Seller on any check or any other
evidences of indebtedness received by Purchaser on account of any of
the Business and Purchased Assets transferred to Purchaser hereunder.
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12.5.3 Seller's Remittance of Funds. After the Closing,
Seller shall promptly transfer and deliver to Purchaser any cash or
other property, if any, that Seller may receive related to the
Business or the Purchased Assets other than the Excluded Assets.
12.5.4 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or
other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.5.5 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving,
any Assumed Liability, and Purchaser shall have the right to conduct
and control all negotiations and proceedings with respect thereto.
Seller shall notify Purchaser promptly of any claim made with respect
to any Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any Assumed
Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's Accountants to cooperate at Purchaser's cost and expense, with
Purchaser and its auditors in the preparation of combined audited financial
statements of Seller and each of the Other Companies for the years ended
December 31, 1996, 1995 and 1994 to the extent required in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. As used herein, the term "combined audited
financial statements" shall mean the audited financial statements of Seller and
each of the Other Companies, combined.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any Books and
Records relating to the Business that Seller may retain as may reasonably be
required in connection with the preparation of financial information or tax
returns of Purchaser.
12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial account closing and reporting and claims and
litigation asserted by or against third parties,
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including, but not limited to, making employees available at reasonable times
to assist with, or provide information in connection with financial account
closing and reporting and claims and litigation, provided that Seller
reimburses Purchaser for its reasonable out-of-pocket expenses (including costs
of employees so assisting) in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and Purchaser;
(ii) by Seller or Purchaser if Closing has not taken place
on or before March 15, 1997; provided however, that no
Party then in material breach of any of its
obligations hereunder shall have the right to
terminate;
(iii) by Purchaser upon notice to Seller if any of the
conditions set forth in Article X hereof have not been
satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Purchaser to fulfill its obligations under
this Agreement);
(iv) by Seller upon notice to Purchaser if any of the
conditions set forth in Article XI hereof have not
been satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Seller to fulfill its obligations under
this Agreement);
(v) by Seller if Purchaser materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Seller gives written
notice of such failure to Purchaser;
(vi) by Purchaser if Seller materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Purchaser gives
written notice of such failure to Seller; and
(vii) by Purchaser upon notice to Seller if any of the
conditions set forth below have not been satisfied or
become impossible to satisfy by the Due Diligence Date
(other than by reason of the material failure of
Purchaser to fulfill its obligations under this
Agreement):
(a) the results of Purchaser's Due Diligence shall not
be satisfactory to Purchaser in its sole discretion;
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(b) Purchaser shall not have secured a commitment for
financing the transaction contemplated by this
Agreement on terms and conditions satisfactory to
Purchaser in its sole discretion;
(c) the results of an inspection of the physical
condition of the Real Property, including the
improvements and the HVAC, electrical, plumbing and
other systems, by a qualified engineering firm engaged
by Purchaser, at its cost and expense, are not
satisfactory to Purchaser in its sole discretion; and
(d) the results of an environmental report on the
Purchased Assets and the Business from a qualified
geotechnical or engineering firm engaged by Purchaser,
at its cost and expense, are not satisfactory to
Purchaser in its sole discretion.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Deposit Fund. Upon termination of this Agreement, the Deposit
Fund shall be disbursed as follows and in accordance with the terms and
conditions of the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13.1(iii) or Section 13.1(vi), the
Parties agree to instruct Escrow Agent to release the
entire amount of the Deposit Fund to Purchaser;
(ii) if this Agreement is terminated by Purchaser pursuant
to Section 13.1(vii) on or before the Due Diligence
Date, the Parties agree to instruct Escrow Agent to
release one-half of the amount of the Deposit Fund to
Purchaser and the balance of the Deposit Fund to
Seller; and
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the
Parties agree to instruct Escrow Agent to release the
entire amount of the Deposit Fund to Seller.
13.4 Remedies.
13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the Deposit Fund
as set forth in Section 13.3 shall be the sole and exclusive remedy of Seller
as liquidated damages, and shall be in lieu of all other rights and remedies
which may otherwise be available at law or in equity.
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13.4.2 Purchaser's Remedies. If Purchaser has the right to
terminate this Agreement pursuant to Section 13.1(vi), in addition to
Purchaser's right to receive the Deposit Fund as permitted under Section 13.3,
Purchaser may seek any other remedies that may otherwise be available at law or
in equity, including, without limitation, an action for specific performance
and reimbursement from Seller for all expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive until October 31, 1997 (the
"Survival Date"); provided, however, that all representations and warranties of
Seller with respect to any environmental matters set forth in Section 6.23 of
this Agreement shall survive for two years after the Closing Date.
Notwithstanding the foregoing, there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of the other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only and
shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall, indemnify, defend, save
and hold Purchaser, any assignee of Purchaser and their respective officers,
directors, employees, agents and Affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller or any Ancillary Agreement to which Seller is or is
to become a party, a breach or nonfulfillment of any covenant or agreement made
by any Seller in this Agreement or in any Ancillary Agreement to which Seller
is or is to become a party, and any and all liabilities of Seller of any nature
whatsoever, whether due or to become due, whether accrued, absolute, contingent
or otherwise, existing on the Closing Date or arising out of any transaction
entered into, or any state of facts existing, prior to the Closing Date, except
for any Assumed Liability. To the extent any Purchaser Indemnitee is entitled
to collect Purchaser Damages, Purchaser shall, at its option and subject to the
terms of the Escrow
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Agreement, be entitled to withdraw sufficient funds from the Escrow Fund
pursuant to the Escrow Agreement in lieu of payment directly from Seller, and
to the extent the amount due any Purchaser Indemnitee exceeds the balance of
the funds held under the Escrow Agreement, Purchaser shall be entitled to
collect such balance owned to Purchaser Indemnitee directly from Seller.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, Affiliates and
agents (collectively, "Seller Indemnitees") harmless from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, a breach of any representation or warranty made by Purchaser
in this Agreement or in any certificate or document furnished pursuant hereto
by Purchaser or any Ancillary Agreement to which Purchaser is a party, a breach
or nonfulfillment of any covenant or agreement made by Purchaser in this
Agreement or in any Ancillary Agreement to which Purchaser is a party, any
Assumed Liability and any and all liabilities of any nature whatsoever arising
out of Purchaser's operation of the Business after the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
Notwithstanding the foregoing, any Purchaser Indemnitee shall be required to
notify Seller's Agent of any claim for Purchaser Damages as required herein
even though the same may be included in the $25,000 threshold set forth in
Section 14.6, and Seller shall have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement. The Indemnified Party
shall permit the Indemnifying Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnifying Party, provided that
the fees and
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expenses of such counsel shall be borne by the Indemnifying Party. If the
Indemnified Party permits the Indemnifying Party to undertake, conduct and
control the conduct and settlement of such action or suit, the Indemnifying
Party shall not thereby permit to exist any Encumbrance upon any asset of the
Indemnified Party; the Indemnifying Party shall not consent to any settlement
that does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; the Indemnifying Party shall permit the Indemnified Party to participate
in such conduct or settlement through counsel chosen by the Indemnified Party;
and the Indemnifying Party shall agree promptly to reimburse the Indemnified
Party for the full amount of any Damages including fees and expenses of counsel
for the Indemnified Party incurred after giving the foregoing notice to the
Indemnifying Party and prior to the assumption of the conduct and control of
such action or suit by the Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under
Section 14.2 until the aggregate amount of Purchaser Damages thereunder exceeds
$25,000, but if the aggregate amount of Purchaser Damages thereunder exceeds
$25,000 in the aggregate, then indemnification shall be made by Seller
thereunder to the full extent of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those Purchaser
Damages as to which Purchaser has given Seller's Agent written notice thereof
on or before the Survival Date; provided, however, that with respect to any
claim for Purchaser Damages sustained by reason of a breach of any
representation or warranty relating to those matters governed by Section 6.23,
Seller's liability shall be limited to Purchaser Damages as to which such
written notice shall have been given to Seller's Agent within two years of the
Closing Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser Damages
arising out of fraud, the breach of any representation or warranty contained
herein or pursuant hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a fact or omitted to
state a fact necessary to make the statements of facts contained therein not
misleading or misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with respect
to the Retained Liabilities.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their
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own fees, expenses and disbursements, including the fees and expenses of their
respective counsel, accountants and other experts in connection with the
subject matter of this Agreement and all other costs and expenses incurred in
performing and complying with all conditions to be performed under this
Agreement.
15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller.
If to Seller, to:
Sellers' Agent:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
Scranton, PA 18505
Fax: (717) 963-1601
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With a required copy to:
Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof shall thereof be binding upon
any Party unless set forth in an instrument in writing signed by the Party to
be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
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15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through a
sale-leaseback. Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide Seller with a copy of any
such assignment, and Seller agrees to execute and deliver any consents
reasonably required by Purchaser's lender in connection therewith, provided
such assignment does not expand any of Seller's obligations and liabilities
hereunder. Notwithstanding any permitted assignment of this Agreement by
Purchaser, Purchaser shall remain liable to Seller for all obligations and
liabilities to be performed by or on behalf of Purchaser hereunder.
[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
----------------------------------
Name: Brian L. Barth
Title: Vice President
KEYSTONE HEALTH VENTURES, INC.
By: /s/ James J. Blumer, Jr.
----------------------------------
Name: James J. Blumer, Jr.
Title: President
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EXHIBIT 2.11
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
27th day of December, 1996, by and between Balanced Care Corporation, a
Delaware corporation ("Purchaser"), and Blakely-Pine Health Care Center, Inc.,
a Pennsylvania corporation ("Seller").
RECITALS:
Seller owns a skilled nursing facility located at P.O. Box 85, Sturges
Road, Peckville, PA 18452 (the "Facility"). Purchaser desires to purchase
substantially all of the assets of Seller and the Business (as hereinafter
defined) related thereto and Seller desires to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Health, the Department of Welfare and all other Persons having jurisdiction
over the accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of the Business as of such date prepared in accordance with
GAAP consistently applied, including those described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute
control.
1.5 "Agreement" shall mean this Asset Purchase Agreement.
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1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the bill of sale, assignment and assumption
described in Section 5.2.2, the Escrow Agreement described in Section 14.2 and
the Employment Agreements described in Section 10.9 .
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Blumer" shall mean James J. Blumer, Jr.
1.9 "Books and Records" shall have the meaning given to it in
Section 6.15.
1.10 "Business" shall mean the operation of a skilled nursing facility
and any other ancillary health care services owned, operated, delivered,
managed, developed, constructed, maintained, used, occupied or possessed by
Seller in connection therewith (including, without limitation, any outpatient
and contract rehab therapy services or any Alzheimer's units).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section 5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident/Patient's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, franchises and books and records of account benefiting,
relating to the Purchased Assets or the operation of the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy, possession or operation thereof, or the operation of any of the
programs or services in conjunction with the Business and all renewals,
replacements and substitutions therefor, issued by any Governmental Authority,
Accreditation Body or Third Party Payor or maintained or used
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by Seller with any third Person.
1.18 "Current Liabilities" shall mean all liabilities classified
as current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to such term in
Section 14.4.
1.20 "Department of Health" shall mean the Commonwealth of
Pennsylvania, Department of Health.
1.21 "Department of Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.21a "Deposit Fund" shall mean $30,000 to be paid by Purchaser and
held by the Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement.
1.22 "Due Diligence Date" shall mean January 15, 1997
1.23 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.23 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's business consistent with past
practices).
1.24 "Employment Agreements" shall mean the contracts entered into
between Purchaser and each of Kelly and Blumer in substantially the form of
Exhibit 1.24.
1.25 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.26 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Sections 136 et seq.)], other Legal Requirements, any common law doctrine and
any provision or condition of any permit, license or other operating
authorization relating to (i) the protection of the environment or the public
welfare from actual or potential exposure (or the effects of exposure) to any
actual or potential release, discharge, disposal or emission (whether past or
present) of any Regulated Substance or (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Regulated Substance.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as
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amended.
1.28 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.29 "Escrow Agent" shall mean Mellon Bank.
1.30 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.30.
1.31 "Escrow Fund" shall mean $125,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
1.32 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.32a "Facility" shall have the meaning given to such term in the
Recitals of this Agreement.
1.33 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.38 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.39 "Kelly" shall mean Michael P. Kelly.
1.39a "Keystone Management Services" shall mean Keystone Management
Services, a Pennsylvania general partnership, consisting of its general
partners, Kelly and Blumer.
1.40 "Knowledge" and words of similar import shall mean, with respect
to Purchaser, actual knowledge of a particular fact or other matter being
possessed by an officer or other individual now or formerly having principal
responsibility for a business or administrative
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function of such Party, including individuals serving in such a capacity in or
for the Business, and the knowledge that reasonably could be expected to be
obtained in the course of conducting a reasonably comprehensive investigation
concerning the subject matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Other Agreements shall mean the agreements set forth on Schedule
1.46, including any other agreements executed and delivered under or in
connection therewith.
1.47 "Other Companies" shall mean the companies identified on Schedule
1.47
1.48 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.49 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
1.50 "Payroll Practice / Employee Arrangement" shall have the meaning
given to such term in Section 6.18.
1.51 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim
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licences, permits and other authorizations of every nature whatsoever required
by, or issued to or on behalf of Seller under, any Legal Requirements
benefiting, relating or effecting the Business or the construction, development,
maintenance, management, use or operation thereof, or the operation of any
programs or services in conjunction with the Business and all renewals,
replacements and substitutions therefor, now or hereafter required or issued by
any Governmental Authority, Accreditation Body or Third Party Payor.
1.52 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.52 hereto.
1.53 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.54 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.55 [RESERVED].
1.56 "Proprietary Rights" shall have the meaning given to such term in
Section 6.9.1.
1.57 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.58 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.59 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.60 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.61 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.61a "Purchaser's Due Diligence" shall have the meaning given to such
term in Section 9.2.
1.62 "Purchaser Indemnitees" shall have the meaning given to such term
in Section 14.2.
1.63 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
1.64 "Real Property Leased" shall mean the real property leased by
Seller in connection
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with the Business as more fully described in Schedule 1.64 hereto.
1.65 "Real Property Owned" shall mean the real property owned by
Seller, and used in connection with the Business as more fully described in
Schedule 1.65 hereto.
1.66 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.67 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv) any spouse, sibling, ancestor or lineal
descendant of any natural Person identified in any one of the preceding
clauses.
1.68 "Resident/Patient's Agreements" shall mean all contracts,
agreements and consents executed by or on behalf of any resident, patient or
other Person seeking services at the Facility as more fully described in
Schedule 1.68 hereto, including, without limitation, assignments of benefits
and guarantees, and such resident/patient's related medical and/or other
records.
1.69 "Retained Liabilities" has the meaning given that term in
Section 4.2.
1.70 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.71 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually and collectively, as the context may
require.
1.72 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.73 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.74 "Seller's Accountants" shall have the meaning given to it in
Section 6.4.
1.74a "Seller's Knowledge" and words of similar import shall mean,
with respect to Seller, actual knowledge of a particular fact or other matter
being possessed by Kelly and/or
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Blumer and the knowledge that reasonably could be expected to be obtained
concerning the subject matter by Kelly and Blumer in the ordinary course of
their ownership and operation of the Business.
1.74b "Survival Date" shall have the meaning given to such term in
Section 14.1.
1.75 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.76 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.77 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.78 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
2.1.1 Real Property. Owned The Real Property Owned, together
with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto;
2.1.2 Real Property Leased. Seller's interest, as lessee, in
the Real Property Leased;
2.1.3 Equipment, Machinery and Other Tangible Personal
Property. All
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machinery, equipment, leasehold improvements, automobiles, supplies,
office furniture and office equipment, computing and telecommunications
equipment and other items of personal property that are owned by Seller
and used in connection with the Business, including those described in
Schedule 2.1.3 hereto;
2.1.4 Contracts Relating to the Business. All of the interest
of Seller in all Contracts relating to the acquisition or ownership by
Seller of any of the Purchased Assets or the operation of the
Business, the Resident/Patient's Agreements listed on Schedule 1.68
hereto and those Contracts not required to be listed on 2.1.4 by
reason of the provisions of Section 6.10.
2.1.5 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations material and advertising material used in the Business,
whether in electronic form or otherwise;
2.1.6 Permits, Licenses. All of Seller's interest in Permits
relating to the Business, including those listed in Schedule 2.1.6
hereto, to the extent such Permits are transferable to Purchaser;
2.1.7 Trade Secrets. All policies and procedures, methods
of delivery of services, trade secrets, designs, drawings and
specifications, market studies, consultants' reports, prototypes, and
all similar property of any nature, tangible or intangible, of Seller
used in the Business;
2.1.8 Intellectual Property. All right, title and interest of
Seller in the patents, trademarks, trademark registrations, trade
names, service marks, copyrights and copyright registrations described
in Schedule 2.1.8;
2.1.9 [RESERVED];
2.1.10 Goodwill. All of the interest of Seller in and to the
goodwill incident to the Business, including but not limited to the
value of the Facility name associated with the Business and the value
of good customer relations;
2.1.11 Inventory. All Closing Inventory;
2.1.12 Resident/Patient Funds. All deposits and escrow
accounts of, or for the benefit of, any of Seller's resident/patients
at the Closing Date;
2.1.13 Prepaid Expenses. All Seller's Prepaid Expenses of, or
for the benefit of, the Business at the Closing Date including those
described in Schedule 2.1.13, to the extent the benefits thereof are
transferable to Purchaser;
2.1.14 Computer Software. All computer applications software,
owned or
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licensed, whether for general business usage (e.g., accounting, word
processing, graphics, spreadsheet analysis, etc.), or specific,
unique-to-the-business usage, and all computer operating, security or
programming software, owned or licensed by Seller and used in the
operation of the Business; and
2.1.15 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following assets
(collectively, the "Excluded Assets") shall be excluded from this Agreement, and
shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable. All Accounts Receivable of
Seller existing on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees
up through and including the Closing Date;
2.2.3 Consideration. The consideration paid to Seller
pursuant to this Agreement;
2.2.4 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.2.5 Corporate Books. Corporate minute books and stock books
of Seller;
2.2.6 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the
extent they relate to liabilities or obligations that are not assumed
by Purchaser hereunder (except the amount of costs and expenses
Purchaser shall have incurred with respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority; and
2.2.8 Other Assets. Assets listed on Schedule 2.2.8.
2.3 License to Use Certain Assets To the extent that there are any
tangible or intangible assets used by Seller in connection with the Business
that are not specifically designated as Excluded Assets by Section 2.2 (without
reference to this Section), the Purchased Assets shall include an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferable license to
utilize such assets in connection with the operation of the Business after the
Closing Date. To the extent that any such assets may not be licensed, Seller
shall take all steps required to assure that Purchaser obtains the benefit of
such assets.
ARTICLE III. CONSIDERATION AND TERMS
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3.1 Consideration for Purchased Assets
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the
"Purchase Price") shall be in the amount of $2,286,000, to be paid by
certified or cashier's check drawn on a national bank or by wire
transfer as follows:
(i) the Purchase Price less the sum of the Deposit Fund
and the Escrow Fund to Seller at the time of
Closing;
(ii) the Escrow Fund to Escrow Agent at the time of
Closing to be held in escrow pursuant to the Escrow
Agreement; and
(iii) upon execution and delivery hereof, the Deposit Fund
to Escrow Agent to be held in escrow pursuant to the
Escrow Agreement.
3.1.2 Other Consideration. As additional consideration, Purchaser shall
also assume the Assumed Liabilities at the time of Closing.
3.3 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Purchased Assets and the Business in accordance with the allocation
set forth in Schedule 3.3. Purchaser and Seller shall report the federal, state
and local income and other tax consequences of the purchase and sale
contemplated hereby in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date, Purchaser
shall acquire the Purchased Assets subject only to, and shall undertake, assume,
perform and otherwise pay, satisfy and discharge, and hold Seller harmless from
the following liabilities and obligations, excluding any liabilities and
obligations to Affiliates of Seller (collectively, the "Assumed Liabilities"):
(i) all obligations of Seller accruing subsequent to the Closing
Date under the
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Contracts contemplated by Section 2.1.4, including, without
limitation, those set forth in Schedule 1.68 and Schedule
2.1.4, provided that the rights thereunder have been duly and
effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing after the Closing Date
under the Permits described in Section 2.1.6, provided that
the rights thereunder have been duly and effectively assigned
to Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or
obligations incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the
indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or
the contract of indemnity) or had committed fraud in the
insurance application;
(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to Closing, and the
transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing; notwithstanding the foregoing, all sales and use
taxes, transfer taxes, and all other
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impositions of tax arising solely by reason of the transfers
contemplated by this Agreement (excluding all federal, state
and local income and gross receipt taxes on the earnings or
gross receipts of Seller prior to the Closing Date, which
shall remain the sole responsibility of Seller) shall be the
responsibility of and shall be borne equally by Seller and
Purchaser (any real estate and personal property taxes for the
year in which Closing occurs shall be pro-rated to the Closing
Date (based on a calendar year or fiscal year for which such
taxes are levied basis), if the tax rates for the year in
which Closing occurs shall not be fixed prior to the Closing
Date for a particular item of the Purchased Assets, the
pro-ration of taxes thereon shall be based upon the tax rate
for the year prior to Closing applied to the latest assessment
valuation; however, in the event that any such taxes are
increased or decreased for the year in which Closing occurs,
Seller or Purchaser shall then reimburse the other party for
amounts in excess of or less than the proration as determined
as of the Closing Date);
(x) for long term indebtedness and other obligations or
guarantees of Seller;
(xi) for Current Liabilities reflected on the books of Seller at
the Closing Date; and
(xii) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date.
4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees (except as indicated on Schedule
1.23) in substantially similar jobs, at the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain liable for all
liability for all accrued vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Seller's Employees attributable to entitlements, injuries, claims,
conditions, events and occurrences occurring on or before the Closing
Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for all
liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Employees of Seller hired by Purchaser attributable to entitlements,
injuries, claims, conditions, events and occurrences first occurring
after the Closing Date.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place on or after January 2, 1997, but in any event
not later than March 15, 1997 (the "Closing"). The date of the Closing shall be
referred to as the "Closing Date." The Closing shall take place at such time,
date and place as may be mutually agreed upon by the Parties.
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5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deeds. Duly executed special warranty deeds, in
recordable form, transferring good and marketable fee simple title to
the Real Property Owned, subject only to Permitted Encumbrances, and
such affidavits or other instruments as Purchaser's title insurance
company may reasonably request, including but not limited to (i)
exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants pursuant
to agreements with Seller and (C) mechanics' or materialmens' liens and
(ii) payoff letters, lien releases and satisfaction pieces and (iii)
gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that Seller has been able to obtain that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the Purchased Assets with assignments to
Purchaser;
5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property
or any of the other Purchased Assets for the applicable current tax
year or years, and all tax assessments or notices thereof upon which
such taxes are based;
5.2.5 Plans and Specifications. To the extent not delivered
prior to Closing, all plans, specifications and other drawings in
Seller's possession or reasonably obtainable by Seller and used in the
construction of the Facility or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty, the
property under the Contracts or any of the other Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's
possession or reasonably obtainable by Seller, surveys and hazardous
waste studies prepared within 36 months before the date hereof, for or
relating to the Purchased Assets;
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5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements relating to the ownership, operation, use,
occupancy, licensure, accreditation or maintenance of the Business;
and
5.2.8 Census. The census of Seller current as of two days
prior to the Closing Date.
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
5.3 Reasonable Steps Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and has all requisite corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and thereby and to perform
all the terms and conditions hereof and thereof and to be performed by it.
6.2 Authorization of Agreement and Enforceability. Seller has taken all
necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party, the performance
by it of all terms and conditions hereof and thereof to be performed by it and
the consummation of the transactions contemplated hereby and thereby,
including, without limitation, obtaining such shareholder's consents as is
required under the Pennsylvania Business Corporation Law. This Agreement
constitutes, and the Ancillary Agreements to which Seller is party, upon
Seller's execution and delivery thereof, will constitute the legal, valid and
binding obligations of Seller, enforceable in accordance with their terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
respect to notices and consents required to be given by Seller to any
Accreditation Body or
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Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any law, statute, rule or regulation to which Seller, the Business or the
Purchased Assets are subject, (iii) violate any judgment, order, writ or decree
of any court applicable to Seller, the Business or the Purchased Assets, (iv)
except with respect to agreements with Seller's lender and except as identified
on Schedule 2.1.4, conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement, Contract,
commitment, lease or other instrument, document or undertaking to which Seller
is a party or any of the Purchased Assets is bound or (v) result in the creation
or imposition of any Encumbrances upon the Purchased Assets.
6.4 Financial Statements. Seller has delivered to Purchaser true and
complete copies of the (i) audited balance sheets of Seller at December 31,
1995, 1994 and 1993 and the related statements of income and cash flows for the
years then ended, certified by Snyder & Clemente, independent public
accountants ("Seller's Accountants") and (ii) monthly statements of profit and
loss for the first 10 months of 1996 with respect to the operation of the
Facility. True and correct copies of such financial statements are attached
hereto as Schedule 6.4. The foregoing financial statements have been prepared
from the Books and Records of Seller in accordance with GAAP consistently
applied throughout the periods involved except as may be noted therein. Such
financial statements, including the related notes, are materially true and
correct and fairly present the financial position of the Business at the dates
indicated and the results of operations and cash flows of the Business for the
periods then ended in accordance with GAAP. The most recent interim financial
statements provided to Purchaser dated October 31, 1996 reflect all material
liabilities of Seller and there has been no material adverse change with
respect to the matters contained therein since the date thereof.
6.5 [RESERVED].
6.6 Inventory. The level of Inventory maintained by Seller and included
in the Purchased Assets is sufficient to carry on the Business as historically
conducted.
6.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.7 hereto, since October 31, 1996, in connection with the Business,
Seller has not:
(i) amended in any material respect or terminated any
Contract other than in the ordinary course of
Seller's business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on the Purchased Assets or the results of
operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the
results of operations of the Business by fire, storm
or similar casualty, whether or not covered by
insurance;
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(iv) sold, transferred, replaced or leased any of the
Purchased Assets or sold any Inventory at a
discount, except for transactions in the ordinary
course of Seller's business consistent with past
practice;
(v) waived or released any material rights with respect
to the Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than
in the ordinary course of Seller's business
consistent with past practice;
viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except
following normal review procedures or as reasonably
deemed necessary in the ordinary course of Seller's
business consistent with past practice;
(x) suffered any major or key personnel changes; or
(xi) materially altered its conduct in its relations with
suppliers, residents and patients.
6.8 Title to Properties; Absence of Liens and Encumbrances. Seller
owns and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased Assets subject to Closing, including
without limitation the Real Property (except as disclosed in Schedule 6.8 or
except as sold or otherwise disposed of by Seller in the ordinary course of
Seller's business consistent with past practice), free and clear of all
Encumbrances, other than Permitted Encumbrances. Seller has the right to quiet
enjoyment of all Real Property Leased in which it holds a leasehold interest
for the full term, including all renewal rights, of the lease or similar
agreement relating thereto. Copies of all existing title insurance policies
written in favor of Seller and all surveys relating to the Real Property in
Seller's possession or reasonably obtainable by Seller have been delivered to
Purchaser. Except as set forth on Schedule 6.8, all structures and other
improvements on the Real Property are in good order and repair and free from
any structural defects and are within the lot lines and do not encroach on the
properties of any other Person, and the use and operation of the Real Property
conforms to all applicable building, zoning, safety and subdivision laws,
Environmental Laws and other Legal Requirements, and all restrictive covenants
and restrictions and conditions affecting title. Except as disclosed on
Schedule 6.8, no portion of the Real Property is located in a flood plain,
flood hazard area or designated wetlands area. Seller has not received any
written or oral notice of assessments for public improvements against the Real
Property or any written or oral notice or order by any Governmental Authority,
any insurance company that has issued a policy with respect to any of such
properties or any board of fire underwriters or other body exercising similar
functions that relates to violations of building, safety or fire ordinances or
regulations,
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claims any defect or deficiency with respect to any of such properties or
requests the performance of any repairs, alterations or other work to or in any
of such properties or in the streets bounding the same. Except as disclosed on
Schedule 6.8, each parcel of Real Property is considered a separate parcel of
land for taxing and conveyancing purposes. There is no pending condemnation,
expropriation, eminent domain or similar proceeding affecting all or any portion
of the Real Property. All public utilities (including water, gas, electric,
storm and sanitary sewage, and telephone utilities) required to operate the
Facility of Seller are available to such Facility and such utilities enter the
boundaries of such Facility through adjoining public streets, permanent
easements or rights-of-way of record in favor of Seller. Such public utilities
are all connected pursuant to valid permits, are all in good working order and
are adequate to service the operations of such Facility as currently conducted
and to the best of Seller's Knowledge permit full compliance with all Legal
Requirements. Seller has not received any written notice of any proposed,
planned or actual curtailment of service of any utility supplied to any Facility
of Seller. Except as disclosed on Schedule 6.8 all present driveways and other
access routes to the Real Property are from public streets and no other Person
has any right to use any such driveways or other access routes.
6.9 Proprietary Rights.
6.9.1 Logos and Tradenames. Schedule 2.1.8 hereto sets forth a
correct and complete list of all patents, logos, trademarks, trade
names, service marks, copyrights and applications or registrations
therefor used in and material to the Business (collectively, the
"Proprietary Rights").
6.9.2 Licenses. Except as disclosed in Schedule 2.1.8.: (i) Seller
owns or possesses adequate licenses or other valid rights to use
(without the making of any payment to others or the obligation or grant
rights to others in exchange) all the Proprietary Rights material to
the Business; (ii) the Proprietary Rights included in the Purchased
Assets constitute all the material rights necessary to conduct the
Business in accordance with past practice and are being conveyed to
Purchaser together with the other Purchased Assets; (iii) the validity
of the Proprietary Rights and the rights therein of Seller have not
been questioned in any litigation to which Seller is a party, nor, to
Seller's Knowledge, is any such litigation threatened; and (iv) to the
best of Seller's Knowledge, the conduct of the Business does not
conflict with patent rights, licenses, trademark rights, trade name
rights, copyrights or other intellectual property rights of others.
6.9.3 Infringement. Except as disclosed in Schedule 2.1.8 hereto,
to Seller's Knowledge, no material use of any Proprietary Rights owned
by Seller has heretofore been, or is now being, made by any Person
other than Seller, and to Seller's Knowledge, there is no infringement
of any Proprietary Rights owned or licensed by Seller. No present or
former director, officer, Employee or consultant of Seller has any
interest in any of the Proprietary Rights.
6.10 Contracts and Commitments. Except as listed and described on
Schedule 1.68 and Schedule 2.1.4, neither Seller nor any party acting on behalf
of Seller with Seller's
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Knowledge and consent is a party to any written or oral (for which Purchaser
shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of
services by another party, involving in any one case
$10,000 or more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident/Patient's Agreement);
(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in
value (except for any Resident/Patient's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee
other than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit
agreement, loan agreement or other Contract or for
the borrowing or lending of money (including without
limitation loans to or from Employees) or guarantee,
pledge or undertaking of the indebtedness of any
other Person;
(vii) Contract for any charitable or political
contribution;
(viii) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in
any likeness of business with any Person;
(ix) license, franchise, distributorship or other
agreement, including those that relate in whole or
in part to any patent, trademark, trade name,
service mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business; or
(x) any other material Contract not made in the ordinary
course of Seller's business consistent with past
practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.68 and Schedule 2.1.4 is valid and
enforceable in accordance with its terms, Seller and, to Seller's Knowledge any
other party thereto, are in compliance with the provisions thereof, Seller and,
to Seller's Knowledge any other party thereto, are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and no event has occurred that with or without the
giving of notice or lapse of time, or both, would constitute a default by
Seller thereunder and, to Seller's Knowledge, a default by any other party
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thereto; (ii) except as set forth on Schedule 1.68 and Schedule 2.1.4 no
advance payments have been received by Seller by or on behalf of any party to
any of the Contracts, commitments, leases and other instruments listed on
Schedule 1.68 and Schedule 2.1.4 for services to be rendered or products to be
delivered to such party after the Closing Date; and (iii) no consent or
approval of any party to any Contract, commitment, lease or other instrument,
document or undertaking listed on Schedule 1.68 and Schedule 2.1.4 is required
for the execution of this Agreement or the consummation of the transactions
contemplated hereby.
6.11 Permits, Licenses. Seller has all Permits that are required to
operate the Business (including without limitation those required under any
Environmental Law) and, Seller is in material compliance with the terms and
conditions of the Permits. Schedule 2.1.6 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.6 hereto as nontransferable
or requiring such consent or approval.
6.12 Compliance with Laws. Except as described in Schedule 6.12
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.13 Legal Proceedings. Except as described in Schedule 6.13 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any Governmental Authority or, to Seller's Knowledge, threatened against
Seller with respect to the Business or any of the Purchased Assets, or relating
to the transactions contemplated by this Agreement, nor to Seller's Knowledge
is there any basis for any such claim, action, suit, proceeding, investigation,
or inquiry. Except as set forth on Schedule 6.13 hereto, Seller is not a party
to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental, regulatory or
administrative official, body or authority that relates to the Purchased Assets
or the Business or that might affect the transactions contemplated by this
Agreement.
6.14 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.14, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the financial statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.4 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's business consistent with past practice since the
financial statements dated October 31, 1996 provided to Purchaser.
6.15 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct
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and have been made available to Purchaser.
6.16 Employees. Schedule 1.23 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.23, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
6.17 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.23
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of the
transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
6.18 Payroll Practice/Employee Arrangement.
6.18.1 Benefit Plans. Schedule 6.18 contains a complete list of
each employee benefit plan subject to ERISA, and/or holiday, vacation
or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has any
liability or obligation, whether actual or contingent, with respect to
the Employees or their respective beneficiaries.
6.18.2 Plan Liability. Seller has not taken any action that may
result in Purchaser being a party to, or bound by, an ERISA Plan, and
Purchaser shall have no liability under, or be subject to any liability
on account of, any ERISA Plan or Payroll Practice/Employee Arrangement
following the consummation of the transaction contemplated hereby.
6.18.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.19 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in relation
to, or in connection with, the transactions contemplated by this Agreement.
6.20 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to
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acquire in any way all or any part of, or interest in, the Business.
6.21 Condition of Assets. Except as set forth on Schedule 6.21, all
buildings, structures and equipment that are part of the Purchased Assets are
structurally sound, are in generally good operating condition and repair
(subject only to routine maintenance and repair) and are usable in the conduct
of the Business consistent with past practice and conform to all applicable
Legal Requirements.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability Seller has operated the Business
and each parcel of Real Property in material compliance with all
applicable Environmental Laws. Seller is not subject to any liability,
penalty or expense (including legal fees), and Purchaser will not
suffer or incur any loss, liability, penalty or expense (including
legal fees) by virtue of any violation of any Environmental Law
occurring prior to the Closing, any environmental activity conducted on
or with respect to any property at or prior to the Closing or any
environmental condition existing on or with respect to any property at
or prior to the Closing, in each case whether or not Seller permitted
or participated in such act or omission.
6.23.2 Treatment; CERCLIS Except in material compliance with all
applicable Environmental Laws, Seller has not treated, stored, recycled
or disposed of any hazardous material, and to Seller's Knowledge, no
other Person has treated, stored, recycled or disposed of any hazardous
material on any part of the Real Property. There has been no release of
any hazardous material at, on or under any Real Property. Seller has
not transported any hazardous material or arranged for the
transportation of any hazardous material to any location that is listed
or proposed for listing on the National Priorities List pursuant to
Superfund, on CERCLIS or any other location that is the subject of
federal, state or local enforcement action or other investigation that
may lead to claims against Seller for cleanup costs, remedial action,
damages to natural resources, to other property or for personal injury
including claims under Superfund. None of the Real Property is listed
or, to Seller's Knowledge, proposed for listing on the National
Priorities List pursuant to Superfund, CERCLIS or any state or local
list of sites requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation, abatement or
cleanup of any threatened or actual release of any hazardous material.
Seller is not required to place any notice or restriction relating to
the presence of any hazardous material at any Real Property or in any
deed to any Real Property. Seller has provided to Purchaser a list of
all sites to which, to Seller's Knowledge, Seller has transported any
hazardous material for recycling, treatment, disposal, other handling
or
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otherwise. There has been no past, and there is no pending or
contemplated, claim by Seller under any Environmental Law or Legal
Requirement based on actions of others that may have impacted on the
Real Property, and Seller has not entered into any agreement with any
Person regarding any Environmental Law, remedial action or other
environmental liability or expense. All storage tanks located on the
Real Property, whether underground or aboveground, are disclosed on
Schedule 6.23, and, to Seller's Knowledge, all such tanks and
associated piping are in sound condition and are not leaking and have
not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business in
respect of claims or occurrences concerning Seller prior to the Closing, (i)
take no action to eliminate or reduce such coverage, other than normal
elimination or reduction of coverage as they occur by virtue of the filing of
claims in the ordinary course under such insurance policies, (ii) pay when due
any premiums under such policies for periods, including retrospective or
retroactive premium adjustments and (iii) provided Purchaser maintains Seller's
insurance policies or otherwise is entitled to make a claim against Seller's
insurance policies pursuant to the terms of this Agreement, use its best
efforts to assist in filing and processing claims under, and otherwise
cooperate with Purchaser to allow Purchaser, in its own name, or on behalf of
Seller, to obtain all coverage benefits applicable to the Business under such
insurance policies, including the execution of assignments or powers of
attorney for the benefit of Purchaser. Any proceeds of insurance paid by an
insurer to Seller for claims of Purchaser made in accordance with this Section
shall be promptly paid to Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.26. Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. Cost Reports Seller has provided Purchaser with copies of all
Seller's cost reports and rate schedules for the current year and the two
immediately preceding years for the Facility. Each such cost report was
prepared in material compliance with all applicable Legal Requirements.
6.28. Occupancy Reports Seller has provided Purchaser with copies of
Seller's
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occupancy reports for the Facility for the last year. Each such occupancy report
was prepared based on the number of operational beds (i.e., double occupancy
rooms were only counted as such when both beds were occupied).
6.29. Tax Returns Seller has filed or caused to be filed, or will file
or cause to be filed, all Tax Returns that are required to be filed by it prior
to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) such Taxes that are fully reserved
against on the financial statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.29,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
6.30 Completeness and Accuracy All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. All Contracts, Permits and other
documents and instruments furnished or made available to Purchaser by Seller
are or will be true, complete and accurate originals or copies of originals and
include all amendments, supplements, waivers and modifications thereto.
6.31 Seller's Assets Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss. 801.1
et seq) had: (i) annual net sales of $100,000,000 or more as stated on its last
regularly prepared statement of income and expenses; or (ii) total assets of
$100,000,000 or more as stated on its last regularly prepared balance sheet.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties is
true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
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7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement,
contract, commitment, lease or other instrument, document or undertaking to
which Purchaser is a party or (v) result in the creation or imposition of any
Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss.
801.1 et seq) had: (i) annual net sale of $100,000,000 or more as stated on its
last regularly prepared statement of income and expenses; or (ii) total assets
of $100,000,000 or more as stated on its last regularly prepared balance sheet.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
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8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in its conduct of the Business,
except as otherwise agreed by Purchaser in writing:
8.1.1 Access to Information. Give to Purchaser and its counsel,
accountants, consultants and other representatives, for the purpose of
audit, review and copying, reasonable access, during normal business
hours, to such of the properties, books, accounts, Contracts and
records of Seller as are relevant to the Purchased Assets and the
Business, and furnish or otherwise make available to Purchaser all such
information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide
Purchaser with the following:
(i) Seller's occupancy reports for the Facility, as soon
as the same become available through the Closing
Date, but no later than ten days after the last day
of any given month (which reports shall be prepared
based on the number of operational beds);
(ii) Seller's federal and/or state surveys or inspections
and any plans of correction for the Facility, as
soon as the same become available through the
Closing Date, but no later than ten days after
received by Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule
for such Facility;
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the Closing Date, but no later than 21 days
after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to the
date hereof and, to the extent consistent with such operation, use its
best efforts until the Closing Date to (i) preserve and keep intact the
Business, (ii) keep available the services of the Employees; (iii)
preserve its relationships with residents, patients, suppliers and
others having business dealings with Seller in connection with the
Business and (iv) maintain current marketing activities;
8.1.3 Maintenance of Properties. Maintain the Purchased Assets,
whether owned or leased, in their present order and condition, in
accordance with Seller's past practices, reasonable wear and tear
excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books and
Records in the usual, regular and ordinary manner, on a basis
consistent with past practice;
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8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased Assets
and to the conduct of the Business;
8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the Business
in accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial efforts
to obtain in writing as promptly as possible any approvals and consents
as required to be obtained by Seller in order to effectuate the
transactions contemplated hereby and deliver to Purchaser copies of
such approvals and consents. Accordingly, Seller shall cooperate with
Purchaser's efforts to obtain the necessary licenses to operate the
Facility from the appropriate Accreditation Bodies, including, without
limitation, the Department of Welfare and the Department of Health.
Upon execution and delivery of this Agreement, Seller shall promptly:
(i) provide Purchaser with copies of all Permits;
(ii) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
Seller's residents/patients of the Facility and (ii)
notices to human service agencies (as that term is
defined by the Department of Welfare). Prior to
sending the notices, Seller shall provide copies to
Purchaser for review and approval, which approval
shall not be unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt notice
in writing of any fact that, if known on the date hereof, would have
been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.9 Surveys. Execute such affidavits or other instruments as are
commercially reasonable and necessary in order for Purchaser to remove
title exceptions for encroachments or survey discrepancies relating to
the Real Property;
8.1.10 Pay Employees to Closing Date. Pay all wages, salaries and
other sums due Employees through the close of business on the day prior
to the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary steps
to transfer to Purchaser the employment of all Employees electing to
continue their employ with Purchaser as of the Closing Date;
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8.1.12 Appointment of Seller's Agent. Irrevocably appoint Blumer
or Kelly ("Seller's Agent"), as Seller's agent and attorney-in-fact to
take any action required or permitted to be taken hereunder by Seller,
including without limitation, the giving and receipt of notices to be
delivered or received by or on behalf of Seller, the payment of
expenses relating to the transactions contemplated under this
Agreement, the representation of Seller in indemnification proceedings
hereunder, and the right to waiver of any of the terms of this
Agreement in any respect, and agree to be bound by any and all actions
taken by Seller's Agent. Purchaser shall be entitled to rely
exclusively on any communications given by Seller's Agent on behalf of
Seller, and shall not be liable for any action taken or not taken in
reliance on Seller's Agent. In the event that Seller's Agent resigns or
refuses to act, Seller shall promptly appoint another Seller as the
substitute Sellers' Agent to act under this Agreement, and Seller shall
promptly deliver a copy of such appointment to Purchaser; and
8.1.13 Compliance with Agreement. Not undertake any course of
action materially inconsistent with satisfaction of the conditions
applicable to it set forth in this Agreement, and use all reasonable
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement.
8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage statements/affidavits in
form and substance satisfactory to Purchaser's title insurer regarding
title, mechanic's liens and such other customary matters as may be
reasonably requested by Purchaser or Purchaser's title insurer; and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller under penalties of perjury, in the
form prescribed by Treasury Regulation Section 1.1445-2(b)(2)(iii),
stating Seller's name, address and Federal tax identification number,
and that it is not a "foreign person" within the meaning of Section
1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign, lease,
encumber or otherwise dispose of any of the Purchased Assets other than
in the ordinary course of Seller's business consistent with past
practices;
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8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material fixed
or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of Seller's
business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security interest or
any other Encumbrance, other than Permitted Encumbrances, any of the
Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase the
rate of compensation paid, or pay any bonus, to anyone connected with
the Business, except for those increases or bonuses planned, in the
ordinary course of Seller's business consistent with past practices, or
establish or adopt any new pension or profit-sharing plan, deferred
compensation agreement or employee benefit arrangement of any kind
whatsoever covering or affecting Employees;
8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as required
pursuant to this Agreement to obtain the consent of such third-party,
the entering into of this Agreement, the terms of this Agreement or the
transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.68 or
Schedule 2.1.4 or other authorization or agreement affecting the
Business or the Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of any
fact that, if known at the Closing Date, would have been required to be
set forth or disclosed in or pursuant to this Agreement, or which would
result in the breach by Purchaser of any of its representations,
warranties, covenants or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course of
action
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inconsistent with satisfaction of the conditions applicable to it set
forth in this Agreement, and Purchaser shall use its best efforts to do
all such acts and take all such measures as may be reasonably necessary
to comply with the representations, agreements, conditions and other
provisions of this Agreement; and
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business.
9.1.4 Seller's Employees. Take all reasonable steps to ensure that
the transfer of employment of all of the Employees electing to continue
their employ with Purchaser as are able to be accomplished prior to or
on the Closing Date.
9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the Employees, residents, patients and suppliers
of Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein ("Purchaser's Due Diligence").
9.3 Approvals, Consents. Use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate the Facility from the Department of Welfare and the Department of
Health, as applicable, including:
(i) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(ii) provide such other notices as required by all Legal
Requirements including (i) notices to Seller's
residents/patients of the Facility and (ii) notices
to human service agencies (as that term is defined
by the Department of Welfare). Prior to sending the
notices, Purchaser shall provide copies to Seller
for review and approval, which approval shall not be
unreasonably withheld.
9.4 Publicity; Advertisement. Except as required by law, publicize,
advertise or announce to any third-party, except as required pursuant to this
Agreement to obtain the consent of such third-party, the entering into of this
Agreement, the terms of this Agreement or the transactions contemplated hereby;
provided, however, the foregoing shall not be applicable to disclosures made by
Purchaser to Purchaser's lender in response to such lender's reasonable
requests.
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ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party to be performed or complied
with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the incumbency and specimen signature of
each officer or representative of Seller executing this Agreement, the
certificate referred to in Section 10.3 and the Ancillary Agreements to which
Seller is a party.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 [RESERVED].
10.7 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions contemplated
thereby shall have been consummated.
10.8 Consents. Any third-party consents, approvals, authorizations or
Permits
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(including, without limitation, those required by any Governmental Authorities)
necessary for the conveyance of the Purchased Assets or valid consummation of
the transactions contemplated hereby shall have been obtained.
10.9 Arrangements with Employees. Subject to the provisions of
Sections 4.3 and 9.1.4, substantially all of the Employees shall have accepted
employment with Purchaser effective on the Closing Date.
10.10 Employment Agreements. Kelly and Blumer shall have executed and
delivered the Employment Agreements with Purchaser.
10.11 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to Purchaser
and Purchaser's lender, reasonably satisfactory to Purchaser and its counsel as
to the matters set forth in Sections 6.1, 6.2 and 6.3 hereof .
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement, the
certificate referred to in Section 11.3 and the Ancillary Agreements to which
Purchaser is a party.
11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction
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directing that the transactions provided for herein, or any of them, not be
consummated as herein provided and no suit, action, investigation, inquiry or
other legal or administrative proceeding by any Governmental Authority or other
Person shall have been instituted, threatened or anticipated which questions the
validity or legality of the transactions contemplated hereby.
11.6 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions contemplated
thereby shall have been consummated.
11.7 Employment Agreements. Purchaser shall have executed and delivered
the Employment Agreements with Kelly and Blumer.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of five (5) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of five years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
12.5.1 Transfer of Assets. Seller agrees that Purchaser, from and
after the Closing, shall have the right and authority to collect for
Purchaser's own account all items
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which shall be transferred to Purchaser as provided herein.
12.5.2 Endorsement of Checks. From and after the Closing,
Purchaser shall have the right and authority to retain and endorse
without recourse the name of Seller on any check or any other evidences
of indebtedness received by Purchaser on account of any of the Business
and Purchased Assets transferred to Purchaser hereunder.
12.5.3 Seller's Remittance of Funds. After the Closing, Seller
shall promptly transfer and deliver to Purchaser any cash or other
property, if any, that Seller may receive related to the Business or
the Purchased Assets other than the Excluded Assets.
12.5.4 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or
other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.5.5 Assumed Liabilities Controlled by Purchaser. From and after
the Closing, Purchaser shall have complete control over the payment,
settlement or other disposition of, or any dispute involving, any
Assumed Liability, and Purchaser shall have the right to conduct and
control all negotiations and proceedings with respect thereto. Seller
shall notify Purchaser promptly of any claim made with respect to any
Assumed Liability and shall not, except with the prior written consent
of Purchaser, voluntarily make any payment of, or settle or offer to
settle, or consent to any compromise with respect to, any such Assumed
Liability. Seller shall cooperate with Purchaser in connection with any
negotiations or proceedings involving any Assumed Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's Accountants to cooperate at Purchaser's cost and expense, with
Purchaser and its auditors in the preparation of combined audited financial
statements of Seller and each of the Other Companies for the years ended
December 31, 1996, 1995 and 1994 to the extent required in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. As used herein, the term "combined audited
financial statements" shall mean the audited financial statements of Seller and
each of the Other Companies, combined.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any Books and
Records relating to the Business that Seller may retain as may reasonably be
required in connection with the preparation of financial information or tax
returns of Purchaser.
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12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial account closing and reporting and claims and
litigation asserted by or against third parties, including, but not limited to,
making employees available at reasonable times to assist with, or provide
information in connection with financial account closing and reporting and
claims and litigation, provided that Seller reimburses Purchaser for its
reasonable out-of-pocket expenses (including costs of employees so assisting)
in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and
Purchaser;
(ii) by Seller or Purchaser if Closing has not
taken place on or before March 15, 1997;
provided however, that no Party then in
material breach of any of its obligations
hereunder shall have the right to
terminate;
(iii) by Purchaser upon notice to Seller if any
of the conditions set forth in Article X
hereof have not been satisfied or become
impossible to satisfy by the Closing Date
(other than by reason of the material
failure of Purchaser to fulfill its
obligations under this Agreement);
(iv) by Seller upon notice to Purchaser if any
of the conditions set forth in Article XI
hereof have not been satisfied or become
impossible to satisfy by the Closing Date
(other than by reason of the material
failure of Seller to fulfill its
obligations under this Agreement);
(v) by Seller if Purchaser materially breaches
or fails to fulfill its obligations under
this Agreement, which failure continues and
remains uncured for 30 consecutive calendar
days after Seller gives written notice of
such failure to Purchaser;
(vi) by Purchaser if Seller materially breaches
or fails to fulfill its obligations under
this Agreement, which failure continues and
remains uncured for 30 consecutive calendar
days after Purchaser gives written notice
of such failure to Seller; and
(vii) by Purchaser upon notice to Seller if any
of the conditions set forth below have not
been satisfied or become impossible to
satisfy by
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the Due Diligence Date (other
than by reason of the material failure of
Purchaser to fulfill its obligations under
this Agreement):
(a) the results of Purchaser's Due
Diligence shall not be satisfactory to
Purchaser in its sole discretion;
(b) Purchaser shall not have secured a
commitment for financing the
transaction contemplated by this
Agreement on terms and conditions
satisfactory to Purchaser in its sole
discretion;
(c) the results of an inspection of the
physical condition of the Real
Property, including the improvements
and the HVAC, electrical, plumbing and
other systems, by a qualified
engineering firm engaged by Purchaser,
at its cost and expense, are not
satisfactory to Purchaser in its sole
discretion; and
(d) the results of an environmental report
on the Purchased Assets and the
Business from a qualified geotechnical
or engineering firm engaged by
Purchaser, at its cost and expense,
are not satisfactory to Purchaser in
its sole discretion.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Deposit Fund. Upon termination of this Agreement, the Deposit Fund
shall be disbursed as follows and in accordance with the terms and conditions of
the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13.1(iii) or Section 13.1(vi), the
Parties agree to instruct Escrow Agent to release
the entire amount of the Deposit Fund to Purchaser;
(ii) if this Agreement is terminated by Purchaser
pursuant to Section 13.1(vii) on or before the Due
Diligence Date, the Parties agree to instruct Escrow
Agent to release one-half of the amount of the
Deposit Fund to Purchaser and the balance of the
Deposit Fund to Seller; and
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the
Parties agree to instruct Escrow Agent to release
the entire amount of the Deposit Fund to Seller.
13.4 Remedies.
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13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the Deposit Fund as
set forth in Section 13.3 shall be the sole and exclusive remedy of Seller as
liquidated damages, and shall be in lieu of all other rights and remedies which
may otherwise be available at law or in equity.
13.4.2 Purchaser's Remedies. If Purchaser has the right to
terminate this Agreement pursuant to Section 13.1(vi), in addition to
Purchaser's right to receive the Deposit Fund as permitted under Section 13.3,
Purchaser may seek any other remedies that may otherwise be available at law or
in equity, including, without limitation, an action for specific performance and
reimbursement from Seller for all expenses incurred by Purchaser in connection
with this Agreement and the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive until October 31, 1997 (the
"Survival Date"); provided, however, that all representations and warranties of
Seller with respect to any environmental matters set forth in Section 6.23 of
this Agreement shall survive for two years after the Closing Date.
Notwithstanding the foregoing, there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of the other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only and
shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall, indemnify, defend, save
and hold Purchaser, any assignee of Purchaser and their respective officers,
directors, employees, agents and Affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller or any Ancillary Agreement to which Seller is or is
to become a party, a breach or nonfulfillment of any covenant or agreement made
by any Seller in this Agreement or in any Ancillary Agreement to which Seller
is or is to become a party, and
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any and all liabilities of Seller of any nature whatsoever, whether due or to
become due, whether accrued, absolute, contingent or otherwise, existing on the
Closing Date or arising out of any transaction entered into, or any state of
facts existing, prior to the Closing Date, except for any Assumed Liability. To
the extent any Purchaser Indemnitee is entitled to collect Purchaser Damages,
Purchaser shall, at its option and subject to the terms of the Escrow Agreement,
be entitled to withdraw sufficient funds from the Escrow Fund pursuant to the
Escrow Agreement in lieu of payment directly from Seller, and to the extent the
amount due any Purchaser Indemnitee exceeds the balance of the funds held under
the Escrow Agreement, Purchaser shall be entitled to collect such balance owned
to Purchaser Indemnitee directly from Seller.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, Affiliates and
agents (collectively, "Seller Indemnitees") harmless from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, a breach of any representation or warranty made by Purchaser
in this Agreement or in any certificate or document furnished pursuant hereto
by Purchaser or any Ancillary Agreement to which Purchaser is a party, a breach
or nonfulfillment of any covenant or agreement made by Purchaser in this
Agreement or in any Ancillary Agreement to which Purchaser is a party, any
Assumed Liability and any and all liabilities of any nature whatsoever arising
out of Purchaser's operation of the Business after the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
Notwithstanding the foregoing, any Purchaser Indemnitee shall be required to
notify Seller's Agent of any claim for Purchaser Damages as required herein
even though the same may be included in the $25,000 threshold set forth in
Section 14.6, and Seller shall have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party
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shall give the Indemnifying Party advance notice of any proposed compromise or
settlement. The Indemnified Party shall permit the Indemnifying Party to
participate in the defense of any such action or suit through counsel chosen by
the Indemnifying Party, provided that the fees and expenses of such counsel
shall be borne by the Indemnifying Party. If the Indemnified Party permits the
Indemnifying Party to undertake, conduct and control the conduct and settlement
of such action or suit, the Indemnifying Party shall not thereby permit to exist
any Encumbrance upon any asset of the Indemnified Party; the Indemnifying Party
shall not consent to any settlement that does not include as an unconditional
term thereof the giving of a complete release from liability with respect to
such action or suit to the Indemnified Party; the Indemnifying Party shall
permit the Indemnified Party to participate in such conduct or settlement
through counsel chosen by the Indemnified Party; and the Indemnifying Party
shall agree promptly to reimburse the Indemnified Party for the full amount of
any Damages including fees and expenses of counsel for the Indemnified Party
incurred after giving the foregoing notice to the Indemnifying Party and prior
to the assumption of the conduct and control of such action or suit by the
Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under Section
14.2 until the aggregate amount of Purchaser Damages thereunder exceeds $25,000,
but if the aggregate amount of Purchaser Damages thereunder exceeds $25,000 in
the aggregate, then indemnification shall be made by Seller thereunder to the
full extent of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those Purchaser Damages
as to which Purchaser has given Seller's Agent written notice thereof on or
before the Survival Date; provided, however, that with respect to any claim for
Purchaser Damages sustained by reason of a breach of any representation or
warranty relating to those matters governed by Section 6.23, Seller's liability
shall be limited to Purchaser Damages as to which such written notice shall have
been given to Seller's Agent within two years of the Closing Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations set
forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser Damages arising
out of fraud, the breach of any representation or warranty contained herein or
pursuant hereto if such representation or warranty was made with actual
knowledge that it contained an untrue statement of a fact or omitted to state a
fact necessary to make the statements of facts contained therein not misleading
or misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with respect
to the Retained Liabilities.
ARTICLE XV. GENERAL
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15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller
If to Seller, to:
Sellers' Agent:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
Scranton, PA 18505
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Fax: (717) 963-1601
With a required copy to:
Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof shall thereof be binding upon
any Party unless set forth in an instrument in writing signed by the Party to
be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
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15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through a
sale-leaseback. Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide Seller with a copy of any
such assignment, and Seller agrees to execute and deliver any consents
reasonably required by Purchaser's lender in connection therewith, provided
such assignment does not expand any of Seller's obligations and liabilities
hereunder. Notwithstanding any permitted assignment of this Agreement by
Purchaser, Purchaser shall remain liable to Seller for all obligations and
liabilities to be performed by or on behalf of Purchaser hereunder.
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[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
------------------------------------
Name: Brian L. Barth
Title: Vice President
BLAKELY-PINE HEALTH CARE CENTER, INC.
By: /s/ Michael P. Kelly
----------------------------------
Name: Michael P. Kelly
Title: President
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<PAGE> 1
Exhibit 2.12
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
27th day of December, 1996, by and between Balanced Care Corporation, a
Delaware corporation ("Purchaser"), and West Side Manor Personal Care and
Retirement Center, Inc., a Pennsylvania corporation ("Seller").
RECITALS:
Seller owns a personal care home located at 80 Wyoming Avenue,
Wyoming, PA 18518 (the "Facility"). Purchaser desires to purchase substantially
all of the assets of Seller and the Business (as hereinafter defined) related
thereto and Seller desires to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Health, the Department of Welfare and all other Persons having jurisdiction
over the accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of the Business as of such date prepared in accordance with
GAAP consistently applied, including those described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute
control.
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1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the bill of sale, assignment and assumption
described in Section 5.2.2, the Escrow Agreement described in Section 14.2 and
the Employment Agreements described in Section 10.9 .
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Blumer" shall mean James J. Blumer, Jr.
1.9 "Books and Records" shall have the meaning given to it in Section
6.15.
1.10 "Business" shall mean the operation of a personal care home and
any other ancillary health care services owned, operated, delivered, managed,
developed, constructed, maintained, used, occupied or possessed by Seller in
connection therewith (including, without limitation, any outpatient and
contract rehab therapy services or any Alzheimer's units).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section 5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident/Patient's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, franchises and books and records of account benefiting,
relating to the Purchased Assets or the operation of the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy, possession or operation thereof, or the operation of any of the
programs or services in conjunction with the Business and all renewals,
replacements and substitutions therefor, issued
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by any Governmental Authority, Accreditation Body or Third Party Payor or
maintained or used by Seller with any third Person.
1.18 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to such term in Section
14.4.
1.20 "Department of Health" shall mean the Commonwealth of
Pennsylvania, Department of Health.
1.21 "Department of Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.21a "Deposit Fund" shall mean $30,000 to be paid by Purchaser and
held by the Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement.
1.22 "Due Diligence Date" shall mean January 15, 1997.
1.23 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.23 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's business consistent with past
practices).
1.24 "Employment Agreements" shall mean the contracts entered into
between Purchaser and each of Kelly and Blumer in substantially the form of
Exhibit 1.24.
1.25 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.26 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Sections 136 et seq.)], other Legal Requirements, any common law doctrine and
any provision or condition of any permit, license or other operating
authorization relating to (i) the protection of the environment or the public
welfare from actual or potential exposure (or the effects of exposure) to any
actual or potential release, discharge, disposal or emission (whether past or
present) of any Regulated Substance or (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Regulated Substance.
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1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.28 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.29 "Escrow Agent" shall mean Mellon Bank.
1.30 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.30.
1.31 "Escrow Fund" shall mean $50,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
1.32 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.32a "Facility" shall have the meaning given to such term in the
Recitals of this Agreement.
1.33 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.38 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.39 "Kelly" shall mean Michael P. Kelly.
1.39a "Keystone Management Services" shall mean Keystone Management
Services, a Pennsylvania general partnership, consisting of its general
partners, Kelly and Blumer.
1.40 "Knowledge" and words of similar import shall mean, with respect
to Purchaser, actual knowledge of a particular fact or other matter being
possessed by an officer or other
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individual now or formerly having principal responsibility for a business or
administrative function of such Party, including individuals serving in such a
capacity in or for the Business, and the knowledge that reasonably could be
expected to be obtained in the course of conducting a reasonably comprehensive
investigation concerning the subject matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Other Agreements" shall mean the agreements set forth on
Schedule 1.46, including any other agreements executed and delivered under or
in connection therewith.
1.47 "Other Companies" shall mean the companies identified on Schedule
1.47.
1.48 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.49 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
1.50 "Payroll Practice / Employee Arrangement" shall have the meaning
given to such term in Section 6.18.
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1.51 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licences, permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under, any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, now or hereafter required or issued by any Governmental
Authority, Accreditation Body or Third Party Payor.
1.52 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.52 hereto.
1.53 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.54 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.55 [RESERVED].
1.56 "Proprietary Rights" shall have the meaning given to such term in
Section 6.9.1.
1.57 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.58 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.59 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.60 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.61 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.61a "Purchaser's Due Diligence" shall have the meaning given to such
term in Section 9.2.
1.62 "Purchaser Indemnitees" shall have the meaning given to such term
in Section 14.2.
1.63 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
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1.64 "Real Property Leased" shall mean the real property leased by
Seller in connection with the Business as more fully described in Schedule 1.64
hereto.
1.65 "Real Property Owned" shall mean the real property owned by
Seller, and used in connection with the Business as more fully described in
Schedule 1.65 hereto.
1.66 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.67 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv) any spouse, sibling, ancestor or lineal
descendant of any natural Person identified in any one of the preceding
clauses.
1.68 "Resident/Patient's Agreements" shall mean all contracts,
agreements and consents executed by or on behalf of any resident, patient or
other Person seeking services at the Facility as more fully described in
Schedule 1.68 hereto, including, without limitation, assignments of benefits
and guarantees, and such resident/patient's related medical and/or other
records.
1.69 "Retained Liabilities" has the meaning given that term in Section
4.2.
1.70 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.71 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually and collectively, as the context may
require.
1.72 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.73 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.74 "Seller's Accountants" shall have the meaning given to it in
Section 6.4.
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1.74a "Seller's Knowledge" and words of similar import shall mean,
with respect to Seller, actual knowledge of a particular fact or other matter
being possessed by Kelly and/or Blumer and the knowledge that reasonably could
be expected to be obtained concerning the subject matter by Kelly and Blumer in
the ordinary course of their ownership and operation of the Business.
1.74b "Survival Date" shall have the meaning given to such term in
Section 14.1.
1.75 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.76 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.77 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.78 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
2.1.1 Real Property Owned. The Real Property Owned, together
with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto;
2.1.2 Real Property Leased. Seller's interest, as lessee, in
the Real Property Leased;
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2.1.3 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements,
automobiles, supplies, office furniture and office equipment,
computing and telecommunications equipment and other items of personal
property that are owned by Seller and used in connection with the
Business, including those described in Schedule 2.1.3 hereto;
2.1.4 Contracts Relating to the Business. All of the interest
of Seller in all Contracts relating to the acquisition or ownership by
Seller of any of the Purchased Assets or the operation of the
Business, the Resident/Patient's Agreements listed on Schedule 1.68
hereto and those Contracts not required to be listed on 2.1.4 by
reason of the provisions of Section 6.10.
2.1.5 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations material and advertising material used in the Business,
whether in electronic form or otherwise;
2.1.6 Permits, Licenses. All of Seller's interest in Permits
relating to the Business, including those listed in Schedule 2.1.6
hereto, to the extent such Permits are transferrable to Purchaser;
2.1.7 Trade Secrets. All policies and procedures, methods of
delivery of services, trade secrets, designs, drawings and
specifications, market studies, consultants' reports, prototypes, and
all similar property of any nature, tangible or intangible, of Seller
used in the Business;
2.1.8 Intellectual Property. All right, title and interest of
Seller in the patents, trademarks, trademark registrations, trade
names, service marks, copyrights and copyright registrations described
in Schedule 2.1.8;
2.1.9 [RESERVED];
2.1.10 Goodwill. All of the interest of Seller in and to the
goodwill incident to the Business, including but not limited to the
value of the Facility name associated with the Business and the value
of good customer relations;
2.1.11 Inventory. All Closing Inventory;
2.1.12 Resident/Patient Funds. All deposits and escrow
accounts of, or for the benefit of, any of Seller's resident/patients
at the Closing Date;
2.1.13 Prepaid Expenses. All Seller's Prepaid Expenses of, or
for the benefit of, the Business at the Closing Date including those
described in Schedule 2.1.13, to the extent the benefits thereof are
transferable to Purchaser;
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2.1.14 Computer Software. All computer applications software,
owned or licensed, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.), or
specific, unique-to-the-business usage, and all computer operating,
security or programming software, owned or licensed by Seller and used
in the operation of the Business; and
2.1.15 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following assets
(collectively, the "Excluded Assets") shall be excluded from this Agreement, and
shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable. All Accounts Receivable of Seller
existing on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees
up through and including the Closing Date;
2.2.3 Consideration. The consideration paid to Seller
pursuant to this Agreement;
2.2.4 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.2.5 Corporate Books. Corporate minute books and stock books
of Seller;
2.2.6 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the
extent they relate to liabilities or obligations that are not assumed
by Purchaser hereunder (except the amount of costs and expenses
Purchaser shall have incurred with respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority; and
2.2.8 Other Assets. Assets listed on Schedule 2.2.8.
2.3 License to Use Certain Assets. To the extent that there are any
tangible or intangible assets used by Seller in connection with the Business
that are not specifically designated as Excluded Assets by Section 2.2 (without
reference to this Section), the Purchased Assets shall include an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferrable license to
utilize such assets in connection with the operation of the Business after the
Closing Date. To the extent that any such assets may not be licensed, Seller
shall take all steps required to assure that Purchaser obtains the benefit of
such assets.
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ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the
"Purchase Price") shall be in the amount of $2,184,000, to be paid by
certified or cashier's check drawn on a national bank or by wire
transfer as follows:
(i) the Purchase Price less the sum of the Deposit Fund and
the Escrow Fund to Seller at the time of Closing;
(ii) the Escrow Fund to Escrow Agent at the time of Closing
to be held in escrow pursuant to the Escrow Agreement;
and
(iii) upon execution and delivery hereof, the Deposit Fund to
Escrow Agent to be held in escrow pursuant to the
Escrow Agreement.
3.1.2 Other Consideration. As additional consideration,
Purchaser shall also assume the Assumed Liabilities at the time of
Closing.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the Business in accordance with the
allocation set forth in Schedule 3.3. Purchaser and Seller shall report the
federal, state and local income and other tax consequences of the purchase and
sale contemplated hereby in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date,
Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
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(i) all obligations of Seller accruing subsequent to the Closing
Date under the Contracts contemplated by Section 2.1.4,
including, without limitation, those set forth in Schedule 1.68
and Schedule 2.1.4, provided that the rights thereunder have
been duly and effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing after the Closing Date under
the Permits described in Section 2.1.6, provided that the
rights thereunder have been duly and effectively assigned to
Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security of
Seller;
(ii) arising out of any transaction affecting Seller or obligations
incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, all legal and accounting
fees and all brokers or finders fees or commissions payable by
Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or indemnification)
but for a claim by the insurer (or the indemnitor) that the
insured (or the indemnities) had breached its obligations under
the policy of insurance (or the contract of indemnity) or had
committed fraud in the insurance application;
(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to Closing, and the
transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior to
Closing;
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notwithstanding the foregoing, all sales and use taxes,
transfer taxes, and all other impositions of tax arising solely
by reason of the transfers contemplated by this Agreement
(excluding all federal, state and local income and gross
receipt taxes on the earnings or gross receipts of Seller prior
to the Closing Date, which shall remain the sole responsibility
of Seller) shall be the responsibility of and shall be borne
equally by Seller and Purchaser (any real estate and personal
property taxes for the year in which Closing occurs shall be
pro-rated to the Closing Date (based on a calendar year or
fiscal year for which such taxes are levied basis), if the tax
rates for the year in which Closing occurs shall not be fixed
prior to the Closing Date for a particular item of the
Purchased Assets, the pro-ration of taxes thereon shall be
based upon the tax rate for the year prior to Closing applied
to the latest assessment valuation; however, in the event that
any such taxes are increased or decreased for the year in which
Closing occurs, Seller or Purchaser shall then reimburse the
other party for amounts in excess of or less than the proration
as determined as of the Closing Date);
(x) for long term indebtedness and other obligations or guarantees
of Seller;
(xi) for Current Liabilities reflected on the books of Seller at the
Closing Date; and
(xii) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date.
4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees (except as indicated on Schedule
1.23) in substantially similar jobs, at the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain liable for all
liability for all accrued vacation entitlements as indicated on
Schedule 12.3, workers' compensation, disability and occupational
diseases of or with respect to all of Seller's Employees attributable
to entitlements, injuries, claims, conditions, events and occurrences
occurring on or before the Closing Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Employees of Seller hired by Purchaser attributable to entitlements,
injuries, claims, conditions, events and occurrences first occurring
after the Closing Date.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place on or after January 2, 1997, but in any event
not later than March 15, 1997
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(the "Closing"). The date of the Closing shall be referred to as the "Closing
Date." The Closing shall take place at such time, date and place as may be
mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deeds. Duly executed special warranty deeds, in
recordable form, transferring good and marketable fee simple title to
the Real Property Owned, subject only to Permitted Encumbrances, and
such affidavits or other instruments as Purchaser's title insurance
company may reasonably request, including but not limited to (i)
exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants
pursuant to agreements with Seller and (C) mechanics' or materialmens'
liens and (ii) payoff letters, lien releases and satisfaction pieces
and (iii) gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that Seller has been able to obtain that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the Purchased Assets with assignments to
Purchaser;
5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property
or any of the other Purchased Assets for the applicable current tax
year or years, and all tax assessments or notices thereof upon which
such taxes are based;
5.2.5 Plans and Specifications. To the extent not delivered
prior to Closing, all plans, specifications and other drawings in
Seller's possession or reasonably obtainable by Seller and used in the
construction of the Facility or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty, the
property under the Contracts or any of the other Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's
possession or reasonably obtainable by Seller, surveys and hazardous
waste studies prepared within 36 months before the date hereof, for or
relating to the Purchased Assets;
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5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements relating to the ownership, operation, use,
occupancy, licensure, accreditation or maintenance of the Business;
and
5.2.8 Rent Roll. The rent roll of Seller listing all
resident/patients and their respective rent payments current as of two
days prior to the Closing.
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
5.3 Reasonable Steps. Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof and to be performed by
it.
6.2 Authorization of Agreement and Enforceability. Seller has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party, the performance
by it of all terms and conditions hereof and thereof to be performed by it and
the consummation of the transactions contemplated hereby and thereby,
including, without limitation, obtaining such shareholder's consents as is
required under the Pennsylvania Business Corporation Law. This Agreement
constitutes, and the Ancillary Agreements to which Seller is party, upon
Seller's execution and delivery thereof, will constitute the legal, valid and
binding obligations of Seller, enforceable in accordance with their terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
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respect to notices and consents required to be given by Seller to any
Accreditation Body or Governmental Authority in connection with the sale and
change of ownership of the Purchased Assets and the Business, violate or
require any consent, authorization or approval of, or exemption by, or filing
under any provision of any law, statute, rule or regulation to which Seller,
the Business or the Purchased Assets are subject, (iii) violate any judgment,
order, writ or decree of any court applicable to Seller, the Business or the
Purchased Assets, (iv) except with respect to agreements with Seller's lender
and except as identified on Schedule 2.1.4, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any agreement, Contract, commitment, lease or other instrument, document
or undertaking to which Seller is a party or any of the Purchased Assets is
bound or (v) result in the creation or imposition of any Encumbrances upon the
Purchased Assets.
6.4 Financial Statements. Seller has delivered to Purchaser true and
complete copies of the (i) audited balance sheets of Seller at December 31,
1995 and the reviewed balanced sheets of Seller at December 31, 1994 and 1993,
together with the related statements of income and cash flows for the years
then ended, certified by Snyder & Clemente, independent public accountants
("Seller's Accountants") and (ii) monthly statements of profit and loss for the
first 10 months of 1996 with respect to the operation of the Facility. True and
correct copies of such financial statements are attached hereto as Schedule
6.4. The foregoing financial statements have been prepared from the Books and
Records of Seller in accordance with GAAP consistently applied throughout the
periods involved except as may be noted therein. Such financial statements,
including the related notes, are materially true and correct and fairly present
the financial position of the Business at the dates indicated and the results
of operations and cash flows of the Business for the periods then ended in
accordance with GAAP. The most recent interim financial statements provided to
Purchaser dated October 31, 1996 reflect all material liabilities of Seller and
there has been no material adverse change with respect to the matters contained
therein since the date thereof.
6.5 [RESERVED].
6.6 Inventory. The level of Inventory maintained by Seller and
included in the Purchased Assets is sufficient to carry on the Business as
historically conducted.
6.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.7 hereto, since October 31, 1996, in connection with the Business,
Seller has not:
(i) amended in any material respect or terminated any
Contract other than in the ordinary course of Seller's
business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on the Purchased Assets or the results of
operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the results
of operations of the Business by fire, storm or similar
casualty, whether or not covered by insurance;
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(iv) sold, transferred, replaced or leased any of the
Purchased Assets or sold any Inventory at a discount,
except for transactions in the ordinary course of
Seller's business consistent with past practice;
(v) waived or released any material rights with respect to
the Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than in
the ordinary course of Seller's business consistent
with past practice;
viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except
following normal review procedures or as reasonably
deemed necessary in the ordinary course of Seller's
business consistent with past practice;
(x) suffered any major or key personnel changes; or
(xi) materially altered its conduct in its relations with
suppliers, residents and patients.
6.8 Title to Properties; Absence of Liens and Encumbrances. Seller
owns and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased Assets subject to Closing, including
without limitation the Real Property (except as disclosed in Schedule 6.8 or
except as sold or otherwise disposed of by Seller in the ordinary course of
Seller's business consistent with past practice), free and clear of all
Encumbrances, other than Permitted Encumbrances. Seller has the right to quiet
enjoyment of all Real Property Leased in which it holds a leasehold interest
for the full term, including all renewal rights, of the lease or similar
agreement relating thereto. Copies of all existing title insurance policies
written in favor of Seller and all surveys relating to the Real Property in
Seller's possession or reasonably obtainable by Seller have been delivered to
Purchaser. Except as set forth on Schedule 6.8, all structures and other
improvements on the Real Property are in good order and repair and free from
any structural defects and are within the lot lines and do not encroach on the
properties of any other Person, and the use and operation of the Real Property
conforms to all applicable building, zoning, safety and subdivision laws,
Environmental Laws and other Legal Requirements, and all restrictive covenants
and restrictions and conditions affecting title. Except as disclosed on
Schedule 6.8, no portion of the Real Property is located in a flood plain,
flood hazard area or designated wetlands area. Seller has not received any
written or oral notice of assessments for public improvements against the Real
Property or any written or oral notice or order by any Governmental Authority,
any insurance company that has issued a policy with
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respect to any of such properties or any board of fire underwriters or other
body exercising similar functions that relates to violations of building,
safety or fire ordinances or regulations, claims any defect or deficiency with
respect to any of such properties or requests the performance of any repairs,
alterations or other work to or in any of such properties or in the streets
bounding the same. Except as disclosed on Schedule 6.8, each parcel of Real
Property is considered a separate parcel of land for taxing and conveyancing
purposes. There is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of the Real Property. All
public utilities (including water, gas, electric, storm and sanitary sewage,
and telephone utilities) required to operate the Facility of Seller are
available to such Facility and such utilities enter the boundaries of such
Facility through adjoining public streets, permanent easements or rights-of-way
of record in favor of Seller. Such public utilities are all connected pursuant
to valid permits, are all in good working order and are adequate to service the
operations of such Facility as currently conducted and to the best of Seller's
Knowledge permit full compliance with all Legal Requirements. Seller has not
received any written notice of any proposed, planned or actual curtailment of
service of any utility supplied to any Facility of Seller. Except as disclosed
on Schedule 6.8 all present driveways and other access routes to the Real
Property are from public streets and no other Person has any right to use any
such driveways or other access routes.
6.9 Proprietary Rights.
6.9.1 Logos and Tradenames. Schedule 2.1.8 hereto sets forth
a correct and complete list of all patents, logos, trademarks, trade
names, service marks, copyrights and applications or registrations
therefor used in and material to the Business (collectively, the
"Proprietary Rights").
6.9.2 Licenses. Except as disclosed in Schedule 2.1.8.: (i)
Seller owns or possesses adequate licenses or other valid rights to
use (without the making of any payment to others or the obligation or
grant rights to others in exchange) all the Proprietary Rights
material to the Business; (ii) the Proprietary Rights included in the
Purchased Assets constitute all the material rights necessary to
conduct the Business in accordance with past practice and are being
conveyed to Purchaser together with the other Purchased Assets; (iii)
the validity of the Proprietary Rights and the rights therein of
Seller have not been questioned in any litigation to which Seller is a
party, nor, to Seller's Knowledge, is any such litigation threatened;
and (iv) to the best of Seller's Knowledge, the conduct of the
Business does not conflict with patent rights, licenses, trademark
rights, trade name rights, copyrights or other intellectual property
rights of others.
6.9.3 Infringement. Except as disclosed in Schedule 2.1.8
hereto, to Seller's Knowledge, no material use of any Proprietary
Rights owned by Seller has heretofore been, or is now being, made by
any Person other than Seller, and to Seller's Knowledge, there is no
infringement of any Proprietary Rights owned or licensed by Seller. No
present or former director, officer, Employee or consultant of Seller
has any interest in any of the Proprietary Rights.
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6.10 Contracts and Commitments. Except as listed and described on
Schedule 1.68 and Schedule 2.1.4, neither Seller nor any party acting on behalf
of Seller with Seller's Knowledge and consent is a party to any written or oral
(for which Purchaser shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of
services by another party, involving in any one case
$10,000 or more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident/Patient's Agreement);
(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in
value (except for any Resident/Patient's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee
other than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement,
loan agreement or other Contract or for the borrowing
or lending of money (including without limitation
loans to or from Employees) or guarantee, pledge or
undertaking of the indebtedness of any other Person;
(vii) Contract for any charitable or political contribution;
(viii) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in any
likeness of business with any Person;
(ix) license, franchise, distributorship or other
agreement, including those that relate in whole or in
part to any patent, trademark, trade name, service
mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business; or
(x) any other material Contract not made in the ordinary
course of Seller's business consistent with past
practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.68 and Schedule 2.1.4 is valid and
enforceable in accordance with its terms, Seller and, to Seller's Knowledge any
other party thereto, are in compliance with the provisions thereof, Seller and,
to Seller's Knowledge any other party thereto, are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and
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no event has occurred that with or without the giving of notice or lapse of
time, or both, would constitute a default by Seller thereunder and, to Seller's
Knowledge, a default by any other party thereto; (ii) except as set forth on
Schedule 1.68 and Schedule 2.1.4 no advance payments have been received by
Seller by or on behalf of any party to any of the Contracts, commitments,
leases and other instruments listed on Schedule 1.68 and Schedule 2.1.4 for
services to be rendered or products to be delivered to such party after the
Closing Date; and (iii) no consent or approval of any party to any Contract,
commitment, lease or other instrument, document or undertaking listed on
Schedule 1.68 and Schedule 2.1.4 is required for the execution of this
Agreement or the consummation of the transactions contemplated hereby.
6.11 Permits, Licenses. Seller has all Permits that are required to
operate the Business (including without limitation those required under any
Environmental Law) and, Seller is in material compliance with the terms and
conditions of the Permits. Schedule 2.1.6 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.6 hereto as nontransferable
or requiring such consent or approval.
6.12 Compliance with Laws. Except as described in Schedule 6.12
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.13 Legal Proceedings. Except as described in Schedule 6.13 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any Governmental Authority or, to Seller's Knowledge, threatened against
Seller with respect to the Business or any of the Purchased Assets, or relating
to the transactions contemplated by this Agreement, nor to Seller's Knowledge
is there any basis for any such claim, action, suit, proceeding, investigation,
or inquiry. Except as set forth on Schedule 6.13 hereto, Seller is not a party
to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental, regulatory or
administrative official, body or authority that relates to the Purchased Assets
or the Business or that might affect the transactions contemplated by this
Agreement.
6.14 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.14, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the financial statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.4 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's business consistent with past practice since the
financial statements dated October 31, 1996 provided to Purchaser.
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6.15 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
6.16 Employees. Schedule 1.23 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.23, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
6.17 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.23,
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of the
transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
6.18 Payroll Practice/Employee Arrangement.
6.18.1 Benefit Plans. Schedule 6.18 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has
any liability or obligation, whether actual or contingent, with
respect to the Employees or their respective beneficiaries.
6.18.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.18.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.19 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
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6.20 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.21 Condition of Assets. Except as set forth on Schedule 6.21, all
buildings, structures and equipment that are part of the Purchased Assets are
structurally sound, are in generally good operating condition and repair
(subject only to routine maintenance and repair) and are usable in the conduct
of the Business consistent with past practice and conform to all applicable
Legal Requirements.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability. Seller has operated the
Business and each parcel of Real Property in material compliance with
all applicable Environmental Laws. Seller is not subject to any
liability, penalty or expense (including legal fees), and Purchaser
will not suffer or incur any loss, liability, penalty or expense
(including legal fees) by virtue of any violation of any Environmental
Law occurring prior to the Closing, any environmental activity
conducted on or with respect to any property at or prior to the
Closing or any environmental condition existing on or with respect to
any property at or prior to the Closing, in each case whether or not
Seller permitted or participated in such act or omission.
6.23.2 Treatment; CERCLIS. Except in material compliance with
all applicable Environmental Laws, Seller has not treated, stored,
recycled or disposed of any hazardous material, and to Seller's
Knowledge no other Person has treated, stored, recycled or disposed of
any hazardous material on any part of the Real Property. There has
been no release of any hazardous material at, on or under any Real
Property. Seller has not transported any hazardous material or
arranged for the transportation of any hazardous material to any
location that is listed or proposed for listing on the National
Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of federal, state or local enforcement
action or other investigation that may lead to claims against Seller
for cleanup costs, remedial action, damages to natural resources, to
other property or for personal injury including claims under
Superfund. None of the Real Property is listed or, to Seller's
Knowledge, proposed for listing on the National Priorities List
pursuant to Superfund, CERCLIS or any state or local list of sites
requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation, abatement
or cleanup of any threatened or actual release of any hazardous
material. Seller is not required to place any notice or restriction
relating to the presence of any hazardous material at any Real
Property or in any deed to any Real Property. Seller has
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provided to Purchaser a list of all sites to which, to Seller's
Knowledge, Seller has transported any hazardous material for
recycling, treatment, disposal, other handling or otherwise. There has
been no past, and there is no pending or contemplated, claim by Seller
under any Environmental Law or Legal Requirement based on actions of
others that may have impacted on the Real Property, and Seller has not
entered into any agreement with any Person regarding any Environmental
Law, remedial action or other environmental liability or expense. All
storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 6.23, and, to Seller's
Knowledge, all such tanks and associated piping are in sound condition
and are not leaking and have not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business in
respect of claims or occurrences concerning Seller prior to the Closing, (i)
take no action to eliminate or reduce such coverage, other than normal
elimination or reduction of coverage as they occur by virtue of the filing of
claims in the ordinary course under such insurance policies, (ii) pay when due
any premiums under such policies for periods, including retrospective or
retroactive premium adjustments and (iii) provided Purchaser maintains Seller's
insurance policies or otherwise is entitled to make a claim against Seller's
insurance policies pursuant to the terms of this Agreement, use its best
efforts to assist in filing and processing claims under, and otherwise
cooperate with Purchaser to allow Purchaser, in its own name, or on behalf of
Seller, to obtain all coverage benefits applicable to the Business under such
insurance policies, including the execution of assignments or powers of
attorney for the benefit of Purchaser. Any proceeds of insurance paid by an
insurer to Seller for claims of Purchaser made in accordance with this Section
shall be promptly paid to Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.26. Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. [RESERVED]
6.28. Occupancy Reports. Seller has provided Purchaser with copies of
Seller's occupancy reports for the Facility for the last year. Each such
occupancy report was prepared
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based on the number of operational beds (i.e., double occupancy rooms were only
counted as such when both beds were occupied).
6.29. Tax Returns. Seller has filed or caused to be filed, or will
file or cause to be filed, all Tax Returns that are required to be filed by it
prior to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) such Taxes that are fully reserved
against on the financial statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.29,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
6.30 Completeness and Accuracy. All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. All Contracts, Permits and other
documents and instruments furnished or made available to Purchaser by Seller
are or will be true, complete and accurate originals or copies of originals and
include all amendments, supplements, waivers and modifications thereto.
6.31 Seller's Assets Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss. 801.1
et seq) had: (i) annual net sales of $100,000,000 or more as stated on its last
regularly prepared statement of income and expenses; or (ii) total assets of
$100,000,000 or more as stated on its last regularly prepared balance sheet.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
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7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement,
contract, commitment, lease or other instrument, document or undertaking to
which Purchaser is a party or (v) result in the creation or imposition of any
Encumbrance upon its assets.
7.4 Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss.
801.1 et seq) had: (i) annual net sale of $100,000,000 or more as stated on its
last regularly prepared statement of income and expenses; or (ii) total assets
of $100,000,000 or more as stated on its last regularly prepared balance sheet.
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ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in its conduct of the Business,
except as otherwise agreed by Purchaser in writing:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access, during normal
business hours, to such of the properties, books, accounts, Contracts
and records of Seller as are relevant to the Purchased Assets and the
Business, and furnish or otherwise make available to Purchaser all
such information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide
Purchaser with the following:
(i) Seller's occupancy reports for the Facility, as soon
as the same become available through the Closing
Date, but no later than ten days after the last day
of any given month (which reports shall be prepared
based on the number of operational beds);
(ii) Seller's federal and/or state surveys or inspections
and any plans of correction for the Facility, as
soon as the same become available through the
Closing Date, but no later than ten days after
received by Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule
for such Facility;
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the Closing Date, but no later than 21 days
after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to
the date hereof and, to the extent consistent with such operation, use
its best efforts until the Closing Date to (i) preserve and keep
intact the Business, (ii) keep available the services of the
Employees; (iii) preserve its relationships with residents, patients,
suppliers and others having business dealings with Seller in
connection with the Business and (iv) maintain current marketing
activities;
8.1.3 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in their present order and condition,
in accordance with Seller's past practices, reasonable wear and tear
excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books
and Records in the usual, regular and ordinary manner, on a basis
consistent with past practice;
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8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased
Assets and to the conduct of the Business;
8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the
Business in accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial
efforts to obtain in writing as promptly as possible any approvals and
consents as required to be obtained by Seller in order to effectuate
the transactions contemplated hereby and deliver to Purchaser copies
of such approvals and consents. Accordingly, Seller shall cooperate
with Purchaser's efforts to obtain the necessary licenses to operate
the Facility from the appropriate Accreditation Bodies, including,
without limitation, the Department of Welfare and the Department of
Health. Upon execution and delivery of this Agreement, Seller shall
promptly:
(i) provide Purchaser with copies of all Permits;
(ii) notify each Accreditation Body and Third Party Payor as
required by any Legal Requirement of the pending change
of ownership of the Facility; and
(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
Seller's residents/patients of the Facility and (ii)
notices to human service agencies (as that term is
defined by the Department of Welfare). Prior to sending
the notices, Seller shall provide copies to Purchaser
for review and approval, which approval shall not be
unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.9 Surveys. Execute such affidavits or other instruments
as are commercially reasonable and necessary in order for Purchaser to
remove title exceptions for encroachments or survey discrepancies
relating to the Real Property;
8.1.10 Pay Employees to Closing Date. Pay all wages, salaries
and other sums due Employees through the close of business on the day
prior to the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary
steps to transfer to Purchaser the employment of all Employees
electing to continue their employ with Purchaser as of the Closing
Date;
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8.1.12 Appointment of Seller's Agent. Irrevocably appoint
Blumer or Kelly ("Seller's Agent"), as Seller's agent and
attorney-in-fact to take any action required or permitted to be taken
hereunder by Seller, including without limitation, the giving and
receipt of notices to be delivered or received by or on behalf of
Seller, the payment of expenses relating to the transactions
contemplated under this Agreement, the representation of Seller in
indemnification proceedings hereunder, and the right to waiver of any
of the terms of this Agreement in any respect, and agree to be bound
by any and all actions taken by Seller's Agent. Purchaser shall be
entitled to rely exclusively on any communications given by Seller's
Agent on behalf of Seller, and shall not be liable for any action
taken or not taken in reliance on Seller's Agent. In the event that
Seller's Agent resigns or refuses to act, Seller shall promptly
appoint another Seller as the substitute Sellers' Agent to act under
this Agreement, and Seller shall promptly deliver a copy of such
appointment to Purchaser; and
8.1.13 Compliance with Agreement. Not undertake any course of
action materially inconsistent with satisfaction of the conditions
applicable to it set forth in this Agreement, and use all reasonable
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement.
8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to
Purchaser's title insurer regarding title, mechanic's liens and such
other customary matters as may be reasonably requested by Purchaser or
Purchaser's title insurer; and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller under penalties of perjury, in
the form prescribed by Treasury Regulation Section
1.1445-2(b)(2)(iii), stating Seller's name, address and Federal tax
identification number, and that it is not a "foreign person" within
the meaning of Section 1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the Purchased Assets
other than in the ordinary course of Seller's business consistent with
past practices;
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8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of Seller's
business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security interest
or any other Encumbrance, other than Permitted Encumbrances, any of
the Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase
the rate of compensation paid, or pay any bonus, to anyone connected
with the Business, except for those increases or bonuses planned, in
the ordinary course of Seller's business consistent with past
practices, or establish or adopt any new pension or profit-sharing
plan, deferred compensation agreement or employee benefit arrangement
of any kind whatsoever covering or affecting Employees;
8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.68 or
Schedule 2.1.4 or other authorization or agreement affecting the
Business or the Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of
any fact that, if known at the Closing Date, would have been required
to be set forth or disclosed in or pursuant to this Agreement, or
which would result in the breach by Purchaser of any of its
representations, warranties, covenants or agreements hereunder;
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9.1.2 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and Purchaser shall use its best
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement; and
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business.
9.1.4 Seller's Employees. Take all reasonable steps to ensure
that the transfer of employment of all of the Employees electing to
continue their employ with Purchaser as are able to be accomplished
prior to or on the Closing Date.
9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the Employees, residents, patients and suppliers
of Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein ("Purchaser's Due Diligence").
9.3 Approvals, Consents. Use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate the Facility from the Department of Welfare and the Department of
Health, as applicable, including:
(i) notify each Accreditation Body and Third Party Payor as
required by any Legal Requirement of the pending change
of ownership of the Facility; and
(ii) provide such other notices as required by all Legal
Requirements including (i) notices to Seller's
residents/patients of the Facility and (ii) notices to
human service agencies (as that term is defined by the
Department of Welfare). Prior to sending the notices,
Purchaser shall provide copies to Seller for review and
approval, which approval shall not be unreasonably
withheld.
9.4 Publicity; Advertisement. Except as required by law, publicize,
advertise or announce to any third-party, except as required pursuant to this
Agreement to obtain the consent of such third-party, the entering into of this
Agreement, the terms of this Agreement or the transactions contemplated hereby;
provided, however, the foregoing shall not be applicable to disclosures made by
Purchaser to Purchaser's lender in response to such lender's reasonable
requests.
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ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party to be performed or complied
with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the incumbency and specimen signature of
each officer or representative of Seller executing this Agreement, the
certificate referred to in Section 10.3 and the Ancillary Agreements to which
Seller is a party.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 [RESERVED].
10.7 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
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10.8 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.9 Arrangements with Employees. Subject to the provisions of
Sections 4.3 and 9.1.4, substantially all of the Employees shall have accepted
employment with Purchaser effective on the Closing Date.
10.10 Employment Agreements. Kelly and Blumer shall have executed and
delivered the Employment Agreements with Purchaser.
10.11 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to Purchaser
and Purchaser's lender, reasonably satisfactory to Purchaser and its counsel as
to the matters set forth in Sections 6.1, 6.2 and 6.3 hereof .
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement, the
certificate referred to in Section 11.3 and the Ancillary Agreements to which
Purchaser is a party.
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11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted,
threatened or anticipated which questions the validity or legality of the
transactions contemplated hereby.
11.6 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
11.7 Employment Agreements. Purchaser shall have executed and
delivered the Employment Agreements with Kelly and Blumer.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of five (5) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of five years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
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12.5.1 Transfer of Assets. Seller agrees that Purchaser, from
and after the Closing, shall have the right and authority to collect
for Purchaser's own account all items which shall be transferred to
Purchaser as provided herein.
12.5.2 Endorsement of Checks. From and after the Closing,
Purchaser shall have the right and authority to retain and endorse
without recourse the name of Seller on any check or any other
evidences of indebtedness received by Purchaser on account of any of
the Business and Purchased Assets transferred to Purchaser hereunder.
12.5.3 Seller's Remittance of Funds. After the Closing,
Seller shall promptly transfer and deliver to Purchaser any cash or
other property, if any, that Seller may receive related to the
Business or the Purchased Assets other than the Excluded Assets.
12.5.4 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or
other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.5.5 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving,
any Assumed Liability, and Purchaser shall have the right to conduct
and control all negotiations and proceedings with respect thereto.
Seller shall notify Purchaser promptly of any claim made with respect
to any Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any Assumed
Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's Accountants to cooperate at Purchaser's cost and expense, with
Purchaser and its auditors in the preparation of combined audited financial
statements of Seller and each of the Other Companies for the years ended
December 31, 1996, 1995 and 1994 to the extent required in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. As used herein, the term "combined audited
financial statements" shall mean the audited financial statements of Seller and
each of the Other Companies, combined.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any Books and
Records relating to the Business that Seller may retain as may reasonably be
required in connection with the preparation of financial information or tax
returns of Purchaser.
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12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial account closing and reporting and claims and
litigation asserted by or against third parties, including, but not limited to,
making employees available at reasonable times to assist with, or provide
information in connection with financial account closing and reporting and
claims and litigation, provided that Seller reimburses Purchaser for its
reasonable out-of-pocket expenses (including costs of employees so assisting)
in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and Purchaser;
(ii) by Seller or Purchaser if Closing has not taken place
on or before March 15, 1997; provided however, that no
Party then in material breach of any of its obligations
hereunder shall have the right to terminate;
(iii) by Purchaser upon notice to Seller if any of the
conditions set forth in Article X hereof have not been
satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Purchaser to fulfill its obligations under
this Agreement);
(iv) by Seller upon notice to Purchaser if any of the
conditions set forth in Article XI hereof have not been
satisfied or become impossible to satisfy by the
Closing Date (other than by reason of the material
failure of Seller to fulfill its obligations under this
Agreement);
(v) by Seller if Purchaser materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Seller gives written
notice of such failure to Purchaser;
(vi) by Purchaser if Seller materially breaches or fails to
fulfill its obligations under this Agreement, which
failure continues and remains uncured for 30
consecutive calendar days after Purchaser gives written
notice of such failure to Seller; and
(vii) by Purchaser upon notice to Seller if any of the
conditions set forth below have not been satisfied or
become impossible to satisfy by the Due Diligence Date
(other than by reason of the material failure of
Purchaser to fulfill its obligations under this
Agreement):
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(a) the results of Purchaser's Due Diligence shall not
be satisfactory to Purchaser in its sole
discretion;
(b) Purchaser shall not have secured a commitment for
financing the transaction contemplated by this
Agreement on terms and conditions satisfactory to
Purchaser in its sole discretion;
(c) the results of an inspection of the physical
condition of the Real Property, including the
improvements and the HVAC, electrical, plumbing and
other systems, by a qualified engineering firm
engaged by Purchaser, at its cost and expense, are
not satisfactory to Purchaser in its sole
discretion; and
(d) the results of an environmental report on the
Purchased Assets and the Business from a qualified
geotechnical or engineering firm engaged by
Purchaser, at its cost and expense, are not
satisfactory to Purchaser in its sole discretion.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Deposit Fund. Upon termination of this Agreement, the Deposit
Fund shall be disbursed as follows and in accordance with the terms and
conditions of the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13.1(iii) or Section 13.1(vi), the
Parties agree to instruct Escrow Agent to release the
entire amount of the Deposit Fund to Purchaser;
(ii) if this Agreement is terminated by Purchaser pursuant
to Section 13.1(vii) on or before the Due Diligence
Date, the Parties agree to instruct Escrow Agent to
release one-half of the amount of the Deposit Fund to
Purchaser and the balance of the Deposit Fund to
Seller; and
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the
Parties agree to instruct Escrow Agent to release the
entire amount of the Deposit Fund to Seller.
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13.4 Remedies.
13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the
Deposit Fund as set forth in Section 13.3 shall be the sole and
exclusive remedy of Seller as liquidated damages, and shall be in lieu
of all other rights and remedies which may otherwise be available at
law or in equity.
13.4.2 Purchaser's Remedies. If Purchaser has the right to
terminate this Agreement pursuant to Section 13.1(vi), in addition to
Purchaser's right to receive the Deposit Fund as permitted under
Section 13.3, Purchaser may seek any other remedies that may otherwise
be available at law or in equity, including, without limitation, an
action for specific performance and reimbursement from Seller for all
expenses incurred by Purchaser in connection with this Agreement and
the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive until October 31, 1997 (the
"Survival Date"); provided, however, that all representations and warranties of
Seller with respect to any environmental matters set forth in Section 6.23 of
this Agreement shall survive for two years after the Closing Date.
Notwithstanding the foregoing, there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of the other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only and
shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall, indemnify, defend, save
and hold Purchaser, any assignee of Purchaser and their respective officers,
directors, employees, agents and Affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller or any Ancillary Agreement to which Seller is or is
to become a party, a breach or nonfulfillment of any covenant or agreement made
by any Seller in this Agreement or in any Ancillary Agreement to which Seller
is or is to become a party, and any and all liabilities of Seller of any nature
whatsoever, whether due or to become due, whether
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accrued, absolute, contingent or otherwise, existing on the Closing Date or
arising out of any transaction entered into, or any state of facts existing,
prior to the Closing Date, except for any Assumed Liability. To the extent any
Purchaser Indemnitee is entitled to collect Purchaser Damages, Purchaser shall,
at its option and subject to the terms of the Escrow Agreement, be entitled to
withdraw sufficient funds from the Escrow Fund pursuant to the Escrow Agreement
in lieu of payment directly from Seller, and to the extent the amount due any
Purchaser Indemnitee exceeds the balance of the funds held under the Escrow
Agreement, Purchaser shall be entitled to collect such balance owned to
Purchaser Indemnitee directly from Seller.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, Affiliates and
agents (collectively, "Seller Indemnitees") harmless from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, a breach of any representation or warranty made by Purchaser
in this Agreement or in any certificate or document furnished pursuant hereto
by Purchaser or any Ancillary Agreement to which Purchaser is a party, a breach
or nonfulfillment of any covenant or agreement made by Purchaser in this
Agreement or in any Ancillary Agreement to which Purchaser is a party, any
Assumed Liability and any and all liabilities of any nature whatsoever arising
out of Purchaser's operation of the Business after the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
Notwithstanding the foregoing, any Purchaser Indemnitee shall be required to
notify Seller's Agent of any claim for Purchaser Damages as required herein
even though the same may be included in the $25,000 threshold set forth in
Section 14.6, and Seller shall have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement.
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The Indemnified Party shall permit the Indemnifying Party to participate in the
defense of any such action or suit through counsel chosen by the Indemnifying
Party, provided that the fees and expenses of such counsel shall be borne by
the Indemnifying Party. If the Indemnified Party permits the Indemnifying Party
to undertake, conduct and control the conduct and settlement of such action or
suit, the Indemnifying Party shall not thereby permit to exist any Encumbrance
upon any asset of the Indemnified Party; the Indemnifying Party shall not
consent to any settlement that does not include as an unconditional term
thereof the giving of a complete release from liability with respect to such
action or suit to the Indemnified Party; the Indemnifying Party shall permit
the Indemnified Party to participate in such conduct or settlement through
counsel chosen by the Indemnified Party; and the Indemnifying Party shall agree
promptly to reimburse the Indemnified Party for the full amount of any Damages
including fees and expenses of counsel for the Indemnified Party incurred after
giving the foregoing notice to the Indemnifying Party and prior to the
assumption of the conduct and control of such action or suit by the
Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under
Section 14.2 until the aggregate amount of Purchaser Damages
thereunder exceeds $25,000, but if the aggregate amount of Purchaser
Damages thereunder exceeds $25,000 in the aggregate, then
indemnification shall be made by Seller thereunder to the full extent
of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those
Purchaser Damages as to which Purchaser has given Seller's Agent
written notice thereof on or before the Survival Date; provided,
however, that with respect to any claim for Purchaser Damages
sustained by reason of a breach of any representation or warranty
relating to those matters governed by Section 6.23, Seller's liability
shall be limited to Purchaser Damages as to which such written notice
shall have been given to Seller's Agent within two years of the
Closing Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser
Damages arising out of fraud, the breach of any representation or
warranty contained herein or pursuant hereto if such representation or
warranty was made with actual knowledge that it contained an untrue
statement of a fact or omitted to state a fact necessary to make the
statements of facts contained therein not misleading or
misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with respect
to the Retained Liabilities.
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ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller.
If to Seller, to:
Sellers' Agent:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
Scranton, PA 18505
Fax: (717) 963-1601
With a required copy to:
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Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof shall thereof be binding upon
any Party unless set forth in an instrument in writing signed by the Party to
be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
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15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through a
sale-leaseback. Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide Seller with a copy of any
such assignment, and Seller agrees to execute and deliver any consents
reasonably required by Purchaser's lender in connection therewith, provided
such assignment does not expand any of Seller's obligations and liabilities
hereunder. Notwithstanding any permitted assignment of this Agreement by
Purchaser, Purchaser shall remain liable to Seller for all obligations and
liabilities to be performed by or on behalf of Purchaser hereunder.
[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
------------------------------------
Name: Brian L. Barth
Title: Vice President
WEST SIDE MANOR PERSONAL CARE AND
RETIREMENT CENTER, INC.
By: /s/ James J. Blumer, Jr.
------------------------------------
Name: James J. Blumer, Jr.
Title: President
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Exhibit 2.13
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
27th day of December, 1996, by and between Balanced Care Corporation, a
Delaware corporation ("Purchaser"), and Old Forge Manor Personal Care and
Retirement Center, Inc., a Pennsylvania corporation ("Seller").
RECITALS:
Seller owns a personal care home located at 246 South Main Street, Old
Forge, PA 18518 (the "Facility"). Purchaser desires to purchase substantially
all of the assets of Seller and the Business (as hereinafter defined) related
thereto and Seller desires to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Health, the Department of Welfare and all other Persons having jurisdiction
over the accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of the Business as of such date prepared in accordance with
GAAP consistently applied, including those described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute
control.
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1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the bill of sale, assignment and assumption
described in Section 5.2.2, the Escrow Agreement described in Section 14.2 and
the Employment Agreements described in Section 10.9 .
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Blumer" shall mean James J. Blumer, Jr.
1.9 "Books and Records" shall have the meaning given to it in Section
6.15.
1.10 "Business" shall mean the operation of a personal care home and
any other ancillary health care services owned, operated, delivered, managed,
developed, constructed, maintained, used, occupied or possessed by Seller in
connection therewith (including, without limitation, any outpatient and
contract rehab therapy services or any Alzheimer's units).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section 5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident/Patient's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, franchises and books and records of account benefiting,
relating to the Purchased Assets or the operation of the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy, possession or operation thereof, or the operation of any of the
programs or services in conjunction with the Business and all renewals,
replacements and substitutions therefor, issued
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by any Governmental Authority, Accreditation Body or Third Party Payor or
maintained or used by Seller with any third Person.
1.18 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to such term in Section
14.4.
1.20 "Department of Health" shall mean the Commonwealth of
Pennsylvania, Department of Health.
1.21 "Department of Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.21a "Deposit Fund" shall mean $30,000 to be paid by Purchaser and
held by the Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement.
1.22 "Due Diligence Date" shall mean January 15, 1997.
1.23 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.23 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's business consistent with past
practices).
1.24 "Employment Agreements" shall mean the contracts entered into
between Purchaser and each of Kelly and Blumer in substantially the form of
Exhibit 1.24.
1.25 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.26 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Sections 136 et seq.)], other Legal Requirements, any common law doctrine and
any provision or condition of any permit, license or other operating
authorization relating to (i) the protection of the environment or the public
welfare from actual or potential exposure (or the effects of exposure) to any
actual or potential release, discharge, disposal or emission (whether past or
present) of any Regulated Substance or (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Regulated Substance.
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1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.28 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.29 "Escrow Agent" shall mean Mellon Bank.
1.30 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.30.
1.31 "Escrow Fund" shall mean $50,000 to be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement.
1.32 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.32a "Facility" shall have the meaning given to such term in the
Recitals of this Agreement.
1.33 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.38 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.39 "Kelly" shall mean Michael P. Kelly.
1.39a "Keystone Management Services" shall mean Keystone Management
Services, a Pennsylvania general partnership, consisting of its general
partners, Kelly and Blumer.
1.40 "Knowledge" and words of similar import shall mean, with respect
to Purchaser, actual knowledge of a particular fact or other matter being
possessed by an officer or other
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individual now or formerly having principal responsibility for a business or
administrative function of such Party, including individuals serving in such a
capacity in or for the Business, and the knowledge that reasonably could be
expected to be obtained in the course of conducting a reasonably comprehensive
investigation concerning the subject matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Other Agreements" shall mean the agreements set forth on
Schedule 1.46, including any other agreements executed and delivered under or
in connection therewith.
1.47 "Other Companies" shall mean the companies identified on Schedule
1.47.
1.48 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.49 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
1.50 "Payroll Practice / Employee Arrangement" shall have the meaning
given to such term in Section 6.18.
1.51 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights,
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variances, permissive uses, accreditations, certificates, certifications,
consents, contracts, interim licences, permits and other authorizations of
every nature whatsoever required by, or issued to or on behalf of Seller under,
any Legal Requirements benefiting, relating or effecting the Business or the
construction, development, maintenance, management, use or operation thereof,
or the operation of any programs or services in conjunction with the Business
and all renewals, replacements and substitutions therefor, now or hereafter
required or issued by any Governmental Authority, Accreditation Body or Third
Party Payor.
1.52 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.52 hereto.
1.53 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.54 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.55 [RESERVED].
1.56 "Proprietary Rights" shall have the meaning given to such term in
Section 6.9.1.
1.57 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.58 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.59 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.60 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.61 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.61a "Purchaser's Due Diligence" shall have the meaning given to such
term in Section 9.2.
1.62 "Purchaser Indemnitees" shall have the meaning given to such term
in Section 14.2.
1.63 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
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1.64 "Real Property Leased" shall mean the real property leased by
Seller in connection with the Business as more fully described in Schedule 1.64
hereto.
1.65 "Real Property Owned" shall mean the real property owned by
Seller, and used in connection with the Business as more fully described in
Schedule 1.65 hereto.
1.66 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.67 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv) any spouse, sibling, ancestor or lineal
descendant of any natural Person identified in any one of the preceding
clauses.
1.68 "Resident/Patient's Agreements" shall mean all contracts,
agreements and consents executed by or on behalf of any resident, patient or
other Person seeking services at the Facility as more fully described in
Schedule 1.68 hereto, including, without limitation, assignments of benefits
and guarantees, and such resident/patient's related medical and/or other
records.
1.69 "Retained Liabilities" has the meaning given that term in Section
4.2.
1.70 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.71 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually and collectively, as the context may
require.
1.72 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.73 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.74 "Seller's Accountants" shall have the meaning given to it in
Section 6.4.
1.74a "Seller's Knowledge" and words of similar import shall mean,
with respect to
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Seller, actual knowledge of a particular fact or other matter being possessed
by Kelly and/or Blumer and the knowledge that reasonably could be expected to
be obtained concerning the subject matter by Kelly and Blumer in the ordinary
course of their ownership and operation of the Business.
1.74b "Survival Date" shall have the meaning given to such term in
Section 14.1.
1.75 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.76 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.77 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.78 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
2.1.1 Real Property Owned. The Real Property Owned, together
with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto;
2.1.2 Real Property Leased. Seller's interest, as lessee, in
the Real Property Leased;
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2.1.3 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements,
automobiles, supplies, office furniture and office equipment,
computing and telecommunications equipment and other items of personal
property that are owned by Seller and used in connection with the
Business, including those described in Schedule 2.1.3 hereto;
2.1.4 Contracts Relating to the Business. All of the interest
of Seller in all Contracts relating to the acquisition or ownership by
Seller of any of the Purchased Assets or the operation of the
Business, the Resident/Patient's Agreements listed on Schedule 1.68
hereto and those Contracts not required to be listed on 2.1.4 by
reason of the provisions of Section 6.10.
2.1.5 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations material and advertising material used in the Business,
whether in electronic form or otherwise;
2.1.6 Permits, Licenses. All of Seller's interest in Permits
relating to the Business, including those listed in Schedule 2.1.6
hereto, to the extent such Permits are transferrable to Purchaser;
2.1.7 Trade Secrets. All policies and procedures, methods of
delivery of services, trade secrets, designs, drawings and
specifications, market studies, consultants' reports, prototypes, and
all similar property of any nature, tangible or intangible, of Seller
used in the Business;
2.1.8 Intellectual Property. All right, title and interest of
Seller in the patents, trademarks, trademark registrations, trade
names, service marks, copyrights and copyright registrations described
in Schedule 2.1.8;
2.1.9 [RESERVED];
2.1.10 Goodwill. All of the interest of Seller in and to the
goodwill incident to the Business, including but not limited to the
value of the Facility name associated with the Business and the value
of good customer relations;
2.1.11 Inventory. All Closing Inventory;
2.1.12 Resident/Patient Funds. All deposits and escrow
accounts of, or for the benefit of, any of Seller's resident/patients
at the Closing Date;
2.1.13 Prepaid Expenses. All Seller's Prepaid Expenses of, or
for the benefit of, the Business at the Closing Date including those
described in Schedule 2.1.13, to the extent the benefits thereof are
transferable to Purchaser;
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2.1.14 Computer Software. All computer applications software,
owned or licensed, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.), or
specific, unique-to-the-business usage, and all computer operating,
security or programming software, owned or licensed by Seller and used
in the operation of the Business; and
2.1.15 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following assets
(collectively, the "Excluded Assets") shall be excluded from this Agreement, and
shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable. All Accounts Receivable of Seller
existing on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees
up through and including the Closing Date;
2.2.3 Consideration. The consideration paid to Seller
pursuant to this Agreement;
2.2.4 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.2.5 Corporate Books. Corporate minute books and stock books
of Seller;
2.2.6 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the
extent they relate to liabilities or obligations that are not assumed
by Purchaser hereunder (except the amount of costs and expenses
Purchaser shall have incurred with respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority; and
2.2.8 Other Assets. Assets listed on Schedule 2.2.8.
2.3 License to Use Certain Assets. To the extent that there are any
tangible or intangible assets used by Seller in connection with the Business
that are not specifically designated as Excluded Assets by Section 2.2 (without
reference to this Section), the Purchased Assets shall include an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferrable license to
utilize such assets in connection with the operation of the Business after the
Closing Date. To the extent that any such assets may not be licensed, Seller
shall take all steps required to assure that Purchaser obtains the benefit of
such assets.
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ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the
"Purchase Price") shall be in the amount of $2,100,000, to be paid by
certified or cashier's check drawn on a national bank or by wire
transfer as follows:
(i) the Purchase Price less the sum of the Deposit Fund
and the Escrow Fund to Seller at the time of Closing;
(ii) the Escrow Fund to Escrow Agent at the time of Closing
to be held in escrow pursuant to the Escrow Agreement;
and
(iii) upon execution and delivery hereof, the Deposit Fund
to Escrow Agent to be held in escrow pursuant to the
Escrow Agreement.
3.1.2 Other Consideration. As additional consideration, Purchaser
shall also assume the Assumed Liabilities at the time of Closing.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the Business in accordance with the
allocation set forth in Schedule 3.3. Purchaser and Seller shall report the
federal, state and local income and other tax consequences of the purchase and
sale contemplated hereby in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date,
Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
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(i) all obligations of Seller accruing subsequent to the Closing
Date under the Contracts contemplated by Section 2.1.4,
including, without limitation, those set forth in Schedule
1.68 and Schedule 2.1.4, provided that the rights thereunder
have been duly and effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing after the Closing Date
under the Permits described in Section 2.1.6, provided that
the rights thereunder have been duly and effectively assigned
to Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or
obligations incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the
indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or
the contract of indemnity) or had committed fraud in the
insurance application;
(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) Federal, state or local tax liabilities or obligations of
Seller in respect to periods prior to Closing, and the
transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing;
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notwithstanding the foregoing, all sales and use taxes,
transfer taxes, and all other impositions of tax arising
solely by reason of the transfers contemplated by this
Agreement (excluding all federal, state and local income and
gross receipt taxes on the earnings or gross receipts of
Seller prior to the Closing Date, which shall remain the sole
responsibility of Seller) shall be the responsibility of and
shall be borne equally by Seller and Purchaser (any real
estate and personal property taxes for the year in which
Closing occurs shall be pro-rated to the Closing Date (based
on a calendar year or fiscal year for which such taxes are
levied basis), if the tax rates for the year in which Closing
occurs shall not be fixed prior to the Closing Date for a
particular item of the Purchased Assets, the pro-ration of
taxes thereon shall be based upon the tax rate for the year
prior to Closing applied to the latest assessment valuation;
however, in the event that any such taxes are increased or
decreased for the year in which Closing occurs, Seller or
Purchaser shall then reimburse the other party for amounts in
excess of or less than the proration as determined as of the
Closing Date);
(x) for long term indebtedness and other obligations or
guarantees of Seller;
(xi) for Current Liabilities reflected on the books of Seller at
the Closing Date; and
(xii) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date.
4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees (except as indicated on Schedule
1.23) in substantially similar jobs, at the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain liable for all
liability for all accrued vacation entitlements as indicated on
Schedule 12.3, workers' compensation, disability and occupational
diseases of or with respect to all of Seller's Employees attributable
to entitlements, injuries, claims, conditions, events and occurrences
occurring on or before the Closing Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to all of
Employees of Seller hired by Purchaser attributable to entitlements,
injuries, claims, conditions, events and occurrences first occurring
after the Closing Date.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place on or after January 2, 1997, but in any event
not later than March 15, 1997
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(the "Closing"). The date of the Closing shall be referred to as the "Closing
Date." The Closing shall take place at such time, date and place as may be
mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deeds. Duly executed special warranty deeds, in
recordable form, transferring good and marketable fee simple title to
the Real Property Owned, subject only to Permitted Encumbrances, and
such affidavits or other instruments as Purchaser's title insurance
company may reasonably request, including but not limited to (i)
exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants
pursuant to agreements with Seller and (C) mechanics' or materialmens'
liens and (ii) payoff letters, lien releases and satisfaction pieces
and (iii) gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that Seller has been able to obtain that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the Purchased Assets with assignments to
Purchaser;
5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property
or any of the other Purchased Assets for the applicable current tax
year or years, and all tax assessments or notices thereof upon which
such taxes are based;
5.2.5 Plans and Specifications. To the extent not delivered
prior to Closing, all plans, specifications and other drawings in
Seller's possession or reasonably obtainable by Seller and used in the
construction of the Facility or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty, the
property under the Contracts or any of the other Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's
possession or reasonably obtainable by Seller, surveys and hazardous
waste studies prepared within 36 months before the date hereof, for or
relating to the Purchased Assets;
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5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements relating to the ownership, operation, use,
occupancy, licensure, accreditation or maintenance of the Business;
and
5.2.8 Rent Roll. The rent roll of Seller listing all
resident/patients and their respective rent payments current as of two
days prior to the Closing.
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
5.3 Reasonable Steps. Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof and to be performed by
it.
6.2 Authorization of Agreement and Enforceability. Seller has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party, the performance
by it of all terms and conditions hereof and thereof to be performed by it and
the consummation of the transactions contemplated hereby and thereby,
including, without limitation, obtaining such shareholder's consents as is
required under the Pennsylvania Business Corporation Law. This Agreement
constitutes, and the Ancillary Agreements to which Seller is party, upon
Seller's execution and delivery thereof, will constitute the legal, valid and
binding obligations of Seller, enforceable in accordance with their terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
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respect to notices and consents required to be given by Seller to any
Accreditation Body or Governmental Authority in connection with the sale and
change of ownership of the Purchased Assets and the Business, violate or
require any consent, authorization or approval of, or exemption by, or filing
under any provision of any law, statute, rule or regulation to which Seller,
the Business or the Purchased Assets are subject, (iii) violate any judgment,
order, writ or decree of any court applicable to Seller, the Business or the
Purchased Assets, (iv) except with respect to agreements with Seller's lender
and except as identified on Schedule 2.1.4, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any agreement, Contract, commitment, lease or other instrument, document
or undertaking to which Seller is a party or any of the Purchased Assets is
bound or (v) result in the creation or imposition of any Encumbrances upon the
Purchased Assets.
6.4 Financial Statements. Seller has delivered to Purchaser true and
complete copies of the (i) audited balance sheets of Seller at December 31,
1995 and the reviewed balanced sheets of Seller at December 31, 1994 and 1993,
together with the related statements of income and cash flows for the years
then ended, certified by Snyder & Clemente, independent public accountants
("Seller's Accountants") and (ii) monthly statements of profit and loss for the
first 10 months of 1996 with respect to the operation of the Facility. True and
correct copies of such financial statements are attached hereto as Schedule
6.4. The foregoing financial statements have been prepared from the Books and
Records of Seller in accordance with GAAP consistently applied throughout the
periods involved except as may be noted therein. Such financial statements,
including the related notes, are materially true and correct and fairly present
the financial position of the Business at the dates indicated and the results
of operations and cash flows of the Business for the periods then ended in
accordance with GAAP. The most recent interim financial statements provided to
Purchaser dated October 31, 1996 reflect all material liabilities of Seller and
there has been no material adverse change with respect to the matters contained
therein since the date thereof.
6.5 [RESERVED].
6.6 Inventory. The level of Inventory maintained by Seller and
included in the Purchased Assets is sufficient to carry on the Business as
historically conducted.
6.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.7 hereto, since October 31, 1996, in connection with the Business,
Seller has not:
(i) amended in any material respect or terminated any Contract
other than in the ordinary course of Seller's business
consistent with past practice;
(ii) suffered the occurrence of any events that, individually or
in the aggregate, have had, or could reasonably be expected
to have, a material adverse effect on the Purchased Assets
or the results of operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the results of
operations of the Business by fire, storm or similar
casualty, whether or not covered by insurance;
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(iv) sold, transferred, replaced or leased any of the Purchased
Assets or sold any Inventory at a discount, except for
transactions in the ordinary course of Seller's business
consistent with past practice;
(v) waived or released any material rights with respect to the
Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments (for
capital expenditures or otherwise) other than in the
ordinary course of Seller's business consistent with past
practice;
viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except following
normal review procedures or as reasonably deemed necessary
in the ordinary course of Seller's business consistent with
past practice;
(x) suffered any major or key personnel changes; or
(xi) materially altered its conduct in its relations with
suppliers, residents and patients.
6.8 Title to Properties; Absence of Liens and Encumbrances. Seller
owns and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased Assets subject to Closing, including
without limitation the Real Property (except as disclosed in Schedule 6.8 or
except as sold or otherwise disposed of by Seller in the ordinary course of
Seller's business consistent with past practice), free and clear of all
Encumbrances, other than Permitted Encumbrances. Seller has the right to quiet
enjoyment of all Real Property Leased in which it holds a leasehold interest
for the full term, including all renewal rights, of the lease or similar
agreement relating thereto. Copies of all existing title insurance policies
written in favor of Seller and all surveys relating to the Real Property in
Seller's possession or reasonably obtainable by Seller have been delivered to
Purchaser. Except as set forth on Schedule 6.8, all structures and other
improvements on the Real Property are in good order and repair and free from
any structural defects and are within the lot lines and do not encroach on the
properties of any other Person, and the use and operation of the Real Property
conforms to all applicable building, zoning, safety and subdivision laws,
Environmental Laws and other Legal Requirements, and all restrictive covenants
and restrictions and conditions affecting title. Except as disclosed on
Schedule 6.8, no portion of the Real Property is located in a flood plain,
flood hazard area or designated wetlands area. Seller has not received any
written or oral notice of assessments for public improvements against the Real
Property or any written or oral notice or order by any Governmental Authority,
any insurance company that has issued a policy with
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respect to any of such properties or any board of fire underwriters or other
body exercising similar functions that relates to violations of building,
safety or fire ordinances or regulations, claims any defect or deficiency with
respect to any of such properties or requests the performance of any repairs,
alterations or other work to or in any of such properties or in the streets
bounding the same. Except as disclosed on Schedule 6.8, each parcel of Real
Property is considered a separate parcel of land for taxing and conveyancing
purposes. There is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of the Real Property. All
public utilities (including water, gas, electric, storm and sanitary sewage,
and telephone utilities) required to operate the Facility of Seller are
available to such Facility and such utilities enter the boundaries of such
Facility through adjoining public streets, permanent easements or rights-of-way
of record in favor of Seller. Such public utilities are all connected pursuant
to valid permits, are all in good working order and are adequate to service the
operations of such Facility as currently conducted and to the best of Seller's
Knowledge permit full compliance with all Legal Requirements. Seller has not
received any written notice of any proposed, planned or actual curtailment of
service of any utility supplied to any Facility of Seller. Except as disclosed
on Schedule 6.8 all present driveways and other access routes to the Real
Property are from public streets and no other Person has any right to use any
such driveways or other access routes.
6.9 Proprietary Rights.
6.9.1 Logos and Tradenames. Schedule 2.1.8 hereto sets forth
a correct and complete list of all patents, logos, trademarks, trade
names, service marks, copyrights and applications or registrations
therefor used in and material to the Business (collectively, the
"Proprietary Rights").
6.9.2 Licenses. Except as disclosed in Schedule 2.1.8.: (i)
Seller owns or possesses adequate licenses or other valid rights to
use (without the making of any payment to others or the obligation or
grant rights to others in exchange) all the Proprietary Rights
material to the Business; (ii) the Proprietary Rights included in the
Purchased Assets constitute all the material rights necessary to
conduct the Business in accordance with past practice and are being
conveyed to Purchaser together with the other Purchased Assets; (iii)
the validity of the Proprietary Rights and the rights therein of
Seller have not been questioned in any litigation to which Seller is a
party, nor, to Seller's Knowledge, is any such litigation threatened;
and (iv) to the best of Seller's Knowledge, the conduct of the
Business does not conflict with patent rights, licenses, trademark
rights, trade name rights, copyrights or other intellectual property
rights of others.
6.9.3 Infringement. Except as disclosed in Schedule 2.1.8
hereto, to Seller's Knowledge, no material use of any Proprietary
Rights owned by Seller has heretofore been, or is now being, made by
any Person other than Seller, and to Seller's Knowledge, there is no
infringement of any Proprietary Rights owned or licensed by Seller. No
present or former director, officer, Employee or consultant of Seller
has any interest in any of the Proprietary Rights.
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6.10 Contracts and Commitments. Except as listed and described on
Schedule 1.68 and Schedule 2.1.4, neither Seller nor any party acting on behalf
of Seller with Seller's Knowledge and consent is a party to any written or oral
(for which Purchaser shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by
another party, involving in any one case $10,000 or more;
(ii) Contract to sell or supply products or to perform services,
involving in any one case $10,000 or more (except for any
Resident/Patient's Agreement);
(iii) Contract continuing over a period of more than six months
from the date hereof or exceeding $10,000 in value (except
for any Resident/Patient's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee other
than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement, loan
agreement or other Contract or for the borrowing or lending
of money (including without limitation loans to or from
Employees) or guarantee, pledge or undertaking of the
indebtedness of any other Person;
(vii) Contract for any charitable or political contribution;
(viii) Contract limiting or restraining Seller or any successor
or assign from engaging or competing in any likeness of
business with any Person;
(ix) license, franchise, distributorship or other agreement,
including those that relate in whole or in part to any
patent, trademark, trade name, service mark or copyright or
to any ideas, technical assistance or other know-how of or
used by the Business; or
(x) any other material Contract not made in the ordinary course
of Seller's business consistent with past practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.68 and Schedule 2.1.4 is valid and
enforceable in accordance with its terms, Seller and, to Seller's Knowledge any
other party thereto, are in compliance with the provisions thereof, Seller and,
to Seller's Knowledge any other party thereto, are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and
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no event has occurred that with or without the giving of notice or lapse of
time, or both, would constitute a default by Seller thereunder and, to Seller's
Knowledge, a default by any other party thereto; (ii) except as set forth on
Schedule 1.68 and Schedule 2.1.4 no advance payments have been received by
Seller by or on behalf of any party to any of the Contracts, commitments,
leases and other instruments listed on Schedule 1.68 and Schedule 2.1.4 for
services to be rendered or products to be delivered to such party after the
Closing Date; and (iii) no consent or approval of any party to any Contract,
commitment, lease or other instrument, document or undertaking listed on
Schedule 1.68 and Schedule 2.1.4 is required for the execution of this
Agreement or the consummation of the transactions contemplated hereby.
6.11 Permits, Licenses. Seller has all Permits that are required to
operate the Business (including without limitation those required under any
Environmental Law) and, Seller is in material compliance with the terms and
conditions of the Permits. Schedule 2.1.6 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.6 hereto as nontransferable
or requiring such consent or approval.
6.12 Compliance with Laws. Except as described in Schedule 6.12
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.13 Legal Proceedings. Except as described in Schedule 6.13 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any Governmental Authority or, to Seller's Knowledge, threatened against
Seller with respect to the Business or any of the Purchased Assets, or relating
to the transactions contemplated by this Agreement, nor to Seller's Knowledge
is there any basis for any such claim, action, suit, proceeding, investigation,
or inquiry. Except as set forth on Schedule 6.13 hereto, Seller is not a party
to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental, regulatory or
administrative official, body or authority that relates to the Purchased Assets
or the Business or that might affect the transactions contemplated by this
Agreement.
6.14 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.14, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the financial statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.4 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's business consistent with past practice since the
financial statements dated October 31, 1996 provided to Purchaser.
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6.15 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
6.16 Employees. Schedule 1.23 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.23, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
6.17 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.23,
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of the
transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
6.18 Payroll Practice/Employee Arrangement.
6.18.1 Benefit Plans. Schedule 6.18 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has
any liability or obligation, whether actual or contingent, with
respect to the Employees or their respective beneficiaries.
6.18.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.18.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.19 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
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6.20 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.21 Condition of Assets. Except as set forth on Schedule 6.21, all
buildings, structures and equipment that are part of the Purchased Assets are
structurally sound, are in generally good operating condition and repair
(subject only to routine maintenance and repair) and are usable in the conduct
of the Business consistent with past practice and conform to all applicable
Legal Requirements.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability. Seller has operated the Business and
each parcel of Real Property in material compliance with all applicable
Environmental Laws. Seller is not subject to any liability, penalty or
expense (including legal fees), and Purchaser will not suffer or incur
any loss, liability, penalty or expense (including legal fees) by
virtue of any violation of any Environmental Law occurring prior to the
Closing, any environmental activity conducted on or with respect to any
property at or prior to the Closing or any environmental condition
existing on or with respect to any property at or prior to the Closing,
in each case whether or not Seller permitted or participated in such
act or omission.
6.23.2 Treatment; CERCLIS. Except in material compliance with
all applicable Environmental Laws, Seller has not treated, stored,
recycled or disposed of any hazardous material, and to Seller's
Knowledge no other Person has treated, stored, recycled or disposed of
any hazardous material on any part of the Real Property. There has
been no release of any hazardous material at, on or under any Real
Property. Seller has not transported any hazardous material or
arranged for the transportation of any hazardous material to any
location that is listed or proposed for listing on the National
Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of federal, state or local enforcement
action or other investigation that may lead to claims against Seller
for cleanup costs, remedial action, damages to natural resources, to
other property or for personal injury including claims under
Superfund. None of the Real Property is listed or, to Seller's
Knowledge, proposed for listing on the National Priorities List
pursuant to Superfund, CERCLIS or any state or local list of sites
requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation, abatement
or cleanup of any threatened or actual release of any hazardous
material. Seller is not required to place any notice or restriction
relating to the presence of any hazardous material at any Real
Property or in any deed to any Real Property. Seller has
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<PAGE> 23
provided to Purchaser a list of all sites to which, to Seller's
Knowledge, Seller has transported any hazardous material for
recycling, treatment, disposal, other handling or otherwise. There has
been no past, and there is no pending or contemplated, claim by Seller
under any Environmental Law or Legal Requirement based on actions of
others that may have impacted on the Real Property, and Seller has not
entered into any agreement with any Person regarding any Environmental
Law, remedial action or other environmental liability or expense. All
storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 6.23, and, to Seller's
Knowledge, all such tanks and associated piping are in sound condition
and are not leaking and have not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business in
respect of claims or occurrences concerning Seller prior to the Closing, (i)
take no action to eliminate or reduce such coverage, other than normal
elimination or reduction of coverage as they occur by virtue of the filing of
claims in the ordinary course under such insurance policies, (ii) pay when due
any premiums under such policies for periods, including retrospective or
retroactive premium adjustments and (iii) provided Purchaser maintains Seller's
insurance policies or otherwise is entitled to make a claim against Seller's
insurance policies pursuant to the terms of this Agreement, use its best
efforts to assist in filing and processing claims under, and otherwise
cooperate with Purchaser to allow Purchaser, in its own name, or on behalf of
Seller, to obtain all coverage benefits applicable to the Business under such
insurance policies, including the execution of assignments or powers of
attorney for the benefit of Purchaser. Any proceeds of insurance paid by an
insurer to Seller for claims of Purchaser made in accordance with this Section
shall be promptly paid to Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.26. Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. [RESERVED]
6.28. Occupancy Reports. Seller has provided Purchaser with copies of
Seller's occupancy reports for the Facility for the last year. Each such
occupancy report was prepared
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based on the number of operational beds (i.e., double occupancy rooms were only
counted as such when both beds were occupied).
6.29. Tax Returns. Seller has filed or caused to be filed, or will
file or cause to be filed, all Tax Returns that are required to be filed by it
prior to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) such Taxes that are fully reserved
against on the financial statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.29,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
6.30 Completeness and Accuracy. All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. All Contracts, Permits and other
documents and instruments furnished or made available to Purchaser by Seller
are or will be true, complete and accurate originals or copies of originals and
include all amendments, supplements, waivers and modifications thereto.
6.31 Seller's Assets Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss. 801.1
et seq) had: (i) annual net sales of $100,000,000 or more as stated on its last
regularly prepared statement of income and expenses; or (ii) total assets of
$100,000,000 or more as stated on its last regularly prepared balance sheet.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
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<PAGE> 25
7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement,
contract, commitment, lease or other instrument, document or undertaking to
which Purchaser is a party or (v) result in the creation or imposition of any
Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss.
801.1 et seq) had: (i) annual net sale of $100,000,000 or more as stated on its
last regularly prepared statement of income and expenses; or (ii) total assets
of $100,000,000 or more as stated on its last regularly prepared balance sheet.
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ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the Closing
Date, Seller covenants that it will, in its conduct of the Business, except as
otherwise agreed by Purchaser in writing:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access, during normal
business hours, to such of the properties, books, accounts, Contracts
and records of Seller as are relevant to the Purchased Assets and the
Business, and furnish or otherwise make available to Purchaser all
such information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide
Purchaser with the following:
(i) Seller's occupancy reports for the Facility, as soon
as the same become available through the Closing
Date, but no later than ten days after the last day
of any given month (which reports shall be prepared
based on the number of operational beds);
(ii) Seller's federal and/or state surveys or inspections
and any plans of correction for the Facility, as
soon as the same become available through the
Closing Date, but no later than ten days after
received by Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule
for such Facility;
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the Closing Date, but no later than 21 days
after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to
the date hereof and, to the extent consistent with such operation, use
its best efforts until the Closing Date to (i) preserve and keep
intact the Business, (ii) keep available the services of the
Employees; (iii) preserve its relationships with residents, patients,
suppliers and others having business dealings with Seller in
connection with the Business and (iv) maintain current marketing
activities;
8.1.3 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in their present order and condition,
in accordance with Seller's past practices, reasonable wear and tear
excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books
and Records in the usual, regular and ordinary manner, on a basis
consistent with past practice;
8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased
Assets and to the conduct of the Business;
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8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the
Business in accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial
efforts to obtain in writing as promptly as possible any approvals and
consents as required to be obtained by Seller in order to effectuate
the transactions contemplated hereby and deliver to Purchaser copies
of such approvals and consents. Accordingly, Seller shall cooperate
with Purchaser's efforts to obtain the necessary licenses to operate
the Facility from the appropriate Accreditation Bodies, including,
without limitation, the Department of Welfare and the Department of
Health. Upon execution and delivery of this Agreement, Seller shall
promptly:
(i) provide Purchaser with copies of all Permits;
(ii) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of the Facility; and
(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
Seller's residents/patients of the Facility and (ii)
notices to human service agencies (as that term is
defined by the Department of Welfare). Prior to
sending the notices, Seller shall provide copies to
Purchaser for review and approval, which approval
shall not be unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.9 Surveys. Execute such affidavits or other
instruments as are commercially reasonable and necessary in order
for Purchaser to remove title exceptions for encroachments
or survey discrepancies relating to the Real Property;
8.1.10 Pay Employees to Closing Date. Pay all wages, salaries
and other sums due Employees through the close of business on the day
prior to the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary
steps to transfer to Purchaser the employment of all Employees
electing to continue their employ with Purchaser as of the Closing
Date;
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8.1.12 Appointment of Seller's Agent. Irrevocably appoint
Blumer or Kelly ("Seller's Agent"), as Seller's agent and
attorney-in-fact to take any action required or permitted to be taken
hereunder by Seller, including without limitation, the giving and
receipt of notices to be delivered or received by or on behalf of
Seller, the payment of expenses relating to the transactions
contemplated under this Agreement, the representation of Seller in
indemnification proceedings hereunder, and the right to waiver of any
of the terms of this Agreement in any respect, and agree to be bound
by any and all actions taken by Seller's Agent. Purchaser shall be
entitled to rely exclusively on any communications given by Seller's
Agent on behalf of Seller, and shall not be liable for any action
taken or not taken in reliance on Seller's Agent. In the event that
Seller's Agent resigns or refuses to act, Seller shall promptly
appoint another Seller as the substitute Sellers' Agent to act under
this Agreement, and Seller shall promptly deliver a copy of such
appointment to Purchaser; and
8.1.13 Compliance with Agreement. Not undertake any course of
action materially inconsistent with satisfaction of the conditions
applicable to it set forth in this Agreement, and use all reasonable
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement.
8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to
Purchaser's title insurer regarding title, mechanic's liens and such
other customary matters as may be reasonably requested by Purchaser or
Purchaser's title insurer; and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller under penalties of perjury, in
the form prescribed by Treasury Regulation Section
1.1445-2(b)(2)(iii), stating Seller's name, address and Federal tax
identification number, and that it is not a "foreign person" within
the meaning of Section 1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the Purchased Assets
other than in the ordinary course of Seller's business consistent with
past practices;
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8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of Seller's
business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security interest
or any other Encumbrance, other than Permitted Encumbrances, any of
the Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase
the rate of compensation paid, or pay any bonus, to anyone connected
with the Business, except for those increases or bonuses planned, in
the ordinary course of Seller's business consistent with past
practices, or establish or adopt any new pension or profit-sharing
plan, deferred compensation agreement or employee benefit arrangement
of any kind whatsoever covering or affecting Employees;
8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.68 or
Schedule 2.1.4 or other authorization or agreement affecting the
Business or the Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of
any fact that, if known at the Closing Date, would have been required
to be set forth or disclosed in or pursuant to this Agreement, or
which would result in the breach by Purchaser of any of its
representations, warranties, covenants or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course of
action
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inconsistent with satisfaction of the conditions applicable to it set
forth in this Agreement, and Purchaser shall use its best efforts to
do all such acts and take all such measures as may be reasonably
necessary to comply with the representations, agreements, conditions
and other provisions of this Agreement; and
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business.
9.1.4 Seller's Employees. Take all reasonable steps to ensure
that the transfer of employment of all of the Employees electing to
continue their employ with Purchaser as are able to be accomplished
prior to or on the Closing Date.
9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the Employees, residents, patients and suppliers
of Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein ("Purchaser's Due Diligence").
9.3 Approvals, Consents. Use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate the Facility from the Department of Welfare and the Department of
Health, as applicable, including:
(i) notify each Accreditation Body and Third Party Payor as
required by any Legal Requirement of the pending change
of ownership of the Facility; and
(ii) provide such other notices as required by all Legal
Requirements including (i) notices to Seller's
residents/patients of the Facility and (ii) notices to
human service agencies (as that term is defined by the
Department of Welfare). Prior to sending the notices,
Purchaser shall provide copies to Seller for review and
approval, which approval shall not be unreasonably
withheld.
9.4 Publicity; Advertisement. Except as required by law, publicize,
advertise or announce to any third-party, except as required pursuant to this
Agreement to obtain the consent of such third-party, the entering into of this
Agreement, the terms of this Agreement or the transactions contemplated hereby;
provided, however, the foregoing shall not be applicable to disclosures made by
Purchaser to Purchaser's lender in response to such lender's reasonable
requests.
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ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party to be performed or complied
with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the incumbency and specimen signature of
each officer or representative of Seller executing this Agreement, the
certificate referred to in Section 10.3 and the Ancillary Agreements to which
Seller is a party.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 [RESERVED].
10.7 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
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10.8 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.9 Arrangements with Employees. Subject to the provisions of
Sections 4.3 and 9.1.4, substantially all of the Employees shall have accepted
employment with Purchaser effective on the Closing Date.
10.10 Employment Agreements. Kelly and Blumer shall have executed and
delivered the Employment Agreements with Purchaser.
10.11 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to Purchaser
and Purchaser's lender, reasonably satisfactory to Purchaser and its counsel as
to the matters set forth in Sections 6.1, 6.2 and 6.3 hereof .
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement, the
certificate referred to in Section 11.3 and the Ancillary Agreements to which
Purchaser is a party.
11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary
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restraining order or any order of any nature in effect issued by a court of
competent jurisdiction directing that the transactions provided for herein, or
any of them, not be consummated as herein provided and no suit, action,
investigation, inquiry or other legal or administrative proceeding by any
Governmental Authority or other Person shall have been instituted, threatened
or anticipated which questions the validity or legality of the transactions
contemplated hereby.
11.6 Other Agreements. Each of the Other Agreements shall have been
executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
11.7 Employment Agreements. Purchaser shall have executed and
delivered the Employment Agreements with Kelly and Blumer.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of five (5) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of five years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
12.5.1 Transfer of Assets. Seller agrees that Purchaser, from
and after the
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Closing, shall have the right and authority to collect for Purchaser's
own account all items which shall be transferred to Purchaser as
provided herein.
12.5.2 Endorsement of Checks. From and after the Closing,
Purchaser shall have the right and authority to retain and endorse
without recourse the name of Seller on any check or any other
evidences of indebtedness received by Purchaser on account of any of
the Business and Purchased Assets transferred to Purchaser hereunder.
12.5.3 Seller's Remittance of Funds. After the Closing,
Seller shall promptly transfer and deliver to Purchaser any cash or
other property, if any, that Seller may receive related to the
Business or the Purchased Assets other than the Excluded Assets.
12.5.4 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or
other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.5.5 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving,
any Assumed Liability, and Purchaser shall have the right to conduct
and control all negotiations and proceedings with respect thereto.
Seller shall notify Purchaser promptly of any claim made with respect
to any Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any Assumed
Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's Accountants to cooperate at Purchaser's cost and expense, with
Purchaser and its auditors in the preparation of combined audited financial
statements of Seller and each of the Other Companies for the years ended
December 31, 1996, 1995 and 1994 to the extent required in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. As used herein, the term "combined audited
financial statements" shall mean the audited financial statements of Seller and
each of the Other Companies, combined.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any Books and
Records relating to the Business that Seller may retain as may reasonably be
required in connection with the preparation of financial information or tax
returns of Purchaser.
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12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial account closing and reporting and claims and
litigation asserted by or against third parties, including, but not limited to,
making employees available at reasonable times to assist with, or provide
information in connection with financial account closing and reporting and
claims and litigation, provided that Seller reimburses Purchaser for its
reasonable out-of-pocket expenses (including costs of employees so assisting)
in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and
Purchaser;
(ii) by Seller or Purchaser if Closing has not
taken place on or before March 15, 1997;
provided however, that no Party then in
material breach of any of its obligations
hereunder shall have the right to
terminate;
(iii) by Purchaser upon notice to Seller if any
of the conditions set forth in Article X
hereof have not been satisfied or become
impossible to satisfy by the Closing Date
(other than by reason of the material
failure of Purchaser to fulfill its
obligations under this Agreement);
(iv) by Seller upon notice to Purchaser if any
of the conditions set forth in Article XI
hereof have not been satisfied or become
impossible to satisfy by the Closing Date
(other than by reason of the material
failure of Seller to fulfill its
obligations under this Agreement);
(v) by Seller if Purchaser materially breaches
or fails to fulfill its obligations under
this Agreement, which failure continues and
remains uncured for 30 consecutive calendar
days after Seller gives written notice of
such failure to Purchaser;
(vi) by Purchaser if Seller materially breaches
or fails to fulfill its obligations under
this Agreement, which failure continues and
remains uncured for 30 consecutive calendar
days after Purchaser gives written notice
of such failure to Seller; and
(vii) by Purchaser upon notice to Seller if any
of the conditions set forth below have not
been satisfied or become impossible to
satisfy by the Due Diligence Date (other
than by reason of the material failure of
Purchaser to fulfill its obligations under
this Agreement):
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(a) the results of Purchaser's Due
Diligence shall not be satisfactory to
Purchaser in its sole discretion;
(b) Purchaser shall not have secured a
commitment for financing the
transaction contemplated by this
Agreement on terms and conditions
satisfactory to Purchaser in its sole
discretion;
(c) the results of an inspection of the
physical condition of the Real
Property, including the improvements
and the HVAC, electrical, plumbing and
other systems, by a qualified
engineering firm engaged by Purchaser,
at its cost and expense, are not
satisfactory to Purchaser in its sole
discretion; and
(d) the results of an environmental report
on the Purchased Assets and the
Business from a qualified geotechnical
or engineering firm engaged by
Purchaser, at its cost and expense, are
not satisfactory to Purchaser in its
sole discretion.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Deposit Fund. Upon termination of this Agreement, the Deposit
Fund shall be disbursed as follows and in accordance with the terms and
conditions of the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13.1(iii) or Section 13.1(vi), the
Parties agree to instruct Escrow Agent to release
the entire amount of the Deposit Fund to Purchaser;
(ii) if this Agreement is terminated by Purchaser
pursuant to Section 13.1(vii) on or before the Due
Diligence Date, the Parties agree to instruct Escrow
Agent to release one-half of the amount of the
Deposit Fund to Purchaser and the balance of the
Deposit Fund to Seller; and
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the
Parties agree to instruct Escrow Agent to release
the entire amount of the Deposit Fund to Seller.
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13.4 Remedies.
13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the Deposit Fund
as set forth in Section 13.3 shall be the sole and exclusive remedy of Seller
as liquidated damages, and shall be in lieu of all other rights and remedies
which may otherwise be available at law or in equity.
13.4.2 Purchaser's Remedies. If Purchaser has the right to
terminate this Agreement pursuant to Section 13.1(vi), in addition to
Purchaser's right to receive the Deposit Fund as permitted under Section 13.3,
Purchaser may seek any other remedies that may otherwise be available at law or
in equity, including, without limitation, an action for specific performance
and reimbursement from Seller for all expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive until October 31, 1997 (the
"Survival Date"); provided, however, that all representations and warranties of
Seller with respect to any environmental matters set forth in Section 6.23 of
this Agreement shall survive for two years after the Closing Date.
Notwithstanding the foregoing, there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of the other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only and
shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall, indemnify, defend, save
and hold Purchaser, any assignee of Purchaser and their respective officers,
directors, employees, agents and Affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller or any Ancillary Agreement to which Seller is or is
to become a party, a breach or nonfulfillment of any covenant or agreement made
by any Seller in this Agreement or in any Ancillary Agreement to which Seller
is or is to become a party, and any and all liabilities of Seller of any nature
whatsoever, whether due or to become due, whether
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accrued, absolute, contingent or otherwise, existing on the Closing Date or
arising out of any transaction entered into, or any state of facts existing,
prior to the Closing Date, except for any Assumed Liability. To the extent any
Purchaser Indemnitee is entitled to collect Purchaser Damages, Purchaser shall,
at its option and subject to the terms of the Escrow Agreement, be entitled to
withdraw sufficient funds from the Escrow Fund pursuant to the Escrow Agreement
in lieu of payment directly from Seller, and to the extent the amount due any
Purchaser Indemnitee exceeds the balance of the funds held under the Escrow
Agreement, Purchaser shall be entitled to collect such balance owned to
Purchaser Indemnitee directly from Seller.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, Affiliates and
agents (collectively, "Seller Indemnitees") harmless from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for, a breach of any representation or warranty made by Purchaser
in this Agreement or in any certificate or document furnished pursuant hereto
by Purchaser or any Ancillary Agreement to which Purchaser is a party, a breach
or nonfulfillment of any covenant or agreement made by Purchaser in this
Agreement or in any Ancillary Agreement to which Purchaser is a party, any
Assumed Liability and any and all liabilities of any nature whatsoever arising
out of Purchaser's operation of the Business after the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
Notwithstanding the foregoing, any Purchaser Indemnitee shall be required to
notify Seller's Agent of any claim for Purchaser Damages as required herein
even though the same may be included in the $25,000 threshold set forth in
Section 14.6, and Seller shall have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement.
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The Indemnified Party shall permit the Indemnifying Party to participate in the
defense of any such action or suit through counsel chosen by the Indemnifying
Party, provided that the fees and expenses of such counsel shall be borne by
the Indemnifying Party. If the Indemnified Party permits the Indemnifying Party
to undertake, conduct and control the conduct and settlement of such action or
suit, the Indemnifying Party shall not thereby permit to exist any Encumbrance
upon any asset of the Indemnified Party; the Indemnifying Party shall not
consent to any settlement that does not include as an unconditional term
thereof the giving of a complete release from liability with respect to such
action or suit to the Indemnified Party; the Indemnifying Party shall permit
the Indemnified Party to participate in such conduct or settlement through
counsel chosen by the Indemnified Party; and the Indemnifying Party shall agree
promptly to reimburse the Indemnified Party for the full amount of any Damages
including fees and expenses of counsel for the Indemnified Party incurred after
giving the foregoing notice to the Indemnifying Party and prior to the
assumption of the conduct and control of such action or suit by the
Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under
Section 14.2 until the aggregate amount of Purchaser Damages thereunder exceeds
$25,000, but if the aggregate amount of Purchaser Damages thereunder exceeds
$25,000 in the aggregate, then indemnification shall be made by Seller
thereunder to the full extent of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those Purchaser
Damages as to which Purchaser has given Seller's Agent written notice thereof
on or before the Survival Date; provided, however, that with respect to any
claim for Purchaser Damages sustained by reason of a breach of any
representation or warranty relating to those matters governed by Section 6.23,
Seller's liability shall be limited to Purchaser Damages as to which such
written notice shall have been given to Seller's Agent within two years of the
Closing Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser Damages
arising out of fraud, the breach of any representation or warranty contained
herein or pursuant hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a fact or omitted to
state a fact necessary to make the statements of facts contained therein not
misleading or misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with respect
to the Retained Liabilities.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not
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the transactions herein contemplated shall be consummated, Purchaser and Seller
shall pay their own fees, expenses and disbursements, including the fees and
expenses of their respective counsel, accountants and other experts in
connection with the subject matter of this Agreement and all other costs and
expenses incurred in performing and complying with all conditions to be
performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller.
If to Seller, to:
Sellers' Agent:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
Scranton, PA 18505
Fax: (717) 963-1601
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With a required copy to:
Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof shall thereof be binding upon
any Party unless set forth in an instrument in writing signed by the Party to
be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
15.9 Construction. Within this Agreement, the singular shall include
the plural and the
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plural shall include the singular, and any gender shall include all other
genders, all as the meaning and the context of this Agreement shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through a
sale-leaseback. Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide Seller with a copy of any
such assignment, and Seller agrees to execute and deliver any consents
reasonably required by Purchaser's lender in connection therewith, provided
such assignment does not expand any of Seller's obligations and liabilities
hereunder. Notwithstanding any permitted assignment of this Agreement by
Purchaser, Purchaser shall remain liable to Seller for all obligations and
liabilities to be performed by or on behalf of Purchaser hereunder.
[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
---------------------------------
Name: Brian L. Barth
Title: President
OLD FORGE MANOR PERSONAL CARE AND
RETIREMENT CENTER, INC.
By: /s/ James L. Blumer, Jr.
---------------------------------
Name: James L. Blumer, Jr.
Title: President
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Exhibit 2.14
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered
into as of the 27th day of December, 1996, by and between Keystone Development
Group, Inc., a Pennsylvania corporation ("Seller"), and Balanced Care
Corporation, a Delaware corporation (together with its permitted assigns,
"Purchaser").
RECITALS:
Seller or its Affiliate (as defined herein) owns or may own certain
real property and other improvements now or hereafter to be constructed on the
premises more particularly described on Exhibit A attached hereto and
incorporated herein (each a "Project" and, collectively, the "Projects"), as
well as any drawings, plans, schematics, specifications, designs, sketches,
design graphics, prototypes, renderings, surveys, plats, sewer modules, studies
(including any topographical studies, subsurface studies or core boring
studies), locational maps, contracts (including construction contracts,
architects contracts, engineering contracts or option agreements), permits
(including any utility permits, building permits, occupancy permits, zoning
permits or conditional use permits), licenses, approvals (including any
variance approvals, plan approvals, land development approvals or subdivision
approvals), title policies, reports (including any inspection reports,
engineering reports or environmental reports), tax notices, correspondence and
other documents relating to the Projects (collectively, the "Documents"), upon
the terms and conditions herein set forth.
Prior to Closing (as defined herein), Seller shall have the right to
substitute for the development project identified as "(a)" on Exhibit A
attached hereto (the "Scranton Manor Project") an alternative development
project (the "Alternative Project") reasonably acceptable to Purchaser. If so
substituted, the Alternative Project shall be included in the definition of
"Projects" and the Scranton Manor Project shall be deleted from such
definition.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets and rights owned by Seller or its Affiliate
in connection with the Projects and Documents, and Seller is selling to
Purchaser such assets and rights. For purposes of this Agreement, the term
"Affiliate" shall mean Scranton Manor, Inc., a Pennsylvania corporation
("SMI"), but only if the Scranton Manor Project is included as a Project at
Closing.
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
1. Recitals. The foregoing recitals are hereby incorporated into and
made a part of this Agreement by reference thereto.
<PAGE> 2
2. Purchaser Price; Other Consideration; Assumed Liabilities.
2.1. Purchase Price. The purchase price (the "Purchase Price") for
the Projects and the Documents shall be in an amount equal to $1,500,000, plus
an amount equal to the actual costs and expenses heretofore incurred and to be
incurred through the Closing by or on behalf of Seller or its Affiliate in
connection with the development and construction of the Projects for the types
of expenses as set forth on Exhibit B attached hereto and incorporated herein,
to be paid at Closing by certified or cashier#s check drawn on a national bank
or by wire transfer.
2.2. Other Consideration. As additional consideration, on the
Closing Date, Purchaser shall acquire the Projects and Documents subject only
to, and shall undertake, assume, perform and otherwise pay, satisfy and
discharge, and hold Seller and its Affiliate harmless from the following
liabilities and obligations (collectively, the "Assumed Liabilities"): all
liabilities and obligations in connection with the Projects whether accruing
prior to or subsequent to the Closing Date under the contracts and permits
executed by or on behalf of Seller and its Affiliate in connection with the
Projects, provided that the rights thereunder have been duly and effectively
assigned to Purchaser.
3. Time; Location. The consummation of the purchase and sale shall
take place on or after January 2, 1997, but in any event not later than March
15, 1997 (the "Closing"). The date of the Closing shall be referred to as the
"Closing Date." The Closing shall take place at such time, date and place as
may be mutually agreed upon by the parties.
4. Purchaser's Obligations to Close. The obligation of Purchaser to
proceed with Closing under this Agreement is subject to the fulfillment prior
to or at the time of Closing of the following conditions with respect to
Seller, any one or more of which may be waived in whole or in part by
Purchaser:
4.1. Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement shall have
been true in all material respects on the date hereof and shall be true in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date.
4.2. Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
4.3. Seller's Certificate. Purchaser shall have received a
certificate from Seller, dated as of the Closing Date, reasonably satisfactory
in form and substance to Purchaser and its counsel, certifying as to the
matters specified in Section 4.1 and Section 4.2 hereof. The matters set forth
in such certificate shall constitute representations and warranties of Seller
hereunder.
4.4. Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to the
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<PAGE> 3
incumbency and specimen signature of each officer or representative of Seller
executing this Agreement and the certificate referred to in Section 4.3.
4.5. Injunction. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
administrative proceeding by any governmental authority or other person shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby or which if successfully asserted might
otherwise have a material adverse effect on the Projects or the Documents or
impose any additional material financial obligation on, or require the
surrender of any material right by, Purchaser.
4.6. Consents. Any third-party consents, approvals or
authorizations (including, without limitation, those required by any
governmental authorities) necessary as of Closing for the conveyance of the
Projects and Documents or valid consummation of the transactions contemplated
hereby have or, to Seller's knowledge, will be able to be obtained.
4.7. Title to Shares; Alternative Project. James J. Blumer, Jr.
("Blumer") and Michael P. Kelly ("Kelly") shall have acquired all of the issued
and outstanding shares of capital stock of SMI (the "Shares"), free and clear
of all liens, encumbrances, mortgages, pledges, security interests,
restrictions, prior assignments, options and claims of any kind and nature
whatsoever or, in the alternative, Seller shall have substituted the
Alternative Project for the Scranton Manor Project.
4.8. Option Agreements. Seller shall have acquired fee simple
title to real property or executed and delivered an option to purchase real
property which is suitable to Purchaser for its Primary Intended Use (as
defined in Section 6.5.3) for at least two of the Projects.
4.9. Other Agreements. Each of the other agreements (the "Other
Agreements") identified on Exhibit C attached hereto and incorporated herein
shall have been executed and delivered by the parties thereto, and the
transactions contemplated thereby shall have been consummated.
4.10. Opinion of Counsel. Purchaser shall have received the
favorable opinion of Oliver, Price & Rhodes, counsel for Seller, addressed to
Purchaser and Purchaser's lender, reasonably satisfactory to Purchaser and its
counsel as to the matters set forth in Sections 6.1, 6.2 and 6.3 hereof.
5. Seller's Obligation to Close. The obligation of Seller to proceed
with Closing under this Agreement is subject to the fulfillment prior to or at
the time of Closing of the following conditions with respect to Purchaser, any
one or more of which may be waived in whole or in part by Seller:
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<PAGE> 4
5.1. Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained in this Agreement shall
have been true in all material respects on the date hereof and shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.
5.2. Performance of Agreement. Purchaser shall have performed in
all material respects all obligations and agreements and complied in all
material respects with all covenants and conditions contained in this Agreement
to be performed or complied with by it at or prior to the Closing Date.
5.3. Purchaser's Certificate. Seller shall have received a
certificate from Purchaser, dated as of the Closing Date, reasonably
satisfactory in form and substance to Seller and its counsel, certifying as to
the fulfillment of all matters specified in Section 5.1 and Section 5.2 hereof.
The matters set forth in such certificate shall constitute representations and
warranties of Purchaser hereunder.
5.4. Secretary's Certificate. Seller shall have received a
certificate, dated the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to the incumbency and specimen signature of
each officer or representative of Purchaser executing this Agreement and the
certificate referred to in Section 5.3.
5.5. Injunction. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided.
5.6. Other Agreements. Each of the Other Agreements shall have
been executed and delivered by the parties thereto, and the transactions
contemplated thereby shall have been consummated.
5.7. Title to Shares; Alternative Project. Blumer and Kelly shall
have acquired all of the Shares, free and clear of all liens, encumbrances,
mortgages, pledges, security interests, restrictions, prior assignments,
options and claims of any kind and nature whatsoever or, in the alternative,
Seller shall have substituted the Alternative Project for the Scranton Manor
Project.
6. Seller's Representations and Warranties. As an inducement to
Purchaser to enter into this Agreement and to consummate the transactions
contemplated hereby, Seller represents and warrants to Purchaser that each of
the following representations and warranties is true and correct as of the date
hereof:
6.1. Organization, Good Standing and Power. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, and has all requisite corporate power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereof and to
be performed by it.
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6.2. Authorization of Agreement and Enforceability. Seller has
taken all necessary corporate action to authorize the execution and delivery of
this Agreement, the performance by it of all terms and conditions hereof to be
performed by it and the consummation of the transactions contemplated hereby,
including, without limitation, obtaining such shareholders' consents as is
required under the Pennsylvania Business Corporation Law. This Agreement
constitutes the legal, valid and binding obligation of Seller, enforceable in
accordance with its terms except to the extent that enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws presently
or hereafter in effect relating to or affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
6.3. No Violation; Consents. The execution, delivery and
performance by Seller of this Agreement, and the consummation of the
transactions contemplated hereby will not (with or without the giving of notice
or the lapse of time, or both) (i) violate any provision of the charter or
bylaws of Seller, (ii) violate or require any consent, authorization or
approval of, or exemption by, or filing under any provision of any law,
statute, rule or regulation to which Seller or the Projects are subject, (iii)
violate any judgment, order, writ or decree of any court applicable to Seller
or the Projects, (iv) conflict with, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under any
agreement, contract, commitment, lease or other instrument, document or
undertaking to which Seller is a party or the Projects are bound or (v) result
in the creation or imposition of any encumbrances upon the Projects.
6.4. Insurance. Schedule 6.4 sets forth a complete list of all
insurance policies maintained with respect to the Projects and all insurance
policies known by Seller to have been maintained by any other person which may
provide any coverage for liabilities relating in any manner to any
environmental law. Except as set forth on Schedule 6.4, no such insurance
maintained with respect to the Projects has ever been canceled or denied.
Following the Closing, Seller shall, to the extent that coverage under its
insurance policies extends to include the Projects in respect of claims or
occurrences prior to the Closing, (i) take no action to eliminate or reduce
such coverage, other than normal elimination or reduction of coverages as they
occur by virtue of the filing of claims in the ordinary course under such
insurance policies, (ii) pay when due any premiums under such policies for such
periods, including retrospective or retroactive premium adjustments and (iii)
provided Purchaser maintains Seller's insurance policies or otherwise is
entitled to make a claim against Seller's insurance policies pursuant to the
terms of this Agreement, use its best efforts to assist in filing and
processing claims under, and otherwise cooperate with Purchaser to allow
Purchaser, in its own name, or on behalf of Seller, to obtain all coverage
benefits applicable to the Projects under such insurance policies, including
the execution of assignments or powers of attorney for the benefit of
Purchaser. Any proceeds of insurance paid by an insurer to Seller for claims of
Purchaser made in accordance with this Section#shall be promptly paid to
Purchaser.
6.5. Real Property. Schedule 6.5 contains a list of all of the
real property currently owned by Seller (the "Real Property"). With respect to
the Real Property:
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<PAGE> 6
6.5.1. Copies of all existing title insurance policies and
all surveys in Seller's possession or reasonably obtainable by Seller have been
delivered to Purchaser;
6.5.2. Seller has not received any written notice of
assessments for public improvements or condemnation;
6.5.3. All public utilities (including water, gas, electric,
storm and sanitary sewage, and telephone utilities) required to operate the
Real Property by Purchaser as a personal care home and/or Alzheimer unit (the
"Primary Intended Use") are or will be available and such utilities enter, or
will enter, the boundaries of the Real Property through adjoining public
streets, permanent easements or rights-of-way of record in favor of Seller;
6.5.4. Such public utilities are, or will be, connected
pursuant to valid permits, are, or will be, in good working order and are, or
will be, adequate to service the Real Property for its Primary Intended Use by
Purchaser;
6.5.5. All present driveways and other access routes are or
will be from public streets and no other person has any right to use any such
driveways or other access routes;
6.5.6. Except as identified on Schedule 6.5, there are no
subsurface rights, rights of surface entry or other provisions of any lease or
reservation of any oil, gas, water or other mineral rights; and
6.5.7. There are no adverse geological or soil conditions
affecting the Projects, including without limitation subsidence from subsurface
mining.
6.6. Environmental Matters. With respect to the Real Property,
except as disclosed in Schedule 6.6:
6.6.1. Compliance; No Liability. Seller has maintained, or
caused to be maintained, the Real Property in material compliance with all
applicable environmental laws. Seller is not subject to any liability, penalty
or expense (including legal fees), and Purchaser will not suffer or incur any
loss, liability, penalty or expense (including legal fees) by virtue of any
violation of any environmental law occurring prior to the Closing, any
environmental activity conducted on or with respect to the Real Property at or
prior to the Closing or any environmental condition existing on or with respect
to the Real Property at or prior to the Closing, in each case whether or not
Seller permitted or participated in such act or omission.
6.6.2. Treatment; CERCLIS. Except in material compliance with
all applicable environmental laws, Seller has not treated, stored, recycled or
disposed of any hazardous material, and to Seller's knowledge no other person
has treated, stored, recycled or disposed of any hazardous material on any part
of the Real Property. Except as set forth on Schedule 6.6, there has been no
release of any hazardous material at, on or under the Real Property. Seller has
not transported any hazardous material or arranged for the transportation of
any hazardous material to any location that is listed or proposed for listing
on the National Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of
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<PAGE> 7
federal, state or local enforcement action or other investigation that may lead
to claims against Seller for cleanup costs, remedial action, damages to natural
resources, to other property or for personal injury including claims under
Superfund. The Real Property is not listed or, to Seller's knowledge, proposed
for listing on the National Priorities List pursuant to Superfund, CERCLIS or
any state or local list of sites requiring investigation or cleanup.
6.6.3. Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Seller has not received any request for information, notice of
claim, demand or other notification that it is or may be potentially
responsible with respect to any investigation, abatement or cleanup of any
threatened or actual release of any hazardous material with respect to the Real
Property. Seller is not required to place any notice or restriction relating
to the presence of any hazardous material at the Real Property. Seller has
provided to Purchaser a list of all sites to which, to Seller's knowledge,
Seller has transported any hazardous material for recycling, treatment,
disposal, other handling or otherwise. There has been no past, and there is no
pending or contemplated, claim by Seller under any environmental law or legal
requirement based on actions of others that may have impacted on the Real
Property, and Seller has not entered into any agreement with any person
regarding any environmental law, remedial action or other environmental
liability or expense with respect to the Real Property. All storage tanks
located on the Real Property, whether underground or aboveground, are disclosed
on Schedule 6.6 and, to Seller's knowledge, all such tanks and associated
piping are in sound condition and are not leaking and have not leaked.
6.7. Title to Real Property; Absence of Liens and Encumbrances.
Seller owns good, marketable and indefeasible title to the Real Property, free
and clear of all encumbrances, other than (i) liens for current taxes not yet
due and (ii) easements, covenants, rights-of-way and other encumbrances or
restrictions of record and zoning restrictions; provided, however, that any
encumbrances in clauses (i) and (ii) do not or will not either individually or
in the aggregate adversely affect the value of the Real Property encumbered or
prohibit or interfere with the operations of the Real Property (the "Permitted
Encumbrances").
6.8. Foreign Person. Seller is not a "foreign person" as that term
is defined in the U.S. Internal Revenue Code and the regulations thereunder.
6.9. Exclusive Right. No person or entity other than Purchaser has
any right or option to acquire the Projects and Documents, or any part thereof.
6.10. Contracts and Permits. To Seller's knowledge, there is no
impediment to the future issuance or execution of any contracts, permits and
licenses required in connection with the construction and development of the
Projects, or no reason to believe that such contracts, permits and licenses
will not be obtained as and when needed.
6.11. Compliance with Legal Requirements. Seller has complied in
all material respects with all legal requirements applicable to the Projects
and has complied with all existing contracts, permits and licenses.
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<PAGE> 8
6.12. Legal Proceedings. There is no claim, action, suit,
proceeding, investigation or inquiry pending before any governmental authority
or, to Seller's knowledge, threatened against Seller or any other person with
an interest in any Real Property with respect to the Projects, or relating to
the transactions contemplated by this Agreement, nor to Seller's knowledge is
there any basis for any such claim, action, suit, proceeding, investigation, or
inquiry. Seller is not a party to or subject to the provisions of any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental, regulatory or administrative official, body or authority that
relates to the Projects that may affect the transactions contemplated by this
Agreement.
6.13. Title to Shares. At Closing, if the Alternative Project is
not substituted for the Scranton Manor Project, the Shares (i) will be owned by
Kelly and Blumer and (ii) will constitute all of the issued and outstanding
shares of capital stock of SMI, free of any existing preemptive rights,
options, warrants, calls, subscriptions or other rights or any other agreements
or commitments with respect to the Shares of any kind or nature whatsoever.
6.14. No Finder. Seller has not taken any action that would give to
any person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
6.15. Seller's Assets. Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, Section
801.1 et seq.) had: (i) annual net sales of $100,000,000 or more as stated on
its last regularly prepared statement of income and expenses; or (ii) total
assets of $100,000,000 or more as stated on its last regularly prepared balance
sheet.
6.16. Completeness and Accuracy. All information set forth on any
Exhibit or Schedule hereto is materially true, correct and complete. No
representation or warranty of Seller contained in this Agreement contains or
will contain any untrue statement of material fact, or omits or will omit to
state any material fact necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. All contracts,
permits. licenses and other documents and instruments furnished or made
available to Purchaser by Seller are or will be true, complete and accurate
originals or copies of originals and include all amendments, supplements,
waivers and modifications thereto.
7. Purchaser's Representations and Warranties. As an inducement to
Seller to enter into this Agreement and to consummate the transactions
contemplated hereby, Purchaser represents and warrants to Seller, that each of
the following representations and warranties is true and correct as of the date
hereof:
7.1 Organization, Good Standing, Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation and has all requisite corporate power and
authority to own the Projects, to execute and deliver this Agreement, to
consummate the transactions contemplated hereby and to perform all the terms
and conditions hereof to be performed by it.
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7.2. Authorization of Agreement and Enforceability. Purchaser has
taken all necessary corporate action to authorize the execution and delivery of
this Agreement, the performance by it of all terms and conditions hereof to be
performed by it and the consummation of the transactions contemplated hereby.
This Agreement constitutes the legal, valid and binding obligations of
Purchaser, enforceable in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
7.3. No Violations; Consents. Except as set forth on Schedule 7.3,
the execution, delivery and performance by Purchaser of this Agreement and the
consummation of the transactions contemplated hereby will not (with or without
the giving of notice or the lapse of time, or both) (i) violate any provision
of the charter or bylaws of Purchaser, (ii) violate, or require any consent,
authorization or approval of or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict with, result in a breach of constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement,
contract, commitment, lease or other instrument, document or undertaking to
which Purchaser is a party or (v) result in the creation or imposition of any
encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit,
proceeding, investigation or inquiry pending before any governmental authority
or, to Purchaser's knowledge, threatened against Purchaser or any of
Purchaser's properties, assets, operations or businesses that might prevent or
delay the consummation of the transactions contemplated hereby.
7.5. No Finder. Purchaser has not taken any action that would give
to any person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6. Purchaser's Assets. Neither Purchaser nor Purchaser's
"ultimate parent entity" (as such term is defined in 16 CFR, Chapter 1,
Subchapter H, section 801.1 et seq.) had: (i) annual net sales of $100,000,000
or more as stated on its last regularly prepared statement of income and
expenses; or (ii) total assets of $100,000,000 or more as stated on its last
regularly prepared balance sheet.
8. Additional Covenants of Seller. Seller further covenants and agrees
as follows:
8.1. Land Acquisition; Option Agreements. For each of the
Projects, Seller shall use its best efforts to acquire fee simple title to real
property or execute and deliver an option to purchase real property which is
suitable to Purchaser for its Primary Intended Use. Seller shall obtain
Purchaser's approval (which shall not be unreasonably withheld) prior to
acquiring any real property, whether in fee or by option.
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8.2. Improvements/Development. From and after the date of this
Agreement, Seller shall submit to Purchaser for Purchaser's approval (which
shall not be unreasonably withheld) a written proposal setting forth any
proposed improvements or other development and/or construction actions to be
taken with respect to the Projects and provide to Purchaser copies of, or
information regarding, the applicable Documents or other support materials as
Purchaser may reasonably request in connection therewith. Without limiting the
foregoing, from and after the date of this Agreement, such proposal shall
indicate the approximate projected costs associated with the proposed actions
to be taken by Seller, which costs shall also be subject to Purchaser's
approval (which shall not be unreasonably withheld).
8.3. No Additional Encumbrances. Except as may otherwise be
provided herein or contemplated hereby, Seller shall not enter into any lease
or other agreement or grant any easement, license or other encumbrance with
respect to the Projects, or permit the Projects to be encumbered in any way
unless such lease, agreement, easement, license or encumbrance will be
terminated prior to Closing or is created with the prior written consent of
Purchaser.
8.4. Preservation. Seller shall maintain and repair the Projects
in as good condition as they are in on the date of this Agreement, ordinary
wear and tear excepted, until Closing.
8.5. Performance of Obligations. Seller shall perform all the
material obligations of Seller relating to the Projects.
8.6. Approvals, Consents. Seller shall use its reasonable efforts,
at the direction of Purchaser, to obtain in writing as promptly as possible any
approvals and consents as required to be obtained by Seller in order to
effectuate the transactions contemplated hereby and deliver to Purchaser copies
of such approvals and consents. Accordingly, Seller shall cooperate with
Purchaser's efforts to obtain the necessary licenses to develop and construct
the Projects from the appropriate governmental authorities and accreditation
bodies.
8.7. Notice of Material Damage. Seller shall give to Purchaser
prompt notice in writing of any fact that, if known at the Closing Date, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect by
Seller of any of its representations, warranties, covenants or agreements
hereunder.
8.8. No Termination or Modification. Seller shall not terminate or
materially modify any material contract, permit, license or other authorization
or agreement affecting the Projects.
8.9. Compliance with Agreement. Seller shall not undertake any
course of action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and use all reasonable efforts to do all such
acts and take all such measures as may be reasonably necessary to comply with
the representations, agreements, conditions and other provisions of this
Agreement.
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8.10. Compliance with Legal Requirements. Seller shall comply in
all material respects with all legal requirements applicable to the Projects
and Seller will use reasonable efforts as directed by Purchaser to procure all
contracts, permits and licenses necessary to develop and construct the Projects
in accordance with its Primary Intended Use.
8.11. Update Schedule. Seller shall promptly disclose to Purchaser
any information contained in the representations and warranties of Seller
contained in Section 6 or in the Exhibits and Schedules to this Agreement which
is no longer materially complete or correct; provided that no such disclosure
shall be deemed to modify, amend or supplement Seller's representations and
warranties.
9. Deliveries at Closing. At Closing, Seller shall deliver to
Purchaser:
9.1. Affidavits. Such affidavits or other instruments as
Purchaser's title insurance company may reasonably request regarding real
property included in the assets to be purchased, including but not limited to
(i) those needed to eliminate exceptions for (A) judgments, bankruptcies, taxes
and municipal claims, (B) parties in possession other than current occupants
pursuant to agreements with Seller and (C) mechanics' or materialmens' liens
and (ii) payoff letters, lien releases and satisfaction pieces and (iii) gap
indemnities;
9.2. Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit D attached hereto and
incorporated herein, transferring to Purchaser good and indefeasible title to
the Projects and Documents, subject only to Permitted Encumbrances and
assigning to Purchaser Seller's right, title and interest in the Projects and
each of the Documents, together with all consents of third parties that Seller
has been able to obtain that are required to make each such assignment
effective to such third parties;
9.3. Deeds. With respect to the Real Property and any other
Project which Seller holds fee title to, duly executed special warranty deeds,
in recordable form, transferring good and marketable fee simple title to such
Projects, subject only to Permitted Encumbrances; and
10. Risk of Loss. All risk of loss shall remain with Seller until
Closing.
11. Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, the Projects and Documents and (ii) otherwise to consummate
the transactions contemplated by this Agreement. In addition, from and after
the Closing Date, Seller shall afford Purchaser and its attorneys, accountants
and other representatives access, during normal business hours, to any books
and records relating to the Projects or Documents that Seller may retain as may
reasonably be required by Purchaser.
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12. Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such books and records
relating to the Projects and Documents as may reasonably be required in
connection with the preparation of financial information or tax returns for
periods concluding on or prior to the Closing Date.
13. Termination of Agreement. This Agreement may be terminated:
13.1. By the mutual consent of Seller and Purchaser;
13.2. By Seller or Purchaser if Closing has not taken place on or
before March 15, 1997; provided however, that no party then in material breach
of any of its obligations hereunder shall have the right to terminate;
13.3. By Purchaser upon notice to Seller if any of the conditions
set forth in Section 4 hereof have not been satisfied or become impossible to
satisfy by the Closing Date (other than by reason of the material failure of
Purchaser to fulfill its obligations under this Agreement);
13.4. By Seller upon notice to Purchaser if any of the conditions
set forth in Section 5 hereof have not been satisfied or become impossible to
satisfy by the Closing Date (other than by reason of the material failure of
Seller to fulfill its obligations under this Agreement);
13.5. By Seller if Purchaser materially breaches or fails to
fulfill its obligations under this Agreement, which failure continues and
remains uncured for 30 consecutive calendar days after Seller gives written
notice of such failure to Purchaser;
13.6. By Purchaser if Seller materially breaches or fails to
fulfill its obligations under this Agreement, which failure continues and
remains uncured for 30 consecutive calendar days after Purchaser gives written
notice of such failure to Seller; and
13.7. By Purchaser upon notice to Seller if either of the following
conditions forth below have not been satisfied or become impossible to satisfy
by January 15, 1997 (other than by reason of the material failure of Purchaser
to fulfill its obligations under this Agreement): (i) the results of
Purchaser's due diligence with respect to the Projects and Documents shall not
be satisfactory to Purchaser in its sole discretion or (ii) Purchaser shall not
have secured a commitment for financing the transaction contemplated by this
Agreement on terms and conditions satisfactory to Purchaser in its sole
discretion.
14. Return of Documents Upon Termination. If this Agreement is
terminated for any reason pursuant to Section 13, each party shall return to
the other party all documents and copies thereof which shall have been
furnished to it by such other party or, with the agreement of the other party,
shall destroy all such documents and copies thereof.
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15. Remedies Upon Termination. If this Agreement is terminated by
Seller or Purchaser as permitted under Section 13 and not as a result of a
breach of a representation or warranty or the failure of any party to perform
its obligations hereunder, such termination shall be without liability of any
party. If a party terminates this Agreement as a result of a breach of a
representation or warranty by the other party or the failure of the other party
to perform its obligations hereunder, the nonbreaching party, in addition to
any other legal remedies that may be available, shall be entitled to
reimbursement from the breaching party for all expenses incurred by the
nonbreaching party in connection with this Agreement and the transactions
contemplated hereby. In addition to the foregoing remedies, if Purchaser has
the right to terminate this Agreement pursuant to Section 13.6, Purchaser may
seek an action for specific performance and reimbursement from Seller for all
expenses incurred by Purchaser in connection with this Agreement and the
transactions contemplated hereby.
16. Survival of Representations and Warranties. All representations
and warranties of the parties shall survive until October 31, 1997 (the
"Survival Date"); provided that there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Any party's right to the indemnification
or other remedies based upon the representations and warranties, covenants,
agreements and undertakings of the other party will not be affected by any
investigation, knowledge or waiver of any condition by such party. Any
investigation by such party shall be for its own protection only and shall not
affect or impair any right or remedy hereunder.
17. Indemnification.
17.1. Indemnification by Seller. Seller shall, indemnify, defend,
save and hold Purchaser, any assignee of Purchaser and their respective
officers, directors, employees, agents and affiliates (collectively, "Purchaser
Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; collectively,
"Purchaser Damages") asserted against, imposed upon, resulting to, required to
be paid by, or incurred by any Purchaser Indemnitees, directly or indirectly,
in connection with, arising out of, which could result in, or which would not
have occurred but for, a breach of any representation or warranty made by
Seller in this Agreement, in any certificate or document furnished at Closing
pursuant hereto by Seller, a breach or nonfulfillment of any covenant or
agreement made by any Seller in this Agreement, and any and all liabilities of
Seller of any nature whatsoever, whether due or to become due, whether accrued,
absolute, contingent or otherwise, existing on the Closing Date or arising out
of any transaction entered into, or any state of facts existing, prior to the
Closing Date, except for any Assumed Liability.
17.2. Indemnification by Purchaser. Purchaser shall indemnify,
defend, save and hold Seller and its officers, directors, employees, affiliates
and agents (collectively, "Seller Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including
13
<PAGE> 14
reasonable legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing and whether or not
any such demands, claims, allegations, etc., of third parties are meritorious;
collectively, "Seller Damages") asserted against, imposed upon, resulting to,
required to be paid by, or incurred by any Seller Indemnitees, directly or
indirectly, in connection with, arising out of, which could result in, or which
would not have occurred but for, a breach of any representation or warranty
made by Purchaser in this Agreement or in any certificate or document furnished
pursuant hereto by Purchaser, a breach or nonfulfillment of any covenant or
agreement made by Purchaser in this Agreement, any Assumed Liability and all
liabilities of any nature whatsoever arising out of Purchaser's ownership of
the Projects and Documents after the Closing Date.
17.3. Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification, such
Indemnified Party shall so notify the party from whom indemnification is being
claimed (the "Indemnifying Party") with reasonable promptness and reasonable
particularity in light of the circumstances then existing. If any action at law
or suit in equity is instituted by or against a third party with respect to
which any Indemnified Party intends to claim any Damages, such Indemnified
Party shall promptly notify the Indemnifying Party of such action or suit. The
failure of an Indemnified Party to give any notice required by this Section 17
shall not affect any of such party's rights hereunder or otherwise except and
to the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party. Notwithstanding the foregoing, any
Purchaser Indemnitee shall be required to notify Seller of any claim for
Purchaser Damages as required herein even though the same may be included in
the $15,000 threshold set forth in Section 17.5, and Seller shall have the
right to dispute any such claim.
17.4. Third Party Claims. The Indemnified Party shall have the
right to conduct and control, through counsel of its choosing, the defense of
any third party claim, action or suit, and the Indemnified Party may compromise
or settle the same, provided that the Indemnified Party shall give the
Indemnifying Party advance notice of any proposed compromise or settlement. The
Indemnified Party shall permit the Indemnifying Party to participate in the
defense of any such action or suit through counsel chosen by the Indemnifying
Party, provided that the fees and expenses of such counsel shall be borne by
the Indemnifying Party. If the Indemnified Party permits the Indemnifying Party
to undertake, conduct and control the conduct and settlement of such action or
suit, the Indemnifying Party shall not thereby permit to exist any Encumbrance
upon any asset of the Indemnified Party; the Indemnifying Party shall not
consent to any settlement that does not include as an unconditional term
thereof the giving of a complete release from liability with respect to such
action or suit to the Indemnified Party; the Indemnifying Party shall permit
the Indemnified Party to participate in such conduct or settlement through
counsel chosen by the Indemnified Party; and the Indemnifying Party shall agree
promptly to reimburse the Indemnified Party for the full amount of any Damages
including fees and expenses of counsel for the Indemnified Party incurred after
giving the foregoing notice to the Indemnifying Party and prior to the
assumption of the conduct and control of such action or suit by the
Indemnifying Party.
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<PAGE> 15
17.5. Limitation of Liability. Notwithstanding the foregoing,
Seller's liabilities and obligations to indemnify Purchaser Indemnitees against
any Purchaser Damages shall be subject to all of the following limitations:
17.5.1. Threshold. No indemnification shall be made under
Section 17.1 until the aggregate amount of Purchaser Damages thereunder exceeds
$15,000, but if the aggregate amount of Purchaser Damages thereunder exceeds
$15,000 in the aggregate, then indemnification shall be made by Seller
thereunder to the full extent of the Purchaser Damages.
17.5.2. Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 17.1 only for those Purchaser
Damages as to which Purchaser has given Seller written notice thereof on or
before the Survival Date; provided, however, that with respect to any claim for
Purchaser Damages sustained by reason of a breach of any representation or
warranty relating to those matters governed by Section 6.6, Seller's liability
shall be limited to Purchaser Damages as to which such written notice shall
have been given to Seller within two years of the Closing Date.
17.5.3. Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 17.5.1 and 17.5.2 shall not apply to Purchaser Damages
arising out of fraud, the breach of any representation or warranty contained
herein or pursuant hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a fact or omitted to
state a fact necessary to make the statements of facts contained therein not
misleading or misrepresented.
17.6. Other Remedies. The indemnification rights of any Indemnified
Party under this Section 17 are independent of and in addition to such rights
and remedies as such Indemnified Party may have at law, in equity or otherwise
for any misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement under or in connection with this Agreement on the part of
any party, none of which rights or remedies shall be affected or diminished
hereby.
18. Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
19. Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Purchaser and Seller. Except as may be
required by law, no party shall act unilaterally in this regard without prior
written approval of the other party, such approval not be unreasonably
withheld.
20. Waivers. The waiver by either party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
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<PAGE> 16
21. Binding Effect; Benefits. This Agreement shall inure to the
benefit of the parties hereto, and shall be binding upon the parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
22. Notices. All notices, requests, demands, elections and other
communications which either party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
22.1. Notice to Seller
If to Seller, to:
James J. Blumer, Jr. or Michael P. Kelly
c/o Keystone Management Services, Inc.
401 Moltke Avenue
Scranton, PA 18505
Fax: (717) 963-1601
With a required copy to:
Alfred J. Weinschenk, Esquire
Oliver, Price & Rhodes
220 Penn Avenue, Suite 300
Scranton, PA 18501-1409
Fax: (717) 343-3929
22.2. Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a copy to:
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<PAGE> 17
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such party shall have specified by notice to the
other party hereto.
23. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the documents delivered at Closing pursuant hereto and
thereto constitute the entire agreement and understanding between the Parties
hereto as to the matters set forth herein and therein and supersede and revoke
all prior agreements and understandings, oral and written, between the Parties
hereto or thereto or otherwise with respect to the subject matter hereof or
thereof. No change, amendment, termination or attempted waiver of any of the
provisions hereof shall thereof be binding upon any Party unless set forth in
an instrument in writing signed by the Party to be bound or their respective
successors in interest.
24. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
25. Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
26. Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
27. Governing Law and Choice of Forum. The validity and interpretation
of this Agreement shall be construed in accordance with, and governed by the
internal laws of the Commonwealth of Pennsylvania.
28. Cooperation. The Parties hereto shall cooperate fully at their own
expense, except as otherwise provided in this Agreement, with each other and
their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
29. Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
17
<PAGE> 18
30. Attorneys' Fees. If a dispute arises among the Parties as a result
of which an action is commenced to interpret or enforce any of the terms of
this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
31. Successors and Assigns. The covenants, agreements, and conditions
contained herein or granted hereby shall be binding upon and shall inure to the
benefit of Purchaser and Seller, and each of their respective successors and
permitted assigns. Seller shall not assign, or otherwise transfer any interest
in this Agreement to any other Person without the prior written consent of
Purchaser, which consent shall not unreasonably be withheld. Purchaser may
assign and transfer all or any portion of its interest in this Agreement
without Seller's consent to one or more of Purchaser's affiliates or to any
lender or lenders providing financing for the transactions contemplated hereby.
In addition, Purchaser anticipates financing the transactions contemplated
hereby through a sale-leaseback. Purchaser shall have the right to assign this
Agreement, in whole or in part, in such manner as Purchaser may desire in order
to facilitate such sale-leasebacks. Purchaser will promptly provide Seller with
a copy of any such assignment, and Seller agrees to execute and deliver any
consents reasonably required by Purchaser's lender in connection therewith,
provided such assignment does not expand any of Seller's obligations and
liabilities hereunder. Notwithstanding any permitted assignment of this
Agreement by Purchaser, Purchaser shall remain liable to Seller for all
obligations and liabilities to be performed by or on behalf of Purchaser
hereunder.
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
------------------------------
Name: Brian L. Barth
Title: Vice President
KEYSTONE DEVELOPMENT GROUP, INC.
By: /s/ James J. Blumer, Jr.
------------------------------
Name: James J. Blumer, Jr.
Title: President
19
<PAGE> 1
EXHIBIT 2.15
AGREEMENT OF AMENDMENT
THIS AGREEMENT OF AMENDMENT (the "AGREEMENT") is made and entered into
as of the 6th day of February, 1997, to be effective on and as of December 27,
1996, by and between Keystone Development Group, Inc., a Pennsylvania
corporation ("SELLER") and Balanced Care Corporation, a Delaware corporation
(together with its permitted assigns, "PURCHASER"),
WITNESSETH:
WHEREAS, Purchaser and Seller entered into that certain Purchase and
Sale Agreement dated as of December 27, 1996 (the "PURCHASE AND SALE
AGREEMENT"), whereby Purchaser agreed to purchaser certain assets and rights
owned by Seller, and Seller agreed to sell to Purchaser such assets and rights;
and
WHEREAS, Purchaser and Seller now desire to amend the terms of the
Purchase and Sale Agreement subject to the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein, the parties hereby agree as follows:
1. RECITALS INCORPORATED; DEFINITIONS. The foregoing recitals
constitute a part of this Agreement and are expressly incorporated herein by
reference. Any term used but not defined herein shall have the meaning ascribed
to such term in the Purchase and Sale Agreement.
2. AMENDMENT OF SECTION 2.1. Section 2.1 of the Purchase and Sale
Agreement is hereby amended and restated in its entirety as follows:
2.1 PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for the
Projects and the Documents shall be in an amount equal to $2,000,000,
plus (i) an amount equal to the actual costs and expenses heretofore
incurred and to be incurred through the Closing by or on behalf of
Seller or its Affiliate in connection with the development and
construction of the Projects for the types of expenses set forth on
Exhibit B attached hereto and incorporated herein, and (ii) 250,000
shares of common stock of Purchaser. The Purchase Price shall be due
and payable from Buyer as follows:
2.1.1 At Closing, $1,500,000 to be paid to Seller by
certified or cashier's check drawn on a national bank or by wire
transfer;
2.1.2 At Closing, 125,000 shares of common stock of Purchaser
to be delivered to each of Kelly and Blumer; and
<PAGE> 2
2.1.3 At closing on the financing for each of the first five
(5) of the Projects to close, $50,000 to be paid to Kelly and
$50,000 to be paid to Blumer.
3. PURCHASE AND SALE AGREEMENT UNAFFECTED. Except as expressly amended
by this Agreement, the Purchase and Sale Agreement is hereby ratified and
confirmed and shall remain in full force and effect.
4. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, executors and administrators. If any provision of this
Agreement shall be or become illegal or unenforceable in whole or in part for
any reason whatsoever, the remaining provisions shall nevertheless be deemed
valid, binding and enforceable.
5. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, including its
statutes of limitations, but without regard to its conflict of laws provisions.
6. HEADINGS. The Section headings used in this Agreement are for the
convenience of reference only, and shall not control or affect the meaning or
construction, or limit the scope or intent, of any provisions of this
Agreement.
7. COUNTERPARTS. This Agreement may be executed in several
counterparts or with counterpart signature pages, each of which shall be deemed
an original, but such counterparts shall together constitute but one and the
same Agreement.
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<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written to be effective on and as of December 27, 1996.
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
------------------------------
Name: Brian L. Barth
Title: Vice President
KEYSTONE DEVELOPMENT GROUP, INC.
By: /s/ James J. Blumer, Jr.
------------------------------
Name: James J. Blumer, Jr.
Title: President
- 3 -
<PAGE> 1
EXHIBIT 2.16
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
8th day of April, 1997, by and among Balanced Care Corporation, a Delaware
corporation (together with its permitted assigns, "Purchaser"), Barry G. Clark
and Karen R. Clark, husband and wife (the "Clarks") and Heavenly Health Care,
Inc. d/b/a Joe Clark Residential Care Homes, a Missouri corporation ("HHC")
(hereinafter, the Clarks and HHC may be individually and collectively referred
to as "Seller").
RECITALS:
HHC owns certain assets in connection with the operation of four
licensed residential care facilities located at the following addresses: (i)
1501 E. Ashland St., Nevada, Missouri (the "Nevada-I Facility"), (ii) 1505 E.
Ashland St., Nevada, Missouri (the "Nevada-II Facility"), (iii) 300 S. Delaware
St., Butler, Missouri (the "Butler Facility") and (iv) 3 Southwest First Lane,
Lamar, Missouri (the "Lamar Facility"). Purchaser desires to purchase
substantially all of the assets of HHC and the Business (as hereinafter
defined) related thereto and HHC desires to sell such assets to Purchaser.
The Clarks own certain assets in connection with the real property,
buildings, fixtures and other improvements comprising the four facilities
referenced above. Purchaser desires to purchase substantially all of the assets
of the Clarks and the Clarks desire to sell such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by each Seller and used in the conduct of the Business, and each
Seller is selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and each
Seller hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs), notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean the Department of Social Services,
the Division of Aging and all other Persons having jurisdiction over the
accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other
<PAGE> 2
accrued expenses as would appear on a balance sheet of either Seller as of such
date prepared in accordance with GAAP consistently applied, including those
described in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute
control.
1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the Escrow Agreement described
in Section 3.1.1, the real property conveyances described in Section 5.2.1 and
the bill of sale, assignment and assumption described in Section 5.2.2.
1.6A "Applicable Closing Date" shall mean the First Closing Date or
the Second Closing Date, as the case may be.
1.6B "Applications" shall have the meaning given to such term in
Section 8.1.14.
1.6C "Approved Plans and Specifications" shall have the meaning given
to such term in Section 8.1.16.
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Books and Records" shall have the meaning given to it in Section
6.16.
1.9 "Business" shall mean the operation of a residential care facility
and, to the extent they exist, any other ancillary health care services owned,
operated, delivered, managed, developed, constructed, maintained, used,
occupied or possessed by HHC in connection therewith (including, without
limitation, any outpatient and contract rehab therapy services or any
Alzheimer's units).
1.10 "Clarks" shall have the meaning given to such term in the
preamble of this Agreement.
1.11 "Closings" shall have the meaning given to such term in Section
5.1.
1.12 "Closing Dates" shall have the meaning given to such term in
Section 5.1.
1.13 "Closing Inventory" shall mean all Inventory relating to the
Business on the Applicable Closing Date.
1.14 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
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<PAGE> 3
1.14A "Construction Permit" shall have the meaning given to such term
in Section 8.1.16.
1.15 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident's
Agreements described on Schedule 1.63, Management Agreements and Provider
Agreements), contracts, contract rights, commitments, customer accounts,
orders, leases, guarantees, warranties and representations, franchises and
books and records of account benefiting, relating to the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy, possession or operation thereof, or the operation of any of the
programs or services in conjunction with the Business and all renewals,
replacements and substitutions therefor, issued by any Governmental Authority,
Accreditation Body or Third Party Payor or maintained or used by HHC with any
third Person.
1.16 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.17 "Damages" shall have the meaning given to such term in Section
14.4.
1.18 "Department of Social Services" shall mean the State of Missouri,
Department of Social Services.
1.19 "Deposit" shall have the meaning given to such term in Section
3.1.1.
1.20 "Division of Aging" shall mean the State of Missouri, Department
of Social Services, Division of Aging.
1.21 "Employee" shall mean any individual employed by HHC in the
conduct of the Business as listed on Schedule 1.21 (such Schedule being subject
to change between the date hereof and the Applicable Closing Date as a result
of employee changes in the ordinary course of business consistent with past
practices).
1.22 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but not limited
to, a mortgage, judgment lien, mechanic's lien, lease, security interest,
easement and right-of-way.
1.22A "Engineering Report" shall have the meaning given to such term
in Section 8.1.14.
1.23 "Environmental Law" shall mean any federal [including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801
et seq.), and the Federal
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Insecticide Fungicide and Rodenticide Act (7 U.S.C. Sections 136 et seq.)],
other Legal Requirements, any common law doctrine and any provision or
condition of any permit, license or other operating authorization relating to
(i) the protection of the environment or the public welfare from actual or
potential exposure (or the effects of exposure) to any actual or potential
release, discharge, disposal or emission (whether past or present) of any
Regulated Substance or (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Regulated Substance.
1.24 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.25 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.26 "Escrow Agent" shall mean Bowman's Vernon County Title Company.
1.27 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser referred to in Section 3.1.1 in
substantially the form of Exhibit 1.27.
1.28 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.29 "Facility" shall mean any of the Nevada/Butler Facilities or the
Lamar Facility, individually, and the term "Facilities" shall mean each of the
Nevada/Butler Facilities and the Lamar Facility together.
1.30 First Closing" shall have the meaning given to such term in
Section 5.1.
1.31 "First Closing Date" shall have the meaning given to such term in
Section 5.1.
1.32 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.33 "GAAS" shall mean generally accepted auditing standards in the
United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipality, city or otherwise, including, without limitation, MDNR.
1.35 "HHC" shall have the meaning given to such term in the preamble
of this Agreement.
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1.36 "Indemnifying Party" shall have the meaning given to such term in
Section 14.4.
1.37 "Indemnified Party" shall have the meaning given to such term in
Section 14.4.
1.38 "Inventory" shall mean the inventory of HHC, including, without
limitation, dry storage goods, janitorial supplies, food and beverage supplies,
office supplies, medical supplies and pharmaceutical supplies.
1.39 "Knowledge" and words of similar import shall mean, with respect
to any Party, actual knowledge of a particular fact or other matter being
possessed by an individual, and the knowledge that reasonably could be expected
to be obtained in the course of conducting a reasonably comprehensive
investigation concerning the subject matter.
1.39A "Lagoon" shall have the meaning given to such term in Section
4.2A(xiii).
1.39B "Lagoon Permits" shall have the meaning given to such term in
Section 8.1.17.
1.39C "Lamar Assets" shall have the meaning given to such term in
Section 2.1.
1.39D "Lamar Facility" shall mean have the meaning given to such term
in the Recitals of this Agreement.
1.40 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.40A "MDNR" shall have the meaning given to such term in Section
4.2A.
1.40B "MDNR Notice" shall have the meaning given to such term in
Section 4.2A.
1.41 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.42 "Management Agreement" shall mean any agreement, whether written
or oral, between HHC and any other Person pursuant to which HHC provides any
payment, fee or other consideration to any other Person to operate or manage
the Business (except any employment agreements).
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1.43 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.43A "NOI" shall mean net operating income, calculated in accordance
with GAAP, before amortization, depreciation, interest, rent expense and income
taxes.
1.43B "Nevada/Butler Assets" shall have the meaning given to such term
in Section 2.1.
1.43C "Nevada/Butler Facilities" shall mean the Nevada-I Facility, the
Nevada-II Facility and the Butler Facility, individually and collectively.
1.44 "Party" shall mean either the Clarks, HHC or Purchaser,
individually, as the context so requires, and the term "Parties" shall mean the
Clarks, HHC and Purchaser together.
1.45 "Payables" as of any date shall mean any of the trade accounts
payable of either Seller with respect to the Purchased Assets or the Business
as of such date in accordance with GAAP consistently applied.
1.46 "Payroll Practice / Employee Arrangement" shall have the meaning
given to such term in Section 6.19.
1.47 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates (including, without limitation, any certificates of need),
certifications, consents, contracts, interim licences, permits and other
authorizations of every nature whatsoever required by, or issued to or on
behalf of HHC under any Legal Requirements benefiting, relating or effecting
the Business or the construction, development, maintenance, management, use or
operation thereof, or the operation of any programs or services in conjunction
with the Business and all applications, renewals, replacements and
substitutions therefor, now or hereafter required or issued by any Governmental
Authority, Accreditation Body or Third Party Payor with respect to the
Business.
1.48 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.48 hereto.
1.49 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.49A "Plans and Specifications" shall have the meaning given to such
term in Section 8.1.14.
1.50 "Prepaid Expenses" as of any date shall mean payments made by
either Seller with respect to the Purchased Assets or, with respect to HHC, the
Business, which constitute prepaid expenses in accordance with GAAP
consistently applied.
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1.51 "Proprietary Rights" shall have the meaning given to such term in
Section 6.10.
1.52 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of HHC in connection
with the operation of the Business relating to any right to payment or other
claim arising out of or in connection with HHC's participation in any Third
Party Payor Program.
1.53 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1.
1.54 "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.55 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.56 "Purchaser Damages" shall have the meaning given to such term in
Section 14.2.
1.57 "Purchaser Indemnitees" shall have the meaning given to such term
in Section 14.2.
1.58 "Real Property" shall mean the Real Property Leased and the Real
Property Owned, collectively.
1.59 "Real Property Leased" shall mean the real property leased by
either Seller in connection with each of the Facilities and the Business as
more fully described in Schedule 1.59 hereto.
1.60 "Real Property Owned" shall mean the real property owned by
either Seller, and used in connection with the Facilities and the Business as
more fully described in Schedule 1.60 hereto.
1.61 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.62 "Related Party" means (i) either Seller, (ii) any Affiliate of
either Seller, (iii) any officer, director, shareholder or partner of any
Person identified in clauses (i) or (ii) preceding, and (iv) any spouse,
sibling, ancestor or lineal descendant of any natural Person identified in any
one of the preceding clauses.
1.63 "Resident's Agreements" shall mean copies of all contracts,
agreements and consents executed by or on behalf of any resident or other
Person seeking services at any of the Facilities as
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more fully described in Schedule 1.63 hereto, including, without limitation,
assignments of benefits and guarantees, and such resident's related medical
and/or other records.
1.64 "Retained Liabilities" has the meaning given that term in Section
4.2.
1.64A "Second Closing" shall have the meaning given to such term in
Section 5.1.
1.64B "Second Closing Date" shall have the meaning given to such term
in Section 5.1.
1.65 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.66 "Seller" shall have the meaning given to such term in the
preamble of this Agreement, individually or collectively, as the context may
require.
1.67 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.68 "Seller Indemnitees" shall have the meaning given to such term in
Section 14.3.
1.69 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.70 "Third Party Payor Programs" shall mean all third party payor
programs which HHC participates, including, without limitation, Medicaid,
Managed Care Plans, other private insurance plans and employee assistance
programs.
1.71 "Third Party Payors" shall mean Medicaid, private insurers and
any other Person which maintains Third Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, on the Applicable Closing Date as set forth in Section 5.1, each
Seller shall sell and convey to Purchaser, free and clear of all Encumbrances
whatsoever (other than Permitted Encumbrances and except as
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expressly provided herein), and Purchaser shall purchase from each Seller, all
of each Seller's respective right, title and interest in and to the assets and
properties, real, personal and mixed, tangible and intangible, to the extent
they exist and are used or useful in connection with the Business associated
with respect to (i) the Nevada/Butler Facilities (the "Nevada/Butler Assets")
and (ii) the Lamar Facility (the "Lamar Assets") (hereinafter, the
Nevada/Butler Assets and the Lamar Assets may be collectively referred to as
the "Purchased Assets") (other than the Excluded Assets), including, without
limitation, the following:
2.1.1 Real Property Owned. The Real Property Owned, together
with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto;
2.1.2 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements,
automobiles, supplies, office furniture and office equipment,
computing and telecommunications equipment and other items of personal
property, including those described in Schedule 2.1.2 hereto;
2.1.3 Contracts Relating to the Business. All contracts
relating to the acquisition or ownership of the Purchased Assets or
the operation of the Business, including, without limitation, the
Contracts listed on Schedule 2.1.3 and the Resident's Agreements
listed on Schedule 1.63 hereto (provided each resident has consented
thereto), to the extent such Contracts and Resident's Agreements are
transferrable to Purchaser;
2.1.4 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations and advertising material used in the Business, whether in
electronic form or otherwise, as they exist on the Applicable Closing
Date;
2.1.5 Permits, Licenses. All Permits relating to the
acquisition or ownership of the Purchased Assets or the operation of
the Business, including, without limitation, those permits listed in
Schedule 2.1.5 hereto, to the extent such Permits are transferrable to
Purchaser;
2.1.6 Facility Plans and Specifications. All plans and
specifications relating to each of the Facilities; provided, however,
Purchaser shall not have the right to use the plans and specifications
for any construction other than with respect to the expansion of any
of the Facilities at the existing property sites without HHC's prior
written consent, which consent shall not be unreasonably withheld;
2.1.7 Goodwill. All goodwill incident to the Business,
including but not limited to the value of good customer relations;
2.1.8 Accounts Receivable. All Accounts Receivable existing
on the Applicable Closing Date;
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2.1.9 Inventory. All Closing Inventory;
2.1.10 Resident Records; Resident Funds. Copies of all
resident records maintained by each of the Facilities, and all prepaid
rents, deposits and escrow accounts maintained by, or for the benefit
of, each of the Facility's residents at the Applicable Closing Date;
2.1.11 Prepaid Expenses. All Prepaid Expenses of, or for the
benefit of, the Purchased Assets or the Business at the Applicable
Closing Date (prorated between Purchaser and Seller as of the
Applicable Closing Date), including those described in Schedule
2.1.11, except for any unearned insurance premiums and workers'
compensation deposits if Purchaser elects not to assume Seller's
insurance; and
2.1.12 Name. All of Seller's interest in the value of the
name "Joe Clark Residential Care Homes;" provided, however, Seller
shall retain the right to use such name with respect to the Lamar
Facility until the Second Closing Date and the right to use such name
outside of the State of Missouri. Furthermore, if Purchaser files a
fictitious name or other applicable name registration changing the
name of the Facilities from "Joe Clark Residential Care Homes" after
the date of this Agreement, Seller shall have the right to use such
name in the State of Missouri as of the date of the
filing/registration.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following assets
(collectively, the "Excluded Assets") shall be excluded from this Agreement,
and shall not be assigned or transferred to Purchaser:
2.2.1 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees
up through and including the Applicable Closing Date;
2.2.2 Consideration. The consideration paid to each Seller
pursuant to this Agreement;
2.2.3 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Applicable Closing
Date;
2.2.4 Corporate Books. Corporate minute book, capital stock
and stock book of HHC;
2.2.5 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the
extent they relate to liabilities or obligations that are not assumed
by Purchaser hereunder (except the amount of costs and expenses
Purchaser shall have incurred with respect to such claims and rights);
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2.2.6 Taxes. Claims for refunds of taxes and other charges
imposed by any Governmental Authority;
2.2.7 Name. The right to use the name "Joe Clark Residential
Care Homes" with respect to the Lamar Facility until the Second
Closing Date and the right to use such name outside the State of
Missouri.
2.2.8 Insurance Premiums and Workers' Compensation Deposits.
Provided Purchaser elects not to assume Seller's insurance, unearned
insurance premiums and workers' compensation deposits (in the event
Purchaser elects to assume such insurance, the foregoing amounts shall
be prorated between Seller and Purchaser as of the Applicable Closing
Date); and
2.2.9 Other Assets. Assets listed on Schedule 2.2.9.
2.3 License to Use Computer Program. Seller has developed a computer
program used in connection with the Business known as "Easy Claims." Seller
hereby grants an irrevocable, nonexclusive, perpetual, paid-up, royalty-free,
non-transferrable license to Purchaser to utilize the "Easy Claims" program
after the First Closing Date in connection with the Business; provided,
however, Seller makes no representation or warranty regarding the soundness or
suitability of the program for use by Purchaser or any other third party.
Purchaser shall not be permitted to grant a license or to otherwise sell any
rights with respect to the "Easy Claims" software to any third party without
the prior written consent of Seller, which consent shall not unreasonably be
withheld.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser for the Purchased Assets and the Business (the "Purchase
Price") shall consist of a cash payment in the amount of $5,000,000,
to be paid by certified or cashier's check drawn on a national bank or
by wire transfer as follows:
(i) $30,000 to Escrow Agent upon execution and delivery
of this Agreement (the "Deposit"), as earnest money
for the Purchased Assets to be held in escrow
pursuant to the Escrow Agreement;
(ii) At the First Closing, with respect to the
Nevada/Butler Assets, (A) $3,645,000 to the Clarks
and (B)$75,000 to HHC; and
(iii) At the Second Closing, with respect to the Lamar
Assets, (A) $1,225,000 to the Clarks and (B) $25,000
to HHC.
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3.1.2 Other Consideration. As additional consideration,
Purchaser shall also assume the Assumed Liabilities (i) with respect
to the Nevada/Butler Assets, at the First Closing and (ii) with
respect to the Lamar Assets, at the Second Closing.
3.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the Business in accordance with the
allocation set forth in Schedule 3.2. Purchaser and each Seller shall report
the federal, state and local income and other tax consequences of the purchase
and sale contemplated hereby in a manner consistent with such allocation, and
shall not take any position inconsistent therewith upon examination of any tax
return, in any refund claim, in any litigation or otherwise.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.2A, 4.3 and
4.4 below, each Seller shall transfer the Purchased Assets to Purchaser free
and clear of all Encumbrances, and without any assumption of liabilities and
obligations, and Purchaser shall not, by virtue of its purchase of the
Purchased Assets, assume or become responsible for any liabilities or
obligations of either Seller or any other Person. For purposes of this Article
IV, the phrase "liabilities and obligations" shall include, without limitation,
any direct or indirect indebtedness, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
4.2 Assumed Liabilities and Obligations of HHC. On the Applicable
Closing Date, Purchaser shall acquire the Purchased Assets subject only to, and
shall undertake, assume, perform and otherwise pay, satisfy and discharge, and
hold HHC harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of HHC (collectively, the "Assumed
Liabilities"):
(i) all obligations of HHC under the Contracts contemplated by
Section 2.1.3 (A) with respect to the Nevada/Butler Assets,
accruing subsequent to the First Closing Date and (B) with
respect to the Lamar Assets, accruing subsequent to the
Second Closing Date, provided that the rights thereunder have
been duly and effectively assigned to Purchaser and
(ii) all obligations of HHC under the Permits described in Section
2.1.5, (A) with respect to the Nevada/Butler Assets, accruing
subsequent to the First Closing Date and (B) with respect to
the Lamar Assets, accruing subsequent to the Second Closing
Date, provided that the rights thereunder have been duly and
effectively assigned to Purchaser and provided further,
notwithstanding anything contained herein to the contrary,
Purchaser shall not assume any of the liabilities and
obligations arising in connection with the matters set forth
in Section 4.2A(xiii) or Section 4.2A(xiv).
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4.2A. Retained Liabilities. Except for the Assumed Liabilities,
Purchaser does not and shall not assume or in any way undertake to pay,
perform, satisfy or discharge any other liability of either Seller existing on
the Applicable Closing Date or arising out of any transactions entered into, or
any state of facts existing, prior to the Applicable Closing Date (or other
applicable date as may be specified below) (the "Retained Liabilities"), and
each Seller agrees to pay and satisfy when due all of such Seller's respective
Retained Liabilities. Except for the obligations and liabilities included in
the Assumed Liabilities, the term "Retained Liabilities" shall include, without
limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of HHC;
(ii) arising out of any transaction affecting either Seller or
obligations incurred by either Seller after either Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by either Seller;
(iv) under or arising out of this Agreement;
(v) against which either Seller is insured or otherwise
indemnified or which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the
indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or
the contract of indemnity) or had committed fraud in the
insurance application;
(vi) to any Related Party;
(viii) to indemnify HHC's officers, directors, shareholders,
Employees or agents;
(ix) federal, state or local tax liabilities or obligations of
either Seller in respect to periods (A) prior to the First
Closing, with respect to the Nevada/Butler Assets and (B)
prior to the Second Closing, with respect to the Lamar
Assets, and the transactions contemplated hereunder,
including, without limitation, income taxes payable under the
Code, any income tax, any franchise tax, any tax recapture,
any FICA, workers' compensation, vacation liability and other
employee benefits, any insurance premiums, rents, or other
accruals and any and all other taxes or amounts due or
payable for a period prior to the Applicable Closing Date;
notwithstanding the foregoing, all sales and use taxes,
transfer taxes, and all other impositions of tax arising
solely by reason of the transfers contemplated by this
Agreement (excluding all federal, state and local income and
gross receipt taxes on the earnings or gross receipts of
either Seller prior to the Applicable Closing Date, which
shall remain the sole responsibility of such
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Seller) shall be the responsibility of and shall be borne
equally by each Seller and Purchaser (any real estate and
personal property taxes for the year in which a Closing
occurs shall be pro-rated to the Applicable Closing Date
[based on a calendar year or fiscal year for which such taxes
are levied basis], if the tax rates for the year in which a
Closing occurs shall not be fixed prior to the Applicable
Closing Date for a particular item of the Purchased Assets,
the pro-ration of taxes thereon shall be based upon the tax
rate for the year prior to the Applicable Closing Date
applied to the latest assessment valuation;
(x) for long term indebtedness and other obligations or
guarantees of either Seller;
(xi) for Current Liabilities of either Seller (A) at the First
Closing Date, with respect to the Nevada/Butler Assets and
(B) at the Second Closing Date, with respect to the Lamar
Assets;
(xii) for Accrued Expenses and Payables of either Seller (A) at the
First Closing Date, with respect to the Nevada/Butler Assets
and (B) at the Second Closing Date, with respect to the Lamar
Assets;
(xiii) for any fines, penalties, damages, costs, expenses or other
liabilities or obligations arising before, on or after either
Closing Date, in connection with either Seller's operation of
the wastewater treatment lagoon at the Lamar Facility (the
"Lagoon"), including, without limitation, any fines,
penalties, damages, costs, expenses or other liabilities or
obligations with respect to that certain Notice of Violation
(No. 16237SW) dated April 7, 1997 issued by the Missouri
Department of Natural Resources (the "MDNR") with respect to
the Lamar Facility and the Lagoon (the "MDNR Notice")
attached hereto and incorporated herein as Exhibit 4.2; and
(xiv) for any fines, penalties, damages, costs, expenses or other
liabilities or obligations arising before, on or after either
Closing Date, in connection with either Seller's failure to
(i) submit the Engineering Report or the Applications in
connection with the Lagoon, (ii) construct and/or remediate
the Lagoon in compliance with the Approved Plans and
Specifications, (iii) obtain the Lagoon Permits, (iv) cease
using the Lagoon until all of the Lagoon Permits are issued
and (v) dispose of any of the waste or effluents from the
Lamar Facility's septic tanks or the Lagoon in compliance
with all Applicable Legal Requirements.
4.3 Offer of Employment. Purchaser shall offer employment, on an
at-will basis, to (i) all of the Employees actively at work at the
Nevada/Butler Facilities on and as of 12:01 a.m. following the First Closing
Date and (ii) all of the Employees actively at work at the Lamar Facility on
and as of 12:01 a.m. following the Second Closing Date, in similar jobs, at
the same base salaries or wages and the same benefits as were paid or provided
by HHC immediately prior to the Applicable Closing
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Date; provided, however, Purchaser shall have the right, at any time following
the Applicable Closing Date, to change any of the foregoing.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 HHC's Liability. HHC shall remain liable for all
liability for all accrued vacation entitlements, workers'
compensation, disability and occupational diseases of or with respect
to the Employees attributable to entitlements, injuries, claims,
conditions, events and occurrences occurring on or before (i) the
First Closing Date, with respect to the Nevada/Butler Facility
Employees and (ii) the Second Closing Date, with respect to the Lamar
Facility Employees.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all liability for all vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to the
Employees hired by Purchaser attributable to entitlements, injuries,
claims, conditions, events and occurrences first occurring after (i)
the First Closing Date, with respect to the Nevada/Butler Facility
Employees and (ii) the Second Closing Date, with respect to the Lamar
Facility Employees.
4.4.3 Workers' Compensation; Unemployment Compensation.
Schedule 4.4.3 attached hereto sets forth a true and correct summary
of the following with respect to HHC and the Employees:
(i) a listing of all workers' compensation contracts;
(ii) the workers' compensation loss experience for the past
three years;
(iii) a summary report and experience rating for unemployment
compensation; and
(iv) the turnover rates for each of the Facilities.
ARTICLE V. CLOSINGS
5.1 Time; Location. The consummation of the purchase and sale of the
Purchased Assets shall take place at two closings (each a "Closing" and,
collectively, the "Closings"). The first such Closing (the "First Closing")
shall take place solely with respect to the Nevada/Butler Assets and shall
occur on or before 12:00 p.m. DST on May 15, 1997 (the "First Closing Date").
The second such Closing (the "Second Closing") shall take place solely with
respect to the Lamar Assets and shall occur on or before 12:00 p.m. DST on the
10th business day following HHC's receipt from the applicable Governmental
Authorities of all of the Lagoon Permits (the "Second Closing Date"). The date
of each Closing shall be referred to as the "Closing Date." The Closings shall
take place at the
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offices of Russell, Brown, Bickel & Breckenridge or such other place as may be
mutually agreed upon by the Parties.
5.2 Documents. Each Seller shall, as the case may be, execute and
deliver the following instruments of transfer and assignment (i) with respect
to the Nevada/Butler Assets, at the First Closing and (ii) with respect to the
Lamar Assets, at the Second Closing:
5.2.1 Deeds. Duly executed special warranty deeds in favor of
Purchaser or Purchaser's designee, in recordable form, transferring
good and marketable fee simple title to the applicable Real Property
Owned, subject only to Permitted Encumbrances, and such affidavits or
other instruments as Purchaser's title insurance company may
reasonably request, including, but not limited to, (i) exceptions for
(A) judgments, bankruptcies, taxes and municipal claims, (B) parties
in possession other than current occupants pursuant to agreements with
either Seller, (C) mechanics' or materialmens' liens and (D)
encroachments or survey discrepancies of any nature; (ii) payoff
letters, lien releases and satisfaction pieces and (iii) gap
indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the applicable Purchased
Assets, subject only to Permitted Encumbrances and the applicable
Assumed Liabilities and assigning to Purchaser, to the extent
assignable, each Seller's right, title and interest in each of the
contracts, permits and other agreements included in the applicable
Purchased Assets, together with all consents of third parties that are
required to make each such assignment effective to such third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the applicable Purchased Assets with assignments
to Purchaser;
5.2.4 Property Tax Statements. To the extent not delivered
prior to the Applicable Closing Date, all real estate and personal
property tax statements or bills for or relating to the applicable
Real Property or any of the other applicable Purchased Assets for the
current tax year or years, and all tax assessments or notices thereof
upon which such taxes are based;
5.2.5 Plans and Specifications. To the extent not delivered
prior to the Applicable Closing Date, all plans, specifications and
other drawings used in the construction of each of the applicable
Facilities and the Lagoon, or any renovations thereof (including,
without limitation, any as-built plans and architectural
specifications) and all guarantees and warranties made by third
parties with respect to the improvements, buildings, personalty or any
of the other applicable Purchased Assets;
5.2.6 Building Permits. To the extent not delivered prior to
the Applicable Closing Date, to the extent any exist, all building
permits, zoning permits, occupancy permits,
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subdivision plans, surveys and hazardous waste studies prepared within
two years before the date hereof, for or relating to each of the
applicable Facilities;
5.2.7 Contracts and Other Permits. To the extent not
delivered prior to the Applicable Closing Date, all Contracts,
Permits, or other instruments or agreements relating to the ownership,
operation, use, occupancy, licensure, accreditation or maintenance of
the Business in connection with the applicable Purchased Assets;
5.2.8 Rent Roll. The rent roll of HHC listing all residents
of each of the applicable Facilities and their respective rent
payments current as of two days prior to the Applicable Closing Date;
5.2.9 Closing Documents. To the extent not delivered prior to
the Applicable Closing Date, the documents referred to in Section
8.1.2, Section 8.1.8, Section 8.1.14, Section 8.1.16 and Section
8.1.17; and
5.2.10 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the applicable Purchased Assets.
5.3 Reasonable Steps. Each Seller shall make such reasonable efforts
as may be appropriate so that on the Applicable Closing Date, Purchaser shall
be placed in actual possession and control of all of the applicable Purchased
Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, the Clarks and/or HHC, as the
case may be, represent and warrant to Purchaser, that each of the following
representations and warranties is true and correct as of the date hereof:
6.1 Organization, Good Standing and Power. HHC is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and has all requisite corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and thereby and to perform
all the terms and conditions hereof and thereof and to be performed by it.
6.2 Authorization of Agreement. HHC has taken all necessary corporate
action to authorize the execution and delivery of this Agreement and the
Ancillary Agreements to which it is a party, the performance by it of all terms
and conditions hereof and thereof to be performed by it and the consummation of
the transactions contemplated hereby and thereby.
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6.3 Enforceability. This Agreement constitutes, and the Ancillary
Agreements to which each Seller is party, upon such Seller's execution and
delivery thereof, will constitute the legal, valid and binding obligations of
such Seller, enforceable in accordance with their terms except to the extent
that enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws presently or hereafter in effect relating to or affecting
the enforcement of creditors' rights generally and by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
6.4 No Violation; Consents. The execution, delivery and performance by
each Seller of this Agreement and the Ancillary Agreements to which each Seller
is a party, and the consummation of the transactions contemplated hereby and
thereby will not (with or without the giving of notice or the lapse of time, or
both) (i) with respect to HHC, violate any provision of the charter or bylaws
of HHC; (ii) except with respect to notices and consents (if any) required to
be given by either Seller to any Accreditation Body or Governmental Authority
in connection with the sale and change of ownership of the Purchased Assets and
the Business, violate or require any consent, authorization or approval of, or
exemption by, or filing under any provision of any law, statute, rule or
regulation to which either Seller, the Business or the Purchased Assets are
subject; (iii) violate any judgment, order, writ or decree of any court
applicable to either Seller, the Business or the Purchased Assets; (iv) except
as identified on Schedule 2.1.3, conflict with, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any contract or other instrument, document or undertaking to which either
Seller is a party or any of the Purchased Assets is bound or (v) result in the
creation or imposition of any Encumbrances upon the Purchased Assets.
6.5 Financial Statements. HHC has delivered to Purchaser true and
complete copies of the unaudited (i) balance sheets of the Business at December
31, 1996, 1995 and 1994 and the related statements of income and cash flows for
the years then ended and (ii) monthly statements of profit and loss for the
first 3 months of 1997 with respect to the operation of each of the Facilities
and, in addition, HHC shall provide Purchaser, as promptly as the same become
available through the Applicable Closing Date, but no later than 15 days after
the last day of each month, monthly statements of profit and loss of HHC for
each of the applicable Facilities. True and correct copies of such financial
statements are attached hereto as Schedule 6.5. The foregoing financial
statements have been prepared from the Books and Records of HHC in accordance
with GAAP consistently applied throughout the periods involved except as may be
noted therein. Such financial statements, including the related notes, are true
and correct and fairly present the financial position of the Business at the
dates indicated and the results of operations and cash flows of the Business
for the periods then ended in accordance with GAAP.
6.6 Accounts Receivable. All Accounts Receivable (i) have or will have
arisen only in the ordinary course of business consistent with past practice
for goods actually sold and delivered or services actually performed and (ii)
are or will be collectible in full at the recorded amounts thereof (subject to
no defenses, setoffs or counterclaims) in the ordinary course of business
(without resort to litigation or assignment to a collection agency) no later
than 90 days after the Applicable Closing
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Date, net of any allowance for bad debts calculated in accordance with GAAP
reflected on the Books and Records of HHC.
6.7 Inventory. The Inventory was or will be acquired and maintained in
accordance with the regular business practices of HHC, consists or will consist
of new and unused items of a quality and quantity usable or salable in the
ordinary course of business consistent with past practice, and is or will be
valued in accordance with GAAP consistently applied.
6.8 Absence of Certain Changes or Events.
6.8.1 HHC. Except as set forth in Schedule 6.8 hereto, since
March 31, 1997, in connection with the Business, HHC has not:
(i) amended in any material respect or terminated any
Contract or Permit other than in the ordinary course
of business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on results of operations of the Business,
including any damage or destruction by fire, storm or
similar casualty, whether or not covered by
insurance;
(iii) sold, transferred, replaced or leased any of the
Purchased Assets, except for transactions in the
ordinary course of business consistent with past
practice;
(iv) waived or released any material rights with respect
to the Purchased Assets or the Business;
(v) transferred or granted any rights to any Proprietary
Rights;
(vi) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than in
the ordinary course of business consistent with past
practice;
(vii) changed its methods of accounting;
(viii) increased the compensation of any of the Employees,
except following normal review procedures or as
reasonably deemed necessary in the ordinary course of
business consistent with past practice;
(ix) suffered any major or key personnel changes;
(x) materially altered its conduct in its relations with
suppliers and residents; or
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(xi) materially altered its marketing efforts with respect
to the Business.
6.8.2 The Clarks. Except as set forth in Schedule 6.8 hereto,
in connection with the Purchased Assets owned by them, the Clarks have
not:
(i) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on such Purchased Assets, including, without
limitation, the Real Property, including any damage
or destruction by fire, storm or similar casualty,
whether or not covered by insurance; or
(ii) waived or released any material rights with respect
to such Purchased Assets, including, without
limitation, the Real Property.
6.9 Real Property.
6.9.1 Title to Properties; Absence of Liens and Encumbrances.
Each Seller owns and will transfer to Purchaser on the Applicable
Closing Date, good, marketable and indefeasible title to all of the
applicable Purchased Assets owned by such Seller, including, without
limitation, the applicable Real Property, free and clear of all
Encumbrances, other than Permitted Encumbrances. Each Seller has the
right to quiet enjoyment of all Real Property Leased in which such
Seller holds a leasehold interest for the full term, including all
renewal rights, of the lease or similar agreement relating thereto.
Copies of all title insurance policies and surveys written in favor of
each Seller relating to the Real Property have been delivered to
Purchaser.
6.9.2 Structures and Improvements. All structures and other
improvements on the Real Property are being purchased by Purchaser on
an "as is, where is" basis.
6.9.3 Boundaries; Location. The Clarks represent and warrant
that the structures and other improvements on the Real Property are
within the lot lines and do not encroach on the properties of any
other Person. The Clarks further represent and warrant that each
parcel of Real Property is considered a separate parcel of land for
taxing and conveyancing purposes and that no portion of the Real
Property is located in a flood plain, flood hazard area or designated
wetlands area.
6.9.4 Use and Operation. Except for the matters contained in
the MDNR Notice with respect to the Lagoon, HHC represents and
warrants that the use and operation of the Real Property conforms to
all applicable building, zoning, safety and subdivision laws,
Environmental Laws and other Legal Requirements, and all restrictive
covenants and restrictions and conditions affecting title.
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6.9.5 Utilities. HHC represents and warrants that all public
utilities (including water, gas, electric, storm and sanitary sewage
and telephone utilities) required to operate each of the Facilities
are available to each Facility and such utilities enter the boundaries
of such Facility through adjoining public streets, permanent easements
or rights-of-way of record in favor of HHC or the Clarks. Except for
the matters contained in the MDNR Notice with respect to the Lagoon,
such public utilities are all connected pursuant to valid permits, are
all in good working order and are adequate to service the operations
of each of the Facilities as currently conducted and permit full
compliance with all Legal Requirements. HHC has not received any
written notice of any proposed, planned or actual curtailment of
service of any utility supplied to any of the Facilities.
6.9.6 Assessments; Notices. Neither Seller has received any
written or oral notice of assessments for public improvements against
the Real Property or any written or oral notice or order by any
Governmental Authority, any insurance company that has issued a policy
with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions that relates
to violations of building, safety or fire ordinances or regulations,
that claims any defect or deficiency with respect to any of such
properties or requests the performance of any repairs, alterations or
other work to or in any of such properties or in the streets bounding
the same.
6.9.7 Condemnation. The Clarks represent and warrant that
there is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of the Real Property.
6.9.8 Access. HHC represents and warrants that all present
driveways and other access routes to the Real Property are from public
streets and no other Person has any right to use any such driveways or
other access routes.
6.10 Proprietary Rights. Neither Seller has any right, title or
interest in any patents, logos, trademarks, trade names, service marks,
copyrights and applications or registrations therefor used in and material to
the Business (collectively, the "Proprietary Rights").
6.11 Contracts and Commitments.
6.11.1 HHC. Except as listed and described on Schedule 1.63
and Schedule 2.1.3, HHC is not with respect to the Business a party to
any written or oral:
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of
services by another party, involving in any one case
$10,000 or more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident's Agreement);
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(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in
value (except for any Resident's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which HHC is either lessor or lessee
other than with respect to the Real Property Leased;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit
agreement, loan agreement or other Contract or for
the borrowing or lending of money (including without
limitation loans to or from Employees) or guarantee,
pledge or undertaking of the indebtedness of any
other Person;
(vii) Contract for any charitable or political
contribution;
(viii) Contract limiting or restraining HHC or any successor
or assign from engaging or competing in any likeness
of business with any Person;
(ix) license, franchise, distributorship or other
agreement, including those that relate in whole or in
part to any patent, trademark, trade name, service
mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business;
(x) Contract or commitment to assign, option, sell,
transfer or otherwise convey any right, title or
interest of HHC in and to all or any portion of the
Business; or
(xi) any other material Contract not made in the ordinary
course of business consistent with past practice.
6.11.2 The Clarks. Except as listed and described on Schedule
1.59 and Schedule 1.60, the Clarks are not with respect to the
Purchased Assets owned by them a party to any written or oral:
(i) contract or commitment to assign, option, sell,
transfer or otherwise convey any right, title or
interest of the Clarks in and to all or any portion
of such Purchased Assets, including, without
limitation, the Real Property Owned;
(ii) lease under which the Clarks are either lessor or
lessee other than with respect to the Real Property
Leased; or
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(iii) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit
agreement, loan agreement or other contract for the
borrowing or lending of money or guarantee, pledge or
undertaking of the indebtedness of any other Person.
Each of the contracts and other instruments, documents and
undertakings listed on Schedule 1.63, Schedule 2.1.3, Schedule 1.59 and
Schedule 1.60 is valid and enforceable in accordance with its terms, the
parties thereto are in compliance with the provisions thereof, neither party is
in default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein, and no event has occurred
that with or without the giving of notice or lapse of time, or both, would
constitute a default thereunder and (ii) except as set forth on Schedule 1.63,
Schedule 2.1.3, Schedule 1.59 and Schedule 1.60, no advance payments have been
received by either Seller by or on behalf of any party to any of the contracts
and other instruments, documents and undertakings listed thereon for services
to be rendered or products to be delivered by such party after the Applicable
Closing Date. Any contracts that cannot be transferred or require consent or
approval for the transfer thereof are specifically identified on Schedule 1.63,
Schedule 2.1.3, Schedule 1.59 and Schedule 1.60 hereto as nontransferable or
requiring such consent or approval.
6.12 Permits, Licenses. Except with respect to the construction and
operating permit referred to in the MDNR Notice, HHC has all Permits that are
required to operate the Facilities as "Residential Care II" facilities as that
term is defined by the Department of Social Services, Division of Aging and the
Business (including without limitation those required under any Environmental
Law) and HHC is in substantial compliance with the terms and conditions of the
Permits. Schedule 2.1.5 hereto sets forth a correct and complete list of all
Permits, each one of which is in full force and effect. To HHC's Knowledge, no
suspension or cancellation of any of the Permits is threatened and no cause
exists for such suspension or cancellation. Any Permits that cannot be
transferred or require consent or approval for the transfer thereof are
specifically identified on Schedule 2.1.5 hereto as nontransferable or
requiring such consent or approval. HHC will cooperate with Purchaser in
accordance with the provisions of Section 8.1.8 with respect to obtaining
and/or transferring the Permits.
6.13 Compliance with Laws. Except as described in Schedule 6.13
hereto, HHC has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.14 Legal Proceedings.
6.14.1 HHC. Except as described in Schedule 6.14 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry
pending before any Governmental Authority or, to HHC's Knowledge,
threatened against HHC with respect to the Business or any of the
Purchased Assets owned or used by it in connection therewith, or
relating to the transactions contemplated by this Agreement, nor to
HHC's Knowledge is there any basis for any such
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claim, action, suit, proceeding, investigation, or inquiry. Except as
set forth on Schedule 6.14 hereto, HHC is not a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental, regulatory or
administrative official, body or authority that relates to the
Business or the Purchased Assets owned or used by HHC in connection
therewith that might affect the transactions contemplated by this
Agreement.
6.14.2 The Clarks. Except as described in Schedule 6.14
hereto, there is no claim, action, suit, proceeding, investigation or
inquiry pending before any Governmental Authority or, to the Clark's
Knowledge, threatened against the Clarks with respect to the Purchased
Assets owned by them, or relating to the transactions contemplated by
this Agreement, nor to the Clark's Knowledge is there any basis for
any such claim, action, suit, proceeding, investigation, or inquiry.
Except as set forth on Schedule 6.14 hereto, the Clarks are not a
party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental,
regulatory or administrative official, body or authority that relates
to the Purchased Assets owned by the Clarks that might affect the
transactions contemplated by this Agreement.
6.15 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.15, HHC has no liabilities or obligations (as defined in Section
4.1) relating to the Business except (i) those liabilities and obligations set
forth on the financial statements of HHC previously provided to Purchaser and
not heretofore paid or discharged; (ii) those liabilities and obligations
arising in the ordinary course of business consistent with past practice under
any Contract or commitment specifically disclosed on Schedule 2.1.3 hereto or
not required to be disclosed because of the term or amount involved; and (iii)
those liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the financial statements dated March 31,
1997 provided to Purchaser.
6.16 Books and Records. All books of account and other financial
records of HHC directly relating to the Business (the "Books and Records") are
materially complete and correct and have been made available to Purchaser. All
of the Books and Records have been prepared and maintained in accordance with
good business practices and, where applicable, in conformity with GAAP (except
as otherwise stated therein) and in compliance in all material respects with
all Legal Requirements.
6.17 Employees. Schedule 1.21 sets forth a true and correct list of
the following for each of the Facilities: (i) all individuals employed by HHC
in the conduct of the Business; (ii) total wage costs; (iii) wage/salary grade
structure and (iv) each Employee's (A) present position and department, (B) job
description, (C) rate of compensation, (D) amount of vacation credit and (E)
service credited for purposes of vesting and eligibility under each Payroll
Practice/Employee Arrangement.
6.18 Labor Disputes. Except as described in Schedule 6.18 hereto,
there are no material discrimination complaints nor any other kind of
employment or labor related disputes against HHC in connection with the
Business pending before or, to HHC's Knowledge, threatened before any
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federal, state or local court or agency, and to HHC's Knowledge, no material
dispute respecting minimum wage or overtime claims or other conditions or terms
of employment exists. The Business has not experienced any material labor
disputes or any material work stoppage due to labor disagreements within the
past three years. With respect to the Business and except to the extent set
forth in Schedule 6.18: (i) there is no unfair labor practice charge or
complaint against HHC pending or, to HHC's Knowledge, threatened, before the
National Labor Relations Board; (ii) there is no labor strike, slowdown or
stoppage pending or, to HHC's Knowledge, threatened against or affecting HHC;
and (iii) no question concerning representation has been raised within the past
three years, or to HHC's Knowledge, is threatened respecting the Employees.
6.19 Payroll Practice/Employee Arrangement.
6.19.1 Benefit Plans. Schedule 6.19 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which HHC has any
liability or obligation, whether actual or contingent, with respect to
the Employees or their respective beneficiaries.
6.19.2 Plan Liability. HHC has not taken any action that may
result in Purchaser being a party to, or bound by, an ERISA Plan, and
Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.19.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.20 No Finder. Neither Seller has taken any action that would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
6.21 Condition of Equipment. Except as set forth on Schedule 6.21, all
equipment that is part of the Purchased Assets is in good operating condition
and repair (subject only to routine maintenance and repair) and usable in the
conduct of the Business consistent with past practice.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, each Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters.
6.23.1 Compliance; No Liability. Except with respect to the
matters disclosed in the MDNR Notice, to the best of each Seller's
Knowledge, HHC has operated the Business and each parcel of Real
Property in material compliance with all applicable Environmental
Laws.
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Neither Seller is subject to any liability, penalty or expense
(including legal fees), and Purchaser will not suffer or incur any
loss, liability, penalty or expense (including legal fees) by virtue
of any violation of any Environmental Law occurring prior to the
Applicable Closing Date, any environmental activity conducted on or
with respect to any property by such Seller at or prior to the
Applicable Closing Date or any environmental condition existing on or
with respect to any property at or prior to the Applicable Closing
Date, in each case whether or not such Seller permitted or
participated in such act or omission.
6.23.2 Treatment; CERCLIS. Neither Seller has treated,
stored, recycled or disposed of any hazardous material, and to each
Seller's Knowledge, no other Person has treated, stored, recycled or
disposed of any hazardous material on any part of the Real Property.
There has been no release of any hazardous material at, on or under
any Real Property. Neither Seller has transported any hazardous
material or arranged for the transportation of any hazardous material
to any location that is listed or proposed for listing on the National
Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of federal, state or local enforcement
action or other investigation that may lead to claims against either
Seller for cleanup costs, remedial action, damages to natural
resources, to other property or for personal injury including claims
under Superfund. None of the Real Property is listed or, to each
Seller's Knowledge, proposed for listing on the National Priorities
List pursuant to Superfund, CERCLIS or any state or local list of
sites requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous Materials;
Storage Tanks. Neither Seller has received any request for
information, notice of claim, demand or other notification that it is
or may be potentially responsible with respect to any investigation,
abatement or cleanup of any threatened or actual release of any
hazardous material. Neither Seller is required to place any notice or
restriction relating to the presence of any hazardous material at any
Real Property or in any deed to any Real Property. Each Seller has
provided to Purchaser a list of all sites to which such Seller has
transported any hazardous material for recycling, treatment, disposal,
other handling or otherwise. There has been no past, and there is no
pending or contemplated, claim by either Seller under any
Environmental Law or Legal Requirement based on actions of others that
may have impacted on the Real Property, and neither Seller has entered
into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. All
storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 6.23, and, to each Seller's
Knowledge, all such tanks and associated piping are in sound condition
and are not leaking and have not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by HHC to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule
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6.24, no insurance has ever been canceled or denied. Following the Applicable
Closing Date, HHC shall, to the extent that coverage under its insurance
policies extends to include the Business, (i) take no action to eliminate or
reduce such coverage, other than normal elimination or reduction of coverage as
they occur by virtue of the filing of claims in the ordinary course under such
insurance policies, (ii) pay when due any premiums under such policies for
periods, including retrospective or retroactive premium adjustments and (iii)
use its best efforts to assist in filing and processing claims under and
otherwise cooperate with Purchaser to allow Purchaser, in its own name, or on
behalf of HHC, to obtain all coverage benefits applicable to the Business under
such insurance policies, including the execution of assignments or powers of
attorney for the benefit of Purchaser. Any proceeds of insurance paid by an
insurer to HHC for claims of Purchaser made in accordance with this Section
shall be promptly paid to Purchaser.
6.25 No Significant Items Excluded. Except for Excluded Assets, there
are no assets, properties, contracts, permits or other items of either Seller
or any Related Party that are of material importance to the ongoing operation
of the Business by Purchaser in substantially the same manner in which the
Business has been conducted by HHC prior to the date of this Agreement.
6.26. Surveys. HHC has provided Purchaser with copies of HHC's federal
and/or state surveys or inspections and any plans of correction for the current
year and the two immediately preceding years for each of the Facilities. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.27. Occupancy Reports. HHC has provided Purchaser with copies of
Seller's occupancy reports for each of the Facilities for the last year. Each
such occupancy report was prepared based on the number of operational beds
(i.e., double occupancy rooms were only counted as such when both beds were
occupied).
6.28 Discounted Rates; Rate limitations; Free Care. Attached hereto is
Schedule 6.28 that sets forth a true and complete list of the following for
each of the Facilities: (i) any services that are provided based on a discount
factor from the rates regularly charged at the Facility; (ii) any restrictions
or limitations on rates which may be charged to private pay residents for
services provided at the Facility; (iii) any percentage of beds or slots in any
program at the Facility that must be reserved for Medicaid eligible residents
and (iv) any amount of welfare, free or charity care or discounted government
assisted resident care provided at the Facility.
6.29. Tax Returns. Each Seller has filed or caused to be filed, or
will file or cause to be filed, all tax returns that are required to be filed
by it prior to or on the Applicable Closing Date, pursuant to all Legal
Requirements of each Governmental Authority with taxing power over it. All such
tax returns were or will be, as the case may be, correct and complete in all
material respects. Each Seller has paid or will pay all taxes that have or will
become due as shown on such tax returns or pursuant to any assessment received
as an adjustment to such tax returns, except (i) such taxes, if any, as are
being contested in good faith and disclosed on Schedule 6.29, (ii) in the case
of HHC, such taxes that are fully reserved against on the financial statements
of HHC previously provided to
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Purchaser and (iii) taxes accruing that are not yet due. Except as set forth on
Schedule 6.29, neither Seller is currently the beneficiary of any extension of
time within which to file any tax return. No claim has been made by any taxing
authority of a jurisdiction other than one in which each Facility is located.
HHC has paid, or will withhold and pay, all taxes required to have been
withheld in connection with amounts paid or owing to any Employee, independent
contractor, creditor, stockholder or other third party.
6.30 Real Property Leased. Neither Seller has any leasehold interest
(as lessee) in any Real Property Leased.
6.31 Trade Secrets. Neither Seller has any policies or procedures,
methods of delivery of services, trade secrets, designs, market studies,
consultants' reports, prototypes, or similar property of any nature, tangible
or intangible, that are protected by law and used in connection with the
Business.
6.32 Other Intangible Assets. Neither Seller has any other intangible
assets (including any causes of action, rights of action, contract rights or
warranty and product liability claims against third parties) relating to the
Purchased Assets or the Business.
6.33 Plans and Specifications. The Approved Plans and Specifications
for the construction and remediation of the Lagoon are, or shall be, prepared
in order that the Lagoon shall accommodate a 57-bed facility.
6.34 Completeness and Accuracy. All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
either Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. All Contracts, Permits and other
documents and instruments furnished or made available to Purchaser by either
Seller are or will be true, complete and accurate originals or copies of
originals and include all amendments, supplements, waivers and modifications
thereto.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to each Seller to enter into this Agreement
and to consummate the transactions contemplated hereby, Purchaser represents
and warrants to each Seller, that each of the following representations and
warranties is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite
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corporate power and authority to own and lease the Purchased Assets, to carry
on the Business and to execute and deliver this Agreement and the Ancillary
Agreements to which Purchaser is a party, to consummate the transactions
contemplated hereby and thereby and to perform all the terms and conditions
hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable in accordance with their
terms except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement,
contract, commitment, lease or other instrument, document or undertaking to
which Purchaser is a party or (v) result in the creation or imposition of any
Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Vacation Credit. Purchaser acknowledges and agrees to honor the
vacation credits set forth on Schedule 1.21 which the Employees are entitled to
receive.
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7.7 Discounted Rates. Purchaser acknowledges and agrees to honor the
lifetime rental rate of $1,300 per month for the following Residents: (i) Ruth
Doll, (ii) Buelah Ripley, (iii) Helen Bell and (iv) Dot Brockman.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING
8.1 Required Actions. Unless otherwise specified herein, between the
date of this Agreement and (i) the First Closing Date, with respect to the all
of the Facilities and the Purchased Assets and (ii) the Second Closing Date,
with respect to the Lamar Facility and the Lamar Assets, each Seller covenants
that it will, as the case may be:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access, during normal
business hours, to such of the properties, books, accounts and records
of such Seller as are relevant to the applicable Purchased Assets and
the Business, and furnish or otherwise make available to Purchaser all
such information concerning the applicable Purchased Assets and the
Business as Purchaser may reasonably request.
8.1.2 Surveys; Occupancy; Operations. With respect to HHC,
provide Purchaser with the following:
(i) occupancy reports for each of the applicable
Facilities, as soon as the same become available
through the Applicable Closing Date, but no later
than 5 days after the last day of any given week
(which reports shall be prepared based on the number
of operational beds);
(ii) federal and/or state surveys or inspections and any
plans of correction for each of the applicable
Facilities, as soon as the same become available
through the Applicable Closing Date, but no later
than 15 days after received by HHC; and
(iii) monthly statements of profit and loss of HHC for each
of the applicable Facilities, as soon as the same
become available through the Applicable Closing Date,
but no later than 15 days after the last day of each
month;
8.1.3 Conduct of Business. With respect to HHC, operate the
Business in the usual, regular and ordinary manner as such Business
was conducted prior to the date hereof and, to the extent consistent
with such operation, use its best efforts until the Applicable Closing
Date to (i) preserve and keep intact the Business; (ii) keep available
the services of the applicable Employees; (iii) preserve its
relationships with residents, suppliers and others having business
dealings with HHC in connection with the Business and (iv) maintain
current marketing activities;
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8.1.4 Maintenance of Properties. Maintain the applicable
Purchased Assets, whether owned or leased, in their good repair, order
and condition, in accordance with each Seller's past practices,
reasonable wear and tear excepted;
8.1.5 Maintenance of Books and Records. With respect to HHC,
maintain the Books and Records in the usual, regular and ordinary
manner, on a basis consistent with past practice;
8.1.6 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased
Assets and, with respect to HHC, to the conduct of the Business;
8.1.7 Performance of Obligations. Perform all the material
obligations of each Seller relating to the applicable Purchased Assets
and, with respect to HHC, the Business in accordance with the past
practices;
8.1.8 Approvals, Consents. Unless needed sooner pursuant to
any Legal Requirement, to obtain in writing as promptly as possible
any approvals and consents as required to be obtained by each Seller
in order to effectuate the transactions contemplated hereby and
deliver to Purchaser copies of such approvals and consents.
Accordingly, HHC shall cooperate with Purchaser's efforts to obtain
the necessary licenses to operate each of the applicable Facilities
from the appropriate Accreditation Bodies, including, without
limitation, MDNR and the Department of Social Services, Division of
Aging. Upon execution and delivery of this Agreement, HHC shall
promptly:
(i) provide Purchaser with copies of all Permits;
(ii) notify each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending
change of ownership of each of the Facilities as of
the Applicable Closing Date; and
(iii) provide such other notices as required by all Legal
Requirements including, if required, (i) notices to
the Facilities' residents and (ii) notices to
referral or human service agencies. Prior to sending
the notices, HHC shall provide copies to Purchaser
for review and approval, which approval shall not be
unreasonably withheld;
8.1.9 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by either Seller of any of its respective representations, warranties,
covenants or agreements hereunder;
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8.1.10 Pay Employees to Applicable Closing Date. With respect
to HHC, pay all wages, salaries and other sums due Employees through
the close of business on the day prior to (i) the First Closing Date,
with respect to the Nevada/Butler Facility Employees and (ii) the
Second Closing Date, with respect to the Lamar Facility Employees;
8.1.11 Transfer of Employees. With respect to HHC, take all
reasonably necessary steps to transfer to Purchaser the employment of
all Employees electing to continue their employ with Purchaser (i) as
of the First Closing Date, with respect to the Nevada/Butler Facility
Employees and (ii) as of the Second Closing Date, with respect to the
Lamar Facility Employees;
8.1.12 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and do all such acts and take all such
measures as may be reasonably necessary to comply with the
representations, agreements, conditions and other provisions of this
Agreement;
8.1.13 Update Schedule. Promptly disclose to Purchaser any
information contained in the representations and warranties of each
Seller contained in Article VI or in the Schedules to this Agreement
which is no longer complete or correct (including furnishing updated
financial statements); provided that no such disclosure shall be
deemed to modify, amend or supplement such Seller's representations
and warranties;
8.1.14 Applications. As soon as is reasonably practicable or
as otherwise specified herein, HHC shall prepare and submit, or cause
to be prepared and submitted, to the appropriate Governmental
Authorities, all applications necessary to construct and operate the
Lagoon to accommodate a 57-bed facility in compliance with all
applicable Legal Requirements, including, without limitation,
applications for the Construction Permit and the Operating Permit (the
"Applications"), together with all plans and specifications regarding
construction and/or remediation of the Lagoon as may be required in
connection with the foregoing (collectively, the "Plans and
Specifications"). On or before April 14, 1997, HHC shall prepare and
submit, or cause to be prepared and submitted, to MDNR an engineering
report containing as-built conditions of the Lamar Facility and
provisions for the removal by HHC of the waste and effluents from the
Lagoon (the "Engineering Report"). Concurrently therewith, HHC shall
provide copies of each of the foregoing to Purchaser.
8.1.15 Sewage Disposal. Commencing immediately and continuing
thereafter until such time as all of the Lagoon Permits are obtained,
at its own cost and expense, HHC shall cease operating the Lagoon and
shall take all necessary action to (i) cap-off or otherwise prevent
the discharge of any and all sewage and effluents from the Lamar
Facility's septic tanks into the Lagoon and (ii) dispose of such
sewage and effluents from the Lamar Facility's septic tanks to an
authorized waste disposal facility by an approved method, all in
compliance with all applicable Legal Requirements.
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8.1.16 Lagoon Construction. As soon as is reasonably
practicable upon issuance of a valid construction permit by MDNR to
construct the Lagoon (the "Construction Permit"), at its own cost and
expense, HHC shall construct and complete, or cause to be constructed
and completed, the Lagoon to accommodate a 57-bed facility in
accordance with the Plans and Specifications, as approved by the
applicable Governmental Authorities (the "Approved Plans and
Specifications"). Concurrently therewith, HHC shall provide copies of
each of the foregoing to Purchaser.
8.1.17 Lagoon Permits. As soon as is reasonably practicable,
at its own cost and expense, HHC shall obtain, or cause to be
obtained, from the applicable Governmental Authorities all Permits and
other approvals that are required in order for HHC to operate the
Lagoon to accommodate a 57-bed facility in compliance with all
applicable Legal Requirements (the "Lagoon Permits"), including,
without limitation, the Construction Permit and a valid operating
permit issued by MDNR (the "Operating Permit"). Concurrently
therewith, HHC shall provide copies of each of the foregoing to
Purchaser.
8.2 Prohibited Actions. Between the date of this Agreement and (i) the
First Closing Date, with respect to all of the Facilities and the Purchased
Assets and (ii) the Second Closing Date, with respect to the Lamar Facility and
the Lamar Assets, neither Seller shall, except as otherwise agreed by Purchaser
in writing:
8.2.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the applicable
Purchased Assets other than in the ordinary course of business
consistent with past practices;
8.2.2 Business Changes. With respect to HHC, change in any
material respect the character of the Business;
8.2.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement,
commitment or other transaction or arrangement, commitment or other
transaction or arrangement that is not the ordinary course of business
consistent with past practices and with respect to which Purchaser
will be bound subsequent to the Applicable Closing Date;
8.2.4 Incurrence of Liens. Subject to lien, security interest
or any other Encumbrance, other than Permitted Encumbrances, any of
the applicable Purchased Assets;
8.2.5 Change in Employee Compensation and Benefits. With
respect to HHC, increase the rate of compensation paid, or pay any
bonus, to anyone connected with the Business, except for those
increases or bonuses planned, in the ordinary course of business
consistent with past practices, or establish or adopt any new pension
or profit-sharing plan, deferred compensation agreement or employee
benefit arrangement of any kind whatsoever covering or affecting the
applicable Employees;
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8.2.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.2.7 No Release. With respect to HHC, except in the ordinary
course of business consistent with past practices, cancel, release or
relinquish any material debts of or claims against others held by HHC
with respect to the Business or waive any material rights relating to
the Business; and
8.2.8 No Termination or Modification. Terminate or materially
modify any material contract or permit (including, without limitation,
those items listed on Schedule 1.63, Schedule 2.1.3, Schedule 1.59 and
Schedule 1.60) or other authorization or agreement affecting the
applicable Purchased Assets or, with respect to HHC, the Business or
the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING
9.1 Required Actions. Unless otherwise specified herein, between the
date of this Agreement and (i) the First Closing Date, with respect to all of
the Facilities and the Purchased Assets and (ii) the Second Closing Date, with
respect to the Lamar Facility and the Lamar Assets, Purchaser shall, except as
otherwise agreed by each Seller in writing:
9.1.1 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to
it set forth in this Agreement, and Purchaser shall do all such acts
and take all such measures as may be reasonably necessary to comply
with the representations, agreements, conditions and other provisions
of this Agreement;
9.1.2 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business which examinations shall be conducted in such a manner as to
prevent disruption of relations with the Employees, residents and
suppliers of HHC; and
9.1.3 HHC's Employees. Take all reasonable steps to ensure
that the transfer of employment of (i) all of the Nevada/Butler
Facility Employees to be accomplished prior to or on the First Closing
Date and (i) all of the Lamar Facility Employees to be accomplished
prior to or on the Second Closing Date.
9.2 Investigation. Purchaser shall use all reasonable efforts to
conduct any follow-up investigation of the Business or the Purchased Assets of
either Seller as may be reasonably required by Purchaser's lender, which
investigation shall be conducted in such a manner as to prevent
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disruption of relations with the Employees, residents and suppliers of HHC. Any
investigation shall be (i) conducted by Purchaser and in HHC's presence and
(ii) scheduled with HHC's prior approval.
9.3 Approvals, Consents. Unless needed sooner pursuant to any Legal
Requirement, Purchaser shall use its best efforts to obtain in writing as
promptly as possible any approvals and consents as required to be obtained by
Purchaser in order to effectuate the transactions contemplated hereby and
deliver to each Seller copies of such approvals and consents. Accordingly,
Purchaser take all reasonable action to obtain the necessary licenses to
operate each of the applicable Facilities from the MDNR and the Department of
Social Services, Division of Aging, including:
(i) providing notice to each Accreditation Body and Third
Party Payor as required by any Legal Requirement of
the pending change of ownership of each of the
Facilities as of the Applicable Closing Date; and
(ii) providing such other notices as required by all Legal
Requirements including, if required, (i) notices to
the Facilities' residents and (ii) notices to
referral and human service agencies. Prior to sending
the notices, Purchaser shall provide copies to HHC
for review and approval, which approval shall not be
unreasonably withheld.
9.4 Publicity; Advertisement. Except as required by law, Purchaser
shall not publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such third-party,
the entering into of this Agreement, the terms of this Agreement or the
transactions contemplated hereby; provided, however, the foregoing shall not be
applicable to disclosures made by Purchaser to Purchaser's lender in response
to such lender's reasonable requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER WITH RESPECT TO
EACH CLOSING
The obligation of Purchaser to proceed with each Closing under this
Agreement is subject to the fulfillment prior to the specified date or at the
time of (i) the First Closing, with respect to all of the Facilities and the
Purchased Assets and (ii) the Second Closing, with respect to the Lamar
Facility and the Lamar Assets, of the following conditions with respect to each
Seller, any one or more of which may be waived in whole or in part by
Purchaser:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of each Seller contained in this Agreement and the Ancillary
Agreement to which each Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Applicable Closing Date with the same force and effect as though made
on and as of the Applicable Closing Date.
10.2 Performance of Agreement. Each Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions
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contained in this Agreement and the Ancillary Agreements to which such Seller
is a party to be performed or complied with by it at or prior to the Applicable
Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from each Seller, dated as of the Applicable Closing Date, reasonably
satisfactory in form and substance to Purchaser and its counsel, certifying as
to the matters specified in Section 10.1 and Section 10.2 hereof. The matters
set forth in such certificate shall constitute representations and warranties
of each Seller hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Applicable Closing Date, of the Secretary or any
Assistant Secretary of HHC with respect to:
(i) the resolutions of the board of directors of HHC and,
if necessary, the stockholders of HHC, authorizing
the execution and delivery of this Agreement and the
Ancillary Agreements to which HHC is a party and the
performance by HHC of the transactions contemplated
hereby and thereby;
(ii) the incumbency and specimen signature of each officer
or representative of HHC executing this Agreement,
the certificate referred to in Section 10.3 and the
Ancillary Agreements to which HHC is a party; and
(iii) the effect that the governing documents of HHC
delivered pursuant to Section 10.6 were in effect at
the date of adoption of such resolutions, the date of
execution of this Agreement and the Applicable
Closing Date.
10.5 Injunction. On the Applicable Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
administrative proceeding by any Governmental Authority or other Person shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby or which if successfully asserted might
otherwise have a material adverse effect on the conduct of the Business or
impose any additional material financial obligation on, or require the
surrender of any material right by, Purchaser.
10.6 Actions and Proceedings. With respect to HHC, all corporate
actions, proceedings, instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental hereto and all other
related legal matters shall be reasonably satisfactory to counsel for
Purchaser, and such counsel shall have been furnished with such certified
copies of such corporate actions and proceedings and such other instruments and
documents as it shall have reasonably requested, including, without limitation:
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(i) certificates of the appropriate public officials to
the effect that HHC is a validly existing corporation
in good standing in its state of incorporation as of
a date not more than 10 days prior to the Applicable
Closing Date;
(ii) incumbency and specimen signature certificates dated
the Applicable Closing Date, signed by the officers
of HHC and certified by its Secretary; and
(iii) true and correct copies of (A) the charter documents
of HHC as of a date not more than 10 days prior to
the Applicable Closing Date, certified by the
Secretary of State of its state of incorporation and
(B) the bylaws of HHC as of the Applicable Closing
Date, certified by the Secretary of HHC.
10.7 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.8 Arrangements with Employees. Substantially all of HHC's Employees
shall have accepted employment with Purchaser effective (i) as of the First
Closing Date, with respect to the Nevada/Butler Facilities and (ii) as of the
Second Closing Date, with respect to the Lamar Facility, and Purchaser shall
have entered into arrangements with applicable key Employees of HHC
satisfactory to Purchaser in its sole discretion.
10.9 Reserved.
10.10 Reserved.
10.11 Environmental Report. At its own cost and expense, Purchaser
shall have obtained a written report from a qualified geotechnical or
engineering firm, in a form and substance, satisfactory to Purchaser,
concerning the presence, handling, treatment and disposal of Regulated
Substances on, in or under the Real Property and disclosing (i) the results of
a review of prior uses of the Real Property disclosed by local public records,
including the chain of title; (ii) contacts with local officials to determine
whether any records exist with respect to the disposal of Regulated Substances
on the Real Property; and (iii) if recommended to or required by Purchaser,
soil samples and groundwater samples consistent with good engineering practice.
10.12 Title Insurance. Purchaser shall have obtained for all Real
Property final marked commitments to issue to Purchaser ALTA (1992-Form B with
appropriate state endorsements) owner's or leasehold policies of title
insurance in coverage amounts equal to the fair market values of such Real
Property, insuring good and marketable title to such Real Property with
mechanic's liens coverage and such endorsements as Purchaser may reasonably
request and with exceptions only for ALTA standard printed exceptions (other
than mechanic's and materialmen's liens and rights of possession) and Permitted
Encumbrances.
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10.13 Estoppel Certificates. Purchaser shall have received estoppel
certificates from the Clarks and any other lessor of the Real Property Leased,
in form and substance satisfactory to Purchaser.
10.14 Closing Documents. Purchaser shall have received the other
documents referred to in Section 5.2 which shall be in form and substance
satisfactory to Purchaser in its reasonable discretion.
10.15 Other Deliveries. At its own cost and expense, Purchaser shall
have received with respect to the Real Property:
10.15.1 Surveys. Surveys of such property which conform to
the standards set forth in the ALTA/American Congress on Surveying and
Mapping Minimum Standard Detail Requirements for Land Title Surveys
and which disclose no state of facts inconsistent with the
representations and warranties of each Seller set forth in Section 6.9
hereof and are otherwise acceptable to Purchaser;
10.15.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to
Purchaser's title insurer regarding title, mechanic's liens and such
other customary matters as may be reasonably requested by Purchaser or
Purchaser's title insurer; and
10.15.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by each Seller under penalties of perjury, in the form
prescribed by Treasury Regulation Section 1.1445-2(b)(2)(iii), stating
each Seller's name, address and Federal tax identification number, and
that each Seller is not a "foreign person" within the meaning of
Section 1445 of the Code.
10.16 Reserved.
10.17 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Russell, Brown, Bickel & Breckenridge, counsel for each Seller,
addressed to Purchaser and Purchaser's lender, reasonably satisfactory to
Purchaser and its counsel as to the matters set forth in Sections 6.1, 6.2 and
6.3 hereof.
10.18 Reserved.
10.19 Engineering Report. On or before April 14, 1997, at its own cost
and expense, HHC shall have prepared and submitted, or caused to be prepared
and submitted, the Engineering Report.
ARTICLE XA. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER WITH
RESPECT TO SECOND CLOSING.
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In addition to the conditions precedent set forth in Article X, the
obligation of Purchaser to proceed with the Second Closing under this Agreement
is subject to the fulfillment prior to the Second Closing Date, with respect to
the Lamar Facility and the Lamar Assets, of the following conditions with
respect to each Seller, any one or more of which may be waived in whole or in
part by Purchaser:
10A.1 Closure Letter. At its own cost and expense, within six months
from the date of this Agreement, HHC shall have obtained, or caused to be
obtained, from MDNR, a closure letter, in form and substance reasonably
acceptable to Purchaser and Purchaser's lender, with respect to the matters set
forth in the MDNR Notice, including, without limitation, that, on the Second
Closing Date, (i) the Lagoon has been constructed and/or remediated by Seller
to accommodate a 57-bed facility in accordance with the Approved Plans and
Specifications and in compliance with all applicable Legal Requirements, (ii)
the Operating Permit will be issued to Seller and (iii) no further enforcement
action, including, without limitation, the imposition of any fines or
penalties, will be taken by MDNR with respect to Seller or the Lagoon.
10A.2 Lagoon Permits. At its own cost and expense, within six months
from the date of this Agreement, HHC shall have obtained, or caused to be
obtained, from the applicable Governmental Authorities all of the Lagoon
Permits.
10A.3 Financial Condition of Lamar Facility. On the Second Closing
Date, the annualized year-to-date NOI of the Lamar Facility shall not be less
than $152,000.
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER WITH RESPECT TO
EACH CLOSING
The obligation of each Seller to proceed with each Closing under this
Agreement is subject to the fulfillment prior to the specified date or at the
time of (i) the First Closing, with respect to all of the Facilities and the
Purchased Assets and (ii) the Second Closing, with respect to the Lamar
Facility and the Lamar Assets, of the following conditions with respect to
Purchaser, any one or more of which may be waived in whole or in part by each
Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Applicable Closing Date with the same force and
effect as though made on and as of the Applicable Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Applicable Closing Date.
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11.3 Purchaser's Certificate. Each Seller shall have received a
certificate from Purchaser, dated as of the Applicable Closing Date, reasonably
satisfactory in form and substance to each Seller and their counsel, certifying
as to the fulfillment of all matters specified in Section 11.1 and Section 11.2
hereof. The matters set forth in such certificate shall constitute
representations and warranties of Purchaser hereunder.
11.4 Secretary's Certificate. Each Seller shall have received a
certificate, dated as of the Applicable Closing Date, of the Secretary or any
Assistant Secretary of Purchaser with respect to:
(i) the resolutions of the board of directors of
Purchaser and, if necessary, the stockholders of
Purchaser, authorizing the execution and delivery of
this Agreement and the Ancillary Agreements to which
Purchaser is a party and the performance by Purchaser
of the transactions contemplated hereby and thereby;
(ii) the incumbency and specimen signature of each officer
or representative of Purchaser executing this
Agreement, the certificate referred to in Section
11.3 and the Ancillary Agreements to which Purchaser
is a party; and
(iii) the effect that the governing documents of Purchaser
delivered pursuant to Section 11.6 were in effect at
the date of adoption of such resolutions, the date of
execution of this Agreement and the Applicable
Closing Date.
11.5 Injunction. On the Applicable Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
administrative proceeding by any Governmental Authority or other Person shall
have been instituted, threatened or anticipated which questions the validity or
legality of the transactions contemplated hereby.
11.6 Actions and Proceedings. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental hereto and all other related legal matters
shall be reasonably satisfactory to counsel for each Seller, and such counsel
shall have been furnished with such certified copies of such corporate actions
and proceedings and such other instruments and documents as it shall have
reasonably requested, including, without limitation:
(i) certificates of the appropriate public officials to
the effect that Purchaser is a validly existing
corporation in good standing in its state of
incorporation as of a date not more than 10 days
prior to the Applicable Closing Date;
(ii) incumbency and specimen signature certificates dated
the Applicable Closing Date, signed by the officers
of Purchaser and certified by its Secretary; and
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(iii) true and correct copies of (A) the charter documents
of Purchaser as of a date not more than 10 days prior
to the Applicable Closing Date, certified by the
Secretary of State of its state of incorporation and
(B) the bylaws of Purchaser as of the Applicable
Closing Date, certified by the Secretary of
Purchaser.
ARTICLE XII. OBLIGATIONS AFTER EACH CLOSING
12.1 Covenant Not to Interfere. Each Seller covenants and agrees that
for a period of three years after the Second Closing Date, each Seller will not
solicit for employment by such Seller or any Affiliates any Person who is an
Employee of the Business as of either Closing Date.
12.2 Noncompetition. For a period of three years following the Second
Closing Date, each Seller will not, directly or indirectly, unless acting in
accordance with Purchaser's written consent, own, manage, operate, finance or
participate in the ownership, management, operation or financing of or permit
its name to be used by or in connection with any business or enterprise engaged
in the Business acquired by Purchaser hereunder and located within a 25-mile
radius of each of the Facilities. Each Seller acknowledges that the provisions
of this Section are reasonable and necessary to protect the interests of
Purchaser, that any violation of this Section will result in an irreparable
injury to Purchaser and that damages at law would not be reasonable or adequate
compensation to Purchaser for violation of this Section and that, in addition
to any other available remedies, Purchaser shall be entitled to have the
provisions of this Section specifically enforced by preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting a
bond or other security to an equitable accounting of all earnings, profits and
other benefits arising out of any violation of this Section. In the event that
the provision of this Section shall ever be deemed to exceed the time,
geographic scope or other limitations permitted by applicable law, then the
provisions shall be deemed reformed to the maximum extent permitted by
applicable law.
12.3 Transition of Employees. From and after the (i) the First Closing
Date, with respect to the Nevada/Butler Facility Employees and (ii) the Second
Closing Date, with respect to the Lamar Facility Employees, Purchaser and HHC
shall cooperate to ensure an orderly transition of the Employees who accept
employment with Purchaser.
12.4 Certain Transitional Matters.
12.4.1 Transfer of Assets. Each Seller agrees that, from and
after (i) the First Closing Date, with respect to the Nevada/Butler
Facilities and Nevada/Butler Assets and (ii) the Second Closing Date,
with respect to the Lamar Facility and the Lamar Assets, Purchaser
shall have the right and authority to collect for Purchaser's own
account all items which shall be transferred to Purchaser with respect
to the Applicable Closing Date as provided herein.
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12.4.2 Endorsement of Checks. From and after (i) the First
Closing Date, with respect to the Nevada/Butler Facilities and
Nevada/Butler Assets and (ii) the Second Closing Date, with respect to
the Lamar Facility and the Lamar Assets, Purchaser shall have the
right and authority to retain and endorse without recourse the name of
each Seller on any check evidencing rent or other revenues received by
Purchaser on account of any of the applicable Purchased Assets and,
with respect to HHC, the Business transferred to Purchaser hereunder.
12.4.3 Seller's Remittance of Funds. After the (i) the First
Closing Date, with respect to the Nevada/Butler Facilities and
Nevada/Butler Assets and (ii) the Second Closing Date, with respect to
the Lamar Facility and the Lamar Assets, each Seller shall promptly
transfer and deliver to Purchaser any cash or other property, if any,
that each Seller may receive related to the applicable Purchased
Assets other than the Excluded Assets and, with respect to HHC, the
Business.
12.4.4 Purchaser's Remittance of Funds. After the Applicable
Closing Date, Purchaser shall promptly transfer and deliver to the
appropriate Seller any cash or other property, if any, that Purchaser
may receive related to the Excluded Assets.
12.4.5 Assumed Liabilities Controlled by Purchaser. From and
after the Applicable Closing Date, Purchaser shall have complete
control over the payment, settlement or other disposition of, or any
dispute involving the applicable Assumed Liabilities, and Purchaser
shall have the right to conduct and control all negotiations and
proceedings with respect thereto. HHC shall notify Purchaser promptly
of any claim made with respect to any of the applicable Assumed
Liabilities and shall not, except with the prior written consent of
Purchaser, voluntarily make any payment of, or settle or offer to
settle, or consent to any compromise with respect to, any such Assumed
Liability. HHC shall cooperate with Purchaser in connection with any
negotiations or proceedings involving any Assumed Liability.
12.5 Audits. To the extent reasonably requested by Purchaser,
following the Applicable Closing Date, at Purchaser's cost and expense, HHC
shall cooperate and request HHC's accountants to cooperate, with Purchaser and
its auditors in the preparation of audited financial statements of each of the
Facilities for the years ended December 31, 1996, 1995 and 1994 prepared in
accordance with GAAP or, to the extent required, in connection with any
registration statement or other form filed by Purchaser with the Securities and
Exchange Commission under the Securities Act of 1933 for a public offering and
sale of securities of Purchaser. Any audit shall be performed in accordance
with GAAS.
12.6 Further Assurances of Seller. From and after the Applicable
Closing Date, each Seller shall, at the request of Purchaser, execute,
acknowledge and deliver to Purchaser, without further consideration, all such
further assignments, conveyances, endorsements, deeds, special powers of
attorney, consents and other documents, and take such other action, as
Purchaser may reasonably request (i) to transfer to and vest in Purchaser, and
protect its rights, title and interest in, all the Purchased Assets and (ii)
otherwise to consummate the transactions contemplated by this Agreement.
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In addition, from and after the Applicable Closing Date, HHC shall afford
Purchaser and its attorneys, accountants and other representatives access,
during normal business hours, to any Books and Records relating to the Business
that HHC may retain as may reasonably be required in connection with the
preparation of financial information or tax returns of Purchaser. Purchaser
shall be responsible for any costs and expenses related to the foregoing,
including any costs and expenses of any employees or professionals providing
assistance requested by Purchaser.
12.7 Further Assurances of Purchaser. From and after the Applicable
Closing Date, Purchaser shall afford to HHC and its attorneys, accountants and
other representatives access, during normal business hours, to such Books and
Records relating to the Business as may reasonably be required in connection
with the preparation of financial information or tax returns for periods
concluding on or prior to the Applicable Closing Date. Purchaser shall
cooperate in all reasonable respects with HHC with respect to its former
interest in the Business and in connection with financial account closing and
reporting and claims and litigation asserted by or against third parties,
including, but not limited to, making Purchaser's employees available at
reasonable times to assist with, or provide information in connection with
financial account closing and reporting and claims and litigation, provided
that HHC reimburses Purchaser for its reasonable out-of-pocket expenses
(including costs of employees so assisting) in connection therewith.
12.8 Operation of the Lagoon. On and as of the Second Closing Date,
Purchaser shall obtain all necessary Permits from the applicable Governmental
Authorities to operate the Lagoon and shall commence operation of the Lagoon.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of each Seller and Purchaser;
(ii) by Purchaser upon notice to each Seller if any of the
conditions set forth in Article X or Article XA
hereof have not been satisfied or become impossible
to satisfy by the specified date or the Applicable
Closing Date, as the case may be (other than by
reason of the material failure of Purchaser to
fulfill its obligations under this Agreement);
(iii) by either Seller upon notice to Purchaser if any of
the conditions set forth in Article XI hereof have
not been satisfied or become impossible to satisfy by
the Applicable Closing Date (other than by reason of
the material failure of such Seller to fulfill its
obligations under this Agreement);
(iv) by either Seller if Purchaser materially breaches or
fails to fulfill its obligations under this
Agreement, which failure continues and remains
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uncured for 30 consecutive calendar days after such
Seller gives written notice of such failure to
Purchaser; and
(v) by Purchaser if either Seller materially breaches or
fails to fulfill its obligations under this
Agreement, which failure continues and remains
uncured for 30 consecutive calendar days after
Purchaser gives written notice of such failure to
such Seller.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party.
13.3 Deposit. Upon termination of this Agreement, the Deposit shall be
disbursed as follows and in accordance with the terms and conditions of the
Escrow Agreement:
(i) if this Agreement is terminated pursuant to (A)
Section 13.1(i), (B) Section 13.1(ii), but only if
such termination results because the conditions set
forth in Sections 10.1, 10.2, 10.3, 10.4, 10.5, 10.6,
10.7, 10.8, 10.11, 10.13, 10.14, 10.15, 10.17, 10.19
or Article XA have not been satisfied or become
impossible to satisfy by the specified date or the
Applicable Closing Date, as the case may be, or (C)
Section 13.1(v), the Parties agree to instruct Escrow
Agent to release the Deposit to Purchaser; and
(iii) if this Agreement is terminated pursuant to (A)
Section 13.1(iii), (B) Section 13.1(ii), but only if
such termination results because the conditions set
forth in Section 10.12 have not been satisfied or
become impossible to satisfy by the specified date or
the Applicable Closing Date, as the case may be, or
(C) Section 13.1(iv), the Parties agree to instruct
Escrow Agent to release the Deposit to Seller.
13.4 Remedies. If this Agreement is terminated by Purchaser or either
Seller as permitted under Section 13.1 and not as a result of a breach of a
representation or warranty or the failure of any Party to perform its
obligations hereunder, except for the return of the Deposit pursuant to Section
13.3, such termination shall be without liability of any Party. If a Party
terminates this Agreement as a result of a breach of a representation or
warranty by the other Party or the failure of the other Party to perform its
obligations hereunder, the nonbreaching Party, in addition to any other legal
remedies that may be available, shall be entitled to a return of the Deposit
pursuant to Section 13.3 and reimbursement from the breaching Party for all
expenses incurred by the nonbreaching Party in connection with this Agreement
and the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
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14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive for two (2) years after the Second
Closing Date; provided that there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Any Party's right to the indemnification
or other remedies based upon the representations and warranties, covenants,
agreements and undertakings of any other Party will not be affected by any
investigation, knowledge or waiver of any condition by such Party. Any
investigation by such Party shall be for its own protection only and shall not
affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Each Seller shall respectively
indemnify, defend, save and hold Purchaser and its officers, directors,
employees, agents and Affiliates (collectively, "Purchaser Indemnitees")
harmless from and against all demands, claims, allegations, assertions, actions
or causes of action, assessments, losses, damages, deficiencies, liabilities,
costs and expenses (including reasonable legal fees, interest, penalties, and
all reasonable amounts paid in investigation, defense or settlement of any of
the foregoing and whether or not any such demands, claims, allegations, etc., of
third parties are meritorious; collectively, "Purchaser Damages") asserted
against, imposed upon, resulting to, required to be paid by, or incurred by any
Purchaser Indemnitees, directly or indirectly, in connection with, arising out
of, which could result in, or which would not have occurred but for, a breach of
any representation or warranty made by such Seller in this Agreement, in any
certificate or document furnished pursuant hereto by such Seller or any
Ancillary Agreement to which such Seller is or is to become a party, a breach or
nonfulfillment of any covenant or agreement made by such Seller in or pursuant
to this Agreement and in any Ancillary Agreement to which such Seller is or is
to become a party, and any Retained Liability, including, without limitation,
the Retained Liabilities set forth in Section 4.2A(xiii) and Section 4.2A(xiv).
Notwithstanding anything to the contrary herein, the obligations and liabilities
of each Seller hereunder shall be joint and several.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold each Seller and its officers, directors, Employees, Affiliates
and agents, as the case may be (collectively, "Seller Indemnitees") harmless
from and against any and all demands, claims, actions or causes of action,
assessments, losses, damages, deficiencies, liabilities, costs and expenses
(including reasonable legal fees, interest, penalties, and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing
and whether or not any such demands, claims, allegations, etc., of third
parties are meritorious; collectively, "Seller Damages") asserted against,
imposed upon, resulting to, required to be paid by, or incurred by any Seller
Indemnitees, directly or indirectly, in connection with, arising out of, which
could result in, or which would not have occurred but for, a breach of any
representation or warranty made by Purchaser in this Agreement or in any
certificate or document furnished pursuant hereto by Purchaser or any Ancillary
Agreement to which Purchaser is a party, a breach or nonfulfillment of any
covenant or agreement made by Purchaser in or pursuant to this Agreement and in
any Ancillary Agreement to which Purchaser is a party, and, with respect to
HHC, any Assumed Liability.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or
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Seller Damages, as the case may be ("Damages") for which it is entitled to
indemnification under this Article XIV, such Indemnified Party shall so notify
the party or parties from whom indemnification is being claimed (the
"Indemnifying Party") with reasonable promptness and reasonable particularity
in light of the circumstances then existing. If any action at law or suit in
equity is instituted by or against a third party with respect to which any
Indemnified Party intends to claim any Damages, such Indemnified Party shall
promptly notify the Indemnifying Party of such action or suit.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement. The Indemnified Party
shall permit the Indemnifying Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnifying Party, provided that
the fees and expenses of such counsel shall be borne by the Indemnifying Party.
If the Indemnified Party permits the Indemnifying Party to undertake, conduct
and control the conduct and settlement of such action or suit, the Indemnifying
Party shall not thereby permit to exist any Encumbrance upon any asset of the
Indemnified Party; the Indemnifying Party shall not consent to any settlement
that does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; the Indemnifying Party shall permit the Indemnified Party to participate
in such conduct or settlement through counsel chosen by the Indemnified Party
(at its own cost and expense); and the Indemnifying Party shall agree promptly
to reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving
the foregoing notice to the Indemnifying Party and prior to the assumption of
the conduct and control of such action or suit by the Indemnifying Party.
14.6 Other Remedies. The indemnification rights of any Indemnified
Party under this Article XIV are independent of and in addition to such rights
and remedies as such Indemnified Party may have at law, in equity or otherwise
for any misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement under or in connection with this Agreement on the part of
any Party, none of which rights or remedies shall be affected or diminished
hereby.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and each Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and among Purchaser and each Seller. Except as may
be required by law, no Party shall act unilaterally in this
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regard without prior written approval of every other Party, such approval not
be unreasonably withheld.
15.3 Waivers. The waiver by any Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors, assigns, heirs, executors, administrators and
legal representatives. Nothing in this Agreement, express or implied, is
intended to confer on any Person other than the Parties hereto, or their
respective successors, assigns, heirs, executors, administrators and legal
representatives any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which any Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by Federal Express or United Parcel Service, or by
telecopying with receipt confirmation (followed by Federal Express or United
Parcel Service of the same) to the Party to whom the same is so given or made.
Such notice, request, demand, waiver, election or other communication will be
deemed to have been given as of the date so delivered.
15.5.1 Notice to Seller.
If to the Clarks, to:
Barry G. Clark and Karen R. Clark
P.O. Box E
Nevada, Missouri 64772
If to HHC, to:
Barry G. Clark, President
P.O. Box E
Nevada, Missouri 64772
With a required copy to:
Bryan C. Breckenridge, Esquire
Russell, Brown, Bickel & Breckenridge
108 West Walnut
P.O. Drawer J
Nevada, Missouri 64772-0938
Fax: (417) 667-3013
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15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, Pennsylvania 17055
Fax: (717) 796-6150
Attn: Director, Legal Services
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to
every other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at each
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof or thereof shall be binding
upon any Party unless set forth in an instrument in writing signed by the Party
to be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the State of
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Missouri. All claims, disputes or causes of action relating to or arising out
of this Agreement shall be brought, heard and resolved solely and exclusively
by and in federal or state court situated in Vernon County, Missouri. The
Parties hereto agree to submit to the jurisdiction of such courts and agree
that such jurisdiction shall be proper for all purposes of this Agreement.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Parties shall pay the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and each Seller, and each of their respective
permitted successors, assigns, heirs, executors, administrators and legal
representatives. Neither Seller shall assign, or otherwise transfer any
interest in this Agreement to any other Person without the prior written
consent of Purchaser, which consent shall not unreasonably be withheld.
Purchaser may assign and transfer its interest in this Agreement without either
Seller's consent to any of Purchaser's Affiliates or to any lender providing
financing for the transactions contemplated hereby. In addition, Purchaser
anticipates financing the transactions contemplated hereby through
sale-leaseback(s). Purchaser shall have the right to assign this Agreement, in
whole or in part, in such manner as Purchaser may desire in order to facilitate
such sale-leasebacks. Purchaser will promptly provide each Seller with a copy
of any such assignment, and each Seller agrees to execute and deliver any
consents reasonably required by Purchaser's lender in connection therewith,
provided such assignment does not expand either of Seller's respective
obligations and liabilities hereunder. Notwithstanding any permitted assignment
of this Agreement by Purchaser, Purchaser shall remain liable to each Seller
for all obligations and liabilities to be performed by or on behalf of
Purchaser hereunder with respect to such Seller.
[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
PURCHASER:
BALANCED CARE CORPORATION
By: /s/ Brian L. Barth
----------------------------
BRIAN L. BARTH
Vice President
SELLER(S):
/s/ Barry G. Clark
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BARRY G. CLARK
/s/ Karen R. Clark
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KAREN R. CLARK
HEAVENLY HEALTH CARE, INC. D/B/A
JOE CLARK RESIDENTIAL CARE HOMES
By: /s/ Barry G. Clark
-----------------------------
BARRY G. CLARK
President/Treasurer
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EXHIBIT 2.17
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
18 day of September, 1997, by and among Balanced Care Corporation, a Delaware
corporation (together with its permitted assigns, "Purchaser"); and Butler
Senior Care, Inc., a Pennsylvania corporation ("Seller").
RECITALS:
Seller owns all of the assets in connection with the operation of
three licensed residential care facilities located at the following addresses
(the "Facilities"): (i) Silver Haven Summit ("Silver Haven"); (ii) Sterling
Care of Sarver ("Sarver"); and (iii) Sterling Care of Saxonburg ("Saxonburg").
Purchaser desires to purchase substantially all of the assets of Seller and the
Business (as hereinafter defined) related thereto and Seller desires to sell
such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser will purchase the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of the Business, and Seller
will sell to Purchaser said assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade
accounts receivable (including, without limitation, any third party receivables
arising in connection with any Third Party Payor Programs), notes receivable,
bid or performance deposits, employee advances and other miscellaneous
receivables associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Public Welfare, the Division of Personal Care Homes and all other Persons having
jurisdiction over the accreditation, certification, evaluation or operation of
the Business.
1.3 "Accrued Expenses" shall mean as of any date, insurance
premiums, payroll and benefits (including, without limitation, vacation, sick
pay, disability pay) and other accrued expenses as would appear on a balance
sheet of Seller as of such date prepared in accordance with GAAP consistently
applied, including those described in Schedule 1.3.
1.3A "Addition" shall mean a twenty-eight personal care bed
addition to Saxonburg currently being constructed by Seller, at Seller's expense
and in accordance with all requirements of the applicable municipality and other
governmental units having jurisdiction thereover, including but not limited to
the Pennsylvania Department of Public Welfare and the Department of Labor and
Industry with respect to building and licensing of personal care homes, which
addition will be completed on or about the Closing Date.
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1.4 "Affiliate" shall mean any company or other entity which
controls, is controlled by or is under common control with the designated Party.
For the purpose of the foregoing, ownership, directly or indirectly, of 20% or
more of the voting stock or other equity interest shall be deemed to constitute
control.
1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyance
described in Section 5.2.1 and the bill of sale, assignment and assumption
described in Section 5.2.2.
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Books and Records" shall have the meaning given to it in
Section 6.16.
1.9 "Business" shall mean the current operation of the Facilities
and any other ancillary health care services owned, operated, delivered,
managed, developed, constructed, maintained, used, occupied or possessed by
Seller in connection therewith (including, without limitation, any outpatient
and contract rehabilitation therapy services or any Alzheimer's units).
1.10 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.11 "Champus" shall mean the Civilian Health and Medical Program
of the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C Sections 1071 et seq.
1.12 "Closing" shall have the meaning given to it in Section 5.1.
1.13 "Closing Date" shall have the meaning given to it in Section
5.1.
1.14 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.15 "Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time, and any successor thereto. Any reference herein to
a specific section or sections of the Code shall be deemed to include a
reference to any corresponding provision of future law.
1.16 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident's
Agreements described on Schedule 1.58, Management Agreements and Provider
Agreements), contracts, contract rights, commitments, customer accounts, orders,
leases, guarantees, warranties and representations, franchises and books and
records of account benefiting, relating to the Business or the ownership,
construction, development, maintenance, repair, management, use, occupancy,
possession or operation thereof, or the operation of any of the programs or
services in conjunction with the Business and all
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renewals, replacements and substitutions therefor, issued by any Governmental
Authority, Accreditation Body or Third Party Payor or maintained or used by
Seller with any third Person.
1.17 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.18 "Damages" shall have the meaning given to such term in Section
14.4.
1.19 "Department of Public Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.20 "Division of Personal Care Homes" shall mean the Commonwealth
of Pennsylvania, Department of Public Welfare, Division of Personal Care Homes.
1.21 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.21 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of business consistent with past practices).
1.22 "Encumbrance" shall mean any right to, or interest in,
property, which subsists in a third-party and which constitutes a claim, lien,
charge or liability attached to and binding upon or an interest in the
property, including, but not limited to, a mortgage, judgment lien, mechanic's
lien, lease, security interest, easement and right-of-way.
1.23 "Environmental Law" shall mean any federal statute [including
but not limited to the Federal Water Pollution Control Act (33 U.S.C. Sections
1251 et seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et
seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections
9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections
6901 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections
1801 et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7
U.S.C. Sections 136 et seq.)], other Legal Requirements, any common law
doctrine and any provision or condition of any Permit, license or other
operating authorization relating to (i) the protection of the environment or
the public welfare from actual or potential exposure (or the effects of
exposure) to any actual or potential release, discharge, disposal or emission
(whether past or present) of any Regulated Substance or (ii) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any Regulated Substance.
1.24 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.25 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.26 "Excluded Assets" shall mean those assets that are not
included in the sale contemplated hereby and as are further defined in Section
2.2.
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1.27 "Facilities" shall mean Silver Haven, Sarver, and Saxonburg,
as defined in the Recitals of this Agreement and shall include the Addition.
1.28 "GAAP" shall mean generally accepted accounting principles in
the United States of America.
1.29 "Governmental Authorities" shall mean all agencies,
authorities, bodies, boards, commissions, courts, instrumentalities,
legislatures and offices of any nature whatsoever of any government,
quasi-governmental unit or political subdivision, whether with a federal,
state, county, district, municipality, city or otherwise.
1.30 "Indemnifying Party" shall have the meaning given to such
term in Section 14.4.
1.31 "Indemnified Party" shall have the meaning given to such term
in Section 14.4.
1.32 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.33 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.34 "Knowledge" and words of similar import shall mean, with
respect to any Party, actual knowledge of a particular fact or other matter
being possessed by an individual, and the knowledge that reasonably could be
expected to be obtained in the course of conducting a reasonably comprehensive
investigation concerning the subject matter.
1.35 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.36 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.37 "Management Agreement" shall mean any agreement, whether
written or oral, between Seller and any other Person pursuant to which Seller
provides any payment, fee or other consideration to any other Person to operate
or manage the Business (except any employment agreements).
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1.38 "Medicaid" shall mean the medical assistance program
established by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et
seq.) and any statute succeeding thereto.
1.39 "Medicare" shall mean the health insurance program for the
aged and disabled established by Title XVIII of the Social Security Act (42
U.S.C. Sections 1395 et seq.) and any statute succeeding thereto.
1.40 "NOI" shall mean earnings before interest, depreciation,
rent, taxes, and amortization and such other items mutually agreed upon between
Purchaser and Seller.
1.41 "Party" shall mean either the Seller or Purchaser,
individually, as the context so requires, and the term "Parties" shall mean the
Seller and Purchaser together.
1.42 "Payables" as of any date shall mean any of the trade
accounts payable of Seller with respect to the Purchased Assets or the Business
as of such date in accordance with GAAP consistently applied.
1.43 "Payroll Practice/Employee Arrangement" shall have the
meaning given to such term in Section 6.19.
1.44 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licenses, Permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, now or hereafter required or issued by any Governmental
Authority, Accreditation Body or Third Party Payor.
1.45 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.45 hereto.
1.46 "Person" shall mean any individual, corporation, company,
limited or general partnership, trust or estate, joint venture, association or
other entity.
1.47 "Prepaid Expenses as of any date shall mean payments made by
Seller with respect to the Purchased Assets or the Business, which constitute
prepaid expenses in accordance with GAAP consistently applied.
1.48 "Proprietary Rights" shall have the meaning given to such
term in Section 6.10.1.
1.49 "Provider Agreements" shall mean all participation, provider
and reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
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1.50 "Purchase Price" shall have the meaning given to such term in
Section 3.1.1 and 3.1.2 herein.
1.51 "Purchased Assets" shall have the meaning given to such term
in Section 2.1.
1.52 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
1.53 "Purchaser Damages" shall have the meaning given to such term
in Section 14.2.
1.54 "Purchaser Indemnitees" shall have the meaning given to such
term in Section 14.2.
1.55 "Real Property" shall mean the real property owned by Seller,
and used in connection with the Facilities and the Business as more fully
described in Schedule 1.55 hereto, and shall include the Addition.
1.56 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified as "hazardous" or "toxic" (by listing or
characteristic) and regulated (or the clean-up of which can be required) by any
Legal Requirement or Environmental Law intended to protect the environment or
the public health or welfare, including but not limited to Legal Requirements
and/or Environmental Laws relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.57 "Related Party" means (i) Seller, (ii) any Affiliate of
Seller, (iii) any officer, director, shareholder or partner of any Person
identified in clauses (i) or (ii) preceding, and (iv) any spouse, sibling,
ancestor or lineal descendant of any natural Person identified in any one of
the preceding clauses.
1.58 "Resident's Agreements" shall mean copies of all contracts,
agreements and consents executed by or on behalf of any resident or other
Person seeking services at the Facilities as more fully described in Schedule
1.58 hereto, including, without limitation, assignments of benefits and
guarantees, and such resident's related medical and/or other records.
1.59 "Retained Liabilities" has the meaning given that term in
Section 4.2.
1.60 "Sarver" shall mean Sterling Care of Sarver, a 41-bed
personal care home with four independent units, located at 120 Elliott Road,
Sarver, PA 16055.
1.61 "Saxonburg" shall mean Sterling Care of Saxonburg, a 55-bed
personal care home, 24-bed Alzheimer unit, and 16 independent living
apartments, with a mailing address of P.O. Box 500, Saxonburg, PA 16056, and
shall include the Addition.
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1.62 "Security Right" means, with respect to any security, any
option, warrant, subscription right, preemptive right, other right, proxy, put,
call, demand, plan, commitment, agreement, understanding or arrangement of any
kind relating to such security, whether issued or unissued, or any other
security convertible into or exchangeable for any such security. "Security
Right" includes any right relating to issuance, sale, assignment, transfer,
purchase, redemption, conversion, exchange, registration or voting and includes
rights conferred by statute, by the issuer's governing documents or by
agreement.
1.63 "Seller" shall have the meaning given to such term in the
preamble of this Agreement.
1.64 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.65 "Seller Indemnitees" shall have the meaning given to such
term in Section 14.3.
1.66 "Silver Haven" shall mean Silver Haven Summit, a 36-bed
Alzheimer center located at 164 Schiebel Road, Butler, PA 16001.
1.67 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day such
assessment).
1.68 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.69 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.70 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
1.71 "Tissue" shall mean Gary Tissue.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, all of
Seller's right, title and interest in and to the assets, properties and rights
of every kind and description, real, personal and mixed, tangible and
intangible, wherever situated
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owned by Seller and used or useful in connection with the Business (the
"Purchased Assets") as the same shall exist on the Closing Date (other than the
Excluded Assets), including, without limitation, the following:
2.1.1 Real Property. The Real Property, together with the
buildings, structures, improvements and fixtures located thereon,
including the Addition, and all rights, privileges, easements,
licenses, hereditaments and other appurtenances relating thereto;
2.1.2 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements, vehicles,
supplies, office furniture and office equipment, computing and
telecommunications equipment and other items of personal property,
including those described in Schedule 2.1.2 hereto;
2.1.3 Contracts Relating to the Business. All Contracts
relating to the acquisition or ownership of the Purchased Assets or
the operation of the Business, including, without limitation, the
Contracts listed on Schedule 2.1.3 and the Resident's Agreements
listed on Schedule 1.58 hereto, to the extent such Contracts are
transferable to Purchaser;
2.1.4 Sales, Rental and Marketing Materials. Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations and advertising material used in the Business, whether in
electronic form or otherwise;
2.1.5 Permits, Licenses. All Permits relating to the
acquisition or ownership of the Purchased Assets or the operation of
the Business, including, without limitation, those Permits listed in
Schedule 2.1.5 hereto, to the extent such Permits are transferable to
Purchaser;
2.1.6 Trade Secrets. All policies and procedures, methods
of delivery of services, trade secrets, designs, architectural plans,
drawings and specifications, market studies, consultants' reports,
prototypes, and all similar property of any nature, tangible or
intangible, used in connection with the Business;
2.1.7 Intellectual Property. All patents, trademarks,
trademark registrations, trade names, service marks, copyrights and
copyright registrations of used in connection with the Business,
including, without limitation, those described in Schedule 2.1.7;
2.1.8 Goodwill. All goodwill incident to the Business,
including but not limited to the value of the names associated with
the Business and the value of good customer relations;
2.1.9 Inventory. All Closing Inventory;
2.1.10 Resident Funds. All deposits and escrow accounts
paid to Seller by, or for the benefit of, any of the Facilities'
residents, all prepaid rents, and all rents
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attributable to the month of Closing, prorated beginning on the
Closing Date and through the end of said month.
2.1.11 Computer Software. All computer applications software,
owned or licensed, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.), or
specific, unique-to-the-business usage, and all computer operating,
security or programming software, owned or licensed and used in the
operation of the Business;
2.1.12 Records. All personnel and resident records; and
2.1.13 Name. All rights to the names "Sterling Care of
Sarver", "Sterling Care of Saxonburg," and "Silver Haven Summit" and
any other trade names which were or are used by Seller with respect to
the Facilities or by which the Facilities were or are known by
residents, suppliers, employees, governmental entities or agencies, or
the community.
2.1.14 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the following
assets (collectively, the "Excluded Assets") shall be excluded from this
Agreement, and shall not be assigned or transferred to Purchaser:
2.2.1 Cash. All other cash, cash equivalents on hand or in
bank accounts, and short-term notes receivable as of the Closing Date;
2.2.2 Consideration. The consideration paid to Seller
pursuant to this Agreement;
2.2.3 Prepaid Expenses. All Prepaid Expenses of, or for
the benefit of, the Purchased Assets or the Business at the Closing
Date including those described in Schedule 2.2.3, to the extent the
benefits thereof are transferable to Purchaser;
2.2.4 Corporate Books. Corporate minute book and stock
book of Seller;
2.2.5 Third Party Claims. Any claims and rights against
third parties (including, without limitation, insurance carriers) to
the extent they relate to liabilities or obligations that are not
assumed by Purchaser hereunder (except the amount of costs and
expenses Purchaser shall have incurred with respect to such claims and
rights);
2.2.6 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority for a period prior to Closing;
2.2.7 Accounts Receivable. All Accounts Receivable
existing on and attributable to periods prior to the Closing Date;
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2.2.8 Other Excluded Assets. Assets listed on Schedule
2.2.8.
2.2.9 Pensions Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.3 License to Use Certain Assets. To the extent that there are
any tangible or intangible assets used by Seller in connection with the
Purchased Assets or the Business that are not specifically designated as
Excluded Assets by Section 2.2 (without reference to this Section), the
Purchased Assets shall include an irrevocable, nonexclusive, perpetual,
paid-up, royalty-free, transferable license to utilize such assets in
connection with the operation of the Business after the Closing Date. To the
extent that any such assets may not be licensed, Seller shall take all steps
required to assure that Purchaser obtains the benefit of such assets.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The amount of the purchase price
("Purchase Price") to be paid by Purchaser for the Assets hereunder
shall be determined in accordance with the following:
(a) At Closing, Purchaser will pay an amount representing the
product of the actual NOI for the Facilities for the year ended December 31,
1996 (the "Facilities' 1996 NOI"), as determined by Purchaser in its due
diligence, times seven-and-one-half, less $450,000.
(b) At Closing, Purchaser also will pay to Seller an amount
representing the difference, if any, between the actual 1997 calendar
year-to-date NOI, annualized, for the Facilities, as of the most recent
complete month, as determined by Purchaser in its due diligence, (the
"Facilities' YTD NOI"), less the Facilities' 1996 NOI, times
seven-and-one-half, and multiplying the product thereof by eighty (80%)
percent;
(c) Purchaser will pay $450,000 to Seller within thirty days
after Purchaser's confirmation that the first new resident has been admitted to
the Addition;
(d) On or before January 15, 1998, Seller shall provide to
Purchaser the 1997 year-end financial statements for the Facilities. If the
actual 1997 NOI for the Facilities, as determined by Purchaser (the
"Facilities' 1997 NOI") exceeds the Facilities' 1996 NOI, Purchaser will pay to
Seller an additional amount representing the difference between the Facilities'
1997 NOI less the Facilities' 1996 NOI, multiplied by seven-and-one-half, less
the amount already paid in Section (b) hereof, to be paid within thirty (30)
days of Purchaser's confirmation of the 1997 Facilities' NOI, but in no event
later than February 15, 1998. If the
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Facilities' 1997 NOI is less than the Facilities' 1996 NOI, as determined by
Purchaser, the amount of such difference, multiplied by seven-and-one-half (the
product of which shall be the "Deficit"), will be deducted from future
payments, if any, under (e), (f) and/or (g) herein, with the amount of the
Deficit has been recovered by Purchaser.
(e) If Seller achieves an eighty (80%) percent occupancy rate for
thirty consecutive days for Saxonburg and the Addition, collectively ("80%
Occupancy"), prior to December 31, 1998, Purchaser will pay to Seller an amount
representing the product of the actual NOI for the Addition, from the date of
the first resident's occupancy of the Addition through the most recent complete
month prior to 80% Occupancy, as defined herein and as determined by Purchaser,
multiplied by seven-and-one-half, less the amount of the Deficit as defined in
(d) herein, if any, which payment will be paid within thirty (30) days of
Purchaser's confirmation of said 80% Occupancy and of said actual NOI for the
Addition.
(f) If Seller further achieves a ninety (90%) percent occupancy
rate for thirty consecutive days for Saxonburg and the Addition, collectively
("90% Occupancy"), on or before December 31, 1995, Purchaser will pay an amount
representing the actual NOI for the Addition from the date of 80% Occupancy, up
to the date of 90% Occupancy, as determined by Purchaser, multiplied by
seven-and-one-half, less the amount of the Deficit not yet recovered by
Purchaser under (e) herein, if any, which payment will be paid within thirty
days of Purchaser's confirmation of said 90% Occupancy and of said actual NOI.
(g) Purchaser will pay a final payment representing the NOI for
the final six months of calendar year 1998 for the Addition, annualized,
multiplied by seven-and-one-half, less the payments made in (e) and (f) hereof,
if any, and less any of the Deficit as defined in (d) herein not yet recovered
by Purchaser, if any, to be paid within thirty days of Purchaser's confirmation
thereof, but in no event later than February 15, 1999.
Purchaser shall pay a cash payment in the amount of $50,000 at the
time of execution of this Agreement (the "Initial Payment"), and, unless
earlier terminated by Purchaser, a second $50,000 payment on October 6, 1997
(the "Second Payment"), to the First American Title Insurance Company as escrow
agent ("Escrow Agent"), to be held in accordance with the terms and conditions
of an Escrow Agreement, in the form of Exhibit 3.1.1 attached hereto, executed
simultaneously herewith by Purchaser, Seller, and Escrow Agent. (The Initial
Payment and the Second Payment are individually and collectively the "Escrowed
Property".) The Initial Payment shall be refundable to Purchaser by Escrow
Agent, upon written notice by Purchaser to Seller, with a copy to Escrow Agent,
on or before October 6, 1997, that it is terminating this Agreement. After
October 6, 1997, the Escrowed Property made shall be paid by Escrow Agent to
Seller at Closing and applied to the Purchase Price, or, if this Agreement is
terminated by either party after October 6, 1997, then the Escrowed Property
shall be distributed by Escrow Agent in accordance with Section 13.1 hereof.
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3.1.2 Other Consideration. As additional consideration,
Purchaser shall also assume the Assumed Liabilities, specified in
Section 4.2 herein, at the time of Closing.
3.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the Business in accordance with the
allocation set forth in Schedule 3.2. Purchaser and Seller shall report the
federal, state and local income and other tax consequences of the purchase and
sale contemplated hereby in a manner consistent with such allocation, and
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shall not take any position inconsistent therewith upon examination of any tax
return, in any refund claim, in any litigation or otherwise.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
4.2 Assumed Liabilities and Obligations of Seller. On the Closing
Date, Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
(i) all obligations of Seller occurring before but accruing on or
after the Closing Date under the Contracts contemplated by
Section 2.1.3, provided that the rights thereunder have been
duly and effectively assigned to Purchaser; and
(ii) all obligations of Seller accruing on or after the Closing
Date under the Permits described in Section 2.1.5, provided
that the rights thereunder have been duly and effectively
assigned to Purchaser.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all of the Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or
obligations incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this
Agreement and the consummation of the
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transactions contemplated hereby, including, without
limitation, all legal and accounting fees and all brokers or
finders fees or commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the
indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or
the contract of indemnity) or had committed fraud in the
insurance application;
(vi) to any Related Party;
(viii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(ix) federal, state or local tax liabilities or obligations of
Seller accrued or relating to a period prior to Closing, and
the transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing; notwithstanding the foregoing, all sales and use
taxes, transfer taxes, and all other impositions of tax
arising solely by reason of the transfers contemplated by
this Agreement (excluding all federal, state and local income
and gross receipt taxes on the earnings or gross receipts of
Seller prior to the Closing Date, which shall remain the sole
responsibility of Seller) shall be the responsibility of and
shall be paid equally by Seller and Purchaser (any real
estate and personal property taxes for the year in which
Closing occurs shall be pro-rated to the Closing Date [based
on a calendar year or fiscal year for which such taxes are
levied basis], if the tax rates for the year in which Closing
occurs shall not be fixed prior to the Closing Date for a
particular item of the Purchased Assets, the pro-ration of
taxes thereon shall be based upon the tax rate for the year
prior to Closing applied to the latest assessment valuation;
however, in the event that any such taxes are increased or
decreased for the year in which Closing occurs, Seller or
Purchaser shall then reimburse the other party for amounts in
excess of or less than the proration as determined as of the
Closing Date);
(x) for long term indebtedness and other obligations or
guarantees of Seller;
(xi) for Current Liabilities of Seller as of the Closing Date;
(xii) if applicable, for or in connection with any cost reports
required to be filed by Seller with respect to periods prior
to Closing; and
(xii) for Accrued Expenses and Payables of Seller at the Closing Date.
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4.3 Offer of Employment. Purchaser may offer employment on and as
of Closing, on an at-will basis, to Employees now or previously employed by
Seller.
4.4 Vacation Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain solely liable
for all accrued vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to the
Employees attributable to entitlements, injuries, claims, conditions,
events and occurrences occurring before the Closing Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all vacation entitlements, workers' compensation, disability and
occupational diseases of or with respect to the Employees hired by
Purchaser attributable to entitlements, injuries, claims, conditions,
events and occurrences first occurring on or after the Closing Date.
4.4.3 Workers' Compensation; Unemployment Compensation.
Schedule 4.4.3 attached hereto sets forth a true and correct summary
of the following with respect to Seller and the Employees:
(i) a listing of all workers' compensation contracts;
(ii) the workers' compensation loss experience for the
past three years:
(iii) a summary report and experience rating for
unemployment compensation; and
(iv) the turnover rates for the Facilities.
ARTICLE V. CLOSING
5.1 Time; Location. The consummation of the purchase and sale of
the Purchased Assets (the "Closing") shall take place on or before October 31,
1997, or such other date mutually agreed upon in writing by the parties (the
"Closing Date"). The Closing shall take place at such time, date and place as
may be mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deed. Duly executed general warranty deeds in favor
of Purchaser or Purchaser's assignee, in recordable form, transferring
good and marketable fee simple title to the Real Property, subject
only to Permitted Encumbrances, and such affidavits, releases,
satisfactions or other instruments as Purchaser's title insurance
company may reasonably request, with respect to, but not limited to,
(i) exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants
pursuant to agreements with either Seller, (C) mechanics' or
materialmen's
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liens and (D) encroachments or survey discrepancies of any nature;
(ii) mortgages or security interests and (iii) gap indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that are required to make each such
assignment effective;
5.2.3 Title Certificates. Certificates of title to all
vehicles, if any, included in the Purchased Assets with assignments to
Purchaser;
5.2.4 Property Tax Statements. To the extent not delivered
prior to Closing, all real estate and personal property tax statements
or bills for or relating to the Real Property or any of the other
Purchased Assets for the applicable current tax year or years, and all
tax assessments or notices thereof upon which such taxes are based;
5.2.5 Plans and Specifications. To the extent not
delivered prior to Closing, all plans, specifications and other
drawings used in the construction of the Facilities, including the
Addition, or any renovations thereof (including, without limitation,
the most current as-built plans and architectural specifications) and
all guarantees and warranties made by third parties with respect to
the improvements, buildings, personalty or any of the other Purchased
Assets;
5.2.6 Building Permits. To the extent not delivered prior
to Closing, all building permits, zoning permits, occupancy permits,
subdivision plans, surveys and hazardous waste studies and soil
studies prepared within two years before the date hereof, for or
relating to the Facilities, including the Addition;
5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements relating to the ownership, operation, use,
occupancy, licensure, accreditation or maintenance of the Business;
5.2.8 Rent Roll. The rent roll listing all residents of
the Facilities and their respective rent payments current as of two
days prior to Closing;
5.2.9 Closing Documents. To the extent not delivered prior
to Closing, the documents referred to in Section 8.1.2 and Section
8.1.8; and
5.2.10 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
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5.3 Reasonable Steps. Seller shall make such reasonable efforts
as may be appropriate so that on the Closing Date, Purchaser shall be placed in
actual possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, and has all requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party, to consummate the transactions contemplated hereby and
thereby and to perform all the terms and conditions hereof and thereof and to
be performed by it.
6.2 Authorization of Agreement. Seller has taken all necessary
corporate action to authorize the execution and delivery of this Agreement and
the Ancillary Agreements to which it is a party, the performance by it of all
terms and conditions hereof and thereof to be performed by it and the
consummation of the transactions contemplated hereby and thereby.
6.3 Enforceability. This Agreement constitutes, and the Ancillary
Agreements to which Seller is party, upon such Seller's execution and delivery
thereof, will constitute the legal, valid and binding obligations of such
Seller, enforceable in accordance with their terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
6.4 No Violation; Consents. The execution, delivery and
performance by Seller of this Agreement and the Ancillary Agreements to which
Seller is a party, and the consummation of the transactions contemplated hereby
and thereby will not (with or without the giving of notice or the lapse of
time, or both) (i) with respect to Seller, violate any provision of the charter
or bylaws of Seller; (ii) except with respect to notices and consents (if any)
required to be given by either Seller to any Accreditation Body or Governmental
Authority in connection with the sale and change of ownership of the Purchased
Assets and the Business, violate or require any consent, authorization or
approval of, or exemption by, or filing under any provision of any law,
statute, rule or regulation to which either Seller, the Business or the
Purchased Assets are subject; (iii) violate any judgment, order, writ or decree
of any court applicable to either Seller, the Business or the Purchased Assets;
(iv) except as identified on Schedule 2.1.3, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any Contract or other instrument, document or undertaking to which either
Seller is a party or any of the Purchased Assets is bound or (v) result in the
creation or imposition of any Encumbrances upon the Purchased Assets.
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6.5 Financial Statements. Seller has delivered to Purchaser true
and complete copies of the audited, or if unavailable, unaudited (i) balance
sheets of the Business at December 31, 1996, 1995 and 1994 and the related
statements of income and cash flows for the years then ended and (ii) monthly
statements of profit and loss and cash flows for the first six months of 1997
with respect to the operation of the Facilities and, in addition, Seller shall
provide Purchaser, as promptly as the same become available through the Closing
Date, but no later than 15 days after the last day of each month, monthly
statements of profit and loss and cash flows of Seller for the Facilities. In
the event that the Closing Date occurs within the first 15 days of a month,
notwithstanding anything to the contrary herein, Seller shall furnish Purchaser
statements of profit and loss and cash flows for the then immediately preceding
month no later than three days prior to the Closing Date. True and correct
copies of such financial statements are attached hereto as Schedule 6.5. The
foregoing financial statements have been prepared from the Books and Records of
Seller in accordance with GAAP consistently applied throughout the periods
involved except as may be noted therein. Such financial statements, including
the related notes, are true and correct and fairly present the financial
position of the Business at the dates indicated and the results of operations
and cash flow statements of the Business for the periods then ended in
accordance with GAAP.
6.6 Accounts Receivable. All Accounts Receivable (i) have or will
have arisen only in the ordinary course of business consistent with past
practice for goods actually sold and delivered or services actually performed;
and (ii) are or will be collectible in full at the recorded amounts thereof
(subject to no defenses, setoffs or counterclaims) in the ordinary course of
business (without resort to litigation or assignment to a collection agency) no
later than 90 days after the Closing Date, net of any allowance for bad debts
calculated in accordance with GAAP reflected on the Books and Records of
Seller.
6.7 Inventory. The Inventory was or will be acquired and
maintained in accordance with the regular business practices of Seller,
consists or will consist of new and unused items of a quality and quantity
usable or salable in the ordinary course of business consistent with past
practice, and is or will be valued in accordance with GAAP consistently
applied.
6.8 Absence of Certain Changes or Events.
6.8.1 Seller. Except as set forth in Schedule 6.8 hereto,
since June 30, 1997 in connection with the Purchased Assets or the
Business, Seller has not:
(i) amended in any material respect or terminated any
Contract or Permit other than in the ordinary course
of business consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could
reasonably be expected to have, a material adverse
effect on the results of operations of the Business
or on the Purchased Assets, including, without
limitation, the Real Property, including any damage
or destruction by fire, storm or similar casualty,
whether or not covered by insurance;
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(iii) sold, transferred, replaced or leased any of the
Purchased Assets, except for transactions in the
ordinary course of business consistent with past
practice;
(iv) waived or released any material rights with respect
to the Purchased Assets or the Business;
(v) transferred or granted any rights to any Proprietary
Rights;
(vi) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than
in the ordinary course of business consistent with
past practice;
(vii) changed its methods of accounting;
(viii) increased the compensation of any of the Employees,
except following normal review procedures or as
reasonably deemed necessary in the ordinary course
of business consistent with past practice;
(ix) suffered any major or key personnel changes;
(x) materially altered its conduct in its relations with
suppliers and residents;
(xi) materially altered its marketing efforts with
respect to the Business; or
(xii) received any notice nor has any knowledge that its
license or Permits to operate the Facilities has
been or will be suspended, revoked, or restricted in
any manner.
6.9 Real Property.
6.9.1 Title to Properties; Absence of Liens and
Encumbrances. Seller owns and will transfer to Purchaser at Closing
good, marketable and indefeasible title to all of the Purchased
Assets, including, without limitation, the Real Property and the
Addition, free and clear of all Encumbrances, other than Permitted
Encumbrances. Copies of all title insurance policies and surveys
written in favor of Seller relating to the Real Property have been
delivered to Purchaser.
6.9.2 Structures and Improvements. Seller represents and
warrants that all structures and other improvements, including the
Addition, on the Real Property are in good order and repair and free
from any structural defects.
6.9.3 Boundaries; Location. Seller represents and warrants
that the structures and other improvements, including the Addition, on
the Real Property are within the lot lines and do not encroach on the
properties of any other Person and that the Real Property is
considered a separate parcel of land for taxing and conveyancing
purposes and that no
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portion of the Real Property is located in a flood plain, flood hazard
area or designated wetlands area and has no subsidence problems due to
natural or manmade sub-surface conditions.
6.9.4 Use and Operation. Seller represents and warrants
that the use and operation of the Real Property, including the
Addition, conforms to all applicable building, zoning, safety and
subdivision laws, Environmental Laws and other Legal Requirements, and
all restrictive covenants and restrictions and conditions affecting
title.
6.9.5 Utilities. Seller represents and warrants that all
public utilities (including water, gas, electric, storm and sanitary
sewage and telephone utilities) required to operate the Facilities are
available to the Facilities, including the Addition, and such
utilities enter the boundaries of such Facilities through adjoining
public streets, permanent easements or rights-of-way of record in
favor of Seller. Such public utilities are all connected pursuant to
valid Permits, are all in good working order and are adequate to
service the operations of the Facilities as currently conducted and
permit full compliance with all Legal Requirements. Seller has not
received any written notice of any proposed, planned or actual
curtailment of service of any utility supplied to the Facilities.
6.9.6 Assessments; Notices. Seller has not received any
written or oral notice of assessments for public improvements against
the Real Property or any written or oral notice or order by any
Governmental Authority, any insurance company that has issued a policy
with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions that relates
to violations of building, safety or fire ordinances or regulations,
that claims any defect or deficiency with respect to any of such
properties or requests the performance of any repairs, alterations or
other work to or in any of such properties or in the streets bounding
the same.
6.9.7 Condemnation. Seller represents and warrants that
there is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of the Real Property.
6.9.8 Access. Seller represents and warrants that all
present driveways and other access routes to the Real Property are
from public streets and no other Person has any right to use any such
driveways or other access routes.
6.10 Proprietary Rights.
6.10.1 Logos and Tradenames. Schedule 2.1.7 hereto sets
forth a correct and complete list of all patents, logos, trademarks,
trade names, service marks, copyrights and applications or
registrations therefor used in and material to the Business
(collectively, the "Proprietary Rights").
6.10.2 Licenses. Except as disclosed in Schedule 2.1.5: (i)
Seller owns or possesses adequate licenses or other valid rights to
use (without the making of any payment to others or the obligation to
grant rights to others in exchange) all the
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Proprietary Rights; (ii) the Proprietary Rights included in the
Purchased Assets constitute all the material rights necessary to
conduct the Business in accordance with past practice and are being
conveyed to Purchaser together with the other Purchased Assets; (iii)
the validity of the Proprietary Rights and the rights therein of
Seller have not been questioned in any litigation to which Seller is a
party, nor, to Seller's Knowledge, is any such litigation threatened;
and (iv) the conduct of the Business does not conflict with patent
rights, licenses, trademark rights, trade name rights, copyrights or
other intellectual property rights of others.
6.10.3 Infringement. Except as disclosed in Schedule 2.1.7
hereto, Seller does not have Knowledge that any material use of any
Proprietary Rights owned by Seller has heretofore been, or is now
being, made by any Person other than Seller, and Seller has no
Knowledge of any infringement of any Proprietary Rights owned or
licensed by Seller. No present or former director, officer, Employee
or consultant of Seller has any interest in any of the Proprietary
Rights.
6.11 Contracts and Commitments. Except as listed and described on
Schedule 1.58 and Schedule 2.1.3, with respect to the Purchased Assets or the
Business, Seller is not a party to any written or oral:
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of
services by another party, involving in any one case
$10,000 or more, except such costs and expenses
relating to the Addition which shall be the
liability of Seller;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more
(except for any Resident's Agreement);
(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in
value (except for any Resident's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit
agreement, loan agreement or other Contract or for
the borrowing or lending of money (including without
limitation loans to or from Employees) or guarantee,
pledge or undertaking of the indebtedness of any
other Person;
(vi) Contract for any charitable or political
contribution;
(vii) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in
any likeness of business with any Person;
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(viii) license, franchise, distributorship or other
agreement, including those that relate in whole or
in part to any patent, trademark, trade name,
service mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business;
(ix) Contract or commitment to assign, option, sell,
transfer or otherwise convey any right, title or
interest of Seller in and to all or any portion of
the Business; or
(x) any other material Contract not made in the ordinary
course of business consistent with past practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.58 and Schedule 2.1.3 is valid and
enforceable in accordance with its terms, the parties thereto are in compliance
with the provisions thereof, neither party is in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein, and no event has occurred that with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder and
(ii) except as set forth on Schedule 1.58 and Schedule 2.1.3, no advance
payments have been received by Seller by or on behalf of any party to any of
the Contracts and other instruments, documents and undertakings listed thereon
for services to be rendered or products to be delivered by such party after the
Closing Date. Any Contracts that cannot be transferred or require consent or
approval for the transfer thereof are specifically identified on Schedule 1.58
and Schedule 2.1.3 hereto as nontransferable or requiring such consent or
approval.
6.12 Permits. Seller has all Permits that are required to operate
the Facilities, and if completed, the Addition, as a personal care facility as
that term is defined by the Department of Public Welfare, Division of Personal
Care Homes and the Business (including without limitation those required under
any Environmental Law) and Seller is in compliance with the terms and
conditions of the Permits Schedule 2.1.5 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension, revocation, restriction or
cancellation. Any Permits that cannot be transferred or require consent or
approval for the transfer thereof are specifically identified on Schedule 2.1.5
hereto as nontransferable or requiring such consent or approval.
6.13 Compliance with Laws. Except as described in Schedule 6.13
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.14 Legal Proceedings. Except as described in Schedule 6.14
hereto, there is no claim, action, suit, proceeding, investigation or inquiry
pending before any Governmental
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Authority or, to Seller's Knowledge, threatened against Seller with respect to
the Business or any of the Purchased Assets owned or used by it in connection
therewith, including the Addition, or relating to the transactions contemplated
by this Agreement, nor to Seller's Knowledge is there any basis for any such
claim, action, suit, proceeding, investigation, or inquiry. Except as set forth
on Schedule 6.14 hereto, Seller is not a party to or subject to the provisions
of any judgment, order, writ, injunction, decree or award of any court,
arbitrator or governmental, regulatory or administrative official, body or
authority that relates to the Business or the Purchased Assets owned or used by
Seller in connection therewith that might affect the transactions contemplated
by this Agreement.
6.15 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.15, Seller has no liabilities or obligations (as defined in Section
4.1) relating to the Business except (i) those liabilities and obligations set
forth on the financial statements of Seller previously provided to Purchaser
and not heretofore paid or discharged; (ii) those liabilities and obligations
arising in the ordinary course of business consistent with past practice under
any Contract or commitment specifically disclosed on Schedule 2.1.3 hereto or
not required to be disclosed because of the term or amount involved; and (iii)
those liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the financial statements dated July 31,
1997, provided to Purchaser.
6.16 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
All of the Books and Records have been prepared and maintained in accordance
with good business practices and, where applicable, in conformity with GAAP
(except as otherwise stated therein) and in compliance in all material respects
with all Legal Requirements.
6.17 Employees. Schedule 1.21 sets forth a true and correct list
of the following for the Facilities: (i) all individuals employed by Seller in
the conduct of the Business; (ii) total wage costs; (iii) wage/salary grade
structure and (iv) each Employee's (A) present position and department, (B) job
description, (C) rate of compensation and (D) service credited for purposes of
vesting and eligibility under each Payroll Practice/Employee Arrangement.
6.18 Labor Disputes. Except as described in Schedule 6.18 hereto,
there are no material discrimination complaints nor any other kind of
employment or labor related disputes against Seller in connection with the
Business pending before or, to Seller's Knowledge, threatened before any
federal, state or local court or agency, and to Seller's Knowledge, no material
dispute respecting minimum wage or overtime claims or other conditions or terms
of employment exists. The Business has not experienced any material labor
disputes or any material work stoppage due to labor disagreements within the
past three years. With respect to the Business and except to the extent set
forth in Schedule 6.18: (i) there is no unfair labor practice charge or
complaint against Seller pending or, to Seller's Knowledge, threatened, before
the National Labor Relations Board; (ii) there is no labor strike, slowdown or
stoppage pending
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or, to Seller's Knowledge, threatened against or affecting Seller; and (iii) no
question concerning representation has been raised within the past three years,
or to Seller's Knowledge, is threatened respecting the Employees.
6.19 Payroll Practice/Employee Arrangement.
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6.19.1 Benefit Plans. Schedule 6.19 contains a complete
list of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has
any liability or obligation, whether actual or contingent, with
respect to the Employees or their respective beneficiaries.
6.19.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.19.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.20 No Finder. Seller has not taken any action that would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
6.21 Condition of Equipment. Except as set forth on Schedule 6.21,
all equipment that is part of the Purchased Assets is in good operating
condition and repair (subject only to routine maintenance and repair) and
usable in the conduct of the Business consistent with past practice.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
6.23.1 Compliance; No Liability. Seller has operated the
Business and the Real Property in material compliance with all
applicable Environmental Laws. Seller is not subject to any liability,
penalty or expense (including legal fees), and Purchaser will not
suffer or incur any loss, liability, penalty or expense (including
legal fees) by virtue of any violation of any Environmental Law
occurring prior to the Closing, any environmental activity conducted
on or with respect to any property by such Seller at or prior to the
Closing or any environmental condition existing on or with respect to
any property at or prior to the Closing, in each case whether or not
such Seller permitted or participated in such act or omission.
6.23.2 Treatment; CERCLA. Seller has not treated, stored,
recycled or disposed of any hazardous material, and to Seller's
Knowledge, no other Person has treated, stored, recycled or disposed
of any hazardous material on any part of the Real Property. There has
been no release of any hazardous material at, on or under any Real
Property. Seller has not transported any hazardous material or
arranged for the transportation of any hazardous material to any
location that is listed or proposed for listing on the National
Priorities List pursuant to Superfund, on CERCLA or any other location
that is the subject of federal, state or local enforcement action or
other investigation that may lead to claims
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against Seller for cleanup costs, remedial action, damages to natural
resources, to other property or for personal injury including claims
under Superfund. The Real Property is not listed or, to Seller's
Knowledge, proposed for listing on the National Priorities List
pursuant to Superfund, CERCLA or any state or local list of sites
requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous
Materials; Storage Tanks. Seller has not received any request for
information, notice of claim, demand or other notification that it is
or may be potentially responsible with respect to any investigation,
abatement or cleanup of any threatened or actual release of any
hazardous material. Seller is not required to place any notice or
restriction relating to the presence of any hazardous material on the
Real Property or in any deed relating to the Real Property. Seller
has provided to Purchaser a list of all sites to which such Seller has
transported any hazardous material for recycling, treatment, disposal,
other handling or otherwise. There has been no past, and there is no
pending or contemplated, claim by Seller under any Environmental Law
or Legal Requirement based on actions of others that may have impacted
on the Real Property, and Seller has not entered into any agreement
with any Person regarding any Environmental Law, remedial action or
other environmental liability or expense. All storage tanks located on
the Real Property, whether underground or aboveground, are disclosed
on Schedule 6.23, and, to Seller's Knowledge, all such tanks and
associated piping are in sound condition and are not leaking and have
not leaked.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.24 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Except as set forth on Schedule 6.24, no insurance has ever been
canceled or denied. Following the Closing, Seller shall, to the extent that
coverage under its insurance policies extends to include the Business, (i) take
no action to eliminate or reduce such coverage, other than normal elimination
or reduction of coverage as they occur by virtue of the filing of claims in the
ordinary course under such insurance policies, (ii) pay when due any premiums
under such policies for periods, including retrospective or retroactive premium
adjustments (iii) use its best efforts to assist in filing and processing
claims under and otherwise cooperate with Purchaser to allow Purchaser, in its
own name, or on behalf of Seller, to obtain all coverage benefits applicable to
the Business under such insurance policies, including the execution of
assignments or powers of attorney for the benefit of Purchaser and (iv)
maintain "key man" insurance coverage, at its own expense, on the life of Gary
Tissue until the final payment has been made by Purchaser to Seller under
Section 3.1.1 hereof. Any proceeds of insurance paid by an insurer to Seller
for claims of Purchaser made in accordance with (i), (ii) and (iii) of this
Section shall be promptly paid to Purchaser. Any proceeds of insurance paid by
an insurer to Seller for claims under (iv) of this Section may be retained by
Seller.
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6.25 No Significant Items Excluded. Except for Excluded Assets,
there are no assets, properties, Contracts, Permits or other items of Seller or
any Related Party that are of material importance to the ongoing operation of
the Business by Purchaser in substantially the same manner in which the
Business has been conducted by Seller prior to the date of this Agreement.
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6.26. Surveys. Seller has provided Purchaser with copies of
Seller's federal and/or state surveys or inspections and any plans of
correction for the current year and the two immediately preceding years for the
Facilities. Each such survey or inspection was prepared in material compliance
with all applicable Legal Requirements.
6.27. Occupancy Reports. Seller has provided Purchaser with copies
of Seller's occupancy reports for the Facilities for the last year. Each such
occupancy report was prepared based on the number of operational beds (i.e.,
double occupancy rooms were only counted as such when both beds were
occupied).
6.28 Discounted Rates; Rate limitations; Free Care. Attached
hereto is Schedule 6.28 that sets forth a true and complete list of the
following for the Facilities: (i) any services that are provided based on a
discount factor from the rates regularly charged at the Facilities; (ii) any
restrictions or limitations on rates which may be charged to private pay
residents for services provided at the Facilities; (iii) any percentage of beds
or slots in any program at the Facilities that must be reserved for Medicare or
Medicaid eligible residents and (iv) any amount of welfare, free or charity
care or discounted government assisted resident care provided at the
Facilities.
6.29. Tax Returns. Seller has filed or caused to be filed, or will
file or cause to be filed, all Tax Returns that are required to be filed by it
prior to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.29, (ii) in the case of Seller, such Taxes
that are fully reserved against on the financial statements of Seller
previously provided to Purchaser and (iii)Taxes accruing that are not yet due.
Except as set forth on Schedule 6.29, neither Seller is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has been made by any taxing authority of a jurisdiction other than one in
which one of the Facilities is located. Seller has paid, or will withhold and
pay, all Taxes required to have been withheld in connection with amounts paid
or owing to any Employee, independent contractor, creditor, stockholder or
other third party.
6.30 NOI. Seller represents and warrants that, for the calendar
year ending December 31, 1996 (i) the collective NOI of the Facilities,
calculated in accordance with GAAP, before amortization, depreciation,
interest, rent expense and income taxes, was $1,080,000; and (ii) the gross
operating revenues for the Facilities were $2,518,000. As used herein, gross
operating revenues shall be all revenues generated as a result of operation of
the Facilities.
6.31 Completeness and Accuracy. All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. All Contracts, Permits and other
documents and instruments furnished or made available to Purchaser by Seller
are or will be true, complete and
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accurate originals or copies of originals and include all amendments,
supplements, waivers and modifications thereto.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date of Closing:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has, or will have on or before the Closing Date, all
requisite corporate power and authority to purchase the Purchased Assets, to
carry on the Business and to execute and deliver this Agreement and the
Ancillary Agreements to which Purchaser is a party, to consummate the
transactions contemplated hereby and thereby and to perform all the terms and
conditions hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has
or will have taken all necessary corporate action to authorize the execution
and delivery of this Agreement and the Ancillary Agreements to which Purchaser
is a party, the performance by it of all terms and conditions hereof and
thereof to be performed by it and the consummation of the transactions
contemplated hereby and thereby, on or before the Closing Date. This Agreement
constitutes, and the Ancillary Agreements, upon Purchaser's execution and
delivery thereof, will constitute, the legal, valid and binding obligations of
Purchaser, enforceable in accordance with their terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3,
the execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement,
contract, commitment, lease or other instrument, document or undertaking to
which Purchaser is a party; or (v) result in the creation or imposition of any
Encumbrance upon its assets.
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7.4. Legal Proceedings. There is no claim, action, suit,
proceeding, investigation or inquiry pending before any Governmental Authority
or, to Purchaser's Knowledge, threatened against Purchaser or any of
Purchaser's properties, assets, operations or businesses that might prevent or
delay the consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would
give to any Person a right to a finder's fee or any type of brokerage
commission in relation to, or in connection with, the transactions contemplated
by this Agreement.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access to such of the
properties, books, accounts and records of such Seller as are relevant
to the Purchased Assets and the Business, and furnish or otherwise
make available to Purchaser all such information concerning the
Purchased Assets and the Business as Purchaser may reasonably request.
8.1.2 Surveys; Occupancy; Operations. With respect to
Seller, provide Purchaser with the following:
(i) occupancy reports for the Facilities, as soon as the
same become available through the Closing Date, but
no later than 5 days after the last day of any given
month (which reports shall be prepared based on the
number of operational beds);
(ii) federal and/or state surveys or inspections and any
plans of correction for the Facilities, as soon as
the same become available through the Closing Date,
but no later than 5 days after received by Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facilities, together with the current rate schedule
for the Facilities; and
(iv) monthly statements of profit and loss of Seller for
the Facilities, as soon as the same become available
through the Closing Date, but no later than 15 days
after the last day of each month;
8.1.3 Conduct of Business. With respect to Seller, operate
the Business in the usual, regular and ordinary manner as such
Business was conducted prior to the date hereof and use its best
efforts until the Closing Date to (i) preserve and keep intact the
Business; (ii) keep available the services of the Employees; (iii)
preserve its relationships
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with residents, suppliers and others having business dealings with
Seller in connection with the Business and (iv) maintain current
marketing activities;
8.1.4 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in their good repair, order and
condition reasonable wear and tear excepted;
8.1.5 Maintenance of Books and Records. With respect to
Seller, maintain the Books and Records in the usual, regular and
ordinary manner, on a basis consistent with past practice;
8.1.6 Compliance with Applicable Law. Comply in all
material respects with all Legal Requirements applicable to the
Purchased Assets and to the conduct of the Business;
8.1.7 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the
Business in accordance with the past practices;
8.1.8 Approvals, Consents. Use its best efforts to obtain
in writing as promptly as possible any approvals and consents as
required to be obtained by Seller in order to effectuate the
transactions contemplated hereby and deliver to Purchaser copies of
such approvals and consents. Accordingly, Seller shall cooperate with
Purchaser's efforts to obtain the necessary licenses to operate the
Facilities from the appropriate Accreditation Bodies, including,
without limitation, the Department of Public Welfare, Division of
Personal Care Homes. Upon execution and delivery of this Agreement,
Seller shall:
(i) promptly provide Purchaser with copies of all
Permits;
(ii) assist Purchaser in notifying each applicable
Accreditation Body and Third Party Payor as required
by any Legal Requirement of the pending change of
ownership of the Facilities; and
(iii) provide to Purchaser all information necessary for
Purchaser to prepare such other notices as required
by all Legal Requirements including, if required,
(i) notices to the Facilities' residents and (ii)
notices to referral or human service agencies.
Seller shall sign said notices and cooperate with
Purchaser to comply with all Legal Requirements.
8.1.9 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.10 Pay Employees to Closing Date. Pay all wages,
salaries and other sums due Employees through the close of business on
the day prior to the Closing Date;
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8.1.11 Cost Reports. If applicable, file, or cause to be
filed, all Medicare and Medicaid cost reports that are required to be
filed after the Closing Date, without regard to any extensions,
pursuant to all applicable Legal Requirements. Any liability of Seller
required to be paid as a result of any such cost report for any period
prior to the Closing Date shall be paid by Seller. Purchaser shall
cause any refund which may be received after the Closing Date as a
result of any such cost report to be paid to Seller;
8.1.12 Transfer of Employees. Take all reasonably necessary
steps to transfer to Purchaser the employment of all Employees
electing to continue their employ with Purchaser as of the Closing
Date;
8.1.13 Compliance with Agreement. Not undertake any course
of action inconsistent with satisfaction of the conditions applicable
to it set forth in this Agreement, and use all reasonable efforts to
do all such acts and take all such measures as may be reasonably
necessary to comply with the representations, agreements, conditions
and other provisions of this Agreement; and
8.1.14 Update Schedule. Promptly disclose to Purchaser any
information contained in the representations and warranties of Seller
contained in Article VI or in the Schedules to this Agreement which is
no longer complete or correct (including furnishing updated financial
statements); provided that no such disclosure shall be deemed to
modify, amend or supplement such Seller's representations and
warranties; and
8.1.15 Surveys. Execute such affidavits or other
instruments as are commercially reasonable and necessary in order for
Purchaser to remove title exceptions for encroachments or survey
discrepancies relating to the Real Property.
8.1.16 Compliance with Bulk Sales Laws. Seller shall (i)
provide notice to the Pennsylvania Department of Revenue ("Revenue"),
and the Pennsylvania Department of Labor and Industry ("L&I") at least
ten days prior to Closing, of the sale of the Business and the
Purchased Assets contemplated hereunder, in accordance with 72 P.S.
Section 1403 and 43 P.S. 788.3, respectively, and shall provide
Purchaser with a copy of said notice; and (ii) file all State tax
reports with Revenue and L&I, covering the period to and including the
Closing Date, pay all taxes due to the Commonwealth in accordance
therewith, and provide Purchaser with evidence of such payment on or
before the Closing Date.
8.2 Prohibited Actions. Between the date of this Agreement and
the Closing Date, Seller shall not, except as otherwise agreed by Purchaser in
writing:
8.2.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the Purchased Assets
other than in the ordinary course of business consistent with past
practices;
8.2.2 Business Changes. Change in any material respect the
character of the Business;
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8.2.3 Incurrence of Material Obligations. Incur any
material fixed or contingent obligation or enter into any material
agreement, commitment or other transaction or arrangement, commitment
or other transaction or arrangement that is not in the ordinary course
of business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.2.4 Incurrence of Liens. Subject to lien, security
interest or any other Encumbrance, other than Permitted Encumbrances,
any of the Purchased Assets;
8.2.5 Change in Employee Compensation and Benefits.
Increase the rate of compensation paid, or pay any bonus, to anyone
connected with the Business, except for those increases or bonuses
planned, in the ordinary course of business consistent with past
practices, or establish or adopt any new pension or profit-sharing
plan, deferred compensation agreement or employee benefit arrangement
of any kind whatsoever covering or affecting Employees;
8.2.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.2.7 No Release. Except in the ordinary course of
business consistent with past practices, cancel, release or relinquish
any material debts of or claims against others held by Seller with
respect to the Business or waive any material rights relating to the
Business; and
8.2.8 No Termination or Modification. Terminate or
materially modify any material Contract or Permit (including, without
limitation, those items listed on Schedule 1.44, Schedule 1.58 and
Schedule 2.1.3) or other authorization or agreement affecting the
Purchased Assets or the Business or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing
of any fact that, if known at the Closing Date, would have been
required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach by Purchaser of any of
its representations, warranties, covenants or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course
of action inconsistent with satisfaction of the conditions applicable
to it set forth in this Agreement, and Purchaser shall use its best
efforts to do all such acts and take all such measures as
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may be reasonably necessary to comply with the representations,
agreements, conditions and other provisions of this Agreement;
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business; and
9.1.4 Seller's Employees. Take all reasonable steps to
ensure the transfer of employment of the Employees listed on Schedule
1.21 and who are offered employment and who elect to continue their
employ with Purchaser as are able to be accomplished prior to or on
the Closing Date.
9.2 Investigation. Purchaser shall use reasonable efforts to
conduct an investigation of the Business of Seller in such a manner as to
prevent disruption of relations with the Employees, residents and suppliers of
Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein. Such investigation shall be
(i) conducted by Purchaser and its representatives (including Purchaser's
lender) in Seller's presence; and (ii) scheduled with Seller's prior approval.
9.3 Approvals, Consents. Purchaser shall use its best efforts to
obtain in writing as promptly as possible any approvals and consents as
required to be obtained by Purchaser in order to effectuate the transactions
contemplated hereby and deliver to Purchaser copies of such approvals and
consents. Accordingly, Purchaser shall take all reasonable action to obtain the
necessary licenses to operate each of the Facilities from the Department of
Public Welfare, Division of Personal Care Homes, including:
(i) providing notice to each applicable Accreditation
Body and Third Party Payor as required by any Legal
Requirement of the pending change of ownership of
each of the Facilities; and
(ii) preparing such other notices as required by all
Legal Requirements including, if required, (i)
notices to the Facilities' residents and (ii)
notices to referral and human service agencies.
Purchaser shall provide such notices to Seller for
mailing.
9.4 Publicity; Advertisement. Except as required by law,
Purchaser shall not publicize, advertise or announce to any third-party, except
as required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this Agreement
or the transactions contemplated hereby; provided, however, the foregoing shall
not be applicable to disclosures made by Purchaser to Purchaser's lender in
response to such lender's requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
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The obligation of Purchaser to proceed with Closing under this
Agreement is subject to the fulfillment prior to the Closing Date of the
following conditions with respect to Seller, any one or more of which may be
waived in whole or in part by Purchaser:
10.1 Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement and the
Ancillary Agreement to which Seller is a party shall have been true in all
material respects on the date hereof and shall be true in all material respects
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date.
10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to be performed or complied with by it at or prior to the
Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a
certificate from Seller, dated as of the Closing Date, reasonably satisfactory
in form and substance to Purchaser and its lender, certifying as to the matters
specified in Section 10.1 and Section 10.2 hereof. The matters set forth in
such certificate shall constitute representations and warranties of Seller
hereunder.
10.5 Injunction. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of therm, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
administrative proceeding by any Governmental Authority or other Person shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby or which if successfully asserted might
otherwise have a material adverse effect on the conduct of the Business or
impose any additional material financial obligation on, or require the
surrender of any material right by, Purchaser.
10.6 Actions and Proceedings. With respect to Seller, all actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental hereto and all other related legal
matters shall be reasonably satisfactory to counsel for Purchaser, and such
counsel shall have been furnished with such certified copies of such actions
and proceedings and such other instruments and documents as it shall have
reasonably requested, including, if applicable, without limitation:
(i) certificates of the appropriate public officials to
the effect that Seller is a validly existing
corporation in good standing in its state of
incorporation as of a date not more than 10 days
prior to the Closing Date;
(ii) incumbency and specimen signature certificates dated
the Closing Date, signed by the officers of Seller
and certified by its Secretary; and
(iii) true and correct copies of (A) the charter documents
of Seller as of a date not more than 10 days prior
to the Closing Date, certified by the Secretary
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of State of its state of incorporation and (B) the
bylaws of Seller as of the Closing Date, certified
by the Secretary of Seller.
10.7 Consents. Any third-party consents, approvals, authorizations
or Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.8 Arrangements with Employees. Substantially all of Seller's
Employees shall have accepted employment with Purchaser effective as of the
Closing Date and Purchaser shall have entered into arrangements with key
Employees of Seller satisfactory to Purchaser in its sole discretion.
10.9 Business Investigation. Purchaser shall have completed its
investigation, as contemplated in Section 9.2, the results of which shall be
satisfactory to Purchaser in its sole discretion.
10.10 Physical Inspection. At its own cost and expense, Purchaser
shall have inspected and approved the physical condition of the Real Property
including the improvements and the HVAC, electrical, plumbing and other
systems, and shall receive the written report in form and substance
satisfactory to Purchaser from a qualified engineering firm approved by
Purchaser or any engineer employed by Purchaser to the effect that the
improvements on the Real Property have been constructed in compliance with, and
currently are in compliance with, all governmental requirements, including
without limitation the Americans With Disabilities Act, and with all
restrictions of record applicable thereto which materially affect the
Purchaser's intended use of the Real Property.
10.11 Environmental Report. At its own cost and expense, Purchaser
shall have obtained a written report from a qualified geotechnical or
engineering firm or other environmental consultant, in a form and substance,
satisfactory to Purchaser, concerning the presence, handling, treatment and
disposal of Regulated Substances on, in or under the Real Property and the
presence of asbestos on, in or under any of the improvements thereon and
disclosing (i) the results of a review of prior uses of the Real Property and
the Facilities disclosed by local public records, including the chain of title;
(ii) contacts with local officials to determine whether any records exist with
respect to the disposal of Regulated Substances on the Real Property or the use
of asbestos in the construction of the improvements thereon; and (iii) if
recommended to or required by Purchaser, soil samples and groundwater samples
consistent with good engineering practice.
10.12 Title Insurance. Purchaser shall have obtained for all Real
Property final marked commitments to issue to Purchaser and its lender ALTA
(1990-Form B with appropriate state endorsements) leasehold and/or owner's
policies of title insurance in coverage amounts equal to the fair market values
of such Real Property, insuring good and marketable title to such Real Property
with mechanic's liens coverage and such other endorsements as Purchaser or its
lender may reasonably request and with exceptions only for ALTA standard
printed exceptions (other than mechanic's and materialmen's liens and rights of
possession) and Permitted Encumbrances.
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10.13 Employment Agreements. Tissue shall have executed and
delivered the Employment Agreement with Purchaser.
10.14 Closing Documents. Purchaser shall have received the other
documents referred to in Section 5.2 which shall be in form and substance
satisfactory to Purchaser in its reasonable discretion.
10.15 Other Deliveries. At its own cost and expense, Purchaser
shall have received with respect to the Real Property:
10.15.1 Surveys. Surveys of the Real Estate which conform to
the standards set forth in the ALTA/American Congress on Surveying and
Mapping Minimum Standard Detail Requirements for Land Title Surveys
and which disclose no state of facts inconsistent with the
representations and warranties of Seller set forth in Section 6.9
hereof and are otherwise acceptable to Purchaser;
10.15.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to
Purchaser's title insurer regarding title, mechanic's liens and such
other customary matters as may be reasonably requested by Purchaser or
Purchaser's title insurer; and
10.15.3 FIRPTA Certificates. A certificate, duly executed
and acknowledged by Seller under penalties of perjury, in the form
prescribed by Treasury Regulation Section 1.1445-2(b)(2)(iii), stating
Seller's name, address and Federal tax identification number, and that
Seller is not a "foreign person" within the meaning of Section 1445 of
the Internal Revenue Code.
10.16 Financing. Purchaser shall have received, on terms that shall
be satisfactory to Purchaser in its sole discretion, a written binding
commitment from a real estate investment trust or other financing source in an
amount sufficient to enable Purchaser to pay the Purchase Price in full.
10.17 Opinion of Counsel. Purchaser shall have received the
favorable opinion of Seller's counsel, addressed to Purchaser and Purchaser's
lender, reasonably satisfactory to Purchaser and its lender as to the matters
set forth in Sections 6.1, 6.2 and 6.3 hereof.
10.18 Authorization. Purchaser shall have obtained approval of the
transactions contemplated herein by its board of directors and shareholders (if
necessary).
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with the Closing under this
Agreement is subject to the fulfillment prior to the specified date or at the
time of Closing of the following conditions with respect to Purchaser, any one
or more of which may be waived in whole or in part by Seller:
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11.1 Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained in this Agreement shall
have been true in all material respects on the date hereof and shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in
all material respects all obligations and agreements and complied in all
material respects with all covenants and conditions contained in this Agreement
to be performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a
certificate from Purchaser, dated as of the Closing Date, reasonably
satisfactory in form and substance to Seller and its counsel, certifying as to
the fulfillment of all matters specified in Section 11.1 and Section 11.2
hereof. The matters set forth in such certificate shall constitute
representations and warranties of Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser, certifying the name and office held by each officer or
representative of Purchaser executing this Agreement, the certificate referred
to in Section 11.3 and the Ancillary Agreements to which Purchaser is a party.
11.5 Injunction. On the Closing Date, there shall be no
injunction, Writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
administrative proceeding by any Governmental Authority or other Person shall
have been instituted, threatened or anticipated which questions the validity or
legality of the transactions contemplated hereby.
11.6 Employment Agreement. Purchaser shall have executed and
delivered the Employment Agreement with Tissue.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that
for a period of three years after the Closing Date, Seller will not solicit for
employment by such Seller or any Affiliates any Person who is an Employee of
the Business as of the Closing Date. Notwithstanding the foregoing, if Buyer
terminates its Employment Agreement with Gary Tissue during the term thereof,
Seller may solicit Mr. Tissue for employment.
12.2 Noncompetition. For a period of three years following the
Closing Date, Seller will not, directly or indirectly, unless acting in
accordance with Purchaser's written consent, own, manage, operate, finance or
participate in the ownership, management, operation or financing of or permit
its name to be used by or in connection with any business or enterprise engaged
in the Business acquired by Purchaser hereunder and located within a 25-mile
radius of the Facilities. Seller acknowledges that the provisions of this
Section are reasonable and necessary to protect the interests of Purchaser,
that any violation of this Section will result in an irreparable injury to
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Purchaser and that damages at law would not be reasonable or adequate
compensation to Purchaser for violation of this Section and that, in addition
to any other available remedies, Purchaser shall be entitled to have the
provisions of this Section specifically enforced by preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting a
bond or other security to an equitable accounting of all earnings, profits and
other benefits arising out of any violation of this Section. In the event that
the provision of this Section shall ever be deemed to exceed the time,
geographic scope or other limitations permitted by applicable law, then the
provisions shall be deemed reformed to the maximum extent permitted by
applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 Certain Transitional Matters.
12.4.1 Transfer of Assets. Seller agrees that Purchaser,
from and after the Closing Date, shall have the right and authority to
collect for Purchaser's own account all items which shall be
transferred to Purchaser as provided herein.
12.4.2 Endorsement of Checks. From and after the Closing
Date, Purchaser shall have the right and authority to retain and
endorse without recourse the name of Seller on any check or any other
evidence of indebtedness received by Purchaser on account of any of
the Purchased Assets and, with respect to Seller, the Business
transferred to Purchaser hereunder.
12.4.3 Seller's Remittance of Funds. After the Closing
Date, Seller shall promptly transfer and deliver to Purchaser any cash
or other property, if any, that Seller may receive related to the
Purchased Assets other than the Excluded Assets and, with respect to
Seller, the Business.
12.4.4 Purchaser's Remittance of Funds. After the Closing
Date, Purchaser shall promptly transfer and deliver to Seller any cash
or other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.4.5 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving
any Assumed Liability, and Purchaser shall have the right to conduct
and control all negotiations and proceedings with respect thereto.
Seller shall notify Purchaser promptly of any claim made with respect
to any Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any Assumed
Liability.
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12.5 Audits. To the extent reasonably requested by Purchaser,
prior to the Closing Date, at Purchaser's cost and expense, Seller shall
cooperate and request Seller's accountants to cooperate, with Purchaser and its
auditors in the preparation of audited financial statements for the Facilities
for the years ended December 31, 1996, 1995 and 1994 and for the period from
January 1, 1997 through the date of Closing, prepared in accordance with GAAP,
to the extent required, in connection with any registration statement or other
form filed by Purchaser with the Securities and Exchange Commission under the
Securities Act of 1933 for a public offering and sale of securities of
Purchaser.
12.6 Further Assurances of Seller. From and after the Closing
Date, Seller shall, at the request of Purchaser, execute, acknowledge and
deliver to Purchaser, without further consideration, all such further
assignments, conveyances, endorsements, deeds, special powers of attorney,
consents and other documents, and take such other action, as Purchaser may
reasonably request (i) to transfer to and vest in Purchaser, and protect its
rights, title and interest in, all the Purchased Assets and (ii) otherwise to
consummate the transactions contemplated by this Agreement. In addition, from
and after the Closing Date, Seller shall afford Purchaser and its attorneys,
accountants and other representatives access, during normal business hours, to
any Books and Records and other information relating to the Business that
Seller may retain as may reasonably be required in connection with the
preparation of financial information or tax returns of Purchaser.
12.7 Further Assurances of Purchaser. From and after the Closing
Date, Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial account closing and reporting and claims and
litigation asserted by or against third parties, including, but not limited to,
making Purchaser's employees available at reasonable times to assist with, or
provide information in connection with financial account closing and reporting
and claims and litigation, provided that Seller reimburses Purchaser for its
reasonable out-of-pocket expenses (including costs of employees so assisting)
in connection therewith.
12.8 Completion of the Addition. Seller expects the Addition to be
completed and made ready for occupancy prior to Closing. If, however, the
Addition has not been completed by the Closing Date, including all punch list
items, Seller shall undertake and complete the Addition expeditiously,
continuously and without delay, in accordance with the plans and specifications
approved by L&I, until the Addition has been completed and a Certificate of
Occupancy is issued by the appropriate governmental authorities, permitting the
occupancy of the Addition and the Facility for use as a personal care home.
12.9 No Name Change. Purchaser covenants and agrees that it shall
continue to operate each of the Facilities under its present name at least
until December 31, 1998.
ARTICLE XIII. TERMINATION
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13.1 Termination of Agreement. This Agreement may be terminated:
(i) By the mutual consent of Seller and Purchaser, in
which case the Escrowed Property shall be returned
by Escrow Agent to Purchaser;
(ii) By Purchaser upon written notice of such termination
to Seller on or before October 6, 1997, in which
case the Escrowed Property shall be returned by
Escrow Agent to Purchaser, in accordance with
Section 3.1.1 of this Agreement;
(iii) By Purchaser or Seller if Closing has not taken
place on or before October 31, 1997 or such other
extension date mutually agreed to in writing by the
parties; provided, however, that no Party then in
material breach of any of its obligations hereunder
shall have the right to terminate. Except as
provided in Section 3.1.1 hereof, upon termination
under this Section 13.1(ii), the Escrowed Property
shall be returned by Escrow Agent to the
non-breaching, terminating party;
(iv) By Purchaser upon notice to Seller if any of the
conditions set forth in Article X hereof have not
been satisfied or become impossible to satisfy by
the Closing Date, as the case may be (other than by
reason of the material failure of Purchaser to
fulfill its obligations under this Agreement).
Except as provided in Section 3.1.1 hereof, upon
termination under this Section 13.1(iii), the
Escrowed Property shall be returned by Escrow Agent
to Purchaser;
(v) By Seller upon notice to Purchaser if any of the
conditions set forth in Article XI hereof have not
been satisfied or become impossible to satisfy by
the Closing Date (other than by reason of the
material failure of such Seller to fulfill its
obligations under this Agreement). Except as
provided in Section 3.1.1 hereof; upon termination
under this Section 13.1(iv), the Escrowed Property
shall be returned by Escrow Agent to Seller;
(vi) By Seller if Purchaser materially breaches or fails
to fulfill its obligations under this Agreement,
which failure continues and remains uncured for 30
consecutive calendar days after such Seller gives
written notice of such failure to Purchaser. Except
as provided in Section 3.1.1 hereof, upon
termination under this Section 13.1(v), the Escrowed
Property shall be returned by Escrow Agent to
Seller; and
(vii) By Purchaser if either Seller materially breaches or
fails to fulfill its obligations under this
Agreement, which failure continues and
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remains uncured for 30 consecutive calendar days
after Purchaser gives written notice of such failure
to such Seller. Except as provided in Section 3.1.1
hereof, upon termination under this Section
13.1(vi), the Escrowed Property shall be returned by
Escrow Agent to Purchaser.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Remedies. If this Agreement is terminated by Purchaser or
Seller as permitted under Section 13.1 and not as a result of a breach of a
representation or warranty or the failure of any Party to perform its
obligations hereunder, such termination shall be without liability of any
Party. If a Party terminates this Agreement as a result of a breach of a
representation or warranty by the other Party or the failure of the other Party
to perform its obligations hereunder, the nonbreaching Party, in addition to
any other legal remedies that may be available, shall be entitled to
reimbursement from the breaching Party for all out-of-pocket expenses and
reasonable attorneys' fees incurred by the nonbreaching Party in connection
with this Agreement and the transactions contemplated hereby.
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All
representations and warranties of the Parties shall survive for two (2) years
after the Closing Date; provided that there shall be no termination of any such
representation or warranty as to which a claim has been asserted prior to the
termination of such survival period. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely. Any Party's right to the
indemnification or other remedies based upon the representations and
warranties, covenants, agreements and undertakings of any other Party will not
be affected by any investigation, knowledge or waiver of any condition by such
Party. Any investigation by such Party shall be for its own protection only
and shall not affect or impair any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall respectively
indemnify, defend, save and hold Purchaser, its successors and assigns, and
their officers, directors, employees, agents and Affiliates (collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations, assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
attorneys' fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing and whether or not
any such demands, claims, allegations, etc., of third parties are meritorious;
collectively, "Purchaser Damages") asserted against, imposed upon, resulting
to, required to be paid by, or incurred by any Purchaser Indemnitees, directly
or indirectly:
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(i) in connection with, arising out of, which could result in, or
which would not have occurred but for (A) a breach of any
representation or warranty made by Seller in this Agreement, any
certificate or document furnished pursuant hereto or any Ancillary
Agreement to which Seller is or is to become a party; (B) a breach or
nonfulfillment of any covenant or agreement made by Seller in or
pursuant to this Agreement and in any Ancillary Agreement to which
Seller is or is to become a party; or (C) Seller's failure to pay any
Retained Liability;
(ii) that arise as a result of the presence in, on or under the
Real Property, or in, on or under the buildings, structures,
improvements or fixtures located thereon, of any toxic or Hazardous
Substances, including but not limited to asbestos, of which presence
Purchaser gives Seller written notice within three years from the date
hereof. Without limiting the generality of the foregoing, Seller's
indemnity obligation shall include costs incurred in connection with
any site investigation or any remedial, removal, or restoration work
required by any local, state, or federal agency because of the
presence or suspected presence of Hazardous Substances in, on or under
the said Real Property, or in, on or under the said buildings,
structures, improvements or fixtures located thereon, whether in the
soil, groundwater, air, or any Other receptor, but shall not include
incidental or consequential damages; and
(iii) that arise as a result of Seller's failure to pay any federal,
state or local tax attributable to a period prior to Closing, whether
or not then assessed, including but not limited to income tax,
corporate tax, employee withholding or other tax or any other fee,
assessment, or liability, which failure results in or could result in
the imposition of a lien on the Real Property or on any of the
Purchased Assets.
14.3 Indemnification by Purchaser. Purchaser shall indemnify,
defend, save and hold Seller and its successors and assigns (collectively,
"Seller Indemnitees") harmless from and against all demands, claims, actions or
causes of action, assessments, losses, damages, deficiencies, liabilities,
costs and expenses (including reasonable attorneys' fees, interest, penalties,
and all reasonable amounts paid in investigation, defense or settlement of any
of the foregoing and whether or not any such demands, claims, allegations,
etc., of third parties are meritorious; collectively, "Seller Damages")
asserted against, imposed upon, resulting to, required to be paid by, or
incurred by any Seller Indemnitees, directly or indirectly, in connection with,
arising out of, or which would not have occurred but for (i) a breach of any
representation or warranty made by Purchaser in this Agreement, any certificate
or document furnished hereunder, or any Ancillary Agreement to which Purchaser
is a party; (ii) a breach or nonfulfillment of any covenant or agreement made
by Purchaser in or pursuant to this Agreement and in any Ancillary Agreement to
which Purchaser is a party; and (iii) Purchaser's failure to pay any Assumed
Liability.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the party or parties
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from whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Article XIV or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
14.5 Third Party Claims. The Indemnified Party shall have the
right to conduct and control, through counsel of its choosing, the defense of
any third party claim, action or suit, and may compromise or settle the same,
provided that it shall give the Indemnifying Party advance notice of any
proposed compromise or settlement. The Indemnified Party shall permit the
Indemnifying Party to participate in the defense of any such action or suit
through counsel chosen by the Indemnifying Party, provided that the fees and
expenses of such counsel shall be borne by the Indemnifying Party. If the
Indemnified Party permits the Indemnifying Party to undertake, conduct and
control the conduct and settlement of such action or suit, the Indemnifying
Party shall not thereby permit to exist any Encumbrance upon any asset of the
Indemnified Party; the Indemnifying Party shall not consent to any settlement
that does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; the Indemnifying Party shall permit the Indemnified Party to participate
in such conduct or settlement through counsel chosen by the Indemnified Party
(at its own cost and expense); and the Indemnifying Party shall agree promptly
to reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving
the foregoing notice to the Indemnifying Party and prior to the assumption of
the conduct and control of such action or suit by the Indemnifying Party.
14.6 Other Remedies. The indemnification rights of any Indemnified
Party under this Article XIV are independent of and in addition to such rights
and remedies as such Indemnified Party may have at law, in equity or otherwise
for any misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement under or in connection with this Agreement on the part of
any Party, none of which rights or remedies shall be affected or diminished
hereby.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by and among Purchaser and Seller. Except as
may be required by law, no Party shall act unilaterally in
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this regard without prior written approval of every other Party, such approval
not be unreasonably withheld.
15.3 Waivers. The waiver by any Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors, assigns, heirs, executors, administrators and
legal representatives. Nothing in this Agreement, express or implied, is
intended to confer on any Person other than the Parties hereto, or their
respective successors, assigns, heirs, executors, administrators and legal
representatives any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which any Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller.
Butler Senior Care, Inc.
P.O. Box 500
100 Bella Court
Saxonburg, PA 16056
Attn: Gary Tissue
FAX: (412) 352-3499
Phone: (412) 352-2827
15.5.2 Notice to Purchaser.
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Karen N. Connelly
With a required copy to:
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Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to
every other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof or thereof shall be binding
upon any Party unless set forth in an instrument in writing signed by the Party
to be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained
in this Agreement are for reference purposes only and shall not be deemed to be
a part of this Agreement or to affect the meaning or interpretation of this
Agreement.
15.9 Construction. Within this Agreement, the singular shall
include the plural and the plural shall include the singular, and any gender
shall include all other genders, all as the meaning and the context of this
Agreement shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania. All claims,
disputes or causes of action relating to or arising out of this Agreement shall
be brought, heard and resolved solely and exclusively by and in federal or
state court situated in Pittsburgh, Pennsylvania. The Parties hereto agree to
submit to the jurisdiction of such courts and agree that such jurisdiction
shall be proper for all purposes of this Agreement.
15.11 Cooperation. The Parties hereto shall cooperate fully at
their own expense, except as otherwise provided in this Agreement, with each
other and their respective counsel and accountants in connection with all steps
to be taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision
of this Agreement or the application thereof to any circumstance shall be
invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Agreement shall not be affected
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thereby and each remaining term, covenant, condition and provision of this
Agreement shall be valid and shall be enforceable to the fullest extent
permitted by law. If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only as broad as is
enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Parties shall pay the prevailing Party's
reasonable attorneys' fees, costs and expenses incurred in connection with the
prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors, assigns, heirs, executors, administrators and legal
representatives. Seller shall not assign, or otherwise transfer any interest in
this Agreement to any other Person without the prior written consent of
Purchaser, which consent shall not unreasonably be withheld. Purchaser may
assign and transfer its interest in this Agreement without Seller's consent to
any of Purchaser's Affiliates or to any lender providing financing for the
transactions contemplated hereby. In addition, Purchaser anticipates financing
the transactions contemplated hereby through sale-leaseback(s). Purchaser shall
have the right to assign this Agreement, in whole or in part, in such manner as
Purchaser may desire in order to facilitate such sale-leasebacks. Purchaser
will promptly provide Seller with a copy of any such assignment, and Seller
agrees to execute and deliver any consents reasonably required by Purchaser's
lender in connection therewith, provided such assignment does not expand either
of Seller's respective obligations and liabilities hereunder. Notwithstanding
any permitted assignment of this Agreement by Purchaser, Purchaser shall remain
liable to Seller for all obligations and liabilities to be performed by or on
behalf of Purchaser hereunder with respect to such Seller.
IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
PURCHASER:
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ BRIAN L. BARTH
------------------
Brian L. Barth
Vice President
SELLER:
BUTLER SENIOR CARE, INC.,
a Pennsylvania corporation
By: /s/ KENNETH W. FRASER
---------------------
Kenneth w. Fraser
President
<PAGE> 1
EXHIBIT 2.18
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this 3rd
day of September, 1997, by and among Balanced Care Corporation, a Delaware
corporation (together with its permitted assigns, "Purchaser"), and Delores
Feltrop Nahar, a/k/a Delores J. Nahar, with the joinder of Albert L. Nahar, her
husband; and Kenneth A. Feltrop, with the joinder of Lori L. Feltrop, his wife,
individually and d/b/a Feltrop Personal Care Home (collectively "Seller").
RECITALS:
Seller owns all of the real and personal assets used in connection
with the operation of Feltrop Personal Care Home, a licensed personal care
facility (the "Facility"), located at 498 Lisbon Road, Darlington, PA 16115;
Purchaser desires to purchase substantially all of the assets of Seller and the
Business (as hereinafter defined) related thereto and Seller desires to sell
such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser will purchase the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of the Business, and Seller
will sell to Purchaser said assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade
accounts receivable (including, without limitation, any third party receivables
arising in connection with any Third Party Payor Programs), notes receivable,
including the Resident Notes as defined in Section 2.1.16 hereof, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department
of Public Welfare, the Division of Personal Care Homes and all other Persons
having jurisdiction over the accreditation, certification, evaluation or
operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits (including, without limitation,
vacation, sick pay, disability pay) and other accrued expenses as would appear
on a balance sheet of Seller as of such date, including those described in
Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which
controls, is controlled by or is under common control with the designated
Party. For the purpose of the foregoing, ownership, directly or indirectly, of
20% or more of the voting stock or other equity interest shall be deemed to
constitute control.
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1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property
conveyance described in Section 5.2.1 and the bill of sale, assignment and
assumption described in Section 5.2.2.
1.7 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.8 "Books and Records" shall have the meaning given to it in
Section 6.16.
1.9 "Business" shall mean the current operation of the Facility
and any other ancillary health care services owned, operated, delivered,
managed, developed, constructed, maintained, used, occupied or possessed by
Seller in connection therewith (including, without limitation, any outpatient
and contract rehabilitation therapy services or any Alzheimer's units).
1.10 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.11 "Champus" shall mean the Civilian Health and Medical Program
of the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C. Sections 1071 et seq.
1.12 "Closing" shall have the meaning given to it in Section 5.1.
1.13 "Closing Date" shall have the meaning given to it in Section
5.1.
1.14 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.15 "Code" shall mean the Internal Revenue Code of 1986, as it
may be amended from time to time, and any successor thereto. Any reference
herein to a specific section or sections of the Code shall be deemed to include
a reference to any corresponding provision of future law.
1.16 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident's
Agreements described on Schedule 1.58, Management Agreements and Provider
Agreements), contracts, contract rights, commitments, customer accounts,
orders, leases, guarantees, warranties and representations, franchises and
books and records of account benefiting, relating to the Business or the
ownership, construction, development, maintenance, repair, management, use,
occupancy, possession or operation thereof, or the operation of any of the
programs or services in conjunction with the Business and all renewals,
replacements and substitutions therefor, issued by any Governmental Authority,
Accreditation Body or Third Party Payor or maintained or used by Seller with
any third Person.
1.17 "Current Liabilities" shall mean all liabilities classified
as current liabilities in accordance with GAAP.
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1.18 "Damages" shall have the meaning given to such term in
Section 14.4.
1.19 "Department of Public Welfare" shall mean the Commonwealth of
Pennsylvania, Department of Public Welfare.
1.20 "Division of Personal Care Homes" shall mean the Commonwealth
of Pennsylvania, Department of Public Welfare, Division of Personal Care Homes.
1.21 "Employee" shall mean any individual employed by Seller in
the conduct of the Business as listed on Schedule 1.21 (such Schedule being
subject to change between the date hereof and the Closing Date as a result of
employee changes in the ordinary course of business consistent with past
practices).
1.22 "Encumbrance" shall mean any right to, or interest in,
property, which subsists in a third-party and which constitutes a claim, lien,
charge or liability attached to and binding upon or an interest in the
Purchased Assets, including, but not limited to, a mortgage, judgment lien,
mechanic's lien, lease, security interest, easement and right-of-way.
1.23 "Environmental Law" shall mean any of the following which
relates to (i) the protection of the environment or the public welfare from
actual or potential exposure (or the effects of exposure) to any actual or
potential release, discharge, disposal or emission (whether past or present) of
any Regulated Substance or (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Regulated Substance:
(a) any federal statute [including but not limited to the Federal Water
Pollution Control Act (33 U.S.C. Sections 1251 et seq.), the Toxic Substances
Control Act (15 U.S.C. Sections 2601 et seq.), the Clean Air Act (42 U.S.C.
Sections 7401 et seq.), the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Sections 9601 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Sections 6901 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Sections 1801 et seq.), and the Federal
Insecticide Fungicide and Rodenticide Act (7 U.S.C. Sections 136 et seq.)]; (b)
other Legal Requirements; (c) any common law doctrine; and (d) any provision or
condition of any permit, license or other operating authorization.
1.24 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.25 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.26 "Excluded Assets" shall mean those assets that are not
included in the sale contemplated hereby and as are further defined in Section
2.2.
1.27 "Facility" shall be as defined in the Recitals of this
Agreement.
1.28 "GAAP" shall mean generally accepted accounting principles in
the United States of America.
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1.29 "Governmental Authorities" shall mean all agencies,
authorities, bodies, boards, commissions, courts, instrumentalities,
legislatures and offices of any nature whatsoever of any government,
quasi-governmental unit or political subdivision, whether with a federal,
state, county, district, municipality, city or otherwise.
1.30 "Indemnifying Party" shall have the meaning given to such term
in Section 14.4.
1.31 "Indemnified Party" shall have the meaning given to such term
in Section 14.4.
1.32 "Inventory" shall mean the inventory of Seller used in the
operation of the Business, including, without limitation, dry storage
goods,janitorial supplies, food and beverage supplies, office supplies, medical
supplies and pharmaceutical supplies.
1.33 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
1.34 "Knowledge" and words of similar import shall mean, with
respect to any Party, actual knowledge of a particular fact or other matter
being possessed by an individual, and the knowledge that reasonably could be
expected to be or should have been obtained in the course of the reasonable
conduct of such Party's business, but shall not be construed to require a
comprehensive investigation concerning any particular subject matter, if such
investigation would exceed the standard of "reasonable conduct."
1.35 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.36 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.37 "Management Agreement" shall mean any agreement, whether
written or oral, between Seller and any other Person pursuant to which Seller
provides any payment, fee or other consideration to any other Person to operate
or manage the Business (except any employment agreements).
1.38 "Medicaid" shall mean the medical assistance program
established by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et
seq.) and any statute succeeding thereto.
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1.39 "Medicare" shall mean the health insurance program for the
aged and disabled established by Title XVIII of the Social Security Act (42
U.S.C. Sections 1395 et seq.) and any statute succeeding thereto.
1.40 "Party" shall mean either the Seller or Purchaser,
individually, as the context so requires, and the term "Parties" shall mean the
Seller and Purchaser together.
1.41 "Payables" as of any date shall mean any of the trade
accounts payable of Seller with respect to the Purchased Assets or the Business
as of such date in accordance with GAAP consistently applied.
1.42 "Payroll Practice/Employee Arrangement" shall have the
meaning given to such term in Section 6.19.
1.43 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licenses, permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all renewals, replacements and
substitutions therefor, now or hereafter required or issued by any
Governmental Authority, Accreditation Body or Third Party Payor.
1.44 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.44 hereto.
1.45 "Person" shall mean any individual, corporation, company,
limited or general partnership, trust or estate, joint venture, association or
other entity.
1.46 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Purchased Assets or the Business, which constitute
prepaid expenses in accordance with GAAP consistently applied.
1.47 "Provider Agreements" shall mean all participation, provider
and reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.48 "Purchase Price" shall mean the cash price paid in accordance
with Section 3.1.1 plus the assumed liabilities, as provided in Section 3.1.2.
1.49 "Purchased Assets" shall have the meaning given to such term
in Section 2.1.
1.50 "Purchaser" shall have the meaning given to such term in the
preamble of this Agreement.
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1.51 "Purchaser Damages" shall have the meaning given to such term
in Section 14.2.
1.52 "Purchaser Indemnitees" shall have the meaning given to such
term in Section 14.2.
1.53 "Real Property" shall mean the real property owned by Seller,
and used in connection with the Facility and the Business as such Real Property
is more fully described in Schedule 1.53 hereto.
1.54 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified as "hazardous" or "toxic" under, or the clean-up of
which can be required by, any Environmental Law, including but not limited to
Environmental Laws relating to clean air, clean water, hazardous and solid
waste disposal, safe drinking water, endangered species, occupational safety
and health, oil spill prevention, groundwater protection, and toxic substances
control.
1.55 "Related Party" means (i) Seller, (ii) any Affiliate of
Seller, (iii) any officer, director, shareholder or partner of any Person
identified in clauses (i) or (ii) preceding, and (iv) any spouse, sibling,
ancestor or lineal descendant of any natural Person identified in any one of
the preceding clauses.
1.56 "Resident's Agreements" shall mean copies of all contracts,
agreements and consents executed by or on behalf of any resident or other
Person seeking services at the Facility as more fully described in Schedule
1.56 hereto, including, without limitation, assignments of benefits and
guarantees, and such resident's related medical and/or other records.
1.57 "Retained Liabilities" has the meaning given that term in
Section 4.2.
1.58 "Security Right" means, with respect to any security, any
option, warrant, subscription right, preemptive right, other right, proxy, put,
call, demand, plan, commitment, agreement, understanding or arrangement of any
kind relating to such security, whether issued or unissued, or any other
security convertible into or exchangeable for any such security. "Security
Right" includes any right relating to issuance, sale, assignment, transfer,
purchase, redemption, conversion, exchange, registration or voting and includes
rights conferred by statute, by the issuer's governing documents or by
agreement.
1.59 "Seller" shall mean Delores Feltrop Nahar, a/k/a Delores J.
Nahar and Kenneth A. Feltrop, each individually and d/b/a Feltrop Personal
Care Home.
1.60 "Seller Damages" shall have the meaning given to such term in
Section 14.3.
1.61 "Seller Indemnitees" shall have the meaning given to such
term in Section 14.3.
1.62 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license,
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lease, service, severance, stamp, transfer, payroll, employment, customs,
duties, alternative, add-on minimum, estimated and franchise taxes (including
any interest, penalties or additions attributable to or imposed on or with
respect to day such assessment).
1.63 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.64 "Third Party Payor Programs" shall mean all third party payor
programs in which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
1.65 "Third Party Payors" shall mean Medicare, Medicaid, Blue
Cross and/or Blue Shield, private insurers and any other Person which maintains
Third Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
otherwise expressly provided herein), and Purchaser shall purchase from Seller,
all of Seller's right, title and interest in and to the assets, properties and
rights of every kind and description, real, personal and mixed, tangible and
intangible, wherever situated owned by each Seller and actually, directly used
in connection with the Business (the "Purchased Assets") as the same shall
exist on the Closing Date (other than the Excluded Assets), as follows:
2.1.1 Real Property. The Real Property, together with the
buildings, structures, improvements and fixtures located thereon, and
all rights, privileges, easements, licenses, hereditaments and other
appurtenances relating thereto;
2.1.2 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements,
automobiles, supplies, office furniture and office equipment,
computing and telecommunications equipment, which arc described in
Schedule 2.1.2 hereto;
2.1.3 Contracts Relating to the Business. All Contracts
relating to the acquisition or ownership of the Purchased Assets or
the operation of the Business which are the Contracts listed on
Schedule 2.1.3 and the Contracts which comprise the Resident's
Agreements listed on Schedule 1.56 hereto, to the extent such
Contracts are transferable to Purchaser;
2.1.4 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources,
suppliers' names, mailing lists, art work, photographs, public
relations and advertising material used in the Business, whether in
electronic form or otherwise;
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2.1.5 Permits, Licenses. All Permits relating to the
acquisition or ownership of the Purchased Assets or the operation of
the Business, including, without limitation, those permits listed in
Schedule 2.1.5 hereto, to the extent such Permits are transferable to
Purchaser;
2.1.6 Trade Secrets. All policies and procedures, methods
of delivery of services, trade secrets, designs, architectural plans,
drawings and specifications, market studies, consultants' reports,
prototypes, and all similar property of any nature, tangible or
intangible, used in connection with the Business;
2.1.7 Intellectual Property. All patents, trademarks,
trademark registrations, trade names, service marks, copyrights and
copyright registrations of used in connection with the Business which
are described in Schedule 2.1.7;
2.1.8 Goodwill. All goodwill incident to the Business,
including but not limited to the value of the names associated with
the Business and the value of good customer relations;
2.1.9 Accounts Receivable. Subject to the provisions of
Section 5.4 hereof, all Accounts Receivable existing on the Closing
Date, except the accounts receivable due from the residents and in the
amounts listed on Schedule 2.1.9;
2.1.10 Inventory. All Closing Inventory;
2.1.11 Resident Funds. Subject to the provisions of Section
5.4 hereof, all prepaid rents, deposits and escrow accounts of, or for
the benefit of, the Facility's residents at the Closing Date;
2.1.12 Computer Software. All computer applications
software, owned or licensed, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.), or
specific, unique-to-the-business usage, and all computer operating,
security or programming software, owned or licensed and used in the
operation of the Business;
2.1.13 Records. With respect to all personnel, the
supporting records and documents for the information summarized in
Schedule 6.19 hereto, and all resident records; and
2.1.14 Name. All rights to the names "Feltrop Personal Care
Home" and "Feltrop's Personal Care Home" and any other trade name
which was or is used by Seller with respect to the Facility or by
which the Facility was or is known by residents, suppliers, employees,
governmental entities or agencies, or the community.
2.1.15 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating
to the Purchased Assets or the Business.
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2.2 Excluded Assets. Notwithstanding Section 2.1, the following
assets (collectively, the "Excluded Assets") shall be excluded from this
Agreement, and shall not be assigned or transferred to Purchaser:
2.2.1 Cash. All other cash, cash equivalents on hand or in
bank accounts, and short-term notes receivable as of the Closing Date;
2.2.2 Consideration. The consideration paid to Seller
pursuant to this Agreement;
2.2.3 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.2.4 Third Party Claims. Any claims and rights against
third parties (including, without limitation, insurance carriers) to
the extent they relate to liabilities or obligations of such third
parties that are not assumed by Purchaser hereunder (except the amount
of reasonable costs and expenses Purchaser shall have incurred with
respect to such claims and rights);
2.2.5 Taxes. Claims for refunds and credits of Taxes and
other charges imposed by any Governmental Authority for a period prior
to Closing; and
2.2.6 Prepaid Expenses. All Prepaid Expenses of; or for the
benefit of, the Purchased Assets or the Business as of the Closing
Date, including those described in Schedule 2.26, for which Seller
will receive a credit as described in Section 5.4 hereof;
2.2.7 Other Excluded Assets. Assets of either Seller which
are not solely, actually and directly used in the operation of the
Business.
2.3 License to Use Certain Assets. To the extent that there are
any tangible or intangible assets used by Seller solely, actually and directly
in connection with the Purchased Assets or the Business that are not
specifically designated as Excluded Assets by Section 2.2 (without reference to
this Section), the Purchased Assets shall include an irrevocable, nonexclusive,
perpetual, paid-up, royalty-free, transferable license to utilize such assets
in connection with the operation of the Business after the Closing Date. To the
extent that any such assets may not be licensed, each Seller shall take all
steps required to assure that Purchaser obtains the benefit of such assets.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The purchase price for the Purchased
Assets and the Business shall be Five Million Seven Hundred Thousand
($5,700,000) Dollars. The consideration to be paid by Purchaser for
the Purchased Assets and the Business shall be paid by Purchaser as
follows: (i) a cash payment in the amount of $30,000 at the time of
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execution of this Agreement (the "Initial Payment"); (ii) $30,000
promptly upon satisfaction of the condition specified in Section 10.15
hereof, but in no event later than September 15, 1997 (the "Second
Payment") (the Initial Payment and the Second Payment, if any are
hereinafter collectively called the "Deposit"); and (iii) the balance
to be paid by wire transfer at the time of Closing (the "Final
Payment").
3.1.2 Other Consideration. As additional consideration, Purchaser
shall also assume the Assumed Liabilities, specified in Section 4.2 herein, at
the time of Closing.
3.2 Allocation. The Purchase Price shall be allocated among the
Purchased Assets and the Business in accordance with the allocation set forth
in Schedule 3.2, which the parties acknowledge is based on the fair market
value of the Purchased Assets and the Business, in conformance with the
requirements of Section 1060 of the Code. Purchaser and each Seller shall
report the federal, state and local income and other tax consequences of the
purchase and sale contemplated hereby in a manner consistent with such
allocation, and shall not take any position inconsistent therewith upon
examination of any tax return, in any refund claim, in any litigation or
otherwise. As required of Section 1060 of the Code and the regulations
thereunder, Purchaser and each Seller shall prepare and timely file Form 8594
with the Internal Revenue Service, which Form shall be consistent with the
allocation set forth in Schedule 3.2.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
4.2 Assumed Liabilities and Obligations of Seller. On the Closing
Date, Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
(i) all obligations of Seller accruing on or after the Closing
Date under the Contracts contemplated by Section 2.1.3,
provided that the rights thereunder have been duly and
effectively assigned to Purchaser and/or that Purchaser has
received the benefits thereof; and
(ii) all obligations of Seller accruing on or after the Closing
Date under the Permits described in Section 2.1.5, provided
that the rights thereunder have been duly and
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effectively assigned to Purchaser and/or that Purchaser has
received the benefits thereof.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing prior to the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all of the Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security
of Seller;
(ii) arising out of any transaction affecting Seller or
obligations incurred by Seller after Closing;
(iii) for Seller's expenses or fees incident to or arising out of
the negotiation, preparation, approval or authorization of
this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, all legal
and accounting fees and all brokers or finders fees or
commissions payable by Seller,
(iv) of Seller under or arising out of this Agreement;
(v) against which Seller is insured or otherwise indemnified, but
only for the amount recovered by Seller, or which would have
been covered by insurance (or indemnification) but for a
claim by the insurer (or the indemnitor) that the insured (or
the indemnities) had breached its obligations under the
policy of insurance (or the contract of indemnity) or had
committed fraud in the insurance application, but only for
the amount that would have been recovered by Seller but for
such breach or fraud;
(vi) of Seller to any Related Party;
(vii) of Seller to indemnify Seller's Employees or agents;
(viii) federal, state or local tax liabilities or obligations of
Seller accrued or relating to a period prior to Closing, and
the transactions contemplated hereunder, including, without
limitation, income taxes payable under the Code, any income
tax, any franchise tax, any tax recapture, any FICA, workers'
compensation, vacation liability and other employee benefits,
any insurance premiums, rents, or other accruals and any and
all other taxes or amounts due or payable for a period prior
to Closing; notwithstanding the foregoing, all sales and use
taxes, transfer taxes, and all other impositions of tax
arising solely by reason of the transfers contemplated by
this Agreement (excluding all federal, state and local income
and gross receipt taxes on the earnings or gross receipts of
Seller prior to the Closing
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Date, which shall remain the sole responsibility of Seller)
shall be the responsibility of and shall be paid equally by
Seller and Purchaser (any real estate and personal property
taxes for the year in which Closing occurs, together with
FICA, workers' compensation, premiums, vacation liability and
other Employee benefits, insurance premiums, rents and other
accruals shall be pro-rated as of the Closing Date as
provided in Section 5.4 hereof.
(ix) for long term indebtedness and other obligations or
guarantees of Seller;
(x) for Current Liabilities of Seller at the Closing Date;
(xi) if applicable, for or in connection with any cost reports
required to be filed by Seller with respect to periods prior
to Closing; and
(xii) for Accrued Expenses and Payables of Seller prior to the
Closing Date.
The provisions of this Section 4.2 shall survive Closing.
4.3 Offer of Employment. Purchaser may offer employment on and as
of Closing, on an at-will basis, to Employees actively at work in substantially
similar jobs, at substantially the same base salaries or wages and
substantially the same benefits as were paid or provided by Seller immediately
prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain solely
liable for all accrued vacation entitlements, workers' compensation,
disability and occupational diseases of or with respect to the
Employees attributable to entitlements, injuries, claims, conditions,
events and occurrences occurring before the Closing Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all vacation entitlements, workers' compensation, disability and
occupational diseases of or with respect to the Employees hired by
Purchaser attributable to entitlements, injuries, claims, conditions,
events and occurrences first occurring on or after the Closing Date.
4.4.3 Workers' Compensation; Unemployment Compensation.
Schedule 4.4.3 attached hereto sets forth a true and correct summary
of the following with respect to Seller and the Employees:
(i) a listing of all workers' compensation contracts;
(ii) the workers' compensation loss experience for the
past three years; and
(iii) a summary report and experience rating for
unemployment compensation.
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ARTICLE V. CLOSING
5.1 Time; Location. Subject to the provisions of Section 13.1(ii),
the consummation of the purchase and sale of the Purchased Assets shall take
place on or before October 3, 1997 (the "Closing"). The date of the Closing
shall be referred to as the "Closing Date." The Closing shall take place at such
time, date and place as may be mutually agreed upon by the Parties.
5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deed. Duly executed special warranty deed in favor
of Purchaser or Purchaser's assignee, in recordable form, transferring
good and marketable fee simple title to the Real Property, subject
only to Permitted Encumbrances, and such affidavits, releases,
satisfactions or other instruments as Purchaser's title insurance
company may reasonably request, with respect to, but not limited to,
(i) exceptions for (A) judgments, bankruptcies, taxes and municipal
claims, (B) parties in possession other than current occupants
pursuant to agreements with either Seller, (C) mechanics' or
materialmen's liens and (D) encroachments or survey discrepancies of
any nature; (ii) mortgages or security interests and (iii) gap
indemnities;
5.2.2 Bill of Sale. A general bill of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto,
transferring to Purchaser good and indefeasible title to all of the
tangible personal property included in the Purchased Assets, subject
only to Permitted Encumbrances and the Assumed Liabilities and
assigning to Purchaser, to the extent assignable, Seller's right,
title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all
consents of third parties that are required to make each such
assignment effective;
5.2.3 Title Certificates. Certificates of title to all
vehicles, if any, included in the Purchased Assets with assignments to
Purchaser;
5.2.4 Property Tax Statements. To the extent not delivered
prior to Closing, all real estate and personal property tax statements
or bills for or relating to the Real Property or any of the other
Purchased Assets for the applicable current tax year or years, and all
tax assessments or notices thereof upon which such taxes are based;
5.2.5 Plans and Specifications. To the extent not
delivered prior to Closing, all plans, specifications and other
drawings in Seller's possession used in the construction of the
Facility or any renovations thereof (including, without limitation,
the most current as-built plans and architectural specifications) and
all guarantees and warranties made by third parties with respect to
the improvements, buildings, personalty or any of the other Purchased
Assets;
5.2.6 Building Permits. To the extent not delivered prior
to Closing, all building permits, zoning permits, occupancy permits,
subdivision plans, surveys and hazardous
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waste studies and soil studies in Seller's possession prepared within
two years before the date hereof, for or relating to the Facility;
5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other
instruments or agreements, which are in effect and existence as of the
Closing Date, relating to the ownership, operation, use, occupancy,
licensure, accreditation or maintenance of the Business;
5.2.8 Rent Roll. The rent roll listing all residents of
the Facility and their respective rent payments current as of two days
prior to Closing;
5.2.9 Closing Documents. To the extent not delivered prior
to Closing, the documents referred to in Section 8.1.2 and Section
8.1.8; and
5.2.10 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may
reasonably require in order to more effectively vest in it, and put it
in possession of, the Purchased Assets.
At Closing, Purchaser shall deliver to Seller the following:
(i) the Purchaser's Certificate described in Section 11.3 hereof, (ii)
the Secretary's Certificate described in Section 11.4 hereof, (iii) the
documents and instruments described in Section 11.6 hereof, and (iv)
the Final Payment, as provided in Section 3.1.1 hereof.
5.3 Reasonable Steps. Seller shall make such reasonable efforts
as may be appropriate so that on the Closing Date, Purchaser shall be placed in
actual possession and control of all of the Purchased Assets.
5.4 Closing Adjustments. The following apportionments shall be
made at the Closing as of the close of business on the day immediately preceding
the Closing Date (hereinafter called the "Adjustment Date"):
(a) Resident fees, rents and other charges for the month in which
occurs the Adjustment Date shall be apportioned between Seller and
Purchaser with Seller retaining or receiving, as the case may be, an
amount equal to the full amount of such resident fees, rents and other
charges times a fraction, the numerator of which is the number of days
in such month to and including the Adjustment Date and the denominator
of which is thirty (30). If at the Adjustment Date there are past due
amounts for the month in which occurs the Adjustment Date, then the
first monies received and applied from such resident or residents shall
be applied to such past due amounts and Seller's share thereof shall be
promptly remitted by Purchaser to Seller. If at the Adjustment Date
there are past due
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amounts owed by residents for any period prior to the Adjustment Date,
Seller shall be paid in the manner provided in Section 5.5 hereof.
(b) With respect to Contracts listed on Schedule 2.1.3, Purchaser
shall, by notice to Seller given within twenty days of Purchaser's
receipt thereof, specify which of said Contracts Purchaser will not
assume at the Closing. If Purchaser fails to give such notice, time
being of the essence, it shall assume all of such Contracts listed on
Schedule 2.1.3, but, in any event, shall not be deemed to have assumed
any contracts of Seller which are not listed on Schedule 2.1.3.
Amounts paid or payable in respect of Contracts assumed by Purchaser
will be prorated based upon the respective periods to which such
payments relate. The foregoing to the contrary notwithstanding, Seller
will obtain a meter reading for electric service not more than thirty
(30) days prior to the Adjustment Date and the unfixed meter charges
based thereon for the intervening period shall be apportioned on the
basis of such reading.
(c) With respect to insurance policies listed on Schedule 6.24,
Purchaser shall, by notice to Seller given within twenty days after
receipt thereof, specify which of said insurance policies Purchaser
will retain. If Purchaser fails to give such notice, time being of the
essence, it shall be deemed to have elected to retain none of such
insurance policies. Premiums paid or payable in respect of each
insurance policy retained by Purchaser will be apportioned based upon
the coverage period thereof.
(d) Real estate taxes shall be apportioned on the basis of the
fiscal year for which assessed. If the Closing shall occur before the
tax rate or assessment is fixed, the apportionment of such real estate
taxes at the Closing shall be based on the tax rate for the next
preceding year applied to the latest assessed valuation; provided,
however, that a final adjustment will be made upon the actual tax
amount, when determined.
(e) As provided in Section 8.1.10, Seller shall pay all wages and
salaries including overtime compensation, of Employees attributable to
time worked through the Adjustment Date; Purchaser shall pay all wages
and salaries including overtime compensation, of Employees
attributable to time work after the Adjustment Date.
(f) As indicated on Schedule 6.19, the Vacation Time (herein so
called) for each of Seller's Employees is accrued over consecutive
twelve month periods (each, a "Service Year"), with each Service Year
commencing on each Employee's initial date of service (or an
anniversary thereof) and ending on the day prior to the next
succeeding anniversary thereof. Employees are permitted to accept
payment in lieu of vacation time off for Vacation Time ("Vacation
Payments"). Purchaser shall receive a credit at Closing for all unused
Vacation Time accrued by Seller's Employees through the Adjustment
Date and for which no Vacation Payment has been made. Seller shall
receive a credit at Closing
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for all Vacation Time actually used by Seller's Employees through the
Adjustment Date and which has not yet accrued as of the Adjustment
Date in favor of said Employees.
The provisions of this Section 5.4 shall survive the Closing.
5.5 Post-Closing Adjustments. Upon Purchaser's receipt of any
payment out of the ordinary course from a resident listed on Schedule 2.1.9 or
their agents, for amounts past due under any Resident's Agreements, whether by
liquidation of assets or otherwise, then providing the amount of said payment
is sufficient to pay the full amount due to Seller from such resident as listed
on Schedule 2.1.9 ("Seller's Payment") and to pay all amounts due to Purchaser
from such resident as of the date of Purchaser's receipt of said payment
("Purchaser's Payment"), Purchaser shall promptly remit Seller's Payment to
Seller, and shall retain for its own account Purchaser's Payment. If said
payment is insufficient to pay Seller's Payment and Purchaser's Payment in
full, then upon receipt of said payment, Purchaser shall promptly remit to
Seller an amount equal to the amount so received, times a fraction, the
numerator of which is the amount of Sellers Payment and the denominator of
which is the sum of Seller's Payment and Purchaser's Payment.
The provisions of this Section 5.5 shall survive the Closing.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Power to Enter Agreement. Each Seller is an adult individual
and has all requisite power and authority to execute and deliver this Agreement
and the Ancillary Agreements to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform all the terms and
conditions hereof and thereof and to be performed by it.
6.2 Authorization of Agreement. Seller has taken all necessary
action to authorize the execution and delivery of this Agreement and the
Ancillary Agreements to which it is a party, the performance by it of all terms
and conditions hereof and thereof to be performed by it and the consummation of
the transactions contemplated hereby and thereby.
6.3 Enforceability. This Agreement constitutes, and the Ancillary
Agreements to which Seller is party, upon its execution and delivery thereof,
will constitute the legal, valid and binding obligations of each Seller,
enforceable in accordance with their terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws
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presently or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
6.4 No Violation; Consents. The execution, delivery and
performance by Seller of this Agreement and the Ancillary Agreements to which
each Seller is a party, and the consummation of the transactions contemplated
hereby and thereby will not (with or without the giving of notice or the lapse
of time, or both) (i) to Seller's Knowledge, except with respect to notices and
consents (if any) required to be given by either Seller to any Accreditation
Body or Governmental Authority in connection with the sale and change of
ownership of the Purchased Assets and the Business, violate or require any
consent, authorization or approval of, or exemption by, or filing under any
provision of any law, statute, rule or regulation to which Seller, the Business
or the Purchased Assets are subject; (ii) violate any judgment, order, writ or
decree of any court applicable to Seller, the Business or the Purchased Assets;
(iii) except as identified on Schedule 2.1.3, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any contract or other instrument, document or undertaking to which Seller
is a
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party or any of the Purchased Assets is bound; or (iv) result in the creation
or imposition of any Encumbrances upon the Purchased Assets.
6.5 Financial Statements. Seller has delivered, or will have
delivered on or before August 25, 1997, to Purchaser true and complete copies
of the audited, or if unavailable, unaudited (i) balance sheets of the Business
at December 31, 1996, 1995 and 1994 and the related statements of income and
cash flows for the years then ended and (ii) monthly statements of profit and
loss and cash flows for the first six months of 1997 with respect to the
operation of the Facility, which were prepared in accordance with GAAP, as
certified by S. R. Snodgrass, A.C. In addition, Seller shall provide Purchaser,
as promptly as the same become available through the month prior to the month
in occurs the Closing Date, but no later than 15 days after the last day of
each month, monthly statements of profit and loss and cash flows of Seller for
the Facility. In the event that the Closing Date occurs within the first 15
days of a month, notwithstanding anything to the contrary herein, Seller shall
furnish Purchaser statements of profit and loss and cash flows for the then
immediately preceding month no later than two weeks after the Closing Date.
True and correct copies of such financial statements are attached hereto as
Schedule 6.5. The foregoing financial statements have been prepared from the
Books and Records of Seller on a consistent basis throughout the periods
involved except as may be noted therein. Such financial statements, including
the related notes, are true and correct and fairly present the financial
position of the Business at the dates indicated and the results of operations
and cash flow statements of the Business for the periods then ended.
6.6 Accounts Receivable. All Accounts Receivable (i) have or will
have arisen only in the ordinary course of business consistent with past
practice for goods actually sold and delivered or services actually performed;
and (ii) to the Knowledge of Seller, are or will be collectible in full at the
recorded amounts thereof (subject to no defenses, setoffs or counterclaims) in
the ordinary course of business (without resort to litigation or assignment to
a collection agency).
6.7 Inventory. The Inventory was or will be acquired and
maintained in accordance with the regular business practices of Seller,
consists or will consist of new and unused items of a quality and quantity
usable or salable in the ordinary course of business consistent with past
practice.
6.8 Absence of Certain Changes or Events.
6.8.1 Seller. Except as set forth in Schedule 6.8 hereto,
since June 30, 1997 in connection with the Purchased Assets or the Business,
Seller has not:
(i) amended in any material respect or terminated any
Contract or Permit other than in the ordinary course
of business consistent with past practice;
(ii) suffered the occurrence of any fire, storm or
similar casualty that, individually or in the
aggregate, have had, or could reasonably be expected
to have, a material adverse effect on the results of
operations of the Business or on the Purchased
Assets, including, without limitation, the Real
Property, whether or not covered by insurance;
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(iii) sold, transferred, replaced or leased any of the
Purchased Assets, except for transactions in the
ordinary course of business consistent with past
practice;
(iv) waived or released any material rights with respect
to the Purchased Assets or the Business;
(v) transferred or granted any rights to the Logo and
Name;
(vi) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than
in the ordinary course of business consistent with
past practice;
(vii) changed its methods of accounting;
(viii) increased the compensation of any of the Employees,
except following normal review procedures or as
reasonably deemed necessary in the ordinary course
of business consistent with past practice;
(ix) suffered any major or key personnel changes (other
than the resignation of each Seller at Closing);
(x) materially altered its conduct in its relations with
suppliers and residents;
(xi) materially altered its marketing efforts with
respect to the Business; or
(xii) received any notice nor has any Knowledge that its
license or permits to operate the Facility has been
or will be suspended, revoked, or restricted in any
manner.
6.9 Real Property.
6.9.1 Title to Properties; Absence of Liens and
Encumbrances. Delores Feltrop Nahar and Kenneth A. Feltrop own equally
and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased Assets, including, without
limitation, the Real Property, free and clear of all Encumbrances,
other than Permitted Encumbrances. Copies of all title insurance
policies and surveys written in favor of Seller relating to the Real
Property have been delivered to Purchaser.
6.9.2 Structures and Improvements. To Seller's Knowledge,
Seller represents and warrants that all structures and other
improvements on the Real Property are in functional order and repair
and free from any structural defects.
6.9.3 Boundaries; Location. Seller represents and warrants
that the Real Property is considered a separate parcel of land for
taxing and conveyancing purposes and, to Seller's Knowledge, the Real
Property (i) is not located in a flood plain, flood
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hazard area or designated wetlands area and (ii) has no subsidence
problems due to natural or manmade sub-surface conditions.
6.9.4 Use and Operation. Seller represents and warrants
that, to Seller's Knowledge, the use and operation of the Real
Property conforms to all applicable building, zoning, safety and
subdivision laws, Environmental Laws and other Legal Requirements, and
all restrictive covenants and restrictions and conditions affecting
title.
6.9.5 Utilities. Seller represents and warrants that all
utilities (including water, electric, storm and sanitary sewage and
telephone utilities) required to operate the Facility are available to
the Facility and such utilities enter the boundaries of such Facility
through adjoining public streets, permanent easements or rights-of-way
of record in favor of Seller. To Seller's Knowledge, such utilities
are all connected pursuant to valid permits, are all in functional
working order and are adequate to service the operations of the
Facility as currently conducted and permit full compliance with all
Legal Requirements. Seller has not received any written notice of any
proposed, planned or actual curtailment of service of any utility
supplied to the Facility.
6.9.6 Assessments; Notices. Seller has not received any
written or oral notice of assessments for public improvements against
the Real Property or any written or oral notice or order by any
Governmental Authority, any insurance company that has issued a policy
with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions that relates
to violations of building, safety or fire ordinances or regulations,
that claims any defect or deficiency with respect to any of such
properties or requests the performance of any repairs, alterations or
other work to or in any of such properties or in the streets bounding
the same.
6.9.7 Condemnation. Seller represents and warrants that
there is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of the Real Property.
6.9.8 Access. Seller represents and warrants that all
present driveways and other access routes to the Real Property are
from public streets and no other Person has any right to use any such
driveways or other access routes.
6.10 Proprietary Rights.
6.10.1 Logos and Tradenames. Schedule 2.1.7 hereto includes
a copy of the logo which Seller has used in connection with Business
(the "Logo"). Moreover, Seller has used the name "Feltrop's Personal
Care Home" continuously since the inception of the Business (the
"Name"). Seller makes no representation or warranty whatsoever that it
has any right, title or interest in and to the Logo and/or the Name.
Seller does represent and warrant that the validity of the Logo and
Name and the rights therein of Seller, if any,
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have not been questioned in any litigation to which Seller is a party,
nor, to Seller's Knowledge, is any such litigation threatened; and
that to Seller's Knowledge, the conduct of the Business does not
conflict with patent rights, licenses, trademark rights, trade name
rights, copyrights or other intellectual property rights of others.
6.10.2 Infringement. Except as disclosed in Schedule 2.1.8
hereto, Seller does not have Knowledge that any material use of the
Logo and Name has heretofore been, or is now being, made by any Person
other than Seller. No present or former Employee or consultant of
Seller has any interest in any of the Logo or Name.
6.11 Contracts and Commitments. Except as listed and described on
Schedule 1.56, Schedule 2.1.3, and Schedule 6.24, with respect to the Purchased
Assets or the Business, Seller is not a party to any written or oral:
(i) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in
any likeness of business with any Person;
(ii) license, franchise, distributorship or other
agreement, including those that relate in whole or
in part to any patent, trademark, trade name,
service mark or copyright or to any ideas, technical
assistance or other know-how of or used by the
Business;
(iii) Contract or commitment to assign, option, sell,
transfer or otherwise convey to any person other
than Purchaser any right, title or interest of
Seller in and to all or any portion of the Business;
or
(iv) any other material Contract not made in the ordinary
course of business consistent with past practice and
by which Purchaser would be bound upon the
occurrence of the Closing (other than by virtue of
Purchaser's election to assume and/or accept an
assignment of, such Contract.
To Seller's Knowledge, each of the Contracts and other instruments,
documents and undertakings listed on Schedule 1.56, Schedule 2.1.3, and
Schedule 6.24 is valid and enforceable in accordance with its terms, the
parties thereto are in compliance with the provisions thereof, neither party is
in default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein, and no event has occurred
that with or without the giving of notice or lapse of time, or both, would
constitute a default thereunder and (ii) except as set forth on Schedule 2.1.3
and Schedule 1.56, and except for the Resident's Agreements, no advance
payments have been received by Seller by or on behalf of any party to any of
the Contracts and other instruments, documents and undertakings listed thereon
for services to be rendered or products to be delivered to such party after the
Closing Date. Any Contracts that cannot be transferred or require consent or
approval for the transfer thereof are specifically identified on Schedule 2.1.3
and Schedule 1.56 hereto as nontransferable or requiring such consent or
approval.
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6.12 Permits. Schedule 2.1.5 hereto sets forth a correct and
complete list of all current Permits. Each of said permits, including but not
limited to the Certificate of Compliance issued by the Pennsylvania Department
of Public Welfare on February 17, 1997 to No.440950, is in full force and
effect. To Seller's Knowledge, no suspension or cancellation of any of the
Permits is threatened and no cause exists for such suspension, revocation,
restriction or cancellation. Any Permits that cannot be transferred or require
consent or approval for the transfer thereof are specifically identified on
Schedule 2.1.5 hereto as nontransferable or requiring such consent or approval.
6.13 Compliance with Laws. Except as described in Schedule 6.13
hereto, Seller has at all times conducted, and is presently conducting, the
Business so as to comply in all material respects with all Legal Requirements
applicable to the conduct of operation of the Business or the ownership or use
of the Purchased Assets.
6.14 Legal Proceedings. Except as described in Schedule 6.14
hereto, there is no claim, action, suit, proceeding, investigation or inquiry
pending before any Governmental Authority or, to Seller's Knowledge, threatened
against Seller with respect to the Business or any of the Purchased Assets
owned or used by it in connection therewith, or relating to the transactions
contemplated by this Agreement, nor to Seller's Knowledge is there any basis
for any such claim, action, suit, proceeding, investigation, or inquiry. Except
as set forth on Schedule 6.14 hereto, Seller is not a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental, regulatory or administrative official, body
or authority that relates to the Business or the Purchased Assets owned or used
by Seller in connection therewith that might affect the transactions
contemplated by this Agreement.
6.15 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.15, Seller has no liabilities or obligations (as defined in Section
4.1) relating to the Business except (i) those liabilities and obligations set
forth on the financial statements of Seller previously provided to Purchaser
and not heretofore paid or discharged; (ii) those liabilities and obligations
arising in the ordinary course of business consistent with past practice under
any Contract or commitment specifically disclosed on Schedule 2.1.3 hereto or
not required to be disclosed because of the term or amount involved; and (iii)
those liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the financial statements dated March 31,
1997 provided to Purchaser; and (iv) those liabilities and obligations by which
Purchaser will not be bound.
6.16 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
All of the Books and Records have been prepared and maintained in accordance
with good business practices and in compliance in all material respects with
all Legal Requirements.
6.17 Employees. Schedule 1.21 sets forth a true and correct list
of the following for the Facility: (i) all individuals employed by Seller in
the conduct of the Business; (ii) total wage costs; (iii) wage/salary grade
structure and (iv) each Employee's (A) present position and
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department, (B) job description, (C) rate of compensation and (D) service
credited for purposes of vesting and eligibility under each Payroll
Practice/Employee Arrangement.
6.18 Labor Disputes. Except as described in Schedule 6.18 hereto,
there are no material discrimination complaints nor any other kind of
employment or labor related disputes against Seller in connection with the
Business pending before or, to Seller's Knowledge, threatened before any
federal, state or local court or agency, and to Seller's Knowledge, no material
dispute respecting minimum wage or overtime claims or other conditions or terms
of employment exists. The Business has not experienced any material labor
disputes or any material work stoppage due to labor disagreements within the
past three years. With respect to the Business and except to the extent set
forth in Schedule 6.18: (i) there is no unfair labor practice charge or
complaint against Seller pending or, to Seller's Knowledge, threatened, before
the National Labor Relations Board; (ii) there is no labor strike, slowdown or
stoppage pending or, to Seller's Knowledge, threatened against or affecting
Seller; and (iii) no question concerning representation has been raised within
the past three years, or to Seller's Knowledge, is threatened respecting the
Employees.
6.19 Payroll Practice/Employee Arrangement.
6.19.1 Benefit Plans. Schedule 6.19 contains a complete
list of each employee benefit plan subject to ERISA, and/or holiday,
vacation or other bonus practice or any other employee pay practice,
arrangement, agreement or commitment (the "Payroll Practice/Employee
Arrangement") and maintained by or with respect to which Seller has
any liability or obligation, whether actual or contingent, with
respect to the Employees or their respective beneficiaries.
6.19.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan,
and Purchaser shall have no liability under, or be subject to any
liability on account of, any ERISA Plan or Payroll Practice/Employee
Arrangement following the consummation of the transaction contemplated
hereby.
6.19.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by
Purchaser.
6.20 Finder's Fee. Seller warrants that the only commission or
finder's fee that will be due and owing upon settlement of this transaction as
a result of any actions taken by Seller will be to 2BeMA Network, Inc. and
shall be payable in full by Seller.
6.21 Condition of Equipment. Except as set forth on Schedule 6.21,
all equipment that is part of the Purchased Assets is operational (subject only
to routine maintenance and repair) and usable in the conduct of the Business
consistent with past practice.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Environmental Matters. Except as disclosed in Schedule 6.23:
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6.23.1 Compliance; No Liability. Seller has operated the
Business and the Real Property in material compliance with all
applicable Environmental Laws. To Seller's Knowledge, Seller is not
subject to any liability, penalty or expense (including legal fees),
and Purchaser will not suffer or incur any loss, liability, penalty or
expense (including legal fees) by virtue of any violation by Seller of
any Environmental Law prior to the Closing, any environmental activity
conducted on or with respect to any property by such Seller at or
prior to the Closing or any environmental condition existing on or
with respect to any property at or prior to the Closing which arose
during either Seller's ownership of the Real Property, in each case
whether or not such Seller permitted or participated in such act or
omission.
6.23.2 Treatment; CERCLA. During either Seller's ownership
of the Real Property (i) Seller has not treated, stored, recycled or
disposed of any hazardous material, and to Seller's Knowledge, no
other Person has treated, stored, recycled or disposed of any
hazardous material on any part of the Real Property; (ii) there has
been no release of any hazardous material at, on or under any Real
Property; and (iii) to Seller's Knowledge, Seller has not transported
any hazardous material or arranged for the transportation of any
hazardous material to any location that is listed or proposed for
listing on the national Priorities List pursuant to Superfund or
CERCLA, or any other location that is the subject of federal, state or
local enforcement action or other investigation that may lead to
claims against Seller for cleanup costs, remedial action, damages to
natural resources, to other property or for personal injury including
claims under Superfund; and (iv) the Real Property is not listed or,
to Seller's Knowledge, proposed for listing on the National Priorities
List pursuant to Superfund, CERCLA or any state or local list of sites
requiring investigation or cleanup.
6.23.3 Notices; Existing Claims; Certain Hazardous
Materials; Storage Tanks. Seller has not received any request for
information, notice of claim, demand or other notification that it is
or may be potentially responsible with respect to any investigation,
abatement or cleanup of any threatened or actual release of any
hazardous material, nor is it required to place any notice or
restriction relating to the presence of any hazardous material on the
Real Property or in any deed relating to the Real Property. There has
been no past, and there is no pending or contemplated, claim by Seller
under any Environmental Law or Legal Requirement based on actions
of others that may have impacted on the Real Property, and Seller has
not entered into any agreement with any Person regarding any
Environmental Law, remedial action or other environmental liability or
expense. All storage tanks located on the Real Property, whether
underground or aboveground, are disclosed on Schedule 6.23, and, to
Seller's Knowledge, all such tanks and associated piping are in sound
condition and are not leaking and have not leaked.
With respect to any matters in this Section 6.23, Purchaser shall bear
the burden of proving that any particular contamination originated during
Seller's ownership of the Property.
6.24 Insurance. Schedule 6.24 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known
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by Seller to have been maintained by any other Person which may provide any
coverage for liabilities relating in any manner to any Environmental Law.
Schedule 6.24 also sets forth a true and correct summary of the loss
experiences for the past three years under each such policy. Except as set
forth on Schedule 6.24, no insurance has ever been canceled or denied. Following
the Closing, Seller shall, to the extent that Purchaser elects to retain
Seller's insurance policies (i) take no action to eliminate or reduce such
coverage, other than normal elimination or reduction of coverage as they occur
by virtue of the filing of claims in the ordinary course under such insurance
policies, (ii) pay when due any premiums under such policies for periods prior
to Closing, including retrospective or retroactive premium adjustments and
(iii) use its best efforts to assist in filing and processing claims under and
otherwise cooperate with Purchaser to allow Purchaser, in its own name, or on
behalf of Seller, to obtain all coverage benefits applicable to the Business
under such insurance policies, including the execution of assignments or powers
of attorney for the benefit of Purchaser. Seller shall promptly pay to
Purchaser any proceeds of insurance paid by an insurer to Seller for claims
attributable to a period on or after Closing.
6.25 No Significant Items Excluded. There are no assets,
properties, contracts, permits or other items of Seller or any Related Party
that are of material importance to the ongoing operation of the Business by
Purchaser in substantially the same manner in which the Business has been
conducted by Seller prior to the date of this Agreement which are not included
in the Purchased Assets.
6.26. Surveys. Seller has provided Purchaser with copies of
Seller's federal and/or state surveys or inspections and any plans of
correction for the current year and the two immediately preceding years for the
Facility. Each such survey or inspection was prepared in material compliance
with all applicable Legal Requirements.
6.27. Occupancy Reports. Seller has provided Purchaser with copies
of Seller's occupancy reports for the Facility for the last year.
6.28 Discounted Rates; Rate limitations; Free Care. Attached
hereto is Schedule 6.28 that sets forth a true and complete list of the
following for the Facility: (i) any services that are provided based on a
discount factor from the rates regularly charged at the Facility; (ii) any
restrictions or limitations on rates which may be charged to private pay
residents for services provided at the Facility; (iii) any percentage of beds
or slots in any program at the Facility that must be reserved for Medicare or
Medicaid eligible residents and (iv) any amount of welfare, free or charity
care or discounted government assisted resident care provided at the Facility.
6.29 Operational Performance. Seller represents and warrants that,
for the calendar year ending December 31, 1996 (i) the gross operating revenues
of the Facility, were $1,938,460; and (ii) the operational income of the
Facility after adjustments for amortization, depreciation, interest, and other
non-recurring expenses as mutually agreed upon by Buyer and Seller was
$805,413. As used herein operational income shall mean the net result of
revenues generated and expenses incurred in connection with the Business.
6.30 Completeness and Accuracy. To Seller's Knowledge: (i) all
information set forth on any Schedule hereto is true, correct and complete;
(ii) no representation or warranty of either
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Seller contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not materially misleading; and (iii) all Contracts,
Permits and other documents and instruments furnished or made available to
Purchaser by Seller are or will be true, complete and accurate originals or
copies of originals and include all amendments, supplements, waivers and
modifications thereto.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser represents and
warrants to each Seller, that each of the following representations and
warranties is true and correct as of the date of Closing:
7.1 Organization, Good Standing, Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation and has, or will have on or before September
15, 1997, all requisite corporate power and authority to purchase the Purchased
Assets, to carry on the Business and to execute and deliver this Agreement and
the Ancillary Agreements to which Purchaser is a party, to consummate the
transactions contemplated hereby and thereby and to perform all the terms and
conditions hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has
or will have taken all necessary corporate action to authorize the execution
and delivery of this Agreement and the Ancillary Agreements to which Purchaser
is a party, the performance by it of all terms and conditions hereof and
thereof to be performed by it and the consummation of the transactions
contemplated hereby and thereby, on or before September 15, 1997. This
Agreement constitutes, and the Ancillary Agreements, upon Purchaser's execution
and delivery thereof, will constitute, the legal, valid and binding obligations
of Purchaser, enforceable in accordance with their terms except to the extent
that enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws presently or hereafter in effect relating to or affecting
the enforcement of creditors' rights generally and by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
7.3 No Violations; Consents. The execution, delivery and
performance by Purchaser of this Agreement and the Ancillary Agreements to
which Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby will not (with or without the giving of notice
or the lapse of time, or both) (i) violate any provision of the charter or
bylaws of Purchaser, (ii) to Purchaser's Knowledge, except with respect to
notices and consents required to be given by Purchaser to any Accreditation
Body or Governmental Authority in connection with the sale and change of
ownership of the Purchased Assets and the Business, violate, or require any
consent, authorization or approval of, or exemption by, or filing under any
provision of any contract, law, statute, rule or regulation to which Purchaser
is subject, (iii) violate any judgment, order, writ or decree of any court
applicable to Purchaser, (iv) conflict with, result in a breach of, constitute
a default under, or accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under any
agreement, contract,
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commitment, lease or other instrument, document or undertaking to which
Purchaser is a party; or (v) result in the creation or imposition of any
Encumbrance upon its assets.
7.4 Legal Proceedings. There is no claim, action, suit,
proceeding, investigation or inquiry pending before any Governmental Authority
or, to Purchaser's Knowledge, threatened against Purchaser or any of
Purchaser's properties, assets, operations or businesses that might prevent or
delay the consummation of the transactions contemplated hereby.
7.5 Broker. No finder's fees, broker's fees or commissions will
be due and payable upon Closing of this transaction as a result of actions by
Purchaser. Seller will pay any fee due to 2BeMA Network, Inc., as provided in
Section 6.20.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will:
8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the
purpose of audit, review and copying, reasonable access to such of the
properties, books, accounts and records of such Seller as are relevant
to the Purchased Assets and the Business, and furnish or otherwise
make available to Purchaser all such information concerning the
Purchased Assets and the Business as Purchaser may reasonably request.
8.1.2 Surveys; Occupancy; Operations. With respect to
Seller, provide Purchaser with the following:
(i) occupancy reports for the Facility, as soon as the
same become available through the Closing Date, but
no later than 5 days after the last day of any given
month, such reports to in the form previously
provided to Purchaser as indicated in Section 6.27
hereof;
(ii) federal and/or state surveys or inspections and any
plans of correction for the Facility, as soon as the
same become available through the Closing Date, but
no later than 5 days after received by Seller;
(iii) if applicable, Seller's cost reports for the current
year and the two immediately preceding years for the
Facility, together with the current rate schedule
for the Facility; and
(iv) monthly statements of profit and loss of Seller for
the Facility, as soon as the same become available
through the month prior to the month in which occurs
the Closing Date, but no later than 15 days after
the last day of each month;
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8.1.3 Conduct of Business. With respect to Seller, operate
the Business in the usual, regular and ordinary manner as such
Business was conducted prior to the date hereof and use reasonable
efforts until the Closing Date to (i) preserve and keep intact the
Business; (ii) keep available the services of the Employees; (iii)
preserve its relationships with residents, suppliers and others having
business dealings with Seller in connection with the Business and (iv)
maintain current marketing activities;
8.1.4 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in operational repair, order and
condition, reasonable wear and tear excepted;
8.1.5 Maintenance of Books and Records. With respect to
Seller, maintain the Books and Records in the usual, regular and
ordinary manner, on a basis consistent with past practice;
8.1.6 Compliance with Applicable Law. Comply in all
material respects with all Legal Requirements applicable to the
Purchased Assets and, with respect to Seller, to the conduct of the
Business, provided however, that Seller shall have the full right and
power to contest the applicability and or the scope of such Legal
Requirements;
8.1.7 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the
Business in accordance with the past practices, provided however that
Seller shall have the full right and power to contest the
applicability and or the scope of said material obligations;
8.1.8 Approvals, Consents. Use its best efforts to obtain
in writing as promptly as possible any approvals and consents as
required to be obtained by Seller in order to effectuate the
transactions contemplated hereby and deliver to Purchaser copies of
such approvals and consents. Accordingly, Seller shall cooperate with
Purchaser's efforts to obtain the necessary licenses to operate the
Facility from the appropriate Accreditation Bodies, including, without
limitation, the Department of Public Welfare, Division of Personal
Care Homes. Upon execution and delivery of this Agreement, Seller
shall:
(i) promptly provide Purchaser with copies of all
current Permits;
(ii) assist Purchaser in notifying each applicable
Accreditation Body and Third Party Payor as required
by any Legal Requirement of the pending change of
ownership of the Facility; and
(iii) provide to Purchaser all information necessary for
Purchaser to prepare such other notices as required
by all Legal Requirements including, required, (i)
notices to the Facility's residents and (ii) notices
to referral or human service agencies. Seller shall
sign said notices and cooperate with Purchaser to
comply with all Legal Requirements.
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8.1.9 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would
have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Seller of any of its representations, warranties, covenants or
agreements hereunder;
8.1.10 Pay Employees to Closing Date. Subject to the
provisions of Section 5.4 hereof, pay all wages, salaries and other
sums due Employees through the close of business on the day prior to
the Closing Date;
8.1.11 Cost Reports. If applicable, file, or cause to be
filed, all Medicare and Medicaid cost reports that are required to be
filed after the Closing Date, without regard to any extensions,
pursuant to all applicable Legal Requirements. Any liability of Seller
required to be paid as a result of any such cost report for any period
prior to the Closing Date shall be paid by Seller. Purchaser shall
cause any refund which may be received after the Closing Date as a
result of any such cost report to be paid to Seller;
8.1.12 Transfer of Employees. Cooperate with Purchaser in
Purchaser's effectuation of the employment of all Employees electing
to continue their employ with Purchaser as of the Closing Date;
8.1.13 Compliance with Agreement. Not undertake any course
of action inconsistent with satisfaction of the conditions applicable
to it set forth in this Agreement, and use all reasonable efforts to do
all such acts and take all such measures as may be reasonably necessary
to comply with the representations, agreements, conditions and other
provisions of this Agreement; and
8.1.14 Update Schedule. Promptly disclose to Purchaser any
information contained in the representations and warranties of each
Seller contained in Article VI or in the Schedules to this Agreement
which is no longer complete or correct (including furnishing updated
financial statements); provided that no such disclosure shall be
deemed to modify, amend or supplement such Seller's representations
and warranties.
8.1.15 Compliance with Bulk Sales Laws. Seller shall
(i) provide notice to the Pennsylvania Department of Revenue
("Revenue") and the Department of Labor and Industry ("L&I"), at least
ten days prior to Closing, of the sale of the Business and the
Purchased Assets contemplated hereunder, in accordance with 72 P.S.
Section 1403 and 43 P.S. 788.3, and shall provide Purchaser with a
copy of said notice; and (ii) file all State tax reports with Revenue
and L&I to and including the Closing Date and pay all taxes due to the
Commonwealth in accordance therewith and provide Purchaser with
evidence of such payment on or before the Closing Date.
8.1.16 Removal of Underground Storage Tank. Seller shall
remove or cause to be removed from the Real Property the underground
storage tank which is currently located above-ground, east of the
Facility, as identified in that certain Phase I Environmental Site
Assessment and Limited Subsurface Investigation dated August 8,
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1997 and prepared by ATC Associates, Inc. On or before September 26,
1997, Seller shall provide Purchaser with either Seller's certificate
or the certificate of a company qualified in the removal and disposal
of environmental containment devices, in a form satisfactory to
Purchaser and its lender for this transaction, in their reasonable
discretion and exercised in good faith, certifying that said
underground storage tank has been removed from the Real Property,
transported and disposed of, in compliance with all federal, state and
local environmental laws. A copy of said report has been provided to
Seller.
8.2 Prohibited Actions. Between the date of this Agreement and
the Closing Date, Seller shall not, except as otherwise agreed by Purchaser in
writing:
8.2.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the Purchased Assets
other than in the ordinary course of business consistent with past
practices;
8.2.2 Business Changes. Change in any material respect the
character of the Business;
8.2.3 Incurrence of Material Obligations. Incur any
material fixed or contingent obligation or enter into any material
agreement, commitment or other transaction or arrangement, commitment
or other transaction or arrangement that is not in the ordinary course
of business consistent with past practices and with respect to which
Purchaser will be bound subsequent to Closing;
8.2.4 Incurrence of Liens. Subject to lien, security
interest or any other Encumbrance, other than Permitted Encumbrances,
any of the Purchased Assets;
8.2.5 Change in Employee Compensation and Benefits.
Increase the rate of compensation paid, or pay any bonus, to anyone
connected with the Business, except for the bonus of $50,000 payable
to Shirley Davis and such other increases or bonuses planned, in the
ordinary course of business consistent with past practices, or
establish or adopt any new pension or profit-sharing plan, deferred
compensation agreement or employee benefit arrangement of any kind
whatsoever covering or affecting Employees;
8.2.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this
Agreement or the transactions contemplated hereby;
8.2.7 No Release. Except in the ordinary course of
business consistent with past practices, (i) cancel, release or
relinquish any material debts of or claims against others held by
Seller with respect to the Business or (ii) waive any material rights
relating to the Business; and
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8.2.8 No Termination or Modification. Except in the
ordinary course of business consistent with past practices, terminate
or materially modify any material contract or permit (including,
without limitation, those items listed on Schedule 1.56 and Schedule
2.1.3) or other authorization or agreement affecting, after the
Closing, the Purchased Assets or the Business or the operation
thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing
of any fact that, if known at the Closing Date, would have been
required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach by Purchaser or Seller
of any of its representations, warranties, covenants or agreements
hereunder;
9.1.2 Compliance with Agreement. Not undertake any course
of action inconsistent with satisfaction of the conditions applicable
to it set forth in this Agreement, and Purchaser shall use its best
efforts to do all such acts and take all such measures as may be
reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement;
9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title
searches and surveys of the Real Property, environmental assessments
and audits and engineering surveys, as Purchaser deems necessary in
connection with the acquisition of the Purchased Assets or the
Business; and
9.1.4 Seller's Employees. Take all reasonable steps to
ensure the transfer of employment of the Employees listed on Schedule
1.21 and who are offered employment and who elect to continue their
employ with Purchaser as are able to be accomplished prior to or on
the Closing Date.
9.2 Investigation. Purchaser shall use reasonable efforts to
conduct an investigation of the Business of Seller in such a manner as to
prevent disruption of relations with the Employees, residents and suppliers of
Seller, which investigation shall include such due diligence as is customary
for transactions of the type contemplated herein. Such investigation shall be
(i) conducted by Purchaser and its representatives (including Purchaser's
lender) in Seller's presence; and (ii) scheduled with Seller's prior approval.
9.3 Approvals, Consents. Purchaser shall use its best efforts to
obtain in writing as promptly as possible any approvals and consents as
required to be obtained by Purchaser in order to effectuate the transactions
contemplated hereby and deliver to Seller copies of such approvals and
consents. Accordingly, Purchaser use best efforts to obtain the necessary
licenses to operate
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each of the Facilities from the Department of Public Welfare, Division of
Personal Care Homes, including:
(i) providing notice to each applicable Accreditation
Body and Third Party Payor as required by any Legal
Requirement of the pending change of ownership of
each of the Facilities; and
(ii) providing such other notices as required by all
Legal Requirements including, if required, (a)
notices to the Facilities' residents and (b) notices
to referral and human service agencies. Prior to
sending the notices referred in clauses (i) and (ii)
of this Section 9.3, Purchaser shall provide copies
to Seller for review and approval, which approval
shall not be unreasonably withheld.
9.4 Publicity; Advertisement. Except as required by law, Purchaser
shall not publicize, advertise or announce to any third-party, except as
required pursuant to this Agreement to obtain the consent of such third-party,
the entering into of this Agreement, the terms of this Agreement or the
transactions contemplated hereby; provided, however, the foregoing shall not be
applicable to disclosures made by Purchaser to Purchaser's lender in response
to such lender's requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with Closing under this
Agreement is subject to the fulfillment prior to the specified date or, if no
date is specified, at the time of Closing of the following conditions with
respect to Seller, any one or more of which may be waived in whole or in part
by Purchaser:
10.1 Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement and the
Ancillary Agreements to which Seller is to become a party shall have been true
in all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to be performed or complied with by it at or prior to the
Closing Date or by such other date specifically set forth herein.
10.3 Seller's Certificate. Purchaser shall have received a
certificate from Seller, dated as of the Closing Date, reasonably satisfactory
in form and substance to Purchaser and its lender, certifying as to the matters
specified in Section 10.1 and Section 10.2 hereof. The matters set forth in
such certificate shall constitute representations and warranties of Seller
hereunder.
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10.4 Injunction. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
administrative proceeding by any Governmental Authority or other Person shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby or which if successfully asserted would
have a material adverse effect on the conduct of the Business or impose any
additional material financial obligation on, or require the surrender of any
material right by, Purchaser.
10.5 Actions and Proceedings. With respect to Seller, all actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental hereto and all other related legal
matters shall be reasonably satisfactory to counsel for Purchaser, and such
counsel shall have been furnished with such certified copies of such actions
and proceedings and such other instruments and documents as it shall have
reasonably requested.
10.6 Consents. Any third-party consents, approvals, authorizations
or Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.7 Business Investigation. At its sole cost and expense,
Purchaser shall have completed its investigation, as contemplated in Section
9.2, the results of which shall be satisfactory to Purchaser in its sole
discretion, on or before September 15, 1997.
10.8 Physical Inspection. At its own cost and expense, Purchaser
shall have inspected and approved on or before August 8, 1997, the physical
condition of the Real Property including the improvements and the HVAC,
electrical, plumbing and other systems, and shall receive the written report in
form and substance satisfactory to Purchaser from a qualified engineering firm
approved by Purchaser or any engineer employed by Purchaser to the effect that
the improvements on the Real Property have been constructed in compliance with,
and currently are in compliance with, all governmental requirements, including
without limitation the Americans With Disabilities Act, and with all
restrictions of record applicable thereto which materially affect the
Purchaser's intended use of the Real Property. Purchaser acknowledges that the
condition in this Section 10.8 has been satisfied.
10.9 Environmental Report. At its own cost and expense, Purchaser
shall have obtained, on or before September 15, 1997 a written report from a
qualified geotechnical or engineering firm or other environmental consultant,
in a form and substance, satisfactory to Purchaser, concerning the presence,
handling, treatment and disposal of Regulated Substances on in or under the
Real Property and the presence of asbestos on, in or under any of the
improvements thereon and disclosing (i) the results of a review of prior uses
of the Real Property and the Facility disclosed by local public records,
including the chain of title; (ii) contacts with local officials to determine
whether any records exist with respect to the disposal of Regulated Substances
on the Real Property or the use of asbestos in the construction of the
improvements
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thereon; and (iii) if recommended to or required by Purchaser, soil samples and
groundwater samples consistent with good engineering practice.
10.10 Title Insurance. Purchaser shall have obtained for all Real
Property final marked commitments to issue to Purchaser, at Purchaser's sole
cost and expense, ALTA (1990-Form B with appropriate state endorsements) owner's
and/or leasehold policies of title insurance in coverage amounts equal to the
fair market values of such Real Property, insuring good and marketable title to
such Real Property with mechanic's liens coverage and such other endorsements as
Purchaser or its lender may reasonably request and with exceptions only for ALTA
standard printed exceptions (other than mechanic's and materialmen's liens and
rights of possession) and Permitted Encumbrances.
10.11 Purchaser shall have received on or before September 26, 1997
the certificate required under Section 8.1.16 hereof.
10.12 Closing Documents. Purchaser shall have received the other
documents referred to in Section 5.2 which shall be in form and substance
satisfactory to Purchaser in its reasonable discretion.
10.13 Other Deliveries. At its own cost and expense, Purchaser shall
have received with respect to the Real Property:
10.13.1 Surveys. On or before September 15, 1997, surveys of
such property which conform to the standards set forth in the
ALTA/American Congress on Surveying and Mapping Minimum Standard
Detail Requirements for Land Title Surveys and which disclose no state
of facts inconsistent with the representations and warranties of
Seller set forth in Section 6.9 hereof and are otherwise acceptable to
Purchaser;
10.13.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to
Purchaser's title insurer regarding title, mechanic's liens and such
other customary matters as may be reasonably requested by Purchaser or
Purchaser's title insurer; and
10.13.3 FIRPTA Certificates. A certificate, duly executed
and acknowledged by Seller under penalties of perjury, in the form
prescribed by Treasury Regulation Section 1.1445-2(b)(2)(iii), stating
Seller's name, address and Federal tax identification number, and that
Seller is not a "foreign person" within the meaning of Section 1445 of
the Code.
10.13.4 Zoning. Purchaser shall have received by September
15, 1997 confirmation from the necessary governmental authorities or
otherwise satisfied itself and its lender that the applicable zoning
ordinances and other applicable land use regulations, if any, permit
the use of the Real Property as a personal care home as licensed by
the Pennsylvania Department of Public Welfare.
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10.14 Financing. Purchaser shall have received on or before
September 15, 1997, on terms that shall be satisfactory to Purchaser in its
sole discretion, a written binding commitment from a real estate investment
trust or other financing source in an amount sufficient to enable Purchaser to
pay the Purchase Price in full.
10.15 Authorization. On or before September 15, 1997, Purchaser
shall have obtained approval of the transactions contemplated herein by its
board of directors and shareholders (if necessary).
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with the Closing under this
Agreement is subject to the fulfillment prior to the specified date or, if no
date is specified, at the time of Closing of the following conditions with
respect to Purchaser, any one or more of which may be waived in whole or in
part by Seller:
11.1 Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained in this Agreement shall
have been true in all material respects on the date hereof and shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in
all material respects all obligations and agreements and complied in all
material respects with all covenants and conditions contained in this Agreement
to be performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a
certificate from Purchaser, dated as of the Closing Date, reasonably
satisfactory in form and substance to Seller and its counsel, certifying as to
the fulfillment of all matters specified in Section 11.1 and Section 11.2
hereof. The matters set forth in such certificate shall constitute
representations and warranties of Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser, certifying:
(i) That the execution and delivery of this Agreement
and the Ancillary Agreements and the performance by
Purchaser of the transactions contemplated hereby
and thereby have been duly authorized by corporate
resolution and all other necessary corporate action
of Purchaser, and no further action or approval is
required in order that this Agreement be binding
upon or enforceable against Purchaser;
(ii) The name and office held by each officer or
representative of Purchaser executing this
Agreement, the certificate referred to in Section
11.3 and the Ancillary Agreements to which Purchaser
is a party, and that each such officer is duly and
currently elected by Purchaser and authorized to
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execute the Agreement, said certificate, and the
Ancillary Agreements on its behalf; and
(iii) That the governing documents of Purchaser delivered
pursuant to Section 11.6 were in effect on the date
of said resolution, the date of execution of this
Agreement and the Closing Date.
11.5 Injunction. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
administrative proceeding by any Governmental Authority or other Person shall
have been instituted, threatened or anticipated which questions the validity or
legality of the transactions contemplated hereby or which, if successfully
asserted, would have a material adverse affect on Seller, or either of them, by
the imposition of any additional material financial obligation on, or
requirement of the surrender of any material right by, either Seller.
11.6 Actions and Proceedings. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental hereto and all other related legal matters
shall be reasonably satisfactory to counsel for Seller, and such counsel shall
have been furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have
reasonably requested, including, without limitation:
(i) certificates of the appropriate public officials to
the effect that Purchaser is a validly existing
corporation in good standing in its state of
incorporation as of a date not more than 10 days
prior to the Closing Date;
(ii) incumbency and specimen signature certificates dated
the Closing Date, signed by the officers of
Purchaser and certified by its Secretary; and
(iii) true and correct copies of (A) the charter documents
of Purchaser as of a date not more than 10 days
prior to the Closing Date, certified by the
Secretary of State of its state of incorporation and
(B) the bylaws of Purchaser as of the Closing Date,
certified by the Secretary of Purchaser.
11.7 Copies of Reports. Seller shall have received, on or before
August 15, 1997, copies of all reports, certificates, instruments and other
information obtained by or on behalf of Purchaser under Sections 10.8, 10.9,
10.10 and 10.13 hereof.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that
for a period of three years after the Closing Date, Seller will not solicit for
employment by such Seller or any Affiliates any Person who is an Employee of
the Business as of the Closing Date.
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12.2 Noncompetition. For a period of three years following the
Closing Date, Seller will not, directly or indirectly, unless acting in
accordance with Purchaser's written consent, own, manage, operate, finance or
participate in the ownership, management, operation or financing of or permit
its name to be used by or in connection with any business or enterprise engaged
in the Business acquired by Purchaser hereunder and located within a 25-mile
radius of the Facility. Seller acknowledges that the provisions of this
Section are reasonable and necessary to protect the interests of Purchaser,
that any violation of this Section will result in an irreparable injury to
Purchaser and that damages at law would not be reasonable or adequate
compensation to Purchaser for violation of this Section and that, in addition
to any other available remedies, Purchaser shall be entitled to have the
provisions of this Section specifically enforced by preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting a
bond or other security to an equitable accounting of all earnings, profits and
other benefits arising out of any violation of this Section. In the event that
the provision of this Section shall ever be deemed to exceed the time,
geographic scope or other limitations permitted by applicable law, then the
provisions shall be deemed reformed to the maximum extent permitted by
applicable law. Notwithstanding the foregoing, either Seller may own up to 5%
of the outstanding stock of a publicly traded company engaged in the Business
acquired by Purchaser hereunder and located within a 25-mile radius of the
Facility.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate in an effort to effect an orderly
transition of the Employees who accept employment with Purchaser.
12.4 Certain Transitional Matters.
12.4.1 Transfer of Assets. Seller agrees that Purchaser,
from and after the Closing Date, shall have the right and authority to
collect for Purchaser's own account all items which shall be
transferred to Purchaser as provided herein.
12.4.2 Endorsement of Checks. From and after the Closing
Date, Purchaser shall have the right and authority to retain and
endorse without recourse the name of Seller on any check or any other
evidence of indebtedness received by Purchaser on account of any of
the Purchased Assets.
12.4.3 Seller's Remittance of Funds. After the Closing
Date, Seller shall promptly transfer and deliver to Purchaser any cash
or other property, if any, that Seller may receive related to the
Purchased Assets other than the Excluded Assets.
12.4.4 Purchaser's Remittance of Funds. After the Closing
Date, Purchaser shall promptly transfer and deliver to Seller any cash
or other property, if any, that Purchaser may receive related to the
Excluded Assets.
12.4.5 Assumed Liabilities Controlled by Purchaser. From
and after the Closing, Purchaser shall have complete control over the
payment, settlement or other disposition of, or any dispute involving
any Assumed Liability for which Purchaser is fully liable under the
provisions of this Agreement, and Purchaser shall have the right to
conduct and
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control all negotiations and proceedings with respect thereto. Seller
shall notify Purchaser promptly of any claim made with respect to any
such Assumed Liability and shall not, except with the prior written
consent of Purchaser, voluntarily make any payment of, or settle or
offer to settle, or consent to any compromise with respect to, any
such Assumed Liability. Seller shall cooperate with Purchaser in
connection with any negotiations or proceedings involving any such
Assumed Liability. With respect to any dispute involving any Assumed
Liability for which both Parties are liable for a portion thereof, the
Parties shall cooperate with each other in good faith with respect to
the defense, payment, settlement, compromise or other disposition
thereof; provided, however, that if the Parties are unable to agree,
the Party with the largest potential liability shall control such
matter.
12.5 Audits. To the extent reasonably requested by Purchaser,
prior to the Closing Date, at Purchaser's cost and expense, Seller shall
cooperate and request Seller's accountants to cooperate, with Purchaser and its
auditors in the preparation of audited financial statements for the Facility
for the years ended December 31, 1996, 1995 and 1994 and for the period from
January 1, 1997 through the date of Closing, prepared in accordance with GAAP,
to the extent required, in connection with any registration statement or other
form filed by Purchaser with the Securities and Exchange Commission under the
Securities Act of 1933 for a public offering and sale of securities of
Purchaser.
12.6 Further Assurances of Seller. From and after the Closing
Date, Seller shall, at the request of Purchaser, execute, acknowledge and
deliver to Purchaser, without further consideration, all such further
assignments, conveyances, endorsements, deeds, special powers of attorney,
consents and other documents, and take such other action, as Purchaser may
reasonably request (i) to transfer to and vest in Purchaser, and protect its
rights, title and interest in, all the Purchased Assets and (ii) otherwise to
consummate the transactions contemplated by this Agreement. In addition, from
and after the Closing Date, Seller shall afford Purchaser and its attorneys,
accountants and other representatives access, during normal business hours, to
any Books and Records and other information relating to the Business that
Seller may retain, as may reasonably be required in connection with the
preparation of financial information or tax returns of Purchaser.
12.7 Further Assurances of Purchaser. From and after the Closing
Date, Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
and other information relating to the Business as may reasonably be required in
connection with the preparation of financial information or Tax Returns for
periods concluding on or prior to the Closing Date and/or in connection with
any other matter pertaining to the Business or the Purchased Assets which
relates, in whole or in part, to a period of time prior to the Closing Date.
Purchaser shall cooperate in all reasonable respects with Seller with respect
to its former interest in the Business and in connection with financial account
closing and reporting and claims and litigation asserted by or against third
parties, including, but not limited to, making Purchaser's employees available
at reasonable times to assist with, or provide information in connection with
financial account closing and reporting and claims and litigation, provided
that Seller reimburses Purchaser for its reasonable out-of-pocket expenses
(including costs of employees so assisting) in connection therewith.
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ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) By the mutual consent of Seller and Purchaser, in
which case the Deposit shall be returned by Seller
to Purchaser;
(ii) By Purchaser or Seller if Closing has not taken
place on or before October 3, 1997; provided,
however, if the Closing has not occurred by October
3, 1997, either Party shall have the right from and
after that date to declare time to be of the essence
by notice to the other Party; such notice to state
the time, date and location of Closing, which date
shall be no less than ten (10) nor more than twenty
(20) days from the date of such notice; and provided
further that no Party then in material breach of any
of its obligations hereunder shall have the right to
terminate. Except as provided in Section 3.1.1
hereof, upon termination under this Section
13.1(ii), the Deposit shall be returned by Seller to
Purchaser on or before October 23, 1997 or within
five days after the date Closing was to occur, as
specified in the notice provided in accordance with
this Section 13.1(ii), if Purchaser is the
non-breaching party, or shall be retained by Seller,
if Seller is the non-breaching party, as the case
may be;
(iii) By Purchaser upon notice to Seller if any of the
conditions set forth in Sections 10.1, 10.2, 10.3,
10.4, 10.5, 10.6, 10.11, 10.12, 10.13.2, 10.13.3 or
10.13.4 hereof have not been materially satisfied or
become impossible to satisfy by the specified date
or the Closing Date, as the case may be (other than
by reason of the material failure of Purchaser to
fulfill its obligations under this Agreement).
Except as provided in Section 3.1.1 hereof; upon
termination under this Section 13.1(iii), the
Deposit shall be returned to Purchaser by Seller
within five days of said notice by Purchaser;
(iv) By Purchaser upon notice to Seller given on or
before September 18, 1997, time being of the
essence, that any of the conditions specified in
Sections 10.9, 10.10, 10.13.1, 10.14, or 10.15 have
not been materially satisfied or become impossible
to satisfy by the specified date or by October 3,
1997, as the case may be (other than by reason of
the material failure of Purchaser to fulfill its
obligations under this Agreement). Upon termination
under this Section 13.1(iv), the Deposit shall be
retained by Seller.
(v) By Seller upon notice to Purchaser if any of the
conditions set forth in Article XI hereof have not
been satisfied or become impossible to satisfy by
October 3, 1997 (other than by reason of the
material
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failure of such Seller to fulfill its obligations
under this Agreement). Except as provided in Section
3.1.1 hereof, upon termination under this Section
13.1(v), the Deposit shall be retained by Seller;
(vi) By Seller if Purchaser materially breaches or fails
to fulfill its obligations under this Agreement,
which failure continues and remains uncured for 30
consecutive calendar days after such Seller gives
written notice of such failure to Purchaser. Except
as provided in Section 3.1.1 hereof, upon
termination under this Section 13.1(vi), the Deposit
shall be retained by Seller; and
(vii) By Purchaser if either Seller materially breaches or
fails to fulfill its obligations under this
Agreement, which failure continues and remains
uncured for 30 consecutive calendar days after
Purchaser gives written notice of such failure to
such Seller. Except as provided in Section 3.1.1
hereof, upon termination under this Section
13.1(vii), the Deposit shall be returned to
Purchaser by Seller within five days after said 30th
calendar day.
The provisions of clauses (vi) and (vii) to the contrary
notwithstanding, if the cure period specified in those clauses would extend
beyond the Closing Date specified in a "time of the essence" notice given under
clause (ii) of this Section 13.1, such cure period shall terminate on the
Closing Date so specified.
13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party or, with the agreement of the other Party, shall destroy all documents
and copies thereof which shall have been furnished to it by such other Party,
if any, or, as to documents pertaining to Seller, which were otherwise obtained
by Purchaser in the course of its due diligence.
13.3 Remedies. If Seller or Purchaser defaults hereunder, the
non-breaching Party shall be entitled to (a) retention or return, as the case
may be, of the Deposit, in accordance with the provisions of Section 13.1
hereunder; and (b) reimbursement from breaching Party for all out-of-pocket
expenses and reasonable attorneys' fees, but in no event more than $20,000. It
is understood and agreed that the non-breaching Party's actual damages in such
event will be difficult to ascertain and that the foregoing represents a
reasonable liquidation thereof. Upon payment of the above sums and the return
of the documents under Section 13.2, this Agreement shall terminate and neither
Party shall have any further liability to the other hereunder. The foregoing to
the contrary notwithstanding, if Seller shall willfully and materially default
hereunder, Purchase shall, in lieu of its remedies above stated, have the right
to seek specific performance.
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ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All
representations and warranties of the Parties shall survive for two (2) years
after the Closing Date (the "Survival Period"); provided that there shall be no
termination of any specific representation or warranty as to which a claim has
been asserted prior to the termination of such Survival Period until the
ultimate disposition of such claim. Except as otherwise expressly provided in
this Agreement, all covenants, agreements, undertakings and indemnities set
forth in this Agreement shall survive indefinitely.
14.2 Indemnification by Seller. Seller shall respectively
indemnify, defend, save and hold Purchaser, its successors and assigns, and
their officers, directors, employees, agents and Affiliates (collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations, assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
attorneys' fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing and whether or not
any such demands, claims, allegations, etc., of third parties are meritorious;
collectively, "Purchaser Damages") asserted against, imposed upon, resulting
to, required to be paid by, or incurred by any Purchaser Indemnitees, directly
or indirectly:
(i) in connection with, arising out of, or which would not have
occurred but for (A) a material breach of any representation or
warranty made by Seller in this Agreement, any certificate or document
furnished pursuant hereto or any Ancillary Agreement to which Seller is
or is to become a party; (B) a material breach or nonfulfillment of any
covenant or agreement made by Seller in or pursuant to this Agreement
and in any Ancillary Agreement to which Seller is or is to become a
party; or (C) Seller's failure to pay any Retained Liability;
(ii) that arise as a result of the presence in, on or under the
Real Property, or in, on or under the buildings, structures,
improvements or fixtures located thereon, of any toxic or Hazardous
Substances, including but not limited to asbestos: (a) not known to
Purchaser, including by virtue of the report referred to in Section
10.9 hereof; (b) placed during Seller's ownership of the Real Property;
and (c) the presence of which Seller is notified by Purchaser in
writing within two years from the Closing Date. Without limiting the
generality of the foregoing, Seller's indemnity obligation shall
include costs incurred in connection with any site investigation or any
remedial, removal, or restoration work, required by any local, state,
or federal agency because of the presence of Hazardous Substances in,
on or under the said Real Property, or in on or under the said
building, structure, improvements or fixtures located thereon, whether
in the soil, groundwater, air, or any other receptor: (a) not known to
Purchaser, including by virtue of the report referred to in Section
10.9 hereof; (b) placed during Seller's ownership; and (c) of which
Seller is notified in writing by Purchaser within two years from the
Closing Date, but
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shall not include incidental or consequential damages. Notwithstanding
the foregoing, toxic or Hazardous Substances emitted, released or
placed on the Real Property as a result of Seller's removal, pursuant
to Section 8.1.16 hereof; of that certain underground storage tank
identified in said report and referred to in Section 8.1.16, do not and
would not constitute a toxic or Hazardous Substance known to Purchaser
by virtue of said report. With respect to any matters in this Section
14.2(ii), Purchaser shall bear the burden of proving that the presence
of any such toxic or Hazardous Substances originated or was placed in,
on or under the Real Property or in, on or under the buildings,
structures, improvements or fixtures located thereon during Seller's
ownership of the Property; and
(iii) that arise as a result of Seller's failure to pay any federal,
state or local tax attributable to a period prior to Closing, whether
or not then assessed, including but not limited to income tax,
corporate tax, employee withholding or other tax or any other fee,
assessment, or liability, which failure results in or could result in
the imposition of a lien on the Real Property or on any of the
Purchased Assets.
14.3 Indemnification by Purchaser. Purchaser shall indemnify,
defend, save and hold each Seller and their respective heirs, executors and
administrators, as the case may be (collectively, "Seller Indemnitees")
harmless from and against all demands, claims, allegations, assertions, actions
or causes of action, assessments, losses, damages, deficiencies, liabilities,
costs and expenses (including reasonable attorneys' fees, interest, penalties,
and all reasonable amounts paid in investigation, defense or settlement of any
of the foregoing and whether or not any such demands, claims, allegations,
etc., of third parties are meritorious; collectively, "Seller Damages")
asserted against, imposed upon, resulting to, required to be paid by, or
incurred by any Seller Indemnitees, directly or indirectly, in connection with,
arising out of, or which would not have occurred but for (i) a breach of any
material representation or warranty made by Purchaser in this Agreement, any
certificate or document furnished hereunder, or any Ancillary Agreement to
which Purchaser is a party; (ii) a material breach or nonfulfillment of any
covenant or agreement made by Purchaser in or pursuant to this Agreement and in
any Ancillary Agreement to which Purchaser is a party; and (iii) Purchaser's
failure to pay any Assumed Liability.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the party or parties from
whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit.
Upon receipt of such notice from the Indemnified Party, the
Indemnifying Party shall be
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obligated promptly to litigate, defend, contest or otherwise protect against
any such action or suit at the expense of the Indemnifying Party. In any such
case, the Indemnifying Party shall have the right to control the conduct of
defense of the matter for which indemnification has been claimed and shall be
entitled to the cooperation of the Indemnified Party, provided however, that if
Seller is the Indemnifying Party, Seller shall not permit to exist and shall
promptly discharge any Encumbrance against any asset of the Purchaser, arising
out of any Purchaser Damages for which Seller is liable to indemnify Purchaser
under Section 14.2, upon notice of such Encumbrance.
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Further, the Indemnifying Party shall not consent to any settlement that does
not include as an unconditional term thereof the complete release from
liability with respect to such action or suit to the Indemnified Party. If the
Indemnifying Party fails to timely respond or take such action as may be
otherwise suitable to protect against any such action or suit, the Indemnified
Party shall have the right, but not the obligation, to litigate, defend, contest
or otherwise protect against the same, and recover the entire cost thereof from
the Indemnifying Party, including the reasonable attorneys' fees, and all
amounts whatsoever paid as a result of such action or suit.
Any provision hereof to the contrary notwithstanding (a) if Damages
are validly asserted by the Indemnified Party because of any material
inaccuracy in any representation or warranty made by the Indemnifying Party, or
breach of any material obligation hereunder or under any Ancillary Agreement by
the Indemnifying Party, but which do not involve any third party action or
suit, the Indemnifying Party shall have the obligation to pay only such amount,
or take such action, as is necessary to make such representation or warranty
materially accurate, or to materially cure such breach, together with
reimbursement to the Indemnified Party for any reasonable incidental and
consequential damages suffered as result; (b) in all instances where the
Indemnified Party shall claim Damages, or having the potential to cause Damages
it shall have the obligation to mitigate such Damages; (c) the indemnification
obligations of the Parties shall apply only to the occurrence of any event
giving rise to Damages to the other party for which a claim is asserted before
termination of the Survival Period; and (d) any inaccuracy of any
representation or warranty made by either Party, or any breach of any provision
of this Agreement or any Ancillary Agreement by either Party, shall be deemed
to be waived by the other Party if such other Party has actual knowledge of
such inaccuracy or breach, as the case may be, but nonetheless proceeds to the
Closing of the transactions contemplated hereby.
14.5 Other Remedies. The indemnification rights of any Indemnified
Party under this Article XIV are independent of and in addition to such rights
and remedies as such Indemnified Party may have at law, in equity or otherwise
for any misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement under or in connection with this Agreement on the part of
any Party, none of which rights or remedies shall be affected or diminished
hereby.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 Publicity. All notices to third-parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by and among Purchaser and Seller. Except as
may be required by law, no Party shall act unilaterally in this regard without
prior written approval of every other Party, such approval not be unreasonably
withheld.
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15.3 Waivers. The waiver by any Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors, assigns, heirs, executors, administrators and
legal representatives. Nothing in this Agreement, express or implied, is
intended to confer on any Person other than the Parties hereto, or their
respective successors, assigns, heirs, executors, administrators and legal
representatives any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which any Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class mail,
postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to have been given as of the
date so delivered or electronically transmitted or two days after mailing
thereof.
15.5.1 Notice to Seller.
Kenneth A. Feltrop
108 McBride Road
Beaver Falls, PA 15010
FAX: N/A
Phone: (412) 846-5117
Delores J. Nahar
147 Lihi Road
Darlington, PA 16115
Phone: (412) 847-9236
With a required copy to:
Lee Harris
2BeMA Network, Inc.
50 Pacific Avenue Mall
San Francisco, CA 94111
FAX: ___________________
Phone: ___________________
Louis A. Prosperi, Esq.
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Suite 3601 Grant Building
301 Grant Building
Pittsburgh, PA 15219
15.5.2 Notice to Purchaser.
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Fax: (717) 796-6150
Attn: Karen N. Connelly, Esquire
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: John C. Rodney, Esquire
Or to such other addresses as such Party shall have specified by notice to
every other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the provisions hereof or thereof shall be binding
upon any Party unless set forth in an instrument in writing signed by the Party
to be bound or their respective successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained
in this Agreement are for reference purposes only and shall not be deemed to be
a part of this Agreement or to affect the meaning or interpretation of this
Agreement.
15.9 Construction. Within this Agreement, the singular shall
include the plural and the plural shall include the singular, and any gender
shall include all other genders, all as the meaning and the context of this
Agreement shall require.
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15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the Commonwealth of Pennsylvania. All claims,
disputes or causes of action relating to or arising out of this Agreement shall
be brought, heard and resolved solely and exclusively by and in state court
situated in Beaver County, Pennsylvania. The Parties hereto agree to submit to
the jurisdiction of such courts and agree that such jurisdiction shall be
proper for all purposes of this Agreement.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
permitted successors, assigns, heirs, executors, administrators and legal
representatives. Seller shall not assign, or otherwise transfer any interest in
this Agreement to any other Person without the prior written consent of
Purchaser, which consent shall not unreasonably be withheld. Purchaser may
assign and transfer its interest in this Agreement without Seller's consent to
any of Purchaser's Affiliates or to any lender providing financing for the
transactions contemplated hereby. In addition, Purchaser anticipates financing
the transactions contemplated hereby through sale-leaseback(s). Purchaser shall
have the right to assign this Agreement, in whole or in part, in such manner as
Purchaser may desire in order to facilitate such sale-leasebacks. Purchaser
will promptly provide Seller with a copy of any such assignment, and Seller
agrees to execute and deliver any consents reasonably required by Purchaser's
lender in connection therewith, provided such assignment does not expand either
of Seller's respective obligations. and liabilities. hereunder. Notwithstanding
any permitted assignment of this Agreement by Purchaser, Purchaser shall remain
liable to Seller for all obligations and liabilities to be performed by or on
behalf of Purchaser hereunder with respect to such Seller.
15.14 Fire or Other Damage. If, prior to the Closing, all or any
part of the Real Property is damaged by fire or other casualty, Seller shall
promptly notify Purchaser of such event. Purchaser shall then have the right
to terminate this Agreement by notice to Seller given within twenty (20) days.
of Seller's notice to Purchaser, time being of the essence. If Purchaser elects
to so terminate this Agreement, the Deposit shall be returned to Purchaser and
both Parties shall be relieved and released of and from any further liability
hereunder. If Purchaser shall elect not to terminate this Agreement, or shall
be deemed to have elected to not terminate this Agreement by
45
<PAGE> 48
failure to give timely notice as provided above, the Closing shall occur in
accordance with the Agreement, without abatement of the Purchase Price or any
liability or obligation on the part of Seller by reason of such casualty, and
Seller shall assign to Purchaser the insurance proceeds, if any, to which
Seller would otherwise be entitled.
15.15 Condemnation. If prior to the Closing all or any of the Real
Property is taken by eminent domain, Seller shall promptly give Purchaser
notice thereof and the following shall apply:
(a) If a material part thereof is taken, either party may, by
notice to the other, elect to cancel this Agreement prior to the
Closing Date. If either Party shall so elect, both Parties shall be
relieved and released of and from any further liability hereunder, and
the Deposit shall be returned to Purchaser. If neither party shall so
elect, the Closing shall occur in accordance with this Agreement,
without abatement of the Purchase Price or any liability or obligation
on the part of Seller by reason of such taking; provided, however,
that Seller shall, at the Closing deliver to Purchaser any net
proceeds of such taking which may have been collected by Seller as a
result of such taking, or if no award or other proceeds shall have
been collected, Purchaser shall have the sole right to receive any
such award or other proceeds which are payable as a result of such
taking.
(b) If a minor or immaterial part thereof is taken, neither Party
shall have the right to terminate this Agreement and the Closing shall
nonetheless occur in accordance with this Agreement; however, the
provisions of the last sentence of clause (a), above shall apply.
IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
PURCHASER:
BALANCED CARE CORPORATION
By: /s/ BRIAN L. BARTH
------------------
Brian L. Barth
Vice President
SELLER:
/s/ DELORES FELTROP NAHAR
-------------------------
Delores Feltrop Nahar,
a/k/a Delores J. Nahar, individually
and d/b/a/ Feltrop Personal Care Home
/s/ ALBERT L. NAHAR
-------------------
Albert L. Nahar
/s/ KENNETH A. FELTROP
----------------------
Kenneth A. Feltrop, individually
and d/b/a/ Feltrop Personal Care Home
/s/ LORI L. FELTROP
-------------------
Lori L. Feltrop
46
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BALANCED CARE CORPORATION
* * * * *
1. The name of the Corporation is Balanced Care Corporation.
The Corporation's original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on April 17, 1995.
2. This Amended and Restated Certificate of Incorporation
restates and integrates and also further amends in certain respects the
Corporation's Amended and Restated Certificate of Incorporation.
3. This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the applicable provisions of Sections 242 and
245 of the General Corporation Law of the State of Delaware.
* * * * *
FIRST: The name of the Corporation is
BALANCED CARE CORPORATION
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, Wilmington, New
Castle County, Delaware. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Sixty-One Million One Hundred Sixty
Thousand Seven Hundred Eight (61,160,708) shares, which shall be divided into
two classes as follows:
1. Fifty Million (50,000,000) shares of Common Stock, the par
value of each of which shares is One Tenth of One Cent ($0.001),
amounting in the aggregate to Fifty Thousand Dollars ($50,000.00); and
2. Eleven Million One Hundred Sixty Thousand Seven Hundred
Eight (11,160,708) shares of Preferred Stock, the par value of each of
which shares is One-Tenth of One Cent ($0.001), amounting in the
aggregate to Eleven Thousand One Hundred Sixty Dollars Seventy One
Cents ($11,160.71), of which One Million One Hundred Fifty Thousand
Nine Hundred Fifty-Eight (1,150,958) shall be shares of Series A
Convertible Preferred Stock (the "Series A Preferred") and Five Million
Nine Thousand Seven Hundred Fifty (5,009,750) shall be shares of Series
B Convertible Preferred Stock
<PAGE> 2
(the "Series B Preferred") having such voting powers, full or limited,
or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as are provided in paragraphs A
and B below, respectively, and Five Million (5,000,000) shall be shares
of Preferred Stock as to which the Corporation's board of directors is
hereby expressly authorized to provide by resolution or resolutions
from time to time for issuance in one or more series, the shares of
each of which series may have such voting powers, full or limited, or
no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be permitted under the
General Corporation Law of the State of Delaware and as shall be stated
in the resolution or resolutions providing for the issue of such stock
adopted by the board of directors pursuant to the authority expressly
vested in the board of directors hereby.
A. Series A Preferred.
SECTION 1. Ranking. The Series A Preferred shall rank junior
to the Series B Preferred for all purposes, including without
limitation as to (i) the declaration and payment of dividends, (ii) the
distribution of assets or winding-up on a complete or partial
liquidation of the Corporation and (iii) the redemption of outstanding
shares.
SECTION 2. Dividends. The holders of the Series A Preferred
shall be entitled to receive, out of funds legally available therefor,
dividends at the same rate as dividends (other than dividends paid in
additional shares of Common Stock) are paid with respect to the Common
Stock (treating each share of Series A Preferred as being equal to the
number of shares of Common Stock (including fractions of a share) into
which each share of Series A Preferred is then convertible).
SECTION 3. Redemption. Shares of the Series A Preferred shall
be redeemable, at the Corporation's election, in whole or in part, at
any time and from time to time. Any redemption by the Corporation shall
be at the cash redemption price of $2.00 per share of Series A
Preferred, together in each case with declared but unpaid dividends
thereon, if any, to the date fixed for redemption.
If less than all of the outstanding shares of the Series A
Preferred not previously called for cash redemption are to be redeemed,
shares to be redeemed shall be selected by the Corporation from
outstanding shares not previously called for cash redemption by lot or
pro rata as determined by the Board of Directors of the Corporation.
Any shares of Series A Preferred redeemed or purchased or otherwise
acquired by the Corporation in any manner whatsoever shall not be
reissued as Series A Preferred and shall be retired and canceled
promptly after the acquisition thereof.
Notice of every redemption under this Section 3, which notice
is effective upon mailing, shall be mailed by registered mail not less
than twenty (20) business days in advance of the date designated for
such redemption to the holders of record of the shares of Series A
Preferred to be redeemed at their respective addresses as the same
shall appear on the books of the Corporation.
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<PAGE> 3
Every notice of redemption under this Section 3 shall be
accompanied by an officers' certificate certifying all facts which are
conditions precedent to such redemption.
SECTION 4. Voting. Except as otherwise required by law and as
specified in this Section 4, the holders of shares of the Series A
Preferred shall have the right and power to vote on any question or in
any proceeding or to be represented at or to receive notice of any
meeting of common stockholders. Unless otherwise required by law, on
any matters on which the holders of the Series A Preferred shall be
entitled to vote, they shall vote together with the holders of the
Common Stock as a single class, and each holder of Series A Preferred
shall be entitled to that number of votes per share of Series A
Preferred held as is equal to the number of shares of Common Stock into
which a share of Series A Preferred could be converted in accordance
with Section 5 hereof on the record date of the meeting at which such
vote is being taken, or if there is no meeting then on the date such
vote is taken.
SECTION 5. Liquidation. In the event of any complete or
partial liquidation, dissolution, distribution of assets or winding-up
of the Corporation, whether voluntary or involuntary, after the holders
of shares of the Series B Preferred shall have been paid in full as
hereinbelow provided, the holders of shares of the Series A Preferred
shall each be entitled to receive out of the assets of the Corporation,
whether such assets are capital or surplus, for each share of the
Series A Preferred a sum equal to $2.00 plus declared but unpaid
dividends thereon, if any, to the date of such liquidation,
dissolution, distribution of assets or winding-up for the purposes
hereof before any distribution shall be made to the holders of Junior
Stock of the Corporation, as defined herein, and if the assets of the
Corporation shall be insufficient to pay in full such amounts, then
such assets shall be distributed among the holders of the Series A
Preferred ratably in accordance with the respective amounts which would
be payable on such shares if all amounts payable thereon were paid in
full. Neither the merger or consolidation of the Corporation, nor the
sale of all or part of its assets, shall be deemed a liquidation,
dissolution or winding-up of the affairs of the Corporation within the
meaning of the foregoing provisions of this Section 5 provided that the
consolidation, merger or sale does not adversely affect the rights of
the Series A Preferred. For purposes hereof, Junior Stock shall mean
the Common Stock and any other class of stock of the Corporation
hereafter authorized over which the Series A Preferred shall have
precedence or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding-up of
the Corporation.
SECTION 6. Conversion Rights. Each share of the Series A
Preferred shall be convertible (i) at the option of the record holder
thereof at any time prior to redemption, by presentation of the
certificate representing such share by the record holder in person or
by registered mail, return receipt requested with postage prepaid
thereon, at the office of the Corporation located in Mechanicsburg,
Pennsylvania, and at such other offices, if any, as the Board of
Directors may determine; or (ii) automatically, upon the closing of a
public offering of shares of the Corporation's Common Stock, registered
under the Securities Act of 1933, as amended (the "IPO"), by virtue of
the consummation of such IPO and without any further action on the part
of the holder of the Series A Preferred; into the number of shares of
fully paid and nonassessable shares of Common Stock determined by
dividing the amount of $2.67 by the conversion price in effect at the
time of conversion. The conversion price initially shall be $2.67 (the
"Conversion Price") and shall be subject to adjustment from time to
time as follows:
3
<PAGE> 4
(a) If the Corporation, at any time while any shares of Series
A Preferred are outstanding, shall pay a dividend payable in Common
Stock, then the Conversion Price shall be adjusted, as of the date that
the Corporation shall take a record of the holders of its Common Stock
for the purpose of effecting such dividend (or if no such record is
taken, as of the date of such payment), to that price determined by
multiplying the Conversion Price in effect immediately prior to such
record date by a fraction (i) the numerator of which shall be the total
number of shares of the Common Stock outstanding immediately prior to
such dividend, and (ii) the denominator of which shall be the total
number of shares of the Common Stock outstanding immediately after such
dividend.
(b) If the Corporation, at any time while any shares of Series
A Preferred are outstanding, shall subdivide the Common Stock, the
Conversion Price shall be proportionately reduced as of the effective
date of such subdivision, or if the Corporation shall take a record of
holders of the Common Stock for the purpose of so subdividing, as of
such record date, whichever is earlier.
(c) If the Corporation, at any time while any shares of Series
A Preferred are outstanding, shall otherwise than by virtue of Article
FIFTH combine the Common Stock, the Conversion Price shall be
proportionately increased as of the effective date of such combination
or, if the Corporation shall take a record of holders of the Common
Stock for the purpose of so combining, as of such record date,
whichever is earlier.
(d) If there is any reorganization, or reclassification of the
Common Stock, or merger or consolidation of the Corporation in which
the Corporation is not the surviving corporation, in lieu of the shares
of Common Stock theretofore issuable upon the exercise of the
conversion rights of the Series A Preferred, each holder of Series A
Preferred shall have the right to procure upon exercise of the
conversion rights of such Preferred Stock the kind and amount of shares
of stock, other securities, money and property which it would have
received at the time of such reclassification, reorganization, merger
or consolidation if such holder of Series A Preferred had exercised the
conversion rights of the Series A Preferred immediately prior to such
reclassification or reorganization. The provisions of this Section 6(d)
shall similarly apply to successive reorganizations, reclassifications,
mergers or consolidations.
(e) Notwithstanding anything to the contrary herein contained,
no adjustment of the Conversion Price shall be made if the amount of
such adjustment shall be less than $0.01 per share, but in such case
any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to $0.01 per share or more.
(f) Whenever the Conversion Price is adjusted as herein
provided and whenever a new Conversion Price becomes effective, a
notice stating that the Conversion Price has been adjusted and setting
forth the new Conversion Price and in reasonable detail the method of
calculation upon which such calculation is based shall forthwith be
prepared, and as soon as practicable after it is required, the
Corporation shall cause such notice to be mailed to the holders of the
Series A Preferred at their last addresses as they shall appear upon
the books of the Corporation.
4
<PAGE> 5
(g) In the event that the Conversion Price of the Series B
Preferred is reduced below $2.67 per share pursuant to Section 8(i)(ii)
of Article FOURTH (B), then the Conversion Price of the Series A
Preferred shall be reduced to the same price per share and shall
thereafter continue to be reduced in the same manner as the Series B
Preferred is so reduced. Reports of adjustments hereunder will be
issued to holders of Series A Preferred in the same manner as provided
in Section 9 of Article FOURTH (B) below.
The Corporation covenants that it will at all times reserve
and keep available, out of its authorized and unissued Common Stock
solely for the purpose of issuance upon conversion of the Series A
Preferred as herein provided, free from preemptive rights or any other
actual or contingent purchase rights of any individual or entity other
than the holders of the Series A Preferred, such number of shares of
Common Stock as shall then be issuable upon the conversion of all
outstanding Series A Preferred. The Corporation covenants that all
shares of Common Stock which shall be so issuable shall upon issue be
duly and validly issued and fully paid and nonassessable.
In connection with the conversion of any shares of Series A
Preferred, no fractions of shares of Common Stock shall be issued, but
the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the market value of such
fractional interest. In such event, the fair market value of a share of
Common Stock of the Corporation shall be the closing price of such
share on the last business day on which such shares were traded
immediately preceding the date upon which such shares of Series A
Preferred are deemed to have been converted. In the event there is no
readily established closing price, then the fair market value shall be
deemed to be equal to the fair market value of such share as determined
in good faith by the Board of Directors.
The issuance of certificates for shares of Common Stock on
conversion of Series A Preferred shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate,
provided, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that
of the holder of the Series A Preferred which has been converted and
the Corporation shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of such
tax or shall have established to the satisfaction of the Corporation
that such tax has been paid.
SECTION 7. Notices of Corporate Action. In the event of:
(a) any taking by the Corporation of a record of the holders
of its Common Stock for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a dividend payable
solely in cash or shares of Common Stock) or other distribution, or any
right or warrant to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to
receive any other right;
(b) any capital reorganization, reclassification or
recapitalization of the Corporation (other than a subdivision or
combination of the outstanding shares of its Common Stock); or
5
<PAGE> 6
(c) any merger or consolidation of the Corporation with or
into another corporation or entity, or the sale of all or substantially
all of the assets of the Corporation to any other person or entity; or
(d) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, and in each such case, the
Corporation shall cause to be mailed to the holders of record of the
outstanding shares of Series A Preferred, at least thirty (30) days
prior to the applicable record or effective date hereinafter specified,
a notice stating (i) the date or expected date on which any such record
is to be taken for the purpose of such dividend, distribution or right
and the amount and character of such dividend, distribution or right or
(ii) the date or expected date on which any such reorganization,
reclassification, recapitalization, merger, consolidation, sale of
assets, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of
record of Common Stock shall be entitled to exchange their shares of
Common Stock for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, merger,
consolidation, sale of assets, dissolution, liquidation or winding up.
Such notice shall also state whether such transaction will result in
any adjustment of the Conversion Price and, if so, shall state the new
Conversion Price, the number of shares of Common Stock into which each
share of Series A Preferred shall be convertible upon such adjustment
and when such adjustment will become effective.
B. Series B Preferred.
SECTION 1. Ranking. The Series B Preferred shall rank senior
to the Series A Preferred for all purposes, including without
limitation as to (i) the declaration and payment of dividends, (ii) the
distribution of assets or winding-up on a complete or partial
liquidation of the Corporation and (iii) the redemption of outstanding
shares.
SECTION 2. Dividends. The holders of the Series B Preferred
shall be entitled to receive, out of funds legally available therefor,
when and as declared by the Board of Directors, quarterly dividends at
the rate per annum of $0.20 per share (the "Accruing Dividends").
Accruing Dividends shall accrue from day to day, whether or not earned
or declared, and shall be cumulative. In addition to Accruing
Dividends, the holders of the Series B Preferred shall be entitled to
receive, out of funds legally available therefor, dividends at the same
rate as dividends (other than dividends paid in additional shares of
Common Stock) are paid with respect to the Common Stock (treating each
share of Series B Preferred as being equal to the number of shares of
Common Stock (including fractions of a share) into which each share of
Series B Preferred is then convertible).
SECTION 3. Voting Rights. Each holder of shares of Series B
Preferred shall at all times while any shares of the Series B Preferred
are outstanding be entitled to the number of votes that would
correspond to the number of shares of Common Stock into which such
holder's shares of the Series B Preferred are convertible on the record
date for the vote or consent of stockholders and shall have voting
rights and powers, subject to the provisions herein contained, equal to
the voting rights and powers of the Series A Preferred and Common
Stock. Each holder of Series B Preferred shall be entitled to notice of
any stockholders meeting in accordance with the By-Laws of the
Corporation and shall vote with holders of the Series A Preferred and
Common Stock upon any matter submitted to a vote of stockholders,
except with respect to those matters required by law
6
<PAGE> 7
or this Amended and Restated Certificate of Incorporation to be
submitted to a separate series or class vote. Unless permitted by the
Corporation's By-Laws or this Amended and Restated Certificate of
Incorporation, fractional votes by the holders of Series B Preferred
shall not be permitted and any fractional voting rights resulting from
the above formula (after aggregating all shares into which shares of
Series B Preferred held by each holder could be converted) shall be
rounded to the nearest whole number.
SECTION 4. Protective Class Voting Provisions. So long as any
share of the Series B Preferred is outstanding, the Corporation shall
not, without first obtaining the approval (by vote or written consent,
as provided by law) of the holders of at least two thirds (2/3) of the
then outstanding shares of the Series B Preferred (voting as a separate
series):
(a) create, authorize or issue shares of any class or series
of capital stock unless the same ranks junior to the shares of the
Series B Preferred with respect to the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation, or create,
authorize or issue any securities convertible into, or warrants,
options or similar rights to purchase, acquire or receive, shares of
capital stock unless the same ranks junior to the shares of the Series
B Preferred with respect to the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation, or
reclassify any authorized capital stock of the Corporation into any
share unless the same ranks junior to the shares of Series B Preferred
with respect to the distribution of assets upon any liquidation,
dissolution or winding up of the Corporation; or
(b) issue or authorize for issuance, whether in a single
transaction or series of related transactions, shares of Common Stock
constituting more than 5% of the outstanding shares of Common Stock
prior to such transaction or transactions (other than issuances of
Excepted Shares (as defined in Section 8(m) of this Article IV (B)); or
(c) declare or pay any dividends on any share of stock other
than the Series B Preferred; except for dividends or other
distributions payable on the Common Stock solely in the form of
additional shares of Common Stock; or
(d) purchase or set aside any sums for the purchase of any
shares of stock other than the Series B Preferred, except for the
purchase of shares of Common Stock from former employees of the
Corporation who acquired such shares directly from the Corporation, if
(i) each such purchase is made pursuant to contractual rights held by
the Corporation relating to the termination of employment of such
former employee and the purchase price does not exceed the original
issue price paid by such former employee to the Corporation for such
share or (ii) is made pursuant to the terms of that certain Stock
Restriction Agreement by and among the Corporation and certain of its
security holders dated as of the September 20, 1996; or
(e) amend, alter, waive or repeal any provision of this
Amended and Restated Certificate of Incorporation; or
(f) amend, alter, or repeal any material provision of this
Amended and Restated Certificate of Incorporation or By-Laws of the
Corporation so as to affect the preferences, rights or powers of the
holders of Series B Preferred; or
7
<PAGE> 8
(g) fix the number of directors of the Corporation to a number
other than seven (7), provided that the Corporation may reduce such
number to six (6) on or after one year from September 20, 1996 by
reducing the number of directors elected solely by holders of Common
Stock; or
(h) merge or consolidate with any other corporation or entity;
or
(i) sell, lease, exchange, or otherwise dispose of all or
substantially all of the assets of the Corporation.
SECTION 5. Right To Elect Directors. Holders of shares of
Series B Preferred shall be entitled to vote as a separate series to
elect two members to the Board of Directors (each a "Preferred
Director" and collectively, the "Preferred Directors"). Any vacancy
caused by the death, resignation, or removal of a Preferred Director
shall be filled by the vote of the holders of a majority of the
outstanding shares of the Series B Preferred.
SECTION 6. Redemption at Option of Series B Stockholders.
Holders of shares of Series B Preferred shall have the right to require
the Corporation to redeem the shares of the Series B Preferred pursuant
to the following provisions:
(a) Each holder of Series B Preferred shall have the right, at
its sole option and election, to require the Corporation to redeem all
or any portion of the shares of the Series B Preferred of such holder
on or after September 20, 2001 by payment in cash on the Redemption
Date an amount equal to $2.50 per share (the "Original Purchase Price")
plus an amount such that the return on the Original Purchase Price
shall be at a per annum rate of 20%, calculated through the date of
payment (such amount being referred to as the "Redemption Price").
Holders of shares of Series B Preferred redeemed pursuant hereto shall
be entitled solely to receive the payment in cash of the Redemption
Price for each such share, and shall not be entitled to receive payment
of Accruing Dividends with respect to any such share.
(b) Any holder of shares of Series B Preferred electing to
have the Corporation redeem that holder's shares of Series B Preferred
shall so notify the Corporation in writing at its principal office or
at such other office or agency maintained by the Corporation for that
purpose, each such notice being referred to as a "Redemption Notice".
Such Redemption Notice shall specify the number of shares of Series B
Preferred to be redeemed and the date on which such redemption shall
occur (the "Redemption Date"), provided that such Redemption Date shall
be at least sixty (60) days from the date the Redemption Notice is
delivered. Any holder may withdraw its election to have shares of
Series B Preferred redeemed pursuant to this Section 6 by delivering a
written notice thereof (a "Withdrawal Notice") to the Company at least
twenty (20) days before the Redemption Date. Within five (5) days of
its receipt of a Redemption Notice or Withdrawal Notice from any holder
of Series B Preferred, the Corporation shall deliver a copy thereof to
all other holders of Series B Preferred by delivery in person, or by
certified or registered mail, return receipt requested at each such
holder's address as shown by the records of the Corporation. Upon
receipt of a copy of a Withdrawal Notice, any holder of Series B
Preferred who has elected to have shares redeemed may withdraw such
election by delivery of written notice thereof by the later of (y)
twenty (20) days before the Redemption Date and (z) fifteen (15) days
after receipt of such Withdrawal Notice.
8
<PAGE> 9
(c) General Provisions for Redemption.
(i) On the Redemption Date each holder of shares of
Series B Preferred electing to have the Corporation redeem that
holder's shares shall surrender the certificate evidencing such shares,
properly endorsed in blank for transfer or accompanied by proper
instruments of assignment or transfer in blank, and bearing all
necessary transfer tax stamps thereto affixed and canceled, to the
Corporation at its principal office or at such other office or agency
maintained by the Corporation for that purpose and shall then be
entitled to receive payment of the redemption price for each share. If
fewer than all of the shares are to be redeemed, the Corporation shall
issue new share certificates for the shares of Series B Preferred not
redeemed.
(ii) If a holder of the shares of Series B Preferred
shall have given the Corporation notice of such holder's election to
have such shares redeemed but shall not have tendered the shares for
redemption by the Redemption Date then, so long as the Corporation has
set aside sufficient funds to pay the Redemption Price for such shares
on the Redemption Date all rights of the holder of such shares (except
the right to receive the Redemption Price therefor upon surrender of
the certificate or certificates therefor, but without interest) shall
terminate, and such shares shall no longer be deemed outstanding for
any purpose.
(iii) If, on any Redemption Date, the funds of the
Corporation legally available for redemption of all shares of Series B
Preferred with respect to which the Corporation has received a
Redemption Notice are insufficient to redeem the total number of shares
of Series B Preferred to be redeemed pursuant to such Redemption
Notices, the holders of shares of Series B Preferred entitled to have
their shares redeemed pursuant to such Redemption Notices shall share
ratably in any funds legally available for redemption according to the
respective amounts which would be payable to such holders if all shares
of Series B Preferred to be redeemed pursuant to such Redemption
Notices were redeemed in full. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of
such shares of Series B Preferred, such funds will be used, at the end
of the next succeeding fiscal quarter, to redeem the balance of such
shares, or such portion thereof for which funds are then legally
available, on the basis set forth above.
(iv) Except as provided in Section 6(c)(ii), shares
of Series B Preferred entitled to be redeemed and not so redeemed on
the Redemption Date shall remain outstanding and entitled to all rights
and preferences provided herein.
SECTION 7. Liquidation Rights.
(a) Upon the liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, before
any payment or distribution of assets of the Corporation shall be made
to or set apart for the holders of the Common Stock or any other class
of stock ranking junior to the shares of Series B Preferred upon
liquidation, dissolution or winding up, and after satisfying the claims
of creditors, holders of Series B Preferred shall be entitled to
receive a liquidation distribution in an amount equal to $2.50 per
share plus, in the case of each share, an amount equal to all Accruing
Dividends unpaid thereon (whether or not declared) and all other
dividends declared but
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unpaid thereon, computed to the date payment thereof is made available
(such amount with respect to one share of Series B Preferred being
sometimes referred to as the "Liquidation Preference Payment" and with
respect to all shares of Series B Preferred, the "Liquidation
Preference Payments".)
(b) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, stating a
payment date, the amount of the Liquidation Preference Payments and the
place where said Liquidation Preference Payments shall be payable,
shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less than
20 days prior to the payment date stated therein, to the holders of
record of Series B Preferred, such notice to be addressed to each such
holder at its address as shown by the records of the Corporation. The
consolidation or merger of the Corporation into or with any other
entity or entities which results in the exchange of outstanding shares
of the Corporation for securities or other consideration issued or paid
or caused to be issued or paid by any such entity or affiliate thereof
(other than a merger to reincorporate the Corporation in a different
jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets,
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of the provisions of this paragraph 7.
For purposes hereof, the Common Stock and Series A Preferred shall rank
on liquidation junior to the Series B Preferred.
(c) If upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation are insufficient to pay the holders of the shares of Series
B Preferred the full amount of the Liquidation Preference Payments,
holders of Series B Preferred shall share ratably with respect to the
distribution of assets upon any liquidation, dissolution or winding up
of the Corporation, in any such distribution of assets of the
Corporation in proportion to the respective amount of the Liquidation
Preference Payments to which the holders thereof are entitled.
(d) In the event of any such liquidation, dissolution or
winding up, unless and until payment in full of all Liquidation
Preference payments has been made to the holders of the shares of
Series B Preferred no dividend or other distribution shall be made to
the holders of the Common Stock, Series A Preferred or other capital
stock ranking junior to the shares of Series B Preferred upon
liquidation, dissolution or winding up, no purchase, redemption or
other acquisition for any consideration by the Corporation shall be
made in respect of the Common Stock, Series A Preferred or such capital
stock and no payment, delivery or commitment to make payment or
delivery of any money or assets to any affiliate of the Corporation for
any purpose shall be made.
(e) After payment of (i) the full amount of the Liquidation
Preference Payments to which they are entitled under Section 7(a), and
(ii) the full amount of the liquidation payments to which the holders
of the Series A Preferred are entitled pursuant to the Corporation's
Amended and Restated Certificate of Incorporation, the holders of the
shares of Series B Preferred shall be entitled to a pro rata share of
any further distribution of assets of the Corporation on the same basis
as they would have been entitled to share if the Series B Preferred had
been converted to Common Stock on the date of the distribution.
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SECTION 8. Conversion.
(a) Each share of the Series B Preferred shall be converted to
Common Stock in the manner set forth in this Section 8 at the direction
of the Corporation and without further action of the holders thereof
upon the closing of a firmly underwritten public offering of shares of
the Corporation's Common Stock, registered under the Securities Act of
1933, as amended (the "1933 Act"), at an offering price of at least
$6.50 per share (which price shall be adjusted appropriately in the
event of a transaction described in subsection (c), below) and
aggregate net proceeds to the Corporation of at least $25,000,000.
(b) The shares of Series B Preferred shall, at the option of
the holders thereof, be convertible, in the manner hereinafter set
forth, into such number of fully paid and nonassessable shares of
Common Stock as is obtained by (i) multiplying the number of shares of
Series B Preferred so to be converted by $3.33 and (ii) dividing the
result by the Conversion Price of $3.33 per share or, in case an
adjustment of such price has taken place pursuant to the further
provisions of this Section 8, then by the Conversion Price as last
adjusted and in effect at the date any share or shares of Series B
Preferred are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion Price").
(c) In the event that otherwise than by virtue of Article
FIFTH the outstanding shares of Common Stock shall be split,
subdivided, combined or consolidated, by reclassification or otherwise,
into a greater or lesser number of shares of Common Stock, and in the
event that the Corporation shall issue shares of Common Stock by way of
a stock dividend or other distribution to the holders of Common Stock,
the Conversion Price in effect immediately prior to such split,
subdivision, stock dividend, combination or consolidation, shall,
concurrently with the effectiveness of such split, subdivision, stock
dividend, combination or consolidation, be increased (in the case of a
combination, consolidation or "reverse" split) or decreased (in the
case of a subdivision, stock dividend or "forward" split)
proportionately.
(d) The holder of any shares of Series B Preferred may
exercise such holder's option to convert such shares into shares of
Common Stock by surrendering for such purpose to the Corporation, at
its principal office or at such other office or agency maintained by
the Corporation for that purpose, a certificate or certificates
representing the shares of Series B Preferred to be converted
accompanied by a written notice stating that such holder elects to
convert all or a specified whole number of such shares in accordance
with the provisions of this Section 8 and specifying the name or names
in which such holder wishes the certificate or certificates for shares
of Common Stock to be issued. In case such notice shall specify a name
or names other than that of such holder, such notice shall be
accompanied by payment of all transfer taxes (if transfer is to a
person or entity other than the holder thereof) payable upon the
issuance of shares of Common Stock in such name or names. As promptly
as practicable, and in any event within 10 business days after the
surrender of such certificates and the receipt of such notice relating
thereto and, if applicable, payment of all transfer taxes (if transfer
is to a person or entity other than the holder thereof), the
Corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation to which the holder of the
Series B Preferred so
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converted shall be entitled and (ii) if less than the full number of
shares of the Series B Preferred evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares
converted. Such conversions shall be deemed to have been made upon
notation on the Corporation's books and stock records and upon delivery
of the certificate or certificates representing the shares of Series B
Preferred to be converted so that the rights of the holder thereof
shall cease except for the right to receive Common Stock of the
Corporation in accordance herewith, and the converting holder shall be
treated for all purposes as having become the record holder of such
Common Stock of the Corporation at such time. All rights associated
with any Series B Preferred shall continue in full force and effect
unless and until converted in accordance with the terms hereof.
(e) Shares of Series B Preferred may not be converted without
the consent of the Corporation after the holder thereof has delivered a
Redemption Notice pursuant to Section 6(b), which has not been
withdrawn in accordance with that Section.
(f) In connection with the conversion of any shares of Series
B Preferred, no fractions of shares of Common Stock shall be issued,
but the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the market value of such
fractional interest. In such event, the fair market value of a share of
Common Stock of the Corporation shall be the closing price of such
share on the last business day on which such shares were traded
immediately preceding the date upon which such shares of Series B
Preferred are deemed to have been converted. In the event there is no
readily established closing price, then the fair market value shall be
deemed to be equal to the fair market value of such share as determined
in good faith by the Board of Directors.
(g) The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of Series B Preferred.
(h) If at any time or from time to time there shall be a
capital reorganization or reclassification of the capital stock of the
Corporation, whether in connection with the merger or consolidation of
the Corporation with or into another corporation, or the sale of all or
substantially all of the assets of the Corporation to any other person
or entity or otherwise (a "Reorganization"), which Reorganization is
effected in such a way that holders of Common Stock shall be entitled
to receive with respect to or in exchange for Common Stock shares of
stock, other securities or property of the Corporation or other person
or entity, then, as a condition of such Reorganization, lawful and
adequate provision shall be made so that each holder of the Series B
Preferred shall thereafter, at the election of such holder be entitled
to receive upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately
theretofore receivable upon the conversion of such share or shares of
Series B Preferred, shares of stock or other securities or property of
the Corporation or any other person or entity equal to the number of
shares of such stock, securities or property as may be issued or
payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock
immediately theretofore receivable upon conversion of such holder's
shares of Series B Preferred had such Reorganization not taken place;
and in any such case appropriate provisions shall be made with respect
to the
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rights and interests of such holder to the end that the provisions
hereof (including without limitation provisions for adjustments of the
Conversion Price) shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
(i) In case the Corporation shall at any time or from time to
time issue or sell, or, in accordance with Section 8(j) below, be
deemed to issue or sell, any shares of its Common Stock ("New Common
Stock") other than Excepted Shares for a consideration per share less
than the Conversion Price in effect at the time of sale (each a
"Dilutive Issuance"), then, forthwith upon such Dilutive Issuance, the
following adjustments shall be made in the Conversion Price:
(i) The Conversion Price shall be reduced to the
price (calculated to the nearest cent) received by the Corporation for
the New Common Stock, provided, however, that if the price received for
the New Common Stock is less than $3.33 per share (appropriately
adjusted to reflect the occurrence of any event described in Section
8(c)) (the "Ratchet Price"), then the Conversion Price shall be further
reduced in accordance with subdivision (ii) of this subsection (i);
(ii) In the event that the Conversion Price as
adjusted pursuant to subsection (i) above would be reduced below the
Ratchet Price, the Conversion Price shall be equal to the Ratchet Price
reduced by an amount equal to the difference between the Ratchet Price
less the Weighted Average Price. For purposes hereof, the "Weighted
Average Price" shall be the price determined by dividing (y) an amount
equal to the sum of (I) the number of shares of Common Stock
outstanding immediately prior to such Dilutive Issuance multiplied by
the Ratchet Price and (II) the consideration, if any, received by the
Corporation upon such Dilutive Issuance by (z) the total number of
shares of Common Stock outstanding immediately after such Dilutive
Issuance;
(iii) Except as provided in Section 8(k)(iii), in no
event shall the Conversion Price be increased above its then current
level notwithstanding that the Corporation received, or is deemed to
have received, a consideration per share of New Common Stock that is
greater than the Conversion Price.
(j) For purposes of determining the adjustments to be made
pursuant to Section 8(i) above, the following provisions shall also
apply:
(i) In case the Corporation shall in any manner grant
(whether evidenced by warrants, options, or otherwise) any rights to
subscribe for or purchase shares of Common Stock or any options for the
purchase of shares of Common Stock (other than, in either case,
Excepted Stock) (such options, warrants or other rights being called
"Options"), whether or not such Options are immediately exercisable,
and the price per share at which such shares are issuable or
deliverable upon the exercise of such Options (determined by dividing
(x) the total minimum amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus the
total minimum amount of additional consideration payable to the
Corporation upon the exercise of such Options by (y) the total maximum
number of shares issuable or deliverable upon the exercise of such
rights or options) shall be less than the Conversion Price in effect
immediately prior to the time of the granting of such Options, then the
granting of such
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Options shall be deemed to be an issue or a sale (as of the date of the
granting of such Options) of the total maximum number of shares
issuable or deliverable upon the exercise of such Options then granted,
and the amount received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon the exercise of such Options, shall be deemed to be the
consideration actually received by the Corporation (as of the date of
the granting of such Options) for the issue or sale of such shares of
Common Stock, and the total maximum number of shares issuable or
deliverable upon the exercise of such Options shall be deemed to be
outstanding;
(ii) In case the Corporation shall in any manner
issue or sell any shares of stock or other securities (other than
shares of Series B Preferred) convertible into or exchangeable for
shares of Common Stock ("Convertible Securities"), whether or not the
rights to convert or exchange are immediately exercisable, and the
price per share for which Common Stock is issuable or deliverable upon
such conversion or exchange (determined by dividing (x) the minimum
total amount received or receivable by the Corporation as consideration
for the issue or sale of such Convertible Securities, plus the minimum
total amount of additional consideration, if any, payable to the
Corporation upon conversion or exchange by (y) the total maximum number
of shares of Common Stock issuable or deliverable upon the conversion
of all such Convertible Securities) shall be less than the Conversion
Price in effect immediately prior to the time of such issue or sale,
then such issue or sale shall be deemed to be an issue or sale (as of
the date of issue or sale of such Convertible Securities) of the total
maximum number of shares of Common Stock issuable or deliverable upon
the conversion of all such Convertible Securities, and the minimum
amount received or receivable by the Corporation as consideration for
the issue of sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon conversion or exchange, shall be deemed to be the
consideration actually received by the Corporation (as of the date of
the issue or sale of such Convertible Securities) for the issue or sale
of such Common Stock.
(k) For the purposes of subsections (i) and (j) above, the
following provisions also shall apply:
(i) In case any shares of Common Stock or any Options
or Convertible Securities shall be issued or sold by the Corporation
for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, before deducting from the
total amount of cash received any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in
connection therewith. In case any shares of New Common Stock, Options
or Convertible Securities shall be issued by the Corporation for
consideration other than cash, the fair value at the time of receipt
thereof by the Corporation, as determined in good faith by the Board of
Directors without deduction of any expenses incurred or underwriting
commission or concessions paid or allowed by the Corporation in
connection therewith, shall be treated as cash.
(ii) In case the Corporation shall take a record of
the holders of any class of its capital stock for the purpose of
entitling them (i) to receive a dividend payable in shares of Common
Stock or payable in stock or other securities convertible into or
exchangeable for shares of Common Stock, or payable at the option of
the stockholder in
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cash or in shares of Common Stock, or payable at the option of the
stockholder in cash, in stock or other securities convertible into or
exchangeable for shares of Common Stock or (ii) to subscribe for or
purchase shares of Common Stock or stock or other securities
convertible into or exchangeable for shares of Common Stock, then such
record date shall be deemed to be the date of the issue or sale of the
shares deemed to have been issued or sold upon the declaration of such
dividend or upon the granting of such right of subscription or
purchase, as the case may be.
(iii) Upon the happening of any of the following
events, namely, if the purchase price provided for in any Option
referred to in subparagraph 8(j)(i), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible
Securities referred to in subparagraph 8(j)(ii), or the rate at which
Convertible Securities referred to in subparagraph 8(j)(ii) are
convertible into or exchangeable for Common Stock shall change at any
time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Conversion Price
in effect at the time of such event shall forthwith be readjusted to
the Conversion Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided for
such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold
if as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced; and on the termination of any such Option
or any such right to convert or exchange such Convertible Securities,
the Conversion Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have been in effect at
the time of such termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such termination, never
been issued.
(iv) The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Corporation, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purpose of
this Section 8.
(l) RESERVED.
(m) For purposes of this Section 8, the term "Excepted Shares"
means (i) 750,000 shares of Common Stock issued or issuable upon the
exercise of warrants which have been or may be granted to Meditrust
Mortgage Investments, Inc. plus all such additional shares of Common
Stock as may be issued thereunder by virtue of antidilution provisions,
if any, contained in such warrants or the agreements governing or
commitment letters relating to the granting of the warrants as in
effect on the date of initial issuance of Series B Preferred (the
"Issue Date"); (ii) up to an aggregate of 1,500,000 shares of Common
Stock (appropriately adjusted to reflect the occurrence of any event
described in Section 8(c)) issued upon the exercise of stock options
giving employees or officers of the Corporation or its subsidiaries the
right to purchase shares of Common Stock plus all such additional
shares of Common Stock as may be issued thereunder by virtue of
antidilution provisions, if any, contained in such options or the
presently effective plan governing the granting of such options,
provided, however, that any shares issued pursuant to options granted
after the Issue Date shall be Excepted Shares only if issued under a
plan approved by the Board of Directors that provides for vesting over
a period not less than four years except in the case of sale, death or
other unanticipated circumstances; (iii) shares of
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Common Stock issued on conversion of the Series B Preferred or Series A
Preferred; (iv) up to 190,000 shares of Common Stock issued or issuable
upon the exercise of warrants outstanding on the Issue Date; and (v)
all shares of Common Stock or Preferred Stock issued solely in
consideration for the acquisition (whether by merger or otherwise) by
the Corporation or any of its subsidiaries of all or substantially all
of the stock or assets of any other entity.
(n) The issuance of certificates for shares of Common Stock
upon conversion of Series B Preferred shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of
the Series B Preferred which is being converted.
(o) The Corporation will at no time close its transfer books
against the transfer of any shares of Common Stock issued or issuable
upon the conversion of any shares of Series B Preferred in any manner
which interferes with the timely conversion of such.
(p) As used in this Section 8, the term "Common Stock" shall
mean and include the Corporation's authorized Common Stock, par value
$.001 per share, as constituted on the date of filing of this Amended
and Restated Certificate of Incorporation, and shall also include any
capital stock of any class of the Corporation thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares
of Common Stock receivable upon conversion of shares of Series B
Preferred shall include only shares designated as Common Stock of the
Corporation on the date of filing of this instrument, or in case of any
Reorganization, the stock, securities or property provided for in
Section 8(h) in this Article IV (B).
SECTION 9. Reports as to Adjustments.
(a) Whenever the Conversion Price is adjusted as provided in
Section 8, the Corporation shall compute such adjustment and promptly
mail to each holder of record of Series B Preferred a certificate,
signed by a principal financial officer of the Corporation, setting
forth the number of shares of Common Stock into which each share of
Series B Preferred is convertible as a result of such adjustment, a
brief statement of the facts requiring such adjustment and the
computation thereof and when such adjustment will become effective
within three business days from the date of such adjustment. The
Company shall promptly deliver copies of any such certificate to each
Series B holder at its address as shown by the records of the
Corporation.
(b) In the event that any Series B holder notifies the Company
that it is in disagreement with the adjustment set forth in any
certificate delivered pursuant to Section 9(a) above, the Corporation
shall forthwith employ a firm of independent public accountants of
recognized standing (who may be the regular accountants of the
Corporation) who shall compute the adjusted Conversion Price in
accordance with the provisions of Section 8 in this Article IV (B) and
shall prepare a certificate in duplicate setting forth such adjusted
Conversion Price as determined as aforesaid and showing in
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detail the facts upon which such adjustment is based, including a
statement of the consideration received or to be received by the
Corporation for any additional stock issued or sold or deemed to have
been issued or sold and for the number of shares of Common Stock
outstanding or deemed to be outstanding, and one counterpart of such
certificate shall forthwith be filed with the transfer agent (if any)
for the Common Stock and the other counterpart shall be retained at the
principal business office of the Corporation, available for inspection,
and thereafter (until further adjusted) the adjusted Conversion Price
shall be as set forth in said certificate. The Company shall promptly
deliver a copy of any such certificate to each Series B holder at its
address as shown by the records of the Company.
SECTION 10. Notices of Corporate Action. In the event of:
(a) any taking by the Corporation of a record of the holders
of its Common Stock for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a dividend payable
solely in cash or shares of Common Stock) or other distribution, or any
right or warrant to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to
receive any other right;
(b) any capital reorganization, reclassification or
recapitalization of the Corporation (other than a subdivision or
combination of the outstanding shares of its Common Stock); or
(c) any merger or consolidation of the Corporation with or
into another corporation or entity, or the sale of all or substantially
all of the assets of the Corporation to any other person or entity; or
(d) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, and in each such case, the
Corporation shall cause to be mailed to the holders of record of the
outstanding shares of Series B Preferred, at least thirty (30) days
prior to the applicable record or effective date hereinafter specified,
a notice stating (i) the date or expected date on which any such record
is to be taken for the purpose of such dividend, distribution or right
and the amount and character of such dividend, distribution or right or
(ii) the date or expected date on which any such reorganization,
reclassification, recapitalization, merger, consolidation, sale of
assets, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of
record of Common Stock shall be entitled to exchange their shares of
Common Stock for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, merger,
consolidation, sale of assets, dissolution, liquidation or winding up.
Such notice shall also state whether such transaction will result in
any adjustment of the Conversion Price and, if so, shall state the new
Conversion Price, the number of shares of Common Stock into which each
share of Series B Preferred shall be convertible upon such adjustment
and when such adjustment will become effective.
SECTION 11. Reacquired Shares. Any shares of Series B
Preferred redeemed or, purchased or otherwise acquired by the
Corporation in any manner whatsoever shall not be reissued as Series B
Preferred and shall be retired and canceled promptly after the
acquisition thereof.
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C. Common Stock.
The rights, preferences, and privileges of the Common Stock of
the Corporation, and the qualifications, limitations and restrictions thereof,
are as follows:
SECTION 1. Relative Rights of Preferred Stock and Common
Stock. All preferences, voting powers, relative, participating,
optional or other special rights and privileges, and qualifications,
limitations, or restrictions of the Common Stock are expressly made
subject and subordinate to those that may be fixed with respect to any
shares of the Preferred Stock.
SECTION 2. Voting Rights. Except as the otherwise required by
law or this Amended and Restated Certificate of Incorporation, each
holder of Common Stock shall have one vote in respect of each share of
stock held by him of record on the books of the Corporation for the
election of directors and on all matters submitted to a vote of
stockholders of the Corporation. The number of authorized shares of
Common Stock may be increased or decreased (but not below the number of
shares then outstanding) by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the Corporation
with each such share being entitled to such number of votes per share
as is provided in this Article IV.
SECTION 3. Dividends. Subject to the preferential rights of
the Preferred Stock, if any, the holders of shares of Common Stock
shall be entitled to receive, when and if declared by the Board of
Directors, out of the assets of the Corporation which are by law
available therefor, dividends payable either in cash, in property or in
shares of capital stock.
SECTION 4. Dissolution, Liquidation or Winding Up. In the
event of any dissolution, liquidation or winding up of the affairs of
the Corporation, after distribution in full of the preferential
amounts, if any, to be distributed to the holders of shares of the
Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise provided by law or this Amended and Restated Certificate of
Incorporation, to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by
them respectively.
FIFTH: Effective as of the filing of this Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware (the "Effective Time"), all issued and outstanding shares of Common
Stock held by each holder of record immediately prior to the Effective Time
("Old Common Stock") shall automatically and without any action on the part of
such holder be combined and reclassified at the rate of three (3) shares of
Common Stock ("New Common Stock") for four (4) shares of Old Common Stock, with
one whole share of New Common Stock being issuable in lieu of any fractional
share otherwise issuable. Each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of Old
Common Stock ("Old Certificates") shall be entitled to receive upon surrender of
such Old Certificates to the Company or its stock transfer agent for
cancellation, a certificate or certificates ("New Certificates") representing
the number of shares of New Common Stock into which and for which the shares of
Old Common Stock formerly represented by such Old Certificates so surrendered
are combined and reclassified. From and after the Effective Time, Old
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Certificates shall represent only the right to receive New Certificates pursuant
to the provisions hereof.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH:
A. The business and affairs of the Corporation shall
be managed by or under the direction of a board of directors consisting
of such number of directors as is determined from time to time by
resolution adopted by affirmative vote of a majority of the entire
board of directors; provided, however, that in no event shall the
number of directors be less than three (3). The directors shall be
divided into three (3) classes, designated Class I, Class II and Class
III. Each class shall consist, as nearly as may be possible, of
one-third (1/3) of the total number of directors constituting the
entire board of directors. Effective upon the filing of this Amended
and Restated Certificate of Incorporation, Class I directors shall
serve for a term ending upon the annual meeting of stockholders held in
the Corporation's fiscal 1999 year, Class II directors shall serve for
a term ending upon the annual meeting of stockholders held in the
Corporation's fiscal 2000 year and Class III directors shall serve for
a term ending upon the annual meeting of stockholders held in the
Corporation's fiscal 2001 year. At each succeeding annual meeting of
stockholders beginning with the annual meeting of stockholders held in
the Corporation's fiscal 1999 year, successors to the class of
directors whose term expires at such annual meeting shall be elected
for a three-year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for
a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term
of any incumbent director. A director shall hold office until the
annual meeting for the year in which his or her term expires and until
his or her successor shall be elected and shall qualify, subject,
however, to prior death, resignation, incapacitation or removal from
office, and except as otherwise required by law. In the event such
election is not held at an annual meeting of stockholders, it shall be
held at any adjournment thereof or a special meeting.
B. Except as otherwise required by law, any vacancy
on the board of directors that results from an increase in the number
of directors shall be filled only by a majority of the board of
directors then in office, provided that a quorum is present, and any
other vacancy occurring in the board of directors shall be filled by a
majority of the directors then in office, even if less than a quorum,
or by a sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have
the same remaining term as that of his or her predecessor. A director
may be removed only for cause by the stockholders.
C. Notwithstanding the foregoing, whenever the
holders of any one or more classes or series of stock issued by the
Corporation shall have the right, voting separately by class or series,
to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of
such directorships shall be governed by the terms of this Amended and
Restated Certificate of Incorporation applicable thereto and such
directors so elected shall not be divided into
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classes pursuant to this Article SEVENTH, in each case unless expressly
provided by such terms.
EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the by-laws of the Corporation.
NINTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by Section
102(b)(7) of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented.
TENTH: Subject to the rights of the holders of any class or
series of capital stock having a preference over the Common Stock as to
dividends or upon liquidation, the stockholders of the Corporation shall have no
authority to call a special meeting of the stockholders.
ELEVENTH: Effective immediately upon the Corporation becoming
subject to the periodic reporting requirements of Section 13 of the Securities
Exchange Act of 1934, as amended, with respect to any class of its capital
stock:
A. no action required to be taken or which may be
taken at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting; and
B. the power of the stockholders to consent in
writing, without a meeting, to the taking of any action is specifically
denied.
TWELTH: Elections of directors need not be by written ballot
unless the by-laws shall so provide.
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<PAGE> 1
EXHIBIT 3.2
BALANCED CARE CORPORATION
AMENDED AND RESTATED
BY-LAWS
Adopted as of September 26, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
ARTICLE I.........................................................................................................1
SECTION 1.1 Registered Office.................................................................................1
SECTION 1.2 Other Offices.....................................................................................1
ARTICLE II........................................................................................................1
SECTION 2.1 Annual Meetings...................................................................................1
SECTION 2.2 Special Meetings..................................................................................1
SECTION 2.3 Notice of Meetings................................................................................1
SECTION 2.4 Adjournments......................................................................................2
SECTION 2.5 Quorum and Manner of Acting.......................................................................2
SECTION 2.6 Organization and Order of Business................................................................2
SECTION 2.7 Voting............................................................................................2
SECTION 2.8 Stock List........................................................................................3
SECTION 2.9 Inspectors........................................................................................3
ARTICLE III.......................................................................................................4
SECTION 3.1 General Powers....................................................................................4
SECTION 3.2 Number and Term of Office.........................................................................4
SECTION 3.3 Election..........................................................................................4
SECTION 3.4 Meetings..........................................................................................5
SECTION 3.5 Committees........................................................................................7
SECTION 3.6 Resignation, Removal and Vacancies................................................................8
ARTICLE IV........................................................................................................8
SECTION 4.1 General...........................................................................................8
SECTION 4.2 Election; Term of Office..........................................................................8
SECTION 4.3 Duties and Functions..............................................................................9
SECTION 4.4 Resignation, Removal and Vacancies...............................................................11
ARTICLE V........................................................................................................11
SECTION 5.1 Mandatory Indemnification of Directors and Officers..............................................11
SECTION 5.2 Mandatory Advancement of Expenses to Directors and Officers......................................12
SECTION 5.3 Permissive Indemnification and Advancement of Expenses...........................................13
SECTION 5.4 Enforcement......................................................................................13
SECTION 5.5 General..........................................................................................13
SECTION 5.6 Definition of Corporation........................................................................14
SECTION 5.7 Definition of Authorized Representative..........................................................14
SECTION 5.8 Savings Clause...................................................................................14
SECTION 5.9 Insurance........................................................................................14
SECTION 5.10 Funding to Meet Indemnification Obligations.....................................................14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE VI.......................................................................................................15
SECTION 6.1 Waiver of Notices................................................................................15
ARTICLE VII......................................................................................................15
SECTION 7.1 Execution and Delivery of Documents; Delegation..................................................15
SECTION 7.2 Deposits.........................................................................................15
SECTION 7.3 Proxies in Respect of Stock or Other Securities of Other Corporations............................15
SECTION 7.4 Books and Records................................................................................16
ARTICLE VIII.....................................................................................................16
SECTION 8.1 Certificates for Stock...........................................................................16
SECTION 8.2 Stock Record.....................................................................................16
SECTION 8.3 Transfer and Registration of Stock...............................................................16
SECTION 8.4 New Certificates.................................................................................17
SECTION 8.5 Regulations......................................................................................17
SECTION 8.6 Fixing Date for Determination of Stockholders of Record..........................................17
ARTICLE IX.......................................................................................................18
SECTION 9.1 Seal.............................................................................................18
SECTION 9.2 Dividends........................................................................................18
SECTION 9.3 Fiscal Year......................................................................................18
SECTION 9.4 Interested Directors; Quorum.....................................................................18
SECTION 9.5 Amendments.......................................................................................18
</TABLE>
- ii -
<PAGE> 4
AMENDED AND RESTATED
BY-LAWS
OF
BALANCED CARE CORPORATION
ADOPTED AS OF SEPTEMBER 26, 1997
ARTICLE I
OFFICES
SECTION 1.1 Registered Office. The registered office of Balanced Care
Corporation (the "Corporation") shall be in the State of Delaware.
SECTION 1.2 Other Offices. The Corporation may also have offices at
such other places either within or without the State of Delaware as the Board
of Directors (the "Board") may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1 Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held on such
date and at such place, either within or without the State of Delaware, and at
such hour as shall be designated by the Board in the notice thereof.
SECTION 2.2 Special Meetings. A special meeting of the stockholders
for any purpose or purposes may be called at any time by the Board, or by a
committee of the Board that has been duly designated by the Board and whose
powers and authority, as expressly provided in a resolution of the Board,
include the power to call such meetings, but such special meetings may not be
called by any other person or persons. Such meeting shall be held on such date
and at such place and hour as shall be designated in the notice thereof.
SECTION 2.3 Notice of Meetings. Except as otherwise expressly required
by law, the Certificate of Incorporation or these By-laws, written notice of
each meeting of the stockholders shall be given not less than ten (10) nor more
than fifty (50) days before the date of the meeting to each stockholder of
record entitled to notice of, or to vote at, such meeting by delivering a
<PAGE> 5
typewritten or printed notice thereof to such stockholder personally or by
depositing such notice in the United States mail, directed to such stockholder
at his address as it appears on the stock records of the Corporation. If mailed,
such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation. Every such notice shall state the place, date
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Notice of any adjourned meeting of the
stockholders shall not be required to be given if the time and place thereof are
announced at the meeting at which the adjournment is taken and a new record date
for the adjourned meeting is not thereafter fixed.
SECTION 2.4 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
SECTION 2.5 Quorum and Manner of Acting. Except as otherwise expressly
required by law, the Certificate of Incorporation or these By-laws, if
stockholders holding of record a majority of the shares of stock of the
Corporation entitled to be voted shall be present in person or by proxy, a
quorum for the transaction of business at any meeting of the stockholders shall
exist. In the absence of a quorum at any such meeting or any adjournments
thereof, a majority in voting interest of those present in person or by proxy
and entitled to vote thereat may adjourn such meeting from time to time in the
manner provided in Section 2.4 above until stockholders holding the amount of
stock requisite for a quorum shall be present in person or by proxy. Shares of
its own stock belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the Corporation, shall
neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to
vote stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
SECTION 2.6 Organization and Order of Business. Meetings of
stockholders shall be presided over by one of the persons holding the following
offices in the following order of priority: the Chairman of the Board, the
Deputy Chairman of the Board, a Vice Chairman of the Board, if any, the
President, a Vice President, a chairman designated by the Board of Directors or
a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting. The order of business at each meeting of
the stockholders shall be determined by the chairman of the meeting, but such
order of business may be changed by a majority in voting interest of those
present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 2.7 Voting. Except as otherwise provided in the Certificate of
Incorporation, each stockholder shall, at each meeting of the stockholders, be
entitled to one vote, in person
2
<PAGE> 6
or by proxy, for each share of stock of the Corporation which has voting power
on the matter in question and which is held by him and registered in his name on
the stock record of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 8.6 of
these By-laws as the record date for the determination of stockholders who
shall be entitled to receive notice of and to vote at such meeting; or
(b) if no record date shall have been so fixed, then at the close of
business on the day next preceding the day on which notice of the meeting shall
be given or, if notice of the meeting shall be waived, at the close of business
on the day next preceding the day on which the meeting shall be held.
At all meetings of the stockholders all matters, except as otherwise provided
in the Certificate of Incorporation, in these By-laws or by law, may be voted
upon, and, if so voted upon, shall be decided by the vote of a majority in
voting interest of the stockholders present in person or by proxy and entitled
to vote thereat, provided a quorum is present. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after one
(1) year from its date, unless the proxy provides for a longer period. A proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the Corporation.
SECTION 2.8 Stock List. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in such stockholder's name, shall be open to the
examination of any such stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of directors,
they shall be ineligible for election to any office at such meeting. This list
shall presumptively determine the identity of the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
Corporation, or to vote at the meeting and the number of shares held by each of
them.
SECTION 2.9 Inspectors. Either the Board or, in the absence of a
designation of inspectors by the Board, the chairman of the meeting may, in its
or his discretion, appoint one or more inspectors, who need not be
stockholders, who shall receive and take charge of ballots and
3
<PAGE> 7
proxies and decide all questions relating to the qualification of those
asserting the right to vote and the validity of ballots and proxies. In the
event of the failure or refusal to serve of any inspector designated by the
Board, the chairman of the meeting shall appoint an inspector to act in place of
each such inspector designated by the Board.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1 General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Certificate of Incorporation
or by these By-laws directed or required to be exercised or done by the
stockholders.
SECTION 3.2 Number and Term of Office. The number of members of the
Board of Directors shall be not less than three (3) nor more than nine (9), as
determined from time to time by the Board of Directors. The directors need not
be stockholders of the corporation. The directors shall be divided into three
(3) classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third (1/3) of the total number
of directors constituting the entire Board of Directors. Effective immediately
upon the filing of the Amended and Restated Certificate of Incorporation of the
corporation on _________, 1997, Class I directors shall serve for a term ending
upon the annual meeting of stockholders held in the Corporation's fiscal 1998
year, Class II directors shall serve for a term ending upon the annual meeting
of stockholders held in Corporation's fiscal 1999 year and Class III directors
shall serve for a term ending upon the annual meeting of stockholders held in
Corporation's fiscal 2000 year. At each succeeding annual meeting of
stockholders beginning with the annual meeting of stockholders held in the
Corporation's fiscal 1998 year, successors to the class of directors whose term
expires at such annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, incapacitation or
removal from office, and except as otherwise required by law. In the event such
election is not held at the annual meeting of stockholders, it shall be held at
any adjournment thereof or a special meeting.
SECTION 3.3 Election. The directors shall be elected at the annual
meeting or any special meeting of the stockholders, except as otherwise
provided in Section 3.6 of this Article III. Directors need not be stockholders
of the Corporation.
4
<PAGE> 8
SECTION 3.4 Meetings.
(A) Annual Meetings. As soon as practicable after each annual meeting
of stockholders and election of directors, the Board shall meet for the purpose
of organization, the election of officers and the transaction of other
business.
(B) Regular Meetings. Regular meetings of the Board or any committee
thereof shall be held as the Board or such committee shall from time to time
determine, provided that in addition to the Annual Meeting of the Board
provided for in paragraph (A) above, not less than five meetings of the Board
shall be held per annum, and at least one (1) each quarter.
(C) Special Meetings. Special meetings of the Board may be called by
order of the President, any Vice President or the Secretary. Special meetings
of the Board shall also be called by the Corporation promptly after receipt of
a joint written request for a meeting form two directors, one of which shall be
a director elected solely by the holders of Series B Convertible Preferred
Stock and one of which shall be a director elected other than solely by the
holders of Series B Convertible Preferred Stock.
(D) Notice of Meetings. No notice of regular meetings of the Board or
of any committee thereof or of any adjourned meeting thereof need be given to
any director present at any prior meeting of the Board or any committee thereof
at which the date, time and place of such meeting was determined. The Secretary
shall give two (2) days prior notice to each director of the time and place of
each annual or special meeting of the Board or adjournment thereof. Such notice
shall be given to each director in person or by facsimile, telephone, telegraph
or ordinary mail postmarked at least two days prior to the special meeting and
sent to such director at the address furnished by such director for the
provision of notice. Notice of any meeting of the Board or any committee
thereof shall not be required to be given to any director who shall attend such
meeting. Any meeting of the Board or any committee thereof shall be a legal
meeting without any notice thereof having been given if a quorum shall be
present and all the directors then in office either shall be present thereat or
shall execute waivers of notice. The purposes of a meeting of the Board or any
committee thereof need not be specified in the notice thereof.
(E) Time and Place of Meetings. Regular meetings of the Board or any
committee thereof shall be held at such times and place or places (either
within or without the State of Delaware) as the Board or the committee may from
time to time determine. Special meetings of the Board or any committee thereof
shall be held at such times and places as the callers thereof may determine.
(F) Quorum and Manner of Acting. Except as otherwise provided in the
Certificate of Incorporation, these By-laws or by law, a majority of the
directors then in office and a majority of the members of any committee shall
be present in person at any meeting thereof in order to constitute a quorum for
the transaction of business at such meeting, and the vote of a majority of the
directors present at any such meeting at which a quorum is present shall be
necessary for the passage of any resolution or for an act to be the act of the
Board or such committee. In the
5
<PAGE> 9
absence of a quorum, a majority of the directors present thereat may adjourn
such meeting from time to time until a quorum shall be present thereat. Notice
of any adjourned meeting (other than announcement at the meeting at which such
adjournment took place) need not be given.
(G) Organization of Meetings. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The order of business at
each meeting of the Board shall be determined by the Chairman of such meeting.
(H) Compensation of Directors. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, the Board of Directors shall
have the authority to fix the compensation of the directors. By resolution of
the Board of Directors, the directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated
compensation as director. Nothing herein contained shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation.
(H) Consent in Lieu of Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in the writing or writings and such writing or writings are
filed with the minutes of the proceedings of the Board or committee.
(I) Action by Communications Equipment. Members of the Board or any
committee designated by the Board may participate in a meeting thereof by means
of conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
6
<PAGE> 10
SECTION 3.5 Committees.
(A) Designation of Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors
of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. In the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at such meeting in the place of any such absent or
disqualified member. Any committee, to the extent permitted by law and to the
extent provided in a resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation between meetings of
the entire Board of Directors, except that no such committee shall have power
or authority (i) in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided by law, fix the designations and any of the
preferences or rights of such shares relating to voting, dividends, redemption,
dissolution, distribution of assets, or the conversion of such shares into, or
the exchange of such shares for, shares of any other class or classes of stock
or any other series of the same class of stock of the Corporation, or fix the
number of shares of any series of stock or authorize the increase or decrease
of the number of shares of any such series), (ii) to adopt or recommend to the
stockholders an agreement of merger or consolidation, (iii) to recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, a dissolution of the Corporation or a
revocation of a dissolution, (iv) to amend these By-laws or recommend to the
stockholders any amendments to these By-laws, (v) to declare a dividend, (vi)
to authorize the issuance of stock, (vii) to change the number of directors or
fill any vacancy on the Board of Directors or any committee thereof, (viii) to
prescribe or change the time or place of any regular meeting of the Board of
Directors or (ix) to approve a plan of merger not requiring stockholder
approval.
(B) Committee Procedure. The Board of Directors may establish
reasonable rules and regulations for the conduct of the proceedings of any
committee and may appoint a chairman of such committee who need not be a member
thereof and a secretary of such committee who need not be a member thereof. To
the extent that the Board of Directors shall not exercise such powers, they may
be exercised by such committee, subject always to the power of the Board of
Directors to change such action.
(C) Committee Meetings. Each committee shall meet at the call of its
chairman or any two regular members of such committee upon twenty-four hours'
notice by letter, facsimile, telegram or oral message to each member of such
committee. The presence of members (regular or alternate) of any committee
equal in number to a majority of the members of such committee shall constitute
a quorum for the transaction of business, and the vote of a majority of members
present at any meeting at which a quorum is present shall be the act of such
committee.
7
<PAGE> 11
(D) Committee Reports. At each regular meeting of the Board of
Directors, each committee shall report the substance of all action taken by
such committee since the date of its last report to the Board of Directors.
Each report shall be filed with the minutes of the meeting of the Board of
Directors to which it is presented as part of the corporate records.
(E) Term of Committees. Each committee of the Board of Directors shall
serve at the pleasure of the Board of Directors.
SECTION 3.6 Resignation, Removal and Vacancies. Any director may
resign at any time by giving written notice of his resignation to the President
or the Secretary.
Any such resignation shall take effect at the time specified therein
or when delivered to the President or Secretary, as the Board shall determine.
Any director may be removed at any time for cause or without cause by
vote of the holders of record of a majority in voting interest of shares then
entitled to vote at an election of such director at a duly constituted meeting
of stockholders. Subject to the Certificate of Incorporation, the vacancy in
the Board caused by any such removal may be filled by the stockholders at such
meeting or, if not so filled, then by the Board as provided in the next
paragraph of these By-laws. Any director may also be removed at any time for
cause by vote of a majority of the whole Board.
Subject to the Certificate of Incorporation, in case of any vacancy on
the Board or in case of any newly created directorship, a majority of the
directors of the Corporation then in office, though less than a quorum, or the
sole remaining director may elect a director to fill the vacancy or the newly
created directorship for the unexpired portion of the term being filled. The
director elected to fill such vacancy shall hold office for the unexpired term
in respect of which such vacancy occurred.
ARTICLE IV
OFFICERS
SECTION 4.1 General. The officers of the Corporation shall be
appointed by the Board of Directors and shall consist of a Chairman of the
Board, a Chief Executive Officer, and a President, such number of Vice
Presidents as the Board of Directors shall elect from time to time (one or more
of whom may be designated Executive Vice Presidents), a Secretary, a Treasurer
(or a position with the duties and responsibilities of a Treasurer) and such
other officers and assistant officers (if any) as the Board of Directors may
from time to time appoint. Any number of offices may be held by the same
person, unless the Certificate of Incorporation or these By-laws otherwise
provide.
SECTION 4.2 Election; Term of Office. The Board of Directors at its
first meeting held after each annual meeting of stockholders shall elect a
Chairman of the Board or a President, or both, a Secretary and a Treasurer (or
a position with the duties and responsibilities of a
8
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Treasurer), and may also elect or appoint (and may authorize the President to
appoint) at that meeting or any other meeting, such other officers (including
one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers) and
agents as it shall deem necessary or appropriate. Each officer of the
Corporation shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors together with the powers
and duties customarily exercised by such officer; and each officer of the
Corporation shall hold office until such officer's successor is elected and
qualified or until such officer's earlier death, resignation or removal.
SECTION 4.3 Duties and Functions.
(A) Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the stockholders and the Board of Directors and shall have such
other duties and powers as may be prescribed by the Board of Directors from
time to time. The Board of Directors may also designate one of its members as
Vice Chairman of the Board. The Vice Chairman of the Board shall, during the
absence or inability to act of the Chairman of the Board, have the powers and
perform the duties of the Chairman of the Board, and shall have such other
powers and perform such other duties as shall be prescribed from time to time
by the Board of Directors.
(B) Chief Executive Officer. The Chief Executive Officer shall have
general charge and control over the affairs of the Corporation, subject to the
direction of the Board of Directors, shall see that all orders and resolutions
of the Board of Directors are carried out, shall report thereon to the Board of
Directors, and shall have such other powers and perform such other duties as
shall be prescribed from time to time by the Board of Directors. In the absence
of the Chairman of the Board or the Vice Chairman of the Board (if any) or in
the event of the inability of or refusal to act by the Chairman of the Board or
the Vice Chairman of the Board (if any), or if the Board has not designated a
Chairman or Vice Chairman, the Chief Executive Officer (if a member of the
Board of Directors) shall perform the duties of the Chairman of the Board, and
when so acting, shall have all of the powers and be subject to all of the
restrictions upon the Chairman of the Board.
(C) President. The President shall have general and active management
of the business of the Corporation, subject to the direction of the Board of
Directors and the Chief Executive Officer, and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President
shall have and exercise such further powers and duties as may be specifically
delegated to or vested in the President from time to time by these By-laws or
the Board of Directors.
(D) Vice President. In the absence of the President or in the event of
inability of or refusal to act by the President, the Vice President (or in the
event there be more than one vice president, the vice presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. The vice presidents shall perform such other duties and
have such other powers as the Board of Directors or the President may from time
to time prescribe.
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(E) Secretary. The Secretary shall attend all meetings of the Board of
Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall
also perform like duties for the standing committees when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and meetings of the Board of Directors as are required by law, the
Certificate of Incorporation and these By-laws, and shall perform such other
duties as may be prescribed by the Board of Directors or the President. If the
Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and if there be no Assistant Secretary, then either the Board of Directors or
the President may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary
or any Assistant Secretary, if there be one, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
the signature of the Secretary or by the signature of any such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or
filed are properly kept or filed, as the case may be except as otherwise
provided in the By-laws of the Corporation or by resolution of the Board of
Directors.
(F) Assistant Secretaries. Except as may be otherwise provided in
these By-laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, or the Secretary, and in the absence of the
Secretary or in the event of the inability of or refusal to act by the
Secretary, the Assistant Secretary (or if there be more than one Assistant
Secretary, the Assistant Secretaries in the order designated by the Board of
Directors or in the absence of any designation, then in order of their
election) shall have the authority to perform all functions of the Secretary,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
(G) Treasurer. The Treasurer shall have the custody of the corporate
funds and securities, shall keep complete and accurate accounts of all receipts
and disbursements of the Corporation, and shall deposit all monies and other
valuable effects of the Corporation in its name and to its credit in such banks
and other depositories as may be designated from time to time by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation, taking
proper vouchers and receipts for such disbursements. The Treasurer shall, when
and if required by the Board of Directors, give and file with the Corporation a
bond, in such form and amount and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of his or
her duties as Treasurer. The Treasurer shall have such other powers and perform
such other duties as the Board of Directors or the President shall from time to
time prescribe.
(H) Assistant Treasurers. Except as may be otherwise provided in these
By-laws, Assistant Treasurers, if there be any, shall perform such duties and
have such powers as from time to time may be assigned to them by the Board of
Directors, the President, or the Treasurer,
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and in the absence of the Treasurer or in the event of the inability of or
refusal to act by the Treasurer, the Assistant Treasurer (or if there be more
than one Assistant Treasurer, the Assistant Treasurers in the order designated
by the Board of Directors or in the absence of any designation, in the order of
their election) shall have the authority to perform all functions of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer.
(I) Other Officers. Such other officers as the Board of Directors may
choose shall perform such duties and have such powers as from time to time may
be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
SECTION 4.4 Resignation, Removal and Vacancies. Any officer may resign
at any time by giving written notice of his resignation to the President or the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein or when delivered to the President or Secretary, as the
Board shall determine.
Any officer, agent or employee may be removed, with or without cause,
at any time by a majority of directors then in office or by the officer who
appointed him.
A vacancy in any office may be filled for the unexpired portion of the
term in the same manner as provided in these By-laws for election or
appointment to such office.
ARTICLE V
INDEMNIFICATION
SECTION 5.1 Mandatory Indemnification of Directors and Officers.
(A) The Corporation shall promptly indemnify, to the fullest extent
provided by Section 5.1(B) hereof, each director or officer (including each
former director or officer)(an "indemnitee") of the Corporation who was or is
made a party to or required to appear in, or is threatened to be made a party
to or required to appear in, any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative, and
whether external or internal to the Corporation (a "proceeding"), by reason of
the fact that the indemnitee is or was an authorized representative of the
Corporation, against all expenses (including attorneys' fees, disbursements and
other charges), judgments, fines (including excise taxes and penalties) and
amounts paid in settlement actually and reasonably incurred by the indemnitee
in connection with such proceeding.
(B) Indemnification pursuant to this Section 5.1 shall include but
shall not be limited to cases in which indemnification and advancement of
expenses are permitted pursuant to the provisions of Section 145 of the
Delaware General Corporation Law as it may be amended or
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supplemented from time to time. Indemnification pursuant to this Section 5.1
shall be made in every case described in Section 5.1(A) hereof except:
(a) In connection with a proceeding (or any claim, issue or
matter therein or any part thereof) initiated by the indemnitee,
unless such initiation was authorized by the Board of Directors of the
Corporation; or
(b) With respect to any act that is established, by a final,
unappealable adjudication adverse to the indemnitee, as having been
material to the cause of action so adjudicated and as having
constituted either willful misconduct or recklessness; or
(c) With respect to any benefit or advantage gained by the
indemnitee to which the indemnitee was not legally entitled; or
(d) In connection with a proceeding by or for the benefit of
the Corporation to recover any profit pursuant to the provisions of
section 16(b) of the Securities Exchange Act of 1934 and regulations
thereunder or similar provisions of any applicable state law; or
(e) To the extent that the indemnitee actually receives
payment under any policy of insurance or is otherwise reimbursed.
(C) Notwithstanding the foregoing provisions of this Section 5.1, to
the extent that an indemnitee is successful on the merits or otherwise in
defense of any proceeding or any part thereof or in defense of any claim, issue
or matter therein, including but not limited to obtaining a dismissal without
prejudice or a settlement without admission of liability, the indemnitee shall
be promptly indemnified by the Corporation against expenses (including
attorneys' fees, disbursements and other charges) actually and reasonably
incurred by the indemnitee in connection therewith.
(D) The right of indemnification pursuant to this Section 5.1 is
conferred in order to attract and retain the services of highly qualified
directors and officers and to encourage them to make corporate decisions
without fear of suits and/or legal harassment. Indemnification pursuant to this
Section 5.1 is therefore declared to be consistent with the fiduciary duty of
the Corporation's Board of Directors. Except as specifically provided in this
Section 5.1, such indemnification shall be made by the Corporation without any
requirement that any determination be made or any action be taken by the Board
of Directors, shareholders, or legal counsel. A failure of the Board of
Directors, shareholders, or legal counsel to make a determination or take
action favorable to the claim of an indemnitee for indemnification pursuant to
this Section 5.1, or the making of a determination or taking of action adverse
to such a claim, shall not preclude indemnification under this Article or
create any presumption that the indemnitee is not entitled to such
indemnification.
SECTION 5.2 Mandatory Advancement of Expenses to Directors and
Officers. The Corporation shall promptly pay all expenses (including attorneys'
fees, disbursements and other
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charges) actually and reasonably incurred by an indemnitee in defending or
appearing in any proceeding described in Section 5.1(A) hereof in advance of the
final disposition of such proceeding upon receipt of (i) an undertaking by or on
behalf of the indemnitee to repay all amounts advanced if it is ultimately
specifically determined by a final, unappealable adjudication that the
indemnitee is not entitled to be indemnified by the Corporation and (ii) an
irrevocable assignment to the Corporation of all payments to which the
indemnitee may be or become entitled, under any policy of insurance or
otherwise, in reimbursement of any such expenses paid by the Corporation
pursuant to this Section 5.2. Notwithstanding the foregoing, no advance payment
shall be made by the Corporation pursuant to this Section 5.2 if the Board of
Directors reasonably and promptly determines by a majority vote of the directors
who are not parties to the proceeding that, based upon the facts known to the
Board at the time the determination is made, the matter is of the kind described
in Section 5.1(B)(a) or (d) hereof or the indemnitee's actions were of the kind
described in Section 5.1(B)(b) or (c) hereof.
SECTION 5.3 Permissive Indemnification and Advancement of Expenses.
The Corporation may, as determined by the Board of Directors from time to time:
(A) Indemnify, to the fullest extent permitted by Section 5.1 hereof,
any other person who was or is made a party to or required to appear in, or is
threatened to be made a party to or required to appear in, or was or is
otherwise involved in, any threatened, pending or completed proceeding by
reason of the fact that such person is or was an authorized representative of
the Corporation, both as to action in such person's official capacity and as to
action in another capacity while holding such office or position, against all
expenses (including attorneys' fees, disbursements and other charges),
judgments, fines (including excise taxes and penalties), and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action or proceeding, with the same effect as though such person were an
"indemnitee" as defined in Section 5.1 hereof; and
(B) Pay expenses incurred by any such other person by reason of his or
her participation in any such proceeding in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of such person
to repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation and to repay all amounts advanced
for which he or she is reimbursed under any policy of insurance or otherwise,
with the same effect as though such person were an "indemnitee" as defined in
Section 5.1 hereof.
SECTION 5.4 Enforcement. If the Corporation refuses or fails to make
any payment to an indemnitee required by this Article, the indemnitee shall be
promptly indemnified by the Corporation against expenses (including attorneys'
fees, disbursements and other charges) actually and reasonably incurred by the
indemnitee in connection with the successful establishment of his or her right
to indemnification or advancement of expenses, in whole or in part, in an
action in a court of competent jurisdiction.
SECTION 5.5 General. Each director or officer of the Corporation shall
be deemed to act in such capacity in reliance upon such rights of
indemnification and advancement of expenses
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as are provided in this Article. The rights of indemnification and advancement
of expenses provided by this Article shall not be deemed exclusive of any other
rights to which any person seeking indemnification or advancement of expenses
may be entitled under any agreement, vote of shareholders or disinterested
directors, statute or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office or
position, and shall continue as to a person who has ceased to be an authorized
representative of the Corporation and shall inure to the benefit of the heirs
and personal representatives of such person. Indemnification and advancement of
expenses under this Article shall be provided whether or not the indemnified
liability arises or arose from any threatened, pending or completed action by or
in the right of the Corporation. Any repeal or modification of this Article
shall not adversely affect any right or protection existing at the time of such
repeal or modification to which any person may be entitled under this Article.
SECTION 5.6 Definition of Corporation. For the purposes of this
Article, references to "the Corporation" shall include all constituent
corporations absorbed in a consolidation, merger or division, as well as the
surviving or new corporations surviving or resulting therefrom, so that (i) any
person who is or was an authorized representative of a constituent, surviving
or new corporation shall stand in the same position under the provisions of
this Article with respect to the surviving or new corporation as such person
would if he or she had served the surviving or new corporation in the same
capacity and (ii) any person who is or was an authorized representative of the
Corporation shall stand in the same position under the provisions of this
Article with respect to the surviving or new corporation as such person would
with respect to the Corporation if its separate existence had continued.
SECTION 5.7 Definition of Authorized Representative. For the purposes
of this Article, the term "authorized representative" shall mean a director,
officer, employee or agent of the Corporation or of any subsidiary of the
Corporation, or a trustee, custodian, administrator, committeeman or fiduciary
of any employee benefit plan established and maintained by the Corporation or
by any subsidiary of the Corporation, or a person serving another corporation,
partnership, joint venture, trust or other enterprise in any of the foregoing
capacities at the request of the Corporation.
SECTION 5.8 Savings Clause. If a court of competent jurisdiction
determines that any provision of this Article requires the Corporation to take
an action that would violate applicable law, such provision shall be limited or
modified in its application to such action to the minimum extent necessary to
avoid such violation of law, and, as so limited or modified, such provision and
the balance of this Article shall be enforceable in accordance with their terms
to the fullest extent permitted by applicable law, including but not limited to
the Delaware General Corporation Law.
SECTION 5.9 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was an authorized representative of the Corporation,
against any liability asserted against or incurred by such person in any such
capacity, or arising out of the status of such person as such, whether or
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not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Article.
SECTION 5.10 Funding to Meet Indemnification Obligations. The Board of
Directors, without approval of the shareholders, shall have the power to borrow
money on behalf of the Corporation, including the power to pledge the assets of
the Corporation, from time to time to discharge the Corporation's obligations
with respect to indemnification, the advancement and reimbursement of expenses,
and the purchase and maintenance of insurance referred to in this Article. The
Corporation may, in lieu of or in addition to the purchase and maintenance of
insurance referred to in Section 5.9 hereof, establish and maintain a fund of
any nature or otherwise secure or insure in any manner its indemnification
obligations, whether arising under or pursuant to this Article or otherwise.
ARTICLE VI
WAIVER OF NOTICES
SECTION 6.1 Waiver of Notices. Whenever notice is required to be given
by the Certificate of Incorporation, by these By-laws or by law, a waiver
thereof in writing, signed by the person entitled to such notice, or by an
attorney thereunto authorized, shall be deemed equivalent to notice, whether
given before or after the time specified therein. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except where the
person attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice.
ARTICLE VII
EXECUTION AND DELIVERY OF DOCUMENTS;
DEPOSITS; PROXIES; BOOKS AND RECORDS
SECTION 7.1 Execution and Delivery of Documents; Delegation. The Board
shall designate the officers, employees and agents of the Corporation who shall
have power to execute and deliver deeds, contracts, mortgages, bonds,
debentures, checks, drafts and other orders for the payment of money and other
documents for and in the name of the Corporation and may authorize such
officers, employees and agents to delegate such power (including authority to
redelegate) by written instrument to other officers, employees or agents of the
Corporation.
SECTION 7.2 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board, the
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President or any other officer of the Corporation to whom power in that respect
shall have been delegated by the Board or these By-laws shall select.
SECTION 7.3 Proxies in Respect of Stock or Other Securities of Other
Corporations. The President or any other officer of the Corporation designated
by the Board shall have the authority from time to time to appoint and instruct
an agent or agents of the Corporation to exercise, in the name and on behalf of
the Corporation, the powers and rights which the Corporation may have as the
holder of stock or other securities in any other corporation, to vote or
consent in respect of such stock or securities and to execute or cause to be
executed in the name and on behalf of the Corporation and under its corporate
seal or otherwise, such written proxies, powers of attorney or other
instruments as he may deem necessary or proper in order that the Corporation
may exercise such powers and rights.
SECTION 7.4 Books and Records. The books and records of the
Corporation may be kept at such places within or without the State of Delaware
as the Board may from time to time determine.
ARTICLE VIII
CERTIFICATES; STOCK RECORD; TRANSFER AND REGISTRATION;
NEW CERTIFICATES; RECORD DATE, ETC.
SECTION 8.1 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him in the Corporation and designating the class of stock to
which such shares belong, which shall otherwise be in such form as the Board
shall prescribe. Each such certificate shall be signed by, the President or a
Vice President and by the Treasurer or the Secretary of the Corporation. Any of
or all such signatures may be facsimiles. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may nevertheless be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue. Every certificate surrendered to the
Corporation for exchange or transfer shall be canceled and a new certificate or
certificates shall not be issued in exchange for any existing certificate until
such existing certificate shall have been so canceled, except in cases provided
for in Section 4 of this Article.
SECTION 8.2 Stock Record. A stock record in one or more counterparts
shall be kept of the name of the person, firm or corporation owning the stock
represented by each certificate for stock of the Corporation issued, the number
of shares represented by each such certificate, the date thereof and, in the
case of cancellation, the date of cancellation.
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SECTION 8.3 Transfer and Registration of Stock.
(A) Transfer. The transfer of stock and certificates of stock which
represent the stock of the Corporation shall be governed by Article 8 of the
Uniform Commercial Code, as adopted in the State of Delaware and as amended
from time to time.
(B) Registration. Registration of transfers of shares of the
Corporation shall be made only on the books of the Corporation which may be
maintained by a transfer agent appointed by the Corporation, by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, and on the surrender of the
certificate or certificates for such shares properly endorsed or accompanied by
a stock power duly executed.
SECTION 8.4 New Certificates. Lost, Stolen or Destroyed Certificates.
The Board may direct that a new share certificate or certificates be issued by
the Corporation for any certificate or certificates alleged to have been lost,
stolen, mutilated or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate to be lost, stolen, mutilated or destroyed.
When authorizing such issue of a new certificate or certificates, the Board
may, in its discretion and as a condition present to the issuance thereof,
require the owner of such lost, stolen, mutilated or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum and in such form as it may direct as indemnity against any claim that
may be made against the Corporation with respect to the certificate alleged to
have been lost, stolen, mutilated or destroyed.
SECTION 8.5 Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws, concerning the
issue, transfer and registration of certificates for stock of the Corporation.
SECTION 8.6 Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
may fix, in advance, a record date, which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, not be more
than fifty nor less than ten days before the date of such meeting; (2) in the
case of determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the Board
of Directors; and (3) in the case of any other action, shall not be more than
fifty days prior to such other action. If no record date is fixed: (a) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (b) the record date for determining stockholders entitled to express
consent to corporate action in
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writing without a meeting when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(c) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders entitled to notice
of or to vote at a meeting of the stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Seal. The Board shall provide a corporate seal which shall
bear the full name of the Corporation and the year and the state of its
incorporation.
SECTION 9.2 Dividends. Subject to the applicable provisions of the
Certificate of Incorporation, dividends upon the outstanding shares of the
Corporation may be declared by the Board of Directors at any annual, regular or
special meeting pursuant to law and may be paid in cash, in property or in
shares of the Corporation.
SECTION 9.3 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 9.4 Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (1) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to
his relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be
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counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
SECTION 9.5 Amendments. Subject to the Certificate of Incorporation
and applicable law, these By-laws may be amended, altered or repealed and new
By-laws may be adopted at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
such amendments and shall fully set forth or summarize the proposed amendments.
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Exhibit 4.1
September 20, 1995
Balanced Care Corporation
3507 Market Street, Suite 202
Camp Hill, Pennsylvania 17011
Attention: Brad E. Hollinger
Re: Commitment for Financing in Balanced Care Corporation
Dear Mr. Hollinger:
I hereby commit to the Balanced Care Corporation (the
"Company") that, subject to the terms and conditions contained herein, I will
purchase certain Company securities. If all such terms and conditions are
satisfied, pursuant to this letter, I will purchase an aggregate of 344,444
shares of Common Stock (as hereinafter defined), constituting 10% of the
then-outstanding shares of Common Stock of the Company when all such purchases
are completed (without giving effect to the purchase of the Preferred Stock, as
hereinafter defined) for $3,333.33, and an aggregate of 1,000,000 shares of
such Preferred Stock for $2,000,000.
1. (a) I agree to purchase from the Company, and the Company agrees to
sell to me, upon the terms and conditions contained herein, on or before
September 20, 1995 (the "Execution Date") (i) in a private sale transaction
newly issued shares of common stock of the Company (the "Common Stock")
constituting two and seventy one-hundredths of a percent (2.70%) of the
outstanding Common Stock (without giving effect to the other purchases
described in this letter) at an aggregate purchase price of $833.33, and (b)
50,000 newly issued shares of the Company's convertible Series A preferred
stock at a price of $2.00 per share (the "Preferred Stock"), with dividends to
be paid quarterly at an annual rate of twelve percent (12%), payable at the
Company's choice in either cash, additional shares of Preferred Stock valued at
$2.00 per share, or any combination thereof (provided, however, that the
Company shall have the option upon notice (1) on and after the first
anniversary of the date of issuance of any such Preferred Stock (the
"Termination Date") and (2) upon the issuance by the Company of additional
shares of preferred stock of the Company aggregating at least $750,000 (other
than additional shares of the Preferred Stock) to terminate the payment of such
dividends and to issue to the holders of the Preferred Stock for each share of
Preferred Stock that fraction of a share of Preferred Stock (x) the numerator
of which is 100,000 multiplied by the number of shares of Preferred Stock
issued and outstanding on the date immediately prior to the Termination Date
(other than shares of Preferred Stock issued in payment of the Company's
dividend obligations) and (y) the denominator of which is the number of shares
of Preferred Stock issued and outstanding on the date immediately prior to the
Termination Date multiplied by one million.
<PAGE> 2
Balanced Care Corp.
September 20, 1995
Page 2
The holders of the Preferred Stock shall have the right to vote with the
holders of the Common Stock on all matters and shall have one (1) vote per
share. Each share of Preferred Stock shall be convertible at any time into one
(1) share of Common Stock and shall have the other rights reflected in the
Certificate of Designation attached hereto as Exhibit A.
(b) Within forty-five (45) days of the date of execution of
this letter (the "Execution Date"), I agree to purchase additional Common Stock
constituting two and sixty-three one-hundredths of a percent (2.63%) of the
outstanding Common Stock (without giving effect to the purchases of Preferred
Stock described in this letter) at an aggregate purchase price of $833.33, and
an additional 75,000 newly issued shares of Preferred Stock at a price of $2.00
per share.
(c) Within ten (10) days of the date the Condition (as
defined below) is satisfied, I agree to purchase in a private sale transaction
additional Common Stock constituting five percent (5%) of the outstanding
Common Stock (without giving effect to the purchases of Preferred Stock
described in this letter) at an aggregate price of $1,666.65 and an additional
125,000 newly issued shares of Preferred Stock at a price of $2.00 per share.
(d) I further agree to purchase (i) in a private sale
transaction an additional 500,000 newly issued shares of Preferred Stock at a
price of $2.00 per share on the five (5) month anniversary (or, if later, the
date which is ten (10) days after the Condition (as defined below) is
satisfied) of the Execution Date and (ii) an additional 250,000 newly issued
shares of Preferred Stock at a price of $2.00 per share on the eleven (11)
month anniversary (or, if later, the date which is ten (10) days after the
Condition (as defined below) is satisfied) of the Execution Date; provided, in
each case, that at least 500,000 of my shares of Sun Healthcare Group, Inc.
("Sun") have been sold to investors at an average price per share of at least
$10.00 (the "Condition") and provided, in the case of (i) that 1 and 2(a) of
Exhibit B attached hereto are satisfied, and in the case of (ii) that 1, 2(b)
and 3 of Exhibit B are satisfied.
I shall make reasonable best efforts to cause the Condition
to be satisfied.
(e) Upon consummation of the issuances of Common Stock
described in this letter, there will be 3,444,444 shares of Common Stock
outstanding (without giving effect to the purchase and conversion of Preferred
Stock described in this letter).
(f) The Company shall have the option to terminate any
further obligations of both parties under this letter if the Condition has not
been satisfied on or before December 1, 1995, upon five (5) days' written
notice to me unless prior to the expiration of such five (5) day period I waive
in writing the requirement that the Condition be satisfied as a condition to my
obligation contained in Section 1(d) of this letter. The Company and I shall
each have the option to terminate any further obligations of this letter if the
Condition has not been satisfied within five (5) months of the Execution Date,
upon five (5) days' written notice, unless with respect to the termination by
the Company, I waive in writing the Condition.
<PAGE> 3
Balanced Care Corp.
September 20, 1995
Page 3
2. My commitment contained in this letter is subject to my (a) holding
30.25% of the Common Stock after giving effect to the purchase of the Common
Stock, the Preferred Stock (including the 500,000 and 250,000 shares of
Preferred Stock) and the conversion of all Preferred Stock to Common Stock, (b)
being granted the right to name one (1) member of the Board of Directors of the
Company in accordance with the Shareholders' Agreement (as defined below) for
each 10% of the Common Stock I own and (c) Messrs. Hollinger, Sutton and Barth
entering into employment agreements with the Company reasonably satisfactory to
me. In addition, the Company and I agree to execute a shareholders' agreement
substantially on the terms set forth in Exhibit C attached hereto (the
"Shareholders' Agreement"), it being understood that the other shareholders of
the Company will be parties to the Shareholders' Agreement. The Common Stock
and the Preferred Stock collectively shall be referred to as the "Securities."
3. I hereby represent and warrant to the Company as follows:
(a) I understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not be sold
except pursuant to an effective registration statement, or pursuant to a duly
available exemption from such registration requirements.
(b) I am purchasing the Securities for my own account and not
with a view to or in a sale which would be in violation of the Act.
(c) I have such knowledge and experience in financial and
business matters that I am capable of evaluating the merits and risks of the
purchase of the Securities, and, having had access to, or having been furnished
with, all such information as I have considered necessary, have concluded that
I am able to bear those risks.
(d) The Securities have not been offered or sold to me by any
form of general solicitation or general advertising.
(e) I understand that if any transfer of the Securities is to
be made in reliance on an exemption under the Act, the Company as the issuer of
the Securities may require an opinion of counsel satisfactory to the Company
that such transfer may be pursuant to an exemption under the Act.
(f) In making any subsequent offering or sale of the
Securities I will be acting only for myself and not as part of a sale or
planned distribution which would be in violation of the Act.
(g) I acknowledge that, so long as appropriate, a legend
similar to the following may appear on the certificates representing the
Securities: "These securities have not
<PAGE> 4
Balanced Care Corp.
September 20, 1995
Page 4
been registered under the Securities Act of 1933 and may be re-offered and sold
only if so registered or if an exemption from registration is available.
Additionally, these securities are subject to certain restrictions contained in
a shareholders' agreement, a copy of which may be obtained from the Company."
(h) All obligations and commitments described in this letter
are valid and enforceable against me and my assigns and designees, and my
performance of such obligations and commitments does not and will not violate
any law, ordinance, administrative or governmental rule or regulation
applicable to me or any decree of any court or governmental agency or body
having jurisdiction over me, or cause me to be in default in any material
respect in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which I am a party
or by which I or my property may be bound.
(i) I have reviewed the Company's business plan attached
hereto as Exhibit D and have had the opportunity to ask all questions and make
all inquiries which I deem necessary in connection with the investment and
financing contemplated in this letter.
4. By acknowledging this letter, the Company represents and warrants
the following:
(a) The Company is a duly formed corporation under the laws
of Delaware and was formed on April 17, 1995. The Company has performed no
activities other than those that are incidental to its formation or the
negotiation and effectuation of this letter and other than as set forth on
Exhibit E attached hereto.
(b) The Company has an authorized capitalization consisting
of (1) 7,000,000 shares of common stock, par value $0.001 per share, of which
3,100,000 shares are issued and outstanding and no shares are held in treasury,
and (2) 3,000,000 shares of preferred stock, par value $0.00l per share, of
which no shares are issued and outstanding, and no shares are held in treasury.
All such outstanding shares have been duly authorized and validly issued and
are fully paid and non-assessable. There are no outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance or sale
of any shares of the capital stock of the Company, other than as contemplated
in this letter.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or any
other entity is required for any transaction or commitment contemplated in this
letter.
(d) The Company is not in violation of its certificate or
articles of incorporation, by-laws or other organizational documents, or of any
law, ordinance,
<PAGE> 5
Balanced Care Corp.
September 20, 1995
Page 5
administrative or governmental rule or regulation applicable to the Company or
of any decree of any court or governmental agency or body having jurisdiction
over the Company, or in default in any material respect in the performance of
any obligation, agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness or in any material agreement, indenture,
lease or other instrument to which the Company is a party or by which it or its
property may be bound.
(e) The Common Stock and the Preferred Stock has been duly
authorized for issuance and, when issued in accordance with the terms of this
letter, will be validly issued, fully paid and non-assessable.
(f) The Company will cause its counsel to deliver a legal
opinion on the Execution Date substantially in the form attached hereto as
Exhibit F.
5. The Company agrees that it will not take any action on or prior to
July 14, 1996, which would result in my being in breach of Section 7 of the
agreement dated May 5, 1995, between Sun and myself, a copy of which has
previously been provided to the Company.
6. The Company agrees to credit towards my purchase of the additional
500,000 newly issued shares of Preferred Stock described in Section 1(d) of
this letter the aggregate amount of my costs and expenses up to $15,000
(including reasonable attorney's and accountant's fees) arising in connection
with the preparation, execution and delivery of this letter and the definitive
agreements (the "Expenses").
7. The Company agrees to grant to any entity owned by me which
provides respiratory therapy services (the "Entity") a right of first refusal
to provide respiratory therapy services to the leased, owned or managed care
facilities of the Company. Additionally, I agree that at the Company's request
I will cause the Entity to provide respiratory therapy to any of the Company's
leased, owned or managed care facilities, on terms and conditions no less
favorable to the Company than those provided to any other third party requiring
such respiratory therapy services.
THIS LETTER AND THE RIGHTS AND OBLIGATIONS DESCRIBED HEREIN, SHALL BE
GOVERNED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE.
<PAGE> 6
Balanced Care Corp.
September 20, 1995
Page 6
If you are in agreement with the foregoing, please sign and return the
enclosed copies of this letter to me no later than 5:00 P.M., New York City
time, on September 20, 1995. This offer shall terminate at such time unless a
signed copy of this letter has been delivered to me.
Very truly yours,
/s/ John Brennan
----------------
John Brennan
Agreed to and accepted this
20th day of September, 1995.
BALANCED CARE CORPORATION
By: /s/ Brad Hollinger
------------------
Brad Hollinger
President
Attachments
<PAGE> 7
Exhibit A
Certificate of Designation
<PAGE> 8
BALANCED CARE CORPORATION
Certificate of Designation, Preferences and Rights
of a Series of Convertible Preferred Stock by
Resolution of the Board of Directors Providing for
the Authorization of up to of 1,500,000 Shares of
Convertible Preferred Stock Designated "Convertible
Series A Preferred Stock"
---------------------------------------------------
Balanced Care Corporation, a Delaware corporation (the
"Company"), pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, does hereby make this Certificate
under the corporate seal of the Company, and does hereby state and certify that
pursuant to the authority expressly vested in the Board of Directors of the
Company by the Certificate of Incorporation, as amended and restated, the Board
of Directors, at a meeting thereof duly called and held on September 20, 1995,
at which meeting a quorum was present and acting throughout, duly adopted the
following resolutions providing for the issue of shares of Preferred Stock
hereinafter referred to, and further providing with respect to such issue of
shares of Preferred Stock for such powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, as are hereinafter set
forth, in addition to those set forth in said Certificate of Incorporation;
RESOLVED, that pursuant to Article 4 of the Certificate of
Incorporation, as amended (which authorizes 3,000,000 shares of Preferred
Stock, $0.00l par value, of which none is presently issued and outstanding),
the Board of Directors hereby provides for the authorization of a series of up
to 1,500,000 shares of Preferred Stock designated "Convertible Series A
Preferred Stock"; and
RESOLVED, that the powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, of the shares of the
Convertible Series A Preferred Stock (the "Series A Preferred") shall be as
follows:
SECTION 1. Dividends.
(a) The annual dividend rate on each share of the Series A
Preferred shall be $0.24 on each issued and outstanding share of such stock,
and no more, payable at the Company's choice in either cash, additional shares
of the Series A Preferred or in any combination thereof, commencing after the
date of issuance of such share of Series A Preferred (the "Issuance Date"). If
the Company chooses to issue additional shares of Series A Preferred as partial
or complete payment of a dividend, each such additional share shall be valued
at $2.00. The dividend payable on a share of Series A Preferred for the period
from the Issuance Date through the first "Dividend Payment Date", as
hereinafter defined, shall be paid on a pro rata basis to the record owner of
such share, computed on the basis of a 360-day year with equal months of 30
days. Dividends on each share of Series A Preferred shall be payable in four
equal
<PAGE> 9
quarterly installments on the last day of August, November, February and May
next succeeding its Issuance Date (each, a "Dividend Payment Date") and such
dividends shall accrue and become cumulative from the Issuance Date.
Accumulated dividends shall not bear interest. Such dividends shall be paid to
the record owner of such shares on the stock register of the Company on the
15th day of the month in which such dividends are to be paid. A dividend on
account or in full for arrears for any past dividend period may be declared and
paid at any time, without reference to any Dividend Payment Date, to
stockholders of record on such date, not exceeding 45 days preceding the
payment date, as may be fixed by the Board of Directors. To the extent that the
amount paid at any time or from time to time on the shares of Series A
Preferred shall be less than the total amount due and payable on all such
shares, such amount shall be paid pro rata to each record owner of such shares
in the proportion that the total number of such shares owned bears to the total
number of shares of the Series A Preferred then outstanding. The shares of
Series A Preferred shall be junior as to dividends to all Senior Stock.
(b) The Company shall have the option to terminate the
provisions of the foregoing Section 1(a) (the "Option") (i) commencing on the
date of the first anniversary of the Issuance Date, (ii) upon the issuance by
the Company of additional shares of Preferred Stock of the Company (other than
additional shares of the Series A Preferred issued in payment of the Company's
dividend obligation) for an aggregate consideration of at least $750,000 and
(iii) upon the issuance of the Dividend Amount to the holder of each share of
Series A Preferred issued and outstanding on the date (the "Termination Date")
that the notice described below is mailed. The Company shall exercise the
Option by mailing a notice of termination under this Section 1(b) to the
holders of record of the shares of Series A Preferred at their respective
addresses as the same shall appear on the books of the Company. Upon the
mailing of such notice, the terms and provisions of Section 1(a) shall expire
and terminate and the holders of the Series A Preferred shall no longer be
entitled to the dividend on the shares of Series A Preferred referred to in
such Section 1(a).
(c) In the event that the Company shall declare a dividend
payable in cash on the shares of Common Stock of the Company (a "Common Cash
Dividend"), the holders of the Series A Preferred shall be entitled to
participate in such Common Cash Dividend on a pro rata basis with the holders
of the Common Stock and shall be entitled to a proportionate share of any such
Common Cash Dividend as though the holders of the Series A Preferred were
holders of the number of shares of Common Stock of the Company into which their
respective shares of Series A Preferred are convertible as of the record date
fixed for the determination of the holders of Common Stock of the Company
entitled to receive such Common Cash Dividend.
SECTION 2. Restrictions on Junior and Parity Stock Payments.
(a) So long as any of the Series A Preferred is outstanding,
the Company will not declare any dividend (other than a dividend payable in
Junior Stock of the Company) on any class of Junior Dividend Stock and will not
make any other Junior Stock Payment unless, after giving effect to the proposed
Junior Stock Payment, at the date of declaration in the case of a dividend, or
at the date of setting apart money therefor in the case of any mandatory
redemption or purchase or other analogous fund, or at the date of payment or
distribution in the case of any
- 2 -
<PAGE> 10
other Junior Stock Payment (each such date being herein called a "Junior Stock
Payment Date"), all dividends on the Series A Preferred for all past dividend
periods shall have been paid and the full dividend thereon for the then current
dividend period shall have been paid, or declared and provided for in cash,
United States Treasury Bills or Notes, or other obligations the payment of
which is guaranteed by the United States, sufficient for the payment thereof.
(b) No dividend shall be paid on the shares of any series of
Parity Dividend Stock with respect to any dividend period unless (i) dividends
for all past dividend periods on the Series A Preferred shall have been paid
and (ii) the full current dividend shall simultaneously have been paid on the
shares of the Series A Preferred, or shall have been declared and provided for
in cash, United States Treasury Bills or Notes or other obligations the payment
of which is guaranteed by the United States, sufficient for the payment
thereof, except that, at any time when dividends on the Series A Preferred
shall be in arrears and shall also be in arrears on any other class or series
of Parity Dividend Stock, the Company may make payments in respect of such
dividends provided that such payments shall be made ratably in proportion to
the amounts which would be payable on all such shares if all cumulative
dividends accrued thereon were declared and paid in full to the then current
dividend payment date with respect to the Series A Preferred.
SECTION 3. Redemption. Shares of the Series A Preferred shall
be redeemable, at the Company's election, in whole or in part, at any time and
from time to time; provided, however, that if the Dividend Amount referred to
in Section 1(b) hereof has not been paid prior to the Redemption Date (as
hereinafter defined), then prior to, and as a condition precedent to, any valid
redemption hereunder, the Company shall distribute to the holder of each
redeemed share of Series A Preferred the Redemption Amount with respect to each
such redeemed share, which Redemption Amount shall also be redeemed by the
Company in accordance with the following provisions; further provided, that no
Redemption Amount shall be distributed with respect to shares of Series A
Preferred which were themselves distributed as Redemption Amount. Any
redemption by the Company shall be at the cash redemption price of $2.00 per
share of Series A Preferred, together in each case with accrued and unpaid
dividends, if any, to the date fixed for redemption.
If less than all of the outstanding shares of the Series A
Preferred not previously called for cash redemption are to be redeemed, shares
to be redeemed shall be selected by the Company from outstanding shares not
previously called for cash redemption by lot or pro rata as determined by the
Board of Directors of the Company. The Company may not redeem for cash less
than all outstanding shares of the Series A Preferred unless full cumulative
dividends shall have been declared and paid or set apart for payment upon all
outstanding shares of the Series A Preferred for all past dividend periods.
Shares of the Series A Preferred redeemed for cash by the Company shall be
restored to the status of authorized but unissued shares of Preferred Stock,
without designations as to series, and may thereafter be issued, but not as
shares of Series A Preferred.
Notice of every redemption under this Section 3, effective
upon mailing, shall be mailed by registered mail not less than 20 business days
in advance of the date designated for
- 3 -
<PAGE> 11
such redemption to the holders of record of the shares of Series A Preferred to
be redeemed at their respective addresses as the same shall appear on the books
of the Company.
Every notice of redemption under this Section 3 shall be
accompanied by an officers' certificate certifying all facts which are
conditions precedent to such redemption.
SECTION 4. Voting. Except as otherwise required by law and as
specified in this Section 4, the holders of shares of the Series A Preferred
shall have the right and power to vote on any question or in any proceeding or
to be represented at or to receive notice of any meeting of common
stockholders. Unless otherwise required by law, on any matters on which the
holders of the Series A Preferred shall be entitled to vote, they shall vote
together with the holders of the Common Stock as a single class, and each
holder of Series A Preferred shall be entitled to that number of votes per
share of Series A Preferred held as is equal to the number of shares of Common
Stock into which a share of Series A Preferred could be converted in accordance
with Section 6 hereof on the record date of the meeting at which such vote is
being taken, or if there is no meeting then on the date such vote is taken.
SECTION 5. Liquidation. In the event of any complete or
partial liquidation, dissolution, distribution of assets or winding-up of the
Company, whether voluntary or involuntary, the holders of shares of the Series
A Preferred shall each be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of the Series A
Preferred a sum equal to $2.00 plus accrued dividends (including cumulative
dividends) to the date of such liquidation, dissolution, distribution of assets
or winding-up for the purposes hereof before any distribution shall be made to
the holders of Junior Stock of the Company, and if the assets of the Company
shall be insufficient to pay in full such amounts, then such assets shall be
distributed among the holders of the Series A Preferred ratably in accordance
with the respective amounts which would be payable on such shares if all
amounts payable thereon were paid in full. Neither the merger or consolidation
of the Company, nor the sale of all or part of its assets, shall be deemed a
liquidation, dissolution or winding-up of the affairs of the Company within the
meaning of the foregoing provisions of this Section 5 provided that the
consolidation, merger or sale does not adversely affect the Preferred Stock. In
the event of any complete or partial liquidation, dissolution, distribution of
assets or winding-up of the Company, whether voluntary or involuntary, the
holders of the Series A Preferred shall not be entitled to receive the
liquidation price of such shares held by them until the liquidation price of
all Senior Stock shall have been paid in full.
SECTION 6. Conversion Rights. Each share of the Series A
Preferred shall be convertible (i) at the option of the record holder thereof
at any time prior to redemption, by presentation of the certificate
representing such share by the record holder in person or by registered mail,
return receipt requested with postage prepaid thereon, at the office of the
Company located in Camp Hill, Pennsylvania, and at such other offices, if any,
as the Board of Directors may determine; or (ii) automatically, upon
consummation of the Company's Initial Public Offering (the "IPO"), by virtue of
the consummation of such IPO and without any further action on the part of the
holder of the Series A Preferred; into the number of shares of fully paid and
nonassessable shares of Common Stock determined by dividing the amount of
$2.00, by the
- 4 -
<PAGE> 12
conversion price in effect at the time of conversion. The conversion price
initially shall be $2.00 (the "Conversion Price") and shall be subject to
adjustment from time to time as follows:
(a) If the Company, at any time while any shares of Series A
Preferred are outstanding, shall pay a dividend payable in Common Stock or make
any other distribution to its stockholders payable in its Common Stock, then
the Conversion Price shall be adjusted, as of the date that the Company shall
take a record of the holders of its Common Stock for the purpose of effecting
such dividend or other distribution (or if no such record is taken, as of the
date of such payment or other distribution), to that price determined by
multiplying the Conversion Price in effect immediately prior to such record or
distribution date by a fraction (i) the numerator of which shall be the total
number of shares of the Common Stock outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of the Common Stock outstanding immediately after such
dividend or distribution; provided, however, that this Section 6(a) shall not
apply to that certain 31 to 1 stock split being declared by the Board of
Directors of the Company to holders of record of the outstanding capital stock
of the Company on or about September 20, 1995.
(b) If the Company, at any time while any shares of Series A
Preferred are outstanding, shall subdivide the Common Stock, the Conversion
Price shall be proportionately reduced as of the effective date of such
subdivision, or if the Company shall take a record of holders of the Common
Stock for the purpose of so subdividing, as of such record date, whichever is
earlier.
(c) If the Company, at any time while any shares of Series A
Preferred are outstanding, shall combine the Common Stock, the Conversion Price
shall be proportionately increased as of the effective date of such combination
or, if the Company shall take a record of holders of the Common Stock for the
purpose of so combining, as of such record date, whichever is earlier.
(d) If there is any reorganization, or reclassification of
the Common Stock, or merger or consolidation of the Company in which the
Company is not the surviving corporation, in lieu of the shares of Common Stock
theretofore issuable upon the exercise of the conversion rights of the Series A
Preferred, each holder of Series A Preferred shall have the right to procure
upon exercise of the conversion rights of such Preferred Stock the kind and
amount of shares of stock, other securities, money and property which it would
have received at the time of such reclassification, reorganization, merger or
consolidation if such holder of Series A Preferred had exercised the conversion
rights of the Series A Preferred immediately prior to such reclassification or
reorganization. The provisions of this Section 6(d) shall similarly apply to
successive reorganizations, reclassifications, mergers or consolidations.
(e) Notwithstanding anything to the contrary herein
contained, no adjustment of the Conversion Price shall be made if the amount of
such adjustment shall be less than $0.01 per share, but in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time and together with the next subsequent
- 5 -
<PAGE> 13
adjustment which, together with any adjustment so carried forward, shall amount
to $0.01 per share or more.
(f) Whenever the Conversion Price is adjusted as herein
provided and whenever a new Conversion Price becomes effective, a notice
stating that the Conversion Price has been adjusted and setting forth the new
Conversion Price and in reasonable detail the method of calculation upon which
such calculation is based shall forthwith be prepared, and as soon as
practicable after it is required, the Company shall cause such notice to be
mailed to the holders of the Series A Preferred at their last addresses as they
shall appear upon the books of the Company.
In case at any time conditions shall arise by reason of
action taken by the Company, which, in the opinion of the Board of Directors of
the Company, are not adequately covered by the other provisions hereof and
which might materially and adversely affect the rights of the holders of the
Series A Preferred, or in case at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, the Board of
Directors of the Company shall appoint a firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company), who shall give their opinion
as to the adjustment, if any (not inconsistent with the standards established
in this Section 6), of the Conversion Price (including, if necessary, any
adjustment as to the securities into which the Series A Preferred may
thereafter be convertible) which is, or would be, required to preserve without
dilution the rights of the holders of the Series A Preferred. The Board of
Directors of the Company shall make the adjustment recommended forthwith upon
the receipt of such opinion or the taking of any such action contemplated, as
the case may be; provided, however, that no adjustment of the Conversion Price
shall be made which in the opinion of the accountant or firm of accountants
giving the aforesaid opinion would result in an increase of the Conversion
Price to more than the Conversion Price then in effect.
The Company covenants that it will at all times reserve and
keep available, out of its authorized and unissued Common Stock solely for the
purpose of issuance upon conversion of the Series A Preferred as herein
provided, free from preemptive rights or any other actual or contingent
purchase rights of Persons other than the holders of the Series A Preferred,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding Series A Preferred. The Company covenants that
all shares of Common Stock which shall be so issuable shall upon issue be duly
and validly issued and fully paid and nonassessable.
The Company shall not be required to issue stock certificates
representing fractions of shares of Common Stock, but shall make payment in
respect of any final fraction of a share based on the Per Share Market Value at
such time or, if a Per Share Market Value cannot be determined, on the
Conversion Price.
The issuance of certificates for shares of Common Stock on
conversion of Series A Preferred shall be made without charge to the holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate in a
name other than
- 6 -
<PAGE> 14
that of the holder of the Series A Preferred which has been converted and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 7. Definitions. For the purposes hereof, the
following terms shall have the following respective meanings:
"Common Stock" shall mean all shares now or hereafter
authorized of the class of Common Stock, $0.00l par value, of the Company
presently authorized and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Dividend Amount" shall mean that fraction of a share of
Series A Preferred, (a) the numerator of which is 100,000 multiplied by the
number of shares of Series A Preferred issued and outstanding on the date
immediately prior to the Termination Date (other than shares of Series A
Preferred issued in payment of the Company's dividend obligations) and (b) the
denominator of which is the number of shares of Series A Preferred issued and
outstanding on the date immediately prior to the Termination Date multiplied by
1,000,000.
"Initial Public Offering" or "IPO" shall mean the first
issuance and sale of equity securities of the Company in an underwritten public
offering registered under the Securities Act of 1933, as amended.
"Junior Distribution Stock" shall mean the Common Stock of
the Company and any other stock of the Company over which the Series A
Preferred has a preference as to distribution of assets.
"Junior Dividend Stock" shall mean the Common Stock of the
Company and any other stock over which the Series A Preferred has a preference
as to payment of dividends.
"Junior Stock" shall mean the Common Stock and any other
class of stock of the Company hereafter authorized over which the Series A
Preferred shall have precedence or priority in the payment of dividends or in
the distribution of assets on any liquidation, dissolution or winding-up of the
Company.
"Junior Stock Payment" shall mean:
(a) any dividend (other than a dividend payable in Common
Stock) on any class of Junior Dividend Stock; or
(b) any redemption, purchase or other acquisition for value,
or setting apart money for any mandatory purchase or other analogous fund for
the redemption or purchase of, any shares of any class of Junior Distribution
Stock, or any other distribution made in respect of any class of Junior
Distribution Stock, either directly or indirectly.
- 7 -
<PAGE> 15
"Parity Distribution Stock" shall mean any stock of the
Company ranking as to distribution of assets on a parity with the Series A
Preferred.
"Parity Dividend Stock" shall mean any stock of the Company
ranking as to payment of dividends on a parity with the Series A Preferred.
"Parity Stock" shall mean Parity Dividend Stock or Parity
Distribution Stock.
"Per Share Market Value" shall mean on any particular date
(a) the last sale price per share of the Common Stock on such date on the
principal stock exchange on which the Common Stock has been listed or, if there
is no such price on such date, then the last price on such exchange on the date
nearest preceding such date, or (b) if the Common Stock is not listed on any
stock exchange, the mean between the final bid and final asked prices for a
share of Common Stock in the over-the-counter market, as reported by the
National Association of Securities Dealers Automated Quotations System
("NASDAQ") at the close of business on such date, or (c) if the Common Stock is
not quoted on NASDAQ, the mean between the bid and asked prices for a share of
Common Stock in the over-the-counter market on such date, as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting prices), or (d) if the Common Stock is
not publicly traded, an independent appraiser will be retained to determine per
share market value, provided that none of the transactions related to the
foregoing shall include purchases by any "affiliate" (as such term is defined
in the General Rules and Regulations under the Securities Act of 1933, as
amended) of the Company.
"Person" shall mean a corporation, an association, a
partnership, a limited liability company, an organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
"Preferred Stock" shall mean all shares now or hereafter
authorized of the Preferred Stock, $0.00l par value, of the Company.
"Prior Stock" shall mean any stock of the Company which has a
preference over the Series A Preferred as to payment of dividends or as to
distribution of assets.
"Redemption Amount" shall mean that fraction of a share of
Series A Preferred, (a) the numerator of which is 100,000 multiplied by the
number of shares of Series A Preferred issued and outstanding (other than
shares of Series A Preferred issued in payment of the Company's dividend
obligations) which are being redeemed pursuant to Section 3 hereof on the date
immediately prior to the date designated for such a redemption (the "Redemption
Date") and (b) the denominator of which is the number of shares of Series A
Preferred issued and outstanding on the date immediately prior to the
Redemption Date multiplied by 1,000,000.
"Senior Stock" shall mean any shares or class of shares of
the Company which are by their terms expressly made senior to the Series A
Preferred as to dividends and as to distribution of assets of the Company.
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<PAGE> 16
SECTION 8. Rank. The shares of Series A Preferred shall be of
equal rank with all other series of Preferred Stock, except as provided in a
certificate of designation filed pursuant to Section 151 of the General
Corporation Law of the State of Delaware with the Secretary of State of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned, the President of the
Corporation, hereby affirms under penalties of perjury that this Certificate of
Designation is the act and deed of the Corporation and that the facts contained
herein are true, all on September 20, 1995.
BALANCED CARE CORPORATION
By: /s/ Brad E. Hollinger
---------------------
Brad E. Hollinger
President
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<PAGE> 1
Exhibit 4.2
EXECUTION COPY
SERIES B STOCK PURCHASE AGREEMENT
Dated as of September 20, 1996
by and between
BALANCED CARE CORPORATION
and
The Investors listed on Schedule 1.1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 THE TRANSACTION....................................................1
1.1 Sale and Issuance of Series B Stock ......................................1
1.2 Delivery and Payment for the Purchased Shares.............................1
1.3 Closings .................................................................1
1.4 Option for Purchase of Additional Shares of Series B Stock ...............2
1.5 Option Closings...........................................................3
1.6 Delivery and Payment for the Shares ......................................3
SECTION 2 INVESTORS' REPRESENTATIONS ........................................4
SECTION 3 REPRESENTATIONS AND WARRANTIES OF BCC..............................5
3.1 Valid Corporate Existence; Qualification..................................5
3.2 Capitalization............................................................6
3.3 Due Issuance of Purchased Shares..........................................6
3.4 No Violation..............................................................6
3.5 Authorization; Validity...................................................7
3.6 Financial Statements......................................................7
3.7 Budget ...................................................................7
3.8 Issuance Taxes............................................................7
3.9 Changes Subsequent to Date of Balance Sheet ..............................7
3.10 No Registration Rights ..................................................9
3.11 No Voting Agreements ....................................................9
3.12 Other Agreements ........................................................9
3.13 Loans and Advances......................................................11
3.14 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons..........11
3.15 Significant Customers and Suppliers.....................................11
3.16 Title to Properties and Assets; Liens, Etc. ............................11
3.17 Litigation, Permits, Etc. ..............................................12
3.18 Proprietary Information of Third Parties ...............................12
3.19 Patents, Trademarks, Etc. ..............................................13
3.20 Tax Returns and Payments ...............................................13
3.21 Employee Matters .......................................................14
3.22 Transactions With Affiliates............................................14
3.23 Government Consent, etc. ...............................................15
3.24 Finder's Fee............................................................15
3.25 Disclosure..............................................................15
3.26 Offering of the Purchased Shares........................................15
3.27 No Violation ...........................................................16
3.28 U.S. Real Property Holding Corporation .................................16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
3.29 Environmental Protection................................................16
3.30 ERISA Matters...........................................................17
3.31 Fraud and Abuse ........................................................19
3.32 Health Professional's Financial Relationships ..........................20
3.33 Third Party Payor and Customer Contracts................................20
3.34 Foreign Corrupt Practices Act ..........................................20
SECTION 4 COVENANTS OF BCC..................................................20
4.1 Use of Proceeds .........................................................20
4.2 Annual and Monthly Financial Statements..................................20
4.3 Inspection Rights........................................................22
4.4 Prompt Payment of Taxes..................................................22
4.5 Accounts and Reports.....................................................22
4.6 Corporate Existence......................................................22
4.7 Maintenance of Properties; Employees ....................................22
4.8 Insurance................................................................23
4.9 Key Man Insurance........................................................23
4.10 Government Consents and Licenses .......................................23
4.11 Loans to Employees......................................................23
4.12 Conflicts of Interest ..................................................23
4.13 Shareholder Listing and Ownership ......................................23
4.14 Reserve for Conversion Shares...........................................23
4.15 Restrictive Agreements Prohibited ......................................24
4.16 Transactions with Affiliates............................................24
4.17 Expenses of Directors ..................................................24
4.18 Board of Directors Meetings.............................................24
4.19 Compensation Arrangements...............................................24
4.20 By-laws.................................................................25
4.21 Performance of Contracts................................................25
4.22 Vesting of Reserved Employee Shares.....................................25
4.23 Employee Nondisclosure and Developments Agreements......................25
4.24 Activities of Subsidiaries..............................................26
4.25 Compliance with Laws ...................................................26
4.26 Keeping of Records and Books of Account.................................26
4.27 Change in Nature of Business............................................26
4.28 U.S. Real Property Interest Statement...................................26
4.29 Rule 144A Information...................................................27
4.30 Compensation and Audit Committees.......................................27
4.31 Termination of Covenants ...............................................27
SECTION 5 CONDITIONS TO CLOSING.............................................27
5.1 Conditions Precedent to Obligations of Investors ........................27
5.2 Conditions Precedent to Obligations of BCC...............................30
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
SECTION 6 RIGHT OF FIRST REFUSAL............................................31
6.1 Right of First Refusal ..................................................31
SECTION 7 MISCELLANEOUS ....................................................32
7.1 Modification or Waiver...................................................32
7.2 Notices..................................................................32
7.3 Binding Effect and Assignment............................................33
7.4 Exhibits, Schedules and Entire Agreement.................................33
7.5 Governing Law............................................................33
7.6 Counterparts.............................................................34
7.7 Section Headings ........................................................34
7.8 Survival of Agreements...................................................34
7.9 Brokerage................................................................34
7.10 Parties in Interest ....................................................34
7.11 Severability............................................................34
7.12 Expense Reimbursement ..................................................34
INDEX TO SCHEDULES
Schedule 1.1 Investors
Schedule 1.3 Closings
Schedule 3.1 Subsidiaries; Qualifications
Schedule 3.2 Capitalization
Schedule 3.9 Changes Subsequent to Date of Balance Sheet
Schedule 3.10 Registration Rights
Schedule 3.12 Other Agreements
Schedule 3.14 Assumptions, Guarantees, Etc.
Schedule 3.16 Title to Properties and Assets
Schedule 3.17 Litigation, Etc.
Schedule 3.19 Patents, Trademarks, Etc.
Schedule 3.21 Employee Matters
Schedule 3.22 Transactions with Affiliates
Schedule 3.24 Finder's Fee
Schedule 3.30 ERISA Matters
</TABLE>
-iii-
<PAGE> 5
Schedule 5.1 Acquired Facilities
INDEX TO EXHIBITS
EXHIBIT A Amended and Restated Charter
EXHIBIT B Securityholders
EXHIBIT C Balance Sheet
EXHIBIT D Operating Budget
EXHIBIT E Employee Nondisclosure and
Developments Agreement
EXHIBIT F Business Plan
EXHIBIT G Performance Milestones
EXHIBIT H Form of Opinion of Company Counsel
EXHIBIT I Stock Restriction Agreement
EXHIBIT J Registration Rights Agreement
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<PAGE> 6
SERIES B STOCK PURCHASE AGREEMENT
THIS SERIES B STOCK PURCHASE AGREEMENT, dated as of September 20,
1996, by and between Balanced Care Corporation ("BCC"), a Delaware corporation
with its principal place of business at 5021 Louise Drive, Suite 200,
Mechanicsburg, Pennsylvania 17055, and the persons named in Schedule 1.1 hereto
(each, an "Investor", collectively, the "Investors").
W I T N E S S E T H:
BCC was organized in 1995 to offer long term care to the elderly. BCC
is seeking to raise funds for general corporate purposes and to fund
acquisitions. The Investors desire to make an equity investment in BCC by
purchasing shares of BCC's Series B Stock, $0.001 par value per share ("Series
B Stock"), having the rights and preferences described in the Amended and
Restated Certificate of Incorporation of Balanced Care Corporation attached to
this Agreement as Exhibit A (the "Charter"). The investors severally
contemplate purchasing, for cash, up to an aggregate of 2,460,875 shares of the
Series B Stock at the Closings (as defined herein) and up to an additional
2,460,875 shares of Series B Stock (the "Option Shares") pursuant to the
options granted by BCC to the Investors hereby at the Option Closings, if any
(as defined herein).
NOW THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto, intending to be legally bound hereby, agree as
follows:
SECTION 1 THE TRANSACTION
1.1 Sale and Issuance of Series B Stock. BCC agrees to issue and sell
to the Investors and each Investor severally agrees to purchase from BCC, the
number of shares of Series B Stock listed opposite its name on Schedule 1.1
(the "Purchased Shares") at a price of $2.50 per share (the "Purchase Price").
1.2 Delivery and Payment for the Purchased Shares. Each Investor shall
make payment of the Purchase Price for the Purchased Shares at the Closing (as
defined below) for such shares specified pursuant to Section 1.3 below by wire
transfer of funds to BCC's account, by certified check or by other delivery
acceptable to BCC. Against receipt of the aggregate Purchase Price for the
Purchased Shares to be purchased in such Closing, BCC shall deliver to the
Investors or such Investor's counsel duly issued certificates representing such
Purchased Shares.
1.3 Closings. The consummation of the purchase and sale of the
Purchased Shares shall take place at three closings (each a "Closing" and,
collectively, the "Closings"). The first such Closing (the "First Closing")
shall take place on the date specified on Schedule 1.3 hereto under the heading
"First Closing", the second such closing (the "Second Closing") shall take
place on the date specified on Schedule 1.3 under the heading "Second Closing".
The third closing (the "Third Closing") shall take place on or before the day
that is 30 days following the
<PAGE> 7
Second Closing. The date of any Closing shall be referred to herein as a
"Closing Date." Each Closing shall take place at the offices of Kirkpatrick &
Lockhart LLP, 1500 Oliver Building, Pittsburgh Pennsylvania, or at such other
time, date or place as the parties agree.
In addition to the Purchased Shares to be purchased by the Investors
at the Third Closing, BCC (a) will sell, at the request of Robertson, Stephens
& Company ("Robertson") up to 220,000 additional shares of Series B Stock and
an option to purchase an additional 220,000 shares pursuant to Section 1.4
below to an affiliate or affiliates of Robertson and (b) may sell up to 220,875
additional shares of Series B Stock and an option to purchase an additional
220,875 shares pursuant to Section 1.4 below to Meditrust Mortgage Investments,
Inc. (or any affiliate thereof reasonably acceptable to Robertson) (each such
purchaser under Section 1.3(a) or (b) an "Additional Investor" and,
collectively, the "Additional Investors"). Any sale of shares to an Additional
Investor shall be under the terms and conditions, including the Purchase Price,
set forth herein. By execution of a counterpart page of this Agreement, the
Additional Investor shall be deemed to be an Investor under this Agreement
(including without limitation for purposes of the Options set forth in Section
1.4 below), the shares so purchased at the Third Closing shall be deemed to be
Purchased Shares hereunder, and Schedule 1.1 shall be automatically amended to
reflect the sale of such shares sold, and to reflect the Option Shares (as
defined below) that may be sold, to such Additional Investor.
1.4 Option for Purchase of Additional Shares of Series B Stock. (a) In
addition to the Purchased Shares to be issued and sold to the Investor pursuant
to this Section 1, BCC hereby grants an option to each Investor (each an
"Option" and, collectively, the "Options") to purchase up to the aggregate
number of additional shares of Series B Stock set forth opposite such
Investor's name on Schedule 1.1 hereto (as such amount may be adjusted pursuant
to Section 1.4(b) hereof) (the "Option Shares") under the terms and conditions,
including Purchase Price, set forth herein. Each Option shall be exercisable on
or before the date that is six (6) months after the date of the First Closing,
and shall be exercised, in whole or in part, by delivery to BCC of a written
notice of exercise (the "Exercise Notice") from the Investor exercising its
Option, which notice shall also specify a closing date (which shall be a
business day) for the consummation of the sale of the Option Shares (each, an
"Option Closing Date"), which date shall not be more than thirty (30) days
following delivery of the Exercise Notice to BCC.
(b) Notwithstanding the above, in the event that BCC provides
reasonable documentation (the "Documentation") to the Investors that it has
achieved all of the performance milestones set forth on Exhibit G hereto, then
each Investor shall be deemed to have exercised its option as of the date of
delivery of the Documentation, and shall be obligated, subject to the other
term and conditions of this Agreement, to purchase all of its unpurchased
Option Shares at a closing to be held thirty (30) days after delivery of the
Documentation (or if such day is not a business day, the next following
business day.) Such closing shall take place in the same manner as an Initial
Option Closing (as defined herein) and shall constitute an Option Closing (as
defined herein for purpose of this Agreement).
(c) In the event that an Investor does not deliver an
Exercise Notice by the date which is (6) months after the First Closing Date,
BCC shall send a notice (the "Notice") to
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<PAGE> 8
each Investor who has delivered an Exercise Notice (an "Option Investor")
indicating the aggregate number of Option Shares for which no Exercise Notice
has been delivered (the ("Available Option Shares"). Each Option Investor may
elect to purchase all or any part of the Available Option Shares by delivery of
a written notice specifying the number of Option Shares to be purchased to BCC
within fifteen (15) days of delivery of the Notice by BCC. In the event that
the Option Investors elect to purchase more than the number of Available Option
Shares, each Option Investor shall be entitled to purchase that fraction of
Available Option Shares as is equal to a fraction the numerator of which is the
total number of shares of Series B Stock held by such Option Investor and the
denominator of which is the total number of Series B Stock held by all Option
Investors electing to purchase Available Option Shares.
1.5 Option Closings. (a) The consummation of the purchase and sale of
any Option Shares to be sold pursuant to an Exercise Notice (an "Initial Option
Closing") shall take place on the Option Closing Date specified in such
Exercise Notice at the offices of Kirkpatrick & Lockhart LLP, 1500 Oliver
Building, Pittsburgh, Pennsylvania, or at such other time, date or place as the
parties agree.
(b) The consummation of the purchase and sale of any
Available Option Shares to be purchased pursuant to Section 1.4(c) hereof (the
"Available Option Closing") shall take place on the 30th day following the
delivery of the Notice by BCC to the Option Investors (or, if such day is not a
business day, the next following business day) (each Initial Option Closing and
Available Option Closing hereunder an "Option Closing").
(c) Unless otherwise agreed by the parties, to the extent
that (a) any Option remains unexercised and the Available Option Shares have
not been elected to be purchased by the Option Investors or (b) any Option
Closing to be held hereunder does not take place because (i) all conditions to
closing set forth in Section 5.2(a)-(c) hereof have not been met or waived by
BCC or (ii) all conditions to closing set forth in Section 5.1 hereof have not
been met other than due to a failure by BCC to take any necessary action or to
use its best efforts to cause in a third party to take any necessary action
thereunder, then on the date that is 225 days following the First Closing all
Options granted hereunder shall expire and neither BCC nor any Investor shall
have any further rights or obligations with respect thereto.
1.6 Delivery and Payment for the Shares. Each Investor shall make
payment of the aggregate Purchase Price for the Option Shares or any Available
Option Shares purchased hereunder (as set forth on Schedule 1.1 hereto) at the
Option Closing or Available Option Closing therefor by wire transfer of funds
to BCC's account, by certified check or by other delivery acceptable to BCC.
Against receipt of the aggregate Purchase Price for the Option Shares or
Available Option Shares purchased in the Option Closing or Available Option
Closing therefor, BCC shall deliver to the Investors or such Investor's counsel
duly issued certificates representing such Option Shares or Available Option
Shares.
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<PAGE> 9
SECTION 2 INVESTORS' REPRESENTATIONS.
As an inducement to BCC to enter into this Agreement and consummate
the transactions contemplated hereby, each Investor represents and warrants to
BCC the following as to itself/himself:
(a) except as otherwise indicated on Schedule 1.1 hereto,
it/he is an "accredited investor" within the meaning of Rule 501 under the
Securities Act of 1933, as amended (the "Securities Act") and was not organized
for the specific purpose of acquiring the Purchased Shares or Option Shares;
(b) it/he has sufficient knowledge and experience in
investing in companies similar to BCC in terms of BCC's stage of development so
as to be able to evaluate the risks and merits of its/his investment in BCC and
it/he is able financially to bear the risks thereof;
(c) it/he has had an opportunity to discuss BCC's business,
management and financial affairs with BCC's management;
(d) the Purchased Shares (and any Option Shares acquired
hereunder) being purchased by it/him are being acquired for its/his own account
for the purpose of investment and not with a view to or for SALE in connection
with any distribution thereof and it/he has no present intention of making any
sale, pledge or other assignment or transfer for value of such shares or any
interest therein;
(e) it/he understands that (i) the Purchased Shares, any
Option Shares acquired hereunder, and the Conversion Shares (as defined in
Section 3.1 hereof) have not been registered under the Securities Act by reason
of their issuance in a transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506
promulgated under the Securities Act, and that BCC is relying upon its/his
representations and warranties in this Section 2 for purposes of complying with
such exemptions; (ii) the Purchased Shares, any Option Shares acquired
hereunder and, upon conversion thereof, the Conversion Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, and the Investor must
therefore bear the economic risks of its investment in the Purchased Shares,
and in any Option Shares acquired hereunder for an indefinite period of time,
(iii) the Purchased Shares, any Option Shares acquired hereunder, and the
Conversion Shares will bear a legend to such effect and (iv) BCC will make a
notation on its transfer books to such effect;
(f) if it/he sells any Conversion Shares pursuant to Rule
144A promulgated under the Securities Act it/he will take all necessary steps
in order to perfect the exemption from registration provided thereby, including
(i) obtaining on behalf of BCC information to enable BCC to establish a
reasonable belief that the purchaser is a qualified institutional buyer and
(ii) advising such purchaser that Rule 144A is being relied upon with respect
to such resale;
(g) as to each Investor which is not a natural person (i) it
is a corporation, partnership or other entity duly organized under the
applicable laws of the jurisdiction of its
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<PAGE> 10
incorporation or formation and is validly existing and in good standing under
the laws of such jurisdiction, (ii) such jurisdiction of incorporation and such
Investor's principal place of business are as set forth on Schedule 1.1 hereto,
(iii) it has the requisite power and authority to execute, deliver and perform
this Agreement, (iv) it has duly taken all corporate, partnership or other
action required to be taken for such Investor to enter into and carry out this
Agreement and to acquire the Purchased Shares and Option Shares, and (v) the
Agreement has been duly executed and delivered by such Investor and constitutes
the valid and binding obligation of such Investor (except as may be limited by
bankruptcy, reorganization, insolvency, moratorium or similar laws of general
application relating to or affecting the enforcement of rights of creditors and
except that enforceability of the Investor's obligations hereunder is subject
to general principles of equity); and
(h) such Investor agrees to furnish such additional
information concerning itself/himself reasonably requested by BCC in order for
it to comply with applicable federal and state securities laws in connection
with the sale of the Purchased Shares and any Option Shares hereunder.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF BCC.
As an inducement to the Investors to enter into this Agreement and
consummate the transactions contemplated hereby, BCC and its Subsidiaries, as
the case may be, represent and warrant to the Investors, as follows:
3.1 Valid Corporate Existence; Qualification. BCC does not own or
control, directly or indirectly, any interest or investment in any other
corporation, association or other business entity other than the wholly-owned
subsidiaries named in Schedule 3.1 hereto (each a "Subsidiary" and
collectively, the "Subsidiaries"). BCC and each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. BCC and each Subsidiary has the requisite
corporate power and authority to carry on its business as currently conducted
and as currently proposed to be conducted, to own its assets, and BCC has the
requisite corporate power and authority to execute, deliver and perform this
Agreement, the Registration Rights Agreement by and among BCC, the Investors
and certain stockholders of BCC in substantially the form attached hereto as
Exhibit J (the "Registration Rights Agreement") and the Stock Restriction
Agreement by and among BCC, the Investors and certain securityholders of BCC in
substantially the form attached hereto as Exhibit I (the "Stock Restriction
Agreement"), to issue, sell and deliver the Purchased Shares and the Option
Shares and to issue and deliver the shares of Common Stock, $.001 par value, of
BCC (the "Common Stock") issuable upon conversion of the Purchased Shares and
Option Shares, if any, (the Conversion Shares"). BCC and each Subsidiary has
qualified or is otherwise authorized to do business as a foreign corporation in
all states or jurisdictions in which the character of the properties owned or
leased by) it required such qualification or authorization. The states or
jurisdictions in which BCC and each of the Subsidiaries is so qualified or
authorized to do business are set forth in Schedule 3.1 hereto.
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<PAGE> 11
3.2 Capitalization.
(a) The authorized capital stock of BCC consists of (i)
14,000,000 shares of Common Stock, $0.001 par value per share (the "Common
Stock"), (ii) 1,150,958 shares of Series A Preferred Stock, $0.001 par value
per share (the "Series A Stock") and (iii) 4,921,750 shares of Series B Stock
(collectively, the "Capital Stock"). Immediately prior to the sale of the
Purchased Shares by the Investors, there are outstanding 5,044,444 shares of
Common Stock, and 1,150,958 shares of Series A Stock, all of which are owned of
record as shown on Exhibit B, and no shares of the Series B Stock.
(b) All outstanding shares of BCC's Capital Stock have been
duly authorized and are validly issued, fully paid and nonassessable, and have
been issued in compliance with the 1933 Act and applicable state securities
laws.
(c) There are no liens, encumbrances, subscriptions or other
restrictions, commitments or agreements to which BCC is a party relating to the
voting, issuance, transfer, sale or disposition of any shares of Capital Stock
of BCC, other than as provided in this Agreement, or as disclosed on Schedule
3.2 hereof.
(d) Except as set forth in Exhibit B or as disclosed on
Schedule 3.2, there are no outstanding rights, options or warrants to purchase,
or securities convertible or exchangeable into shares of the capital stock of
BCC or any other securities of BCC or other agreements for the purchase or
acquisition from BCC, or to the knowledge of BCC, from any of its stockholders
of any shares of its capital stock or any other securities of BCC. The rights
and preferences of the Series B Stock are set forth in the Charter, which has
been approved by all requisite corporate action, has been duly filed with the
Secretary of State of the State of Delaware and is in full force and effect.
3.3 Due Issuance of Purchased Shares. The Purchased Shares, the Option
Shares and the Conversion Shares are duly authorized, and, when issued to the
Investors as provided herein and in the Charter, will be duly and validly
issued, fully paid and nonassessable. No person has any right of first refusal
or preemptive right granted in connection with the Purchased Shares, the Option
Shares, the Conversion Shares or any future issuances of securities by BCC
except as provided in this Agreement or as disclosed in Schedule 3.2 hereof.
3.4 No Violation. Neither the execution and delivery of this
Agreement, the Registration Rights Agreement or the Stock Restriction
Agreement, nor compliance by BCC with any of the provisions hereof or thereof
will:
(a) violate or conflict with any provision of the charter
documents or by-laws of BCC or any Subsidiary;
(b) violate or, with or without the giving of notice or the
passage of time or both, result in a default under, the breach or termination
of, or otherwise give any other contracting party the right to terminate, or
declare a default under, the terms of any agreement or
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<PAGE> 12
other document or undertaking to which BCC or any Subsidiary is a party, except
violations, breaches or rights of termination that have been waived in writing;
or
(c) violate any law or regulation of any jurisdiction
relating to BCC or any Subsidiary, or result in the termination or impairment
of any Permit (as defined in Section 3.17 hereof).
3.5 Authorization; Validity. All corporate action required to be taken
by or on behalf of BCC to authorize BCC to enter into and carry out this
Agreement, the Registration Rights Agreement and the Stock Restriction
Agreement, to issue, sell and deliver the Purchased Shares, the Option Shares
and to issue and deliver the Conversion Shares has been duly and properly taken
and BCC is bound by such actions. Each of this Agreement, the Stock Restriction
Agreement and the Registration Rights Agreement has been duly executed and
delivered by BCC and is valid and binding upon it and enforceable against it in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium or similar laws of general application
relating to or affecting the enforcement of rights of creditors and except that
enforceability of its obligations hereunder is subject to general principles of
equity.
3.6 Financial Statements. Attached hereto as Exhibit C is a
preliminary draft of the audited consolidated balance sheet of BCC and its
Subsidiaries as of June 30, 1996 (the "Balance Sheet") and the related draft
consolidated statements of earnings, stockholders' equity and cash flows of BCC
and its subsidiaries for the fiscal year then ended. All such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the period indicated and fairly
present the financial position of BCC at the date thereof and the results of
operations of BCC for the period covered thereby.
3.7 Budget. Attached hereto as Exhibit D is BCC's operating budget for
the one year period ending June 30, 1997 (the "Operating Budget"). BCC has also
provided to the Investors a preliminary forecast of the operating budget for
the one year period ending June 30, 1998, which is in the same form as the
Operating Budget.
3.8 Issuance Taxes. There are no taxes, levies, assessments or other
charges due to any governmental entity in connection with the issuance of the
Purchased Shares or the Option Shares.
3.9 Changes Subsequent to Date of Balance Sheet. Except as disclosed
in Schedule 3.9, since the date of the Balance Sheet and through the date
hereof:
(a) There has not been any material adverse change in the
condition (financial or otherwise), assets, liabilities, commitments, business,
properties, operations, prospects or affairs of BCC and its Subsidiaries from
that reflected in the Balance Sheet, except for changes in the ordinary course
of business which have not been, either in any case or in the aggregate,
materially adverse;
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(b) neither BCC nor any Subsidiary has suffered any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting its financial condition, properties, business, operations,
prospects or affairs;
(c) neither BCC nor any Subsidiary has waived any rights or
claims held by it or canceled any debts owed to it;
(d) neither BCC nor any Subsidiary has entered into any
leases for capital equipment, incurred any material obligations for capital
expenditures or become subject to any other indebtedness, obligations or
liabilities (absolute, accrued or contingent) other than current liabilities
shown on the Balance Sheet and current liabilities incurred since the date
thereof in the ordinary course of business;
(e) neither BCC nor any Subsidiary has mortgaged, pledged or
subjected to a lien or any other encumbrance, any of its assets;
(f) neither BCC nor any Subsidiary has sold, assigned or
transferred its tangible assets or canceled any debts or claims, except in each
case, in the ordinary course of business at prices not less than those which it
reasonably believed to be the then prevailing market prices;
(g) neither BCC nor any Subsidiary has sold, assigned or
transferred, or granted any exclusive license with respect to, any patents,
trademarks, trade names, copyrights, licenses, applications for any thereof, or
any other intangible assets;
(h) neither BCC nor any Subsidiary has defaulted in any
material respect in the performance of any material contract or other material
obligation;
(i) neither BCC nor any Subsidiary has purchased or otherwise
acquired any equity or debt security of any other corporation, entity or
person;
(j) neither BCC nor any Subsidiary has entered into any
material transaction or contract other than in the ordinary course of business,
all of which are accurately reflected in its books and records;
(k) neither BCC nor any Subsidiary has made any loans to its
employees, officers or directors other than advances of expenses in the
ordinary course of business;
(l) neither BCC nor any Subsidiary has made any change in the
compensation of any officer or directors whose total per annum compensation is
$75,000 or more;
(m) BCC has not declared or paid any dividend or made any
other distribution of its assets to securityholders;
(n) neither BCC nor any Subsidiary has experienced any labor
organization activity.
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(o) neither BCC nor any Subsidiary has issued any stock, bond
or other corporate security;
(p) neither BCC nor any Subsidiary has made any material
change in its manner of business or operations; and
(q) neither BCC nor any Subsidiary has entered into any
commitment (contingent or otherwise) to do any of the foregoing.
3.10 No Registration Rights. Prior to the Closing, no person or entity
has any demand, Form S-3 or other piggyback registration rights, under the 1933
Act with respect to any securities of BCC, other than those disclosed on
Schedule 3.10 hereof.
3.11 No Voting Agreements. Prior to the Closing, there are no
agreements or arrangements to which BCC is a party or, to the best of its
knowledge, among any other persons, relating to the voting of any securities of
BCC.
3.12 Other Agreement. Except as set forth in the attached Schedule
3.12, BCC is not a party to or otherwise bound by any written or oral:
(a) distributor, dealer, manufacturer's representative or
sales agency agreement which is not terminable on less than ninety (90) days'
notice without cost or other liability to BCC (except for agreements which, in
the aggregate, are not material to the business of BCC);
(b) any contract or agreement with any governmental authority
or third party fiscal intermediary or carrier administering any state Medicaid
program or the Medicare program, any state Medicaid program, the Medicare
program, any hospital, nursing facility or other inpatient health care
facility, health maintenance organization, preferred provider organization or
self-insured employer or other third party payor;
(c) agreement with any supplier containing any provision
permitting any party other than BCC to renegotiate the price or other terms, or
containing any pay-back or other similar provision, upon the occurrence of a
failure by BCC to meet its obligations under the agreement when due or the
occurrence of any other event;
(d) agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(e) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, Stock, purchase, stock option or other plan,
agreement or understanding pursuant to which benefits are provided to any
employee of BCC (other than group insurance plans applicable to employees
generally);
(f) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of BCC;
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<PAGE> 15
(g) guaranty of any obligation for borrowed money or
otherwise;
(h) agreement, or group of related agreements with the same
party or any group of affiliated parties, under which BCC has advanced or
agreed to advance money or has agreed to lease any property as lessee or
lessor;
(i) agreement or obligation (contingent or otherwise) to
issue, sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity securities;
(j) assignment, license or other agreement with respect to
any form of intangible property;
(k) agreement under which it has limited or restricted its
right to compete with any person in any respect; or
(1) other agreement or group of related agreements with the
same party involving more than $25,000 or continuing over a period of more than
six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by BCC without penalty upon notice of thirty (30) days or less, but
excluding any agreement or group of agreements with a customer of BCC for the
sale, lease or rental of BCC's products or services if such agreement or group
of agreements was entered into by BCC in the ordinary course of business.
With respect to the above agreements, BCC and its Subsidiaries, and to the best
of BCC's knowledge after due inquiry, each other party thereto, have in all
material respects performed all the obligations required to be performed by
them to date (or each non-performing party has received a valid, enforceable
and irrevocable written waiver with respect to its non-performance) and have
received no notice of default and are not in default (with due notice or lapse
of time or both) under any such agreement, instrument, commitment, plan or
arrangement to which BCC or any Subsidiary is a party or by which its property
may be bound. Neither BCC nor any Subsidiary has a present expectation or
intention of not fully performing all its obligations under each such
agreement, instrument, commitment, plan or arrangement, and neither BCC nor any
Subsidiary has any knowledge of any breach or anticipated breach by the other
party to any agreement, instrument, commitment, plan or arrangement to which
BCC or any Subsidiary is a party. Each of BCC and its Subsidiaries is in full
compliance with all of the terms and provisions of its Charter and By-laws, as
amended.
3.13 Loans and Advances. Neither BCC nor any Subsidiary has any
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of BCC
or such Subsidiary in respect of reimbursable business expenses anticipated to
be incurred by them in connection with their performance of services for BCC or
such Subsidiary.
3.14 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
Except as set forth on the attached Schedule 3. 14, neither BCC nor any
Subsidiary has assumed, guaranteed,
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<PAGE> 16
endorsed or otherwise become directly or contingently liable on any
indebtedness of any other person (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor, or otherwise to
assure the creditor against loss), except for guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
3.15 Significant Customers and Suppliers. No customer or supplier
which was significant to BCC and its Subsidiaries, taken as a whole, during the
period covered by the financial statements referred to in Section 3.6 or which
thereafter has been significant to BCC and its subsidiaries, taken as whole,
has terminated, materially reduced or threatened to terminate or materially
reduce its purchases from or provision of products or services to BCC and its
Subsidiaries, as the case may be.
3.16 Title to Properties and Assets; Liens, Etc. Except as set forth
on Schedule 316: BCC or a Subsidiary has good and marketable title to its
properties and assets and the properties and assets reflected in the Balance
Sheet (except properties and assets disposed of since the date of such Balance
Sheet in the ordinary course of business), in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (i) the lien of current
taxes not yet due and payable, (ii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to carriers,
warehousemen, materialmen, laborers and the like, (iii) liens in respect of
pledges or deposits under workers' compensation laws or similar legislation, or
(iv) minor defects in title, and none of the foregoing, individually or in the
aggregate, materially interferes with BCC's or such Subsidiary's present or
proposed use of such property or assets, including without limitation the
ability to secure financing using such property and assets as collateral. To
the best of BCC's knowledge, after due inquiry, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely affect the use or
operation of BCC's and its Subsidiaries' properties and assets for their
respective intended uses and purposes, or the value of such properties, and
neither BCC nor any Subsidiary has received notice of any special assessment
proceedings which would so affect such properties and assets.
With respect to the property leased by BCC or any Subsidiary ("Leased
Property"), no event has occurred and is continuing which, with due notice or
lapse of time or both, would constitute a default or event of default by BCC or
such Subsidiary under any lease or agreement respecting such property. With
respect to all Leased Property, BCC or its Subsidiary as the case may be, holds
a valid leasehold interest free of any liens, claims and encumbrances, subject
to clauses (i) through (iv) of the preceding paragraph. Neither BCC nor any
Subsidiary's possession of any Leased Property has been disturbed and, to the
best of BCC's knowledge after due inquiry, no claim has been asserted against
BCC or any Subsidiary adverse to its rights in any Leased Property.
3.17 Litigation, Permits, Etc. (a) Except as otherwise set forth in
Schedule 3.17, there is no (i) action, suit, claim, proceeding or investigation
pending or, to the best of BCC's knowledge, threatened against or affecting BCC
or any Subsidiary, at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board,
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<PAGE> 17
bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to BCC or any Subsidiary pending under collective
bargaining agreements or otherwise or (iii) governmental inquiry pending or, to
the best of BCC's knowledge, threatened against or affecting BCC or any
Subsidiary (including without limitation any inquiry as to the qualification of
BCC or any Subsidiary to hold or receive any license or permit), and there is
no basis for any of the foregoing. Neither BCC nor any Subsidiary has received
any opinion or memorandum or legal advice from legal counsel to the effect that
it is exposed, from a legal standpoint, to any liability or disadvantage which
may be material to its business, prospects, financial condition, operations,
property or affairs. Neither BCC nor any Subsidiary is in default with respect
to any order, writ, injunction or decree known to or served upon BCC or any
Subsidiary of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by BCC or any Subsidiary
pending or threatened against others.
(b) Each of BCC and its Subsidiaries has complied with all
laws, rules, regulations and orders applicable to its business, operations,
properties, assets, products and services, has all necessary permits, licenses,
franchises, certificates of need and other authorizations (the "Permits")
required to conduct its business as conducted and as proposed to be conducted,
and, in the event that any such Permits have been issued on a temporary basis,
such Permits shall be issued (or reissued, as the case may be) on a permanent
basis within ninety (90) days of the date hereof. Each of BCC and its
Subsidiaries has been operating their respective businesses pursuant to and in
compliance with the terms of all such Permits and all such Permits are in full
force and effect. There is no existing law, rule, regulation or order, and BCC,
after due inquiry, is not aware of any proposed law, rule, regulation or order,
whether Federal, state, county or local, which would prohibit or restrict BCC
or any Subsidiary from, or otherwise materially adversely affect BCC or any
Subsidiary in, conducting its business in any jurisdiction in which it is now
conducting business or in which it proposes to conduct business.
3.18 Proprietary Information of Third Parties. To the best of BCC's
knowledge, no third party has claimed or has reason to claim that any person
employed by or affiliated with BCC or any Subsidiary has (a) violated or may be
violating any of the terms or conditions of his employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third parry or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
BCC which suggests that such a claim might be contemplated. To the best of
BCC's knowledge, no person employed by or affiliated with BCC or any Subsidiary
has employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the best of the BCC's
knowledge, no person employed by or affiliated with BCC or any Subsidiary has
violated any confidential relationship which such person may have had with any
third party, in connection with the development, manufacture or sale of any
product or proposed product or the development or sale of any service or
proposed service of BCC or any Subsidiary, and BCC has no reason to believe
there will be any such employment or violation. To the best of BCC's knowledge,
none of the execution, delivery or performance of this Agreement, the
Registration Rights Agreement or the
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<PAGE> 18
Stock Restriction Agreement, or the carrying on of the business of BCC as
officers, employees or agents by any officer, director or key employee of BCC
or any Subsidiary, or the conduct or proposed conduct of the business of BCC or
any Subsidiary, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is obligated.
3.19 Patents, Trademarks, Etc. Set forth in Schedule 3.1 is a list and
brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of BCC
or any Subsidiary, or of which BCC or any Subsidiary is a licenser or licensee
or in which BCC or any Subsidiary has any right, and in each case a brief
description of the nature of such right. BCC owns or possesses adequate
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets, customer lists
and know how (collectively, "Intellectual Property") necessary or desirable to
the conduct of the business of BCC or any of its Subsidiaries as conducted and
as proposed to be conducted, and no claim is pending or, to the best of the
BCC's knowledge, threatened to the effect that the operations of BCC or any of
its Subsidiaries infringe upon or conflict with the asserted rights of any
other person under any Intellectual Property, and there is no basis for any
such claim (whether or not pending or threatened). No claim is pending or
threatened to the effect that any such Intellectual Property owned or licensed
by BCC or any Subsidiary, or which BCC or any Subsidiary otherwise has the
right to use, is invalid or unenforceable by BCC or such Subsidiary, and there
is no basis for any such claim (whether or not pending or threatened). All
prior art known to BCC which may be or may have been pertinent to the
examination of any United States patent or patent application listed in
Schedule 3.19 has been cited to the United States Patent and Trademark Office.
To the best of the BCC's knowledge, all technical information developed by and
belonging to BCC or any Subsidiary which has not been patented has been kept
confidential. Neither BCC nor any Subsidiary has granted or assigned to any
other person or entity any right to manufacture, have manufactured, assemble or
sell the products or proposed products or to provide the services or proposed
services of BCC or its Subsidiaries.
3.20 Tax Returns and Payments. All of the respective Federal, state
and local tax returns and reports of BCC required by law to be filed have been
duly filed within the time prescribed by law and all amounts which are shown as
due thereon have been paid. The federal income tax returns of BCC have not been
audited by the Internal Revenue Service, and there are in effect no waivers of
the applicable statutes of limitations for federal taxes, for any period. No
deficiency, assessment or proposed adjustment of BCC's Federal, state or local
income or franchise taxes is pending and BCC has no knowledge of any proposed
liability for any tax to be imposed upon its properties or assets for which
there is not an adequate reserve reflected in the Balance Sheet. BCC has paid
all social security taxes when due and has withheld and paid over all federal,
state and local taxes which it has been obligated to withhold. There is no tax
lien, whether imposed by any Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of BCC. Neither BCC nor
any of its present or former stockholders
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has ever filed an election pursuant to Section 1362 of the Internal Revenue
Code of 1986, as amended (the "Code"), that BCC be taxed as an S corporation.
3. 21 Employee Matters.
(a) Except as provided in Schedule 3.21, no employee of BCC
is represented by a labor union and BCC has not entered into any collective
bargaining agreements with any of its employees, nor has it received notice, in
any manner, that any group of its employees is seeking to organize a bargaining
unit or to engage in collective bargaining with BCC.
(b) Except as provided in Schedule 3.21, no officer or
employee of BCC or other person has any written or oral agreement with BCC
relating to his/her employment by BCC on a full-time, part-time or consultative
basis;
(c) Each of the officers of BCC, each key employee and each
other employee now employed by BCC or a Subsidiary who has access to
confidential information of BCC or such Subsidiary has executed an Employee
Nondisclosure and Developments Agreement substantially in the form of Exhibit E
(collectively, the "Employee Nondisclosure and Developments Agreements"), and
such agreements are in full force and effect.
(d) No officer or key employee of BCC or any Subsidiary has
advised BCC or such Subsidiary (orally or in writing) that he or she intends to
terminate employment with BCC or such Subsidiary.
(e) BCC and each Subsidiary has complied in all material
respects with all applicable laws relating to the employment of labor,
including provisions relating to wages, hours, equal opportunity. collective
bargaining and the payment of Social Security and other taxes, and with the
Employee Retirement Income Security Act of 1974, as amended ("ER1SA").
(f) Set forth in Schedule 3.21 is a list of the names of the
officers of BCC, together with the title or job classification of each such
person and the total compensation paid to such person by BCC and/or its
Subsidiaries in 1995 and the total compensation anticipated to be paid to each
such person by in 1996.
3.22 Transactions With Affiliates. Except as set forth on Schedule
3.22. No director, officers, employee or stockholder of BCC or any Subsidiary,
or member of the family of any such person, or any corporation, partnership,
trust or other entity in which any such person, or any member of the family of
any such person, has a substantial interest or is an officer, director,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof, is a party to any transaction with BCC or any Subsidiary, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or
otherwise requiring payments to any such person or firm, other than
employment-at-will arrangements in the ordinary course of business.
3.23 Government Consent, etc. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of BCC is required
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in connection with the valid execution, delivery and performance of this
Agreement, the Registration Rights Agreement or the Stock Restriction
Agreement, or the offer, sale or issuance of the Purchased Shares or the Option
Shares, except such filings, qualifications or approvals (if necessary)
relating to the offer and sale of the Purchased Shares or the Option Shares
under applicable blue sky laws, which filings will have been made or which
qualifications or approvals will have been obtained prior to the closing with
respect to such shares.
3.24 Finder's Fee. Except as set forth on Schedule 3.24 BCC has not
retained any investment banker, broker, finder or similar agent in connection
with the transactions contemplated hereby. The total finder's fees, commissions
or similar expenses which will become due and payable by BCC as a result of
completing the transactions contemplated hereby will not exceed $250,000.
3.25 Disclosure. Neither this Agreement, nor any Schedule or Exhibit
to this Agreement, nor the Business Plan of BCC and attached hereto as Exhibit
F (the "Business Plan"), contains an untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading. None of the statements, documents, certificates or
other items prepared or supplied by BCC with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not
misleading. There is no fact which BCC has not disclosed to the Investors and
their counsel in writing and of which BCC is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of BCC or any
of its subsidiaries. The financial projections and other estimates contained in
the Business Plan were prepared by BCC based on BCC's experience in the
industry and on assumptions of fact and opinion as to future events which BCC,
at the date of the issuance of the Business Plan, believed to be reasonable,
but which BCC cannot and does not assure or guarantee the attainment of in any
manner. As of the date hereof no facts have come to the attention of BCC which
would, in its opinion, require BCC to revise or amplify the assumptions
underlying such projections and other estimates or the conclusions derived
therefrom.
3.26 Offering of the Purchased Shares. Neither BCC nor any person
authorized or employed by BCC as agent, broker, dealer or otherwise in
connection with the offering or sale of the Purchased Shares and Option Shares
or any security of BCC similar to the Purchased Shares and Option Shares has
offered the Purchased Shares and Option Shares or any such similar security for
sale to, or solicited any offer to buy the Purchased Shares and Option Shares
or any such similar security from, or otherwise approached or negotiated with
respect thereto with, any person or persons, and neither BCC nor any person
acting on its behalf has taken or will take any other action (including,
without limitation, any offer, issuance or sale of any security of BCC under
circumstances which might require the integration of such security with
Purchased Shares or Option Shares under the Securities Act or the rules and
regulations promulgated thereunder), in either case so as to subject the
offering, issuance or sale of the Purchased Shares or Option Shares to the
registration provisions of the Securities Act.
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3.27 No Violation. In reliance in part on the representations in
Section 2 made by the Investors, the offer, sale and issuance of the Purchased
Shares in conformity with the terms of this Agreement will not result in a
violation of Section 5 of the Securities Act or the registration requirements
of the securities laws of any state.
3.28 U.S. Real Property Holding Corporation. BCC is not now and has
never been a "United States real property holding corporation", as defined in
Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and BCC has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns which are required under Section 1.897-2(h) of such Regulations.
3.29 Environmental Protection. Neither BCC nor any Subsidiary has
caused or allowed, or contracted with any party for, the generation, use,
transportation, treatment, storage or disposal of any Hazardous Substances (as
defined below) in connection with the operation of its business or otherwise.
BCC and its Subsidiaries, the operation of its business, and any real property
that BCC or any Subsidiary owns, leases or otherwise occupies or uses (the
"Premises") are in compliance with all applicable Environmental Laws (as
defined below) and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws, including, without limitation, any
Environmental Laws or orders or directives with respect to any cleanup or
remediation of any release or threat of release of Hazardous Substances.
Neither BCC nor any Subsidiary has received any citation, directive, letter or
other communication, written or oral, or any notice of any proceeding, claim or
lawsuit, from any person arising out of the ownership or occupation of the
Premises, or the conduct of its operations, and neither BCC nor any Subsidiary
is aware of any basis therefor. BCC and each Subsidiary have obtained and are
maintaining in full force and effect all necessary permits, licenses and
approvals required by all Environmental Laws applicable to the Premises and the
business operations conducted thereon (including operations conducted by
tenants on the Premises), and is in compliance with all such permits, licenses
and approvals. Neither BCC nor any Subsidiary has caused or allowed a release,
or a threat of release, of any Hazardous Substance unto, at or near the
Premises, and, to the best of the BCC's knowledge, neither the Premises nor any
property at or near the Premises has ever been subject to a release, or a
threat of release, of any Hazardous Substance. For the purposes of this
Agreement, the term "Environmental Laws" shall mean any Federal, state or local
law or ordinance or regulation pertaining to the protection of human health or
the environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001,
et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections
6901, et seq. For purposes of this Agreement, the term "Hazardous Substances"
shall include oil and petroleum products, asbestos, polychlorinated biphenyls,
urea formaldehyde and any other materials classified as hazardous or toxic
under any Environmental Laws.
3.30 ERISA Matters.
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(a) As used in this Section 3.30, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
(i) "Benefit Arrangement" means each employment,
severance or other similar contract, arrangement or policy (written or
oral) and each plan or arrangement (written or oral) providing for
severance benefits, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits
which (i) is not an Employee Plan and (ii) covers any employee or
former employee of BCC.
(ii) ""Employee Plan" means each "employee benefit
plan," as such term is defined in Section 3(3) of ERISA, that (A)(i)
is subject to any provision of ERISA and (ii) is maintained or
contributed to by BCC, or (B)(i) is subject to any provision of Title
IV of ER1SA and (ii) is maintained or contributed to by any of BCC's
ERISA Affiliates.
(iii) "EBONY" means the Employee Retirement Income
Security Act of 1974, as amended.
(iv) "ERISA Affiliate" of any entity means any other
entity that, together with such entity, would be treated as a single
employer under Section 414 of the Code.
(v) "Multiemployer Plan" means each Employee Plan
that is a multiemployer plan, as defined in Section 3(37) of ERISA.
(b) Schedule 3.30 lists each Employee Plan that covers any
employee of BCC or any Subsidiary, copies or descriptions of all of which have
previously been made available or furnished to the Investors. With respect to
each Employee Plan, the BCC has provided the most recently filed Form 5500 and
an accurate summary description of such plan. BCC has provided the Investors
with complete age, salary, service and related data as of the most recent
practicable date for officers and directors of BCC whose total per annum
compensation is $75,000 or more.
(c) Schedule 3.30 also includes a list of each Benefit
Arrangement of BCC and its Subsidiaries, copies or descriptions of all of which
have been made available or furnished previously to the Investors.
(d) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. BCC and its Affiliates have not incurred
any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
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(e) None of the Employee Plans or other arrangements listed
on Schedule 3.30 covers any non-United States employee or former employee of
BCC or any Subsidiary.
(f) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(g) Each Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code. BCC has
furnished to the Investors copies of the most recent Internal Revenue Service
determination letters with respect to each such plan. Each Employee Plan has
been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including
but not limited to ERISA and the Code, which are applicable to such plan.
(h) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan and Benefit Arrangement.
(i) All contributions and payments accrued under each
Employee Plan and Benefit Arrangement, determined in accordance with prior
funding and accrual practices, as adjusted to include proportional accruals for
the period ending on the Closing Date, will be discharged and paid on or prior
to the Closing Date except to the extent reflected on the Balance Sheet. Except
as disclosed in writing to the Investors prior to the date hereof, there has
been no amendment to, written interpretation of or announcement (whether or not
written) by BCC or any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended prior to the date hereof.
(j) There is no contract, agreement, plan or arrangement
covering any employee or former employee of BCC or any Subsidiary that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
(k) No tax under Section 4980B of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(l) With respect to the employees and former employees of BCC
and its Subsidiaries, there are no employee post-retirement medical or health
plans in effect, except as required by Section 4980B of the Code.
(m) No employee of BCC or any Subsidiary will become entitled
to any bonus, retirement, severance or similar benefit or enhanced benefit
solely as a result of the transactions contemplated hereby.
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(n) BCC and its Subsidiaries do not have, nor are they
reasonably expected to have, any liability under Title IV of ERISA.
3.31 Fraud and Abuse. Neither BCC, any Subsidiary, nor to BCC's
knowledge, any affiliate or any of their respective partners, officers and
directors, or any person who provides professional services under agreements
with BCC, any Subsidiary or any affiliate has engaged in any activities which
are prohibited under federal Medicare or Medicaid statutes, 42 U.S.C. Sections
1320a-7, 1320-7(a) and 1320a-7b, the federal CHAMPUS statute, or the regulations
promulgated pursuant to such statutes or related state or local statutes or
regulations or which are prohibited by rules of professional conduct, including
but not limited to the following:
(a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
(c) presenting or causing to be presented a claim for
reimbursement for services under Medicare, Medicaid, CHAMPUS or other state
health care program that is for an item or service that is known or should be
known not be (i) not provided as claimed, or (ii) false or fraudulent;
(d) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment;
(e) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind (i) in return for
referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by CHAMPUS, Medicare or Medicaid, or other state health care program, or
(ii) in return for purchasing, leasing or ordering or arranging for or
recommending purchasing, leasing, or ordering any good, facility, service or
item for which payment may be made in whole or in part by CHAMPUS, Medicare or
Medicaid or other state health care program; or
(f) knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement or
representation (or omit to state a fact required to be stated therein or
necessary to make the statements contained therein not misleading) of a
material fact with respect to (i) the conditions or operations of a facility in
order that the facility may qualify for CHAMPUS, Medicare, Medicaid or other
state healthcare program certification, or (ii) information required to be
provided under Section 1124A of the Social Security Act (42 U.S.C.
Section 1320a-3).
3.32 Health Professional's Financial Relationships. The operations of
BCC and the Subsidiaries are in compliance with and do not otherwise violate the
federal Medicare and Medicaid statutes regarding health professional
self-referrals, 42 U.S.C. Section 1395nn and 42 U.S.C Section 1396b, or the
regulations promulgated pursuant to such statute, or similar state or local
statutes or regulations.
3.33 Third Party Payor and Customer Contracts. Except as set forth in
Schedule 3.9 hereto, neither BCC nor any Subsidiary has, since the date of the
Balance Sheet, lost, or been notified by any representative of a third party
payor or other customer that it will lose or suffer diminution in its
relationship with any such third party payor or customer either as a result of
the transactions contemplated by this Agreement or otherwise.
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3.34 Foreign Corrupt Practices Act. Neither BCC nor any Subsidiary has
taken any action which would cause it to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any rules and regulations thereunder. To
the best of BCC's knowledge after due inquiry, there is not now and there has
never been, any employment by BCC or any Subsidiary of, or beneficial ownership
in BCC or any Subsidiary by, any governmental or political official in any
country in the world.
SECTION 4 COVENANTS OF BCC.
4.1 Use of Proceeds. BCC covenants that it will use the proceeds
(after deduction of reasonable and necessary expenses) from the sale of the
Purchased Shares and, if applicable, the Option Shares to the Investors to
satisfy working capital needs of BCC and for general corporate purposes,
including acquisitions, joint ventures and capital expenditures, all in
accordance with the Operating Budget, as approved and ratified by the Board of
Directors of BCC on or after the date hereof.
4.2 Annual and Monthly Financial Statements. BCC shall deliver to each
Investor the following:
(a) within ninety (90) days after the end of each fiscal year
of BCC, an audited consolidated balance sheet, profit or loss statement and
statement of cash flows for such fiscal year completed prepared in accordance
with generally accepted accounting principles, consistently applied, and
setting forth in each case in comparative form the figures from the previous
fiscal year, certified by KPMG Peat Marwick LLP or another nationally
recognized firm of independent accountants selected by the Board of Directors
of BCC;
(b) within thirty (30) days after the end of each month,
internally prepared unaudited consolidated financial statements which shall
include a profit or loss statement, a balance sheet, and a statement of cash
flows for the previous month prepared in accordance with generally accepted
accounting principles consistently applied (provided that such financial
statements need not include year end audit adjustments or notes) and certified
by the chief financial officer of BCC, in each case with comparative figures
from the prior fiscal year and from the budgeted figures for the corresponding
period;
(c) at the time of delivery of each annual financial
statement pursuant to Section 5.01(a), a certificate executed by the Chief
Financial Officer of BCC stating that such officer has caused this Agreement
and the terms of the Series B Stock to be reviewed and has no knowledge of any
default by BCC in the performance or observance of any of the provisions of
this Agreement or the terms of the Series B Stock or, if such officer has such
knowledge, specifying such default and the nature thereof;
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(d) at the time of delivery of annual and monthly financial
statements pursuant to Sections 5.01(a) and (b), a certificate executed by the
Chief Financial Officer of BCC stating that such officer has caused each loan
agreement with Meditrust Mortgage Investments Inc. to which BCC or any
subsidiary is a party to be reviewed and has no knowledge of any breach or
default (or any condition which would constitute a default thereunder) by BCC
or any subsidiary under such agreements or, if such officer has such knowledge,
specifying such breach or default and the nature thereof provided, that BCC's
obligation hereunder may be satisfied by delivery to the Investors of copies of
annual and monthly statements delivered to Meditrust pursuant to such loan
agreements;
(e) at the time of delivery of each monthly statement
pursuant to Section 5.01(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments
in staffing, marketing, sales and operations;
(f) at the time of delivery of each monthly statement
pursuant to Section 5.01(b), a report of census information for each facility
operated by BCC showing total bed capacity, current bed occupancy and
year-to-date bed occupancy as a percentage of total bed capacity, and such
other census information as is reasonably requested by such Investor;
(g) no later than sixty (60) days prior to the start of each
fiscal year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for BCC and its subsidiaries in
respect of such fiscal year, all itemized in reasonable detail and prepared on
a monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(h) promptly following receipt by BCC, each audit response
letter, accountant's management letter and other written report submitted to
BCC by its independent public accountants in connection with an annual or
interim audit of the books of BCC or any of its subsidiaries;
(i) promptly after the commencement thereof, notice of all
actions, suits, claims, proceedings, investigations and inquiries of the type
described in Section 2.07 that could materially adversely affect BCC or any of
its subsidiaries;
(j) promptly upon sending, making available or filing the
same, all press releases, reports and financial statements that BCC sends or
makes available to its stockholders or directors; and
(k) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of BCC and its subsidiaries as such Investor reasonably may request.
4.3 Inspection Rights. Each Investor shall have the right, as may be
requested by any Investor at reasonable times upon reasonable notice, to
examine BCC's or any subsidiary's books and records and take copies and
extracts therefrom and to discuss BCC's or any Subsidiary's affairs, finances
and accounts with its officers, employees and public accountants; provided,
however, that neither BCC nor any subsidiary shall be obligated to provide to
any Investor any information that it considers to be a trade secret or to
contain confidential information unless said Investor has entered into an
appropriate confidentiality agreement.
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4.4 Prompt Payment of Taxes. BCC shall promptly pay and discharge, or
cause to be paid and discharged, prior to the earliest date on which any
penalty or interest is incurred or begins to accrue, all lawful taxes,
assessments and governmental charges or levies imposed upon any of its income,
profits, property or business; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if BCC
shall have set aside on its books adequate reserves, with respect thereto; and
provided, further that BCC shall pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor or with respect thereto.
4.5 Accounts and Reports. BCC shall keep true records and books of
account in which full and correct entries shall be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles consistently applied.
4.6 Corporate Existence. BCC shall maintain, and except as permitted
by Section 4.24 cause any subsidiary to maintain, its valid corporate existence
and good standing under the laws of the jurisdiction of its incorporation.
4.7 Maintenance of Properties; Employees. BCC and each subsidiary
shall maintain all of its properties used or useful in any material respect in
the conduct of its business in good repair, working order and condition,
ordinary wear and tear excepted, as necessary to permit such business to be
properly and advantageously conducted. BCC shall pay all wages and salaries due
to its employees and agents within a reasonable time unless the Board of
Directors and such persons agree to defer such payments.
4.8 Insurance. BCC and its subsidiaries shall at all times carry
adequate insurance with financially sound and reputable insurers with respect
to all its properties and assets that are customarily insured by entities
engaged in the same or similar business similarly situated, against loss or
damage of the kinds customarily insured by such entities, which insurance shall
be of such types (including public liability) and product liability insurance
and will provide the levels of coverage as are customarily carried under
similar circumstances by such entities. Such insurance shall be sufficient in
amount to allow BCC and its subsidiaries to replace any of its properties or
assets that might be damaged or destroyed without creating a material adverse
effect on BCC or its operations.
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4.9 Key Man Insurance. BCC shall have obtained, prior to or within 30
days of the Closing, a policy of key man life insurance on the life of Brad E.
Hollinger (so long as he remains an employee of BCC), in the amount of at least
$5,000,000 with BCC being named beneficiary on said policy. BCC shall not cause
or permit any assignment or change in beneficiary and shall not borrow against
any such policy. If requested by Investors holding at least a majority of the
outstanding Purchased Shares, BCC will add one designee of such Investors as a
notice party for each such policy and shall request that the issuer of each
policy provide such designee with ten (10) days' notice before such policy is
terminated (for failure to pay premiums or otherwise) or assigned or before any
change is made in the beneficiary thereof.
4.10 Government Consents and Licenses. BCC shall obtain and/or
maintain all necessary and appropriate Permits, governmental consents and
licenses in connection with the operation of its business and ownership or
possession of its assets.
4.11 Loans to Employees. BCC shall not lend money or extend credit to
any of its employees other than in the ordinary course of business (it being
acknowledged that BCC has heretofore made certain loans to one or more
employees in connection with the purchase of a new principal residence
following the employee's relocation).
4.12 Conflicts of Interest. BCC shall use its best efforts to ensure
that its employees do not engage in activities in conflict of interest with BCC
during the terms of their employment, without the prior consent of a majority
of the Board of Directors of BCC.
4.13 Shareholder Listing and Ownership. BCC shall deliver to the
investors within 30 days after the end of each fiscal year of BCC, a complete
listing of its shareholders by class and share ownership as of the end of the
fiscal year.
4.14 Reserve for Conversion Shares. BCC shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, for
the purpose of effecting the conversion of the Purchased Shares and any Option
Shares otherwise complying with the terms of this Agreement, such number of its
duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Purchased Shares and any Option Shares from time to time
outstanding or otherwise to comply with the terms of this Agreement. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the Purchased Shares and any Option
Shares or otherwise to comply with the terms of this Agreement, BCC will
forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes. BCC will obtain any authorization,
consent, approval or other action by or make any filing with any court or
administrative body that may be required under applicable state securities laws
in connection with the issuance of shares of Common Stock upon conversion of
the Purchased Shares and any Option Shares.
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4.15 Restrictive Agreements Prohibited. Neither BCC nor any of its
subsidiaries shall become a party to any agreement which by its terms restricts
BCC's performance of this Agreement, the Registration Rights Agreement, the
Stock Restriction Agreement or the Charter.
4.16 Transactions with Affiliates. Except for transactions
contemplated by this Agreement or as otherwise approved by the Board of
Directors, neither BCC nor any of its subsidiaries shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of BCC or
any of its subsidiaries, member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or
member of the family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof,
except for transactions on customary terms related to such person's employment.
4.17 Expenses of Directors. BCC shall promptly reimburse in full, each
director of BCC who is not an employee of BCC and who was elected as a director
solely or in part by the holders of Series B Stock, for all of his reasonable
out-of-pocket expenses incurred in attending each meeting of the Board of
Directors of BCC or any Committee thereof.
4.18 Board of Directors Meetings. BCC shall use its best efforts to
ensure that meetings of its Board of Directors are held at least six times each
year and at least once each quarter. In addition to any member of the Board of
Directors elected solely by the holders of Series B Stock, for so long as the
Investors hold any of the Purchased Shares, Option Shares and/or Conversion
Shares, BCC shall permit the Investors to designate one representative to
attend each meeting of the Board of Directors of BCC and each meeting of any
Committee thereof and to participate in all discussions during each such
meeting. BCC shall send to each such Investor and designee the notice of the
time and place of such meeting in the same manner and at the same time as it
shall send such notice to its directors or committee members, as the case may
be. BCC shall also provide to such designee copies of all notices, reports,
minutes and consents at the time and in the manner as they are provided to the
Board of Directors or committee, except for information reasonably designated
as proprietary information by the Board of Directors.
4.19 Compensation Arrangements.
(a) Any employment agreements between BCC and any officer
thereof shall be submitted to the Compensation Committee of the Board of
Directors (the "Compensation Committee") for its review and, in the event the
Compensation Committee recommends modifications to any such agreements, BCC
shall use its best efforts to enter into an amendment to such agreement with
the officer effecting such modifications.
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(b) BCC shall not (i) put into place any company-wide stock
option or other equity compensation plan without the prior approval of the
Compensation Committee, and any existing plan shall be subject to review and
modification by the Compensation Committee or (ii) issue any stock options or
other equity compensation to any person being hired to serve or serving as an
officer or director of BCC without the prior review and approval of the form of
agreement effecting such option grant by the Compensation Committee.
(c) BCC shall not pay to officers and directors whose total
per annum compensation is $75,000 or more compensation in excess of that
compensation customarily paid to management in companies of similar size, of
similar maturity, and in similar businesses without the unanimous written
consent of those members of BCC's Board of Directors elected solely by the
holders of Series B Stock.
4.20 By-laws. BCC shall at all times cause its By-laws to provide
that, (a) unless otherwise required by the laws of the State of Delaware BCC
shall be required to call a meeting of the Board of Directors or stockholders
upon the joint written request of a director elected solely by the holders of
Series B Stock and a director elected other than solely by the holders of
Series B Stock and (b) the number of directors fixed in accordance therewith
shall in no event conflict with any of the terms or provisions of the Series B
Stock as set forth in the Charter. BCC shall at all times maintain provisions
in its By-laws and/or Charter indemnifying all directors against liability and
absolving all directors from liability to BCC and its stockholders to the
maximum extent permitted under the laws of the State of Delaware.
4.21 Performance of Contracts. BCC shall not amend, modify, terminate,
waive or otherwise alter, in whole or in part, any of the Employee
Nondisclosure and Developments Agreements or the Non-Competition Agreements
without the unanimous written consent of those members of BCC's Board of
Directors elected solely by the holders of Series B Stock.
4.22 Vesting of Reserved Employee Shares. BCC shall not grant to any
of its employees options to purchase shares of BCC's capital stock which will
become exercisable at a rate in excess of 25% per annum from the date of such
grant without the unanimous written consent of those members of BCC's Board of
Directors elected solely by the holders of Series B Stock.
4.23 Employee Nondisclosure and Developments Agreements. BCC shall use
its best efforts to obtain, and shall cause its subsidiaries to use their best
efforts to obtain, an Employee Nondisclosure and Developments Agreement in
substantially the form of Exhibit E from all future officers, key employees and
other employees who will have access to confidential information of BCC or any
of its subsidiaries, upon their employment by BCC or any of its subsidiaries.
4.24 Activities of Subsidiaries. BCC shall not permit any subsidiary
to consolidate or merge into or with or sell or transfer all or substantially
all its assets, except that any subsidiary may (i) consolidate or merge into or
with or sell or transfer assets to any other subsidiary, or (ii) merge into or
sell or transfer assets to BCC. BCC shall not sell or otherwise transfer any
shares of capital stock of any subsidiary, except to BCC or another subsidiary,
or permit any subsidiary to issue, sell or otherwise transfer any shares of its
capital stock or the capital stock of any subsidiary, except to BCC or another
subsidiary. BCC shall not permit any subsidiary to purchase or set aside any
sums for the purchase of, or pay any dividend or make any distribution on, any
shares of its stock, except for dividends or other distributions payable to BCC
or another subsidiary.
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4.25 Compliance with Laws. BCC shall comply, and cause each subsidiary
to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise, including without limitation Medicare and
Medicaid statutes, the federal CHAMPUS statute, related state and local
statutes and all regulations promulgated thereunder as well as applicable rules
of professional conduct.
4.26 Keeping of Records and Books of Account. BCC shall keep, and
cause each subsidiary to keep, adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of BCC
and such subsidiary, and in which, for each fiscal year, all proper reserves
for depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.
4.27 Change in Nature of Business. BCC shall not make, or permit any
subsidiary to make, any material change in the nature of its business as set
forth in the Business Plan.
4.28 U.S. Real Property Interest Statement.
(a) BCC shall use its best efforts to avoid becoming a "U.S.
Real Property Holding Company" within the meaning of Section 897(c)(1)(B) and
897(c)(2) of the Code and Treasury Regulations 1.897-2(b)("U.S. Real Property
Holding Company").
(b) Notwithstanding the above, should BCC determine that it
has become a U.S. Real Property Holding Company, it shall provide prompt
written notice to each Investor following any "determination date" (as defined
in Treasury Regulation Section 1.897-2(c)(i)) on which BCC becomes a United
Senates Real Property Holding Company. In addition, upon a written request by
any Investor, BCC shall provide such Investor with a written statement
informing the Investor whether such Investor's interest in BCC constitutes a
U.S. real property interest. BCC's determination shall comply with the
requirements of Treasury Regulation Section 1.897-2(h)(1) or any successor
regulation, and BCC shall provide timely notice to the Internal Revenue
Service, in accordance with and to the extent required by Treasury Regulation
Section 1.897-2(h)(2) or any successor regulation, that such statement has been
made. BCC's written statement to any Investor shall be delivered to such
Investor within ten (10) days of such Investor's written request therefor.
BCC's obligation to furnish a written statement pursuant to this Section 4.29
shall continue notwithstanding the fact that a class of BCC's stock may be
regularly traded on an established securities market.
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4.29 Rule 144A Information. BCC shall, at all times during which it is
neither subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor exempt
from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, provide in
writing, upon the written request of any Investor or a prospective buyer of
Purchased Shares, Option Shares or Conversion Shares from any Investor, all
information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule l 44A
Information"). BCC also shall, upon the written request of any Investor,
cooperate with and assist such Investor or any member of the National
Association of Securities Dealers, Inc. PORTAL system in applying to designate
and thereafter maintain the eligibility of the Purchased Shares or Conversion
Shares, as the case may be, for trading through PORTAL. BCC's obligations under
this Section 4.29 shall at all times be contingent upon the relevant Investor's
obtaining from the prospective buyer of Purchased Shares, Option Shares or
Conversion Shares a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of any Purchased
Shares, Option Shares or Conversion Shares.
4.30 Compensation and Audit Committees. BCC shall, by amending its
By-laws or otherwise, establish and maintain a Compensation Committee and an
Audit Committee of the Board of Directors, each of which shall consist of three
(3) directors, one of whom (on each Committee) shall be a director elected
solely by the holders of Series B Stock.
4.31 Termination of Covenants. The provisions of this Section 4 shall
terminate upon the closing of a firmly underwritten public offering of shares
of BCC's Common Stock, registered under the Securities Act, at an offering
price of at least $8.00 per share (which price shall be adjusted appropriately
in the event of stock splits, combinations and the like) and aggregate net
proceeds to BCC of at least $25,000,000 (such event being referred to herein as
the "Public Offering").
SECTION 5 CONDITIONS TO CLOSING.
5.1 Conditions Precedent to Obligations of Investors. The obligation
of the Investors to proceed with any Closing or any Option Closing under this
Agreement is subject to the fulfillment prior to or at the time of such Closing
or Option Closing of the following conditions with respect to BCC, any one or
more of which may be waived in whole or in part by the participating Investors
at such Investors' sole option:
(a) Each of the representations and warranties of BCC
contained in this Agreement shall be true and correct in all material respects
(disregarding all qualifications and exceptions contained in any representation
or warranty relating to materiality) on and as of the Closing Date or Option
Closing Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to such Closing or Option
Closing and the President and the Chief Financial Officer BCC shall have
certified to such effect to the Investors in writing provided that BCC shall be
permitted to amend in writing any schedule to this Agreement prior to any
Closing or Option Closing. BCC shall have performed in all respects all of the
covenants and complied with all of the provisions required by this Agreement to
be performed or complied with by BCC at or before the Closing or Option Closing
and the President and the Chief Financial Officer of BCC shall have certified
to the Investors in writing to such effect and to the effect that all of the
conditions set forth in this Section 5 have been satisfied.
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(b) No order of any court or any administrative agency shall
be in effect that restrains or prohibits the transactions contemplated hereby
or that would limit or adversely affect the Investors' ownership of the Series
B Stock of BCC, and there has not been any threatened, nor shall there be
pending, any action or proceeding by or before any governmental body
challenging the lawfulness of or seeking to prevent or delay any of the
transactions contemplated by this Agreement.
(c) Between the date hereof and the Closing or Option
Closing, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the assets, results of operations, liabilities,
prospects or conditions, financially or otherwise of BCC.
(d) Counsel to BCC shall deliver at each Closing or Option
Closing a legal opinion substantially in the form set forth in Exhibit H
hereto.
(e) [Reserved]
(f) Supporting Documents. The Investors and their counsel
shall have received copies of the following documents:
(i) (A) the Charter, certified as of a recent date
by the Secretary of State of the State of Delaware, (B) a certificate
of said Secretary dated as of a recent date as to the due
incorporation and good standing of BCC, the payment of all excise
taxes by BCC and listing all documents of BCC on file with said
Secretary, (C) a certificate of the Secretary of State of the
jurisdiction of incorporation of each of the Subsidiaries dated as of
a recent date as to the due incorporation and good standing of such
Subsidiary, and (D) a certificate of the Secretary of State of each
jurisdiction in which BCC and each Subsidiary is qualified to do
business dated as of a recent date as to the good standing of BCC and
each Subsidiary;
(ii) a certificate of the Secretary or an Assistant
Secretary of BCC dated the Closing Date or Option Closing Date and
certifying: (A) that attached thereto is a true and complete copy of
the By-laws of BCC as in effect on the date of such certification; (B)
that attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors or the stockholders of BCC
authorizing the execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Stock Restriction Agreement,
the issuance, sale and delivery of the Purchased Shares and the
reservation, issuance and delivery of the Conversion Shares, and that
all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated
by this Agreement and the Registration Rights Agreement, the Stock
Restriction Agreement; (C) that the Charter has not been amended since
the date of the last amendment referred to in the certificate
delivered pursuant to clause (i)(B) above; and (D) to the incumbency
and specimen signature of each officer of BCC executing this
Agreement, the Registration Rights Agreement, the Stock Restriction
Agreement, the stock certificates representing the Purchased Shares
and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of BCC as to
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<PAGE> 34
the incumbency and signature of the officer signing the certificate
referred to in this clause (ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of BCC as the
Investors or their counsel reasonably may request.
(i) Purchase by Other Investors. Prior to each Closing or the
Option Closing, each Investor shall have purchased and paid for the Purchased
Shares being purchased by it on the Closing Date or Option Closing Date, and
the aggregate purchase price paid by all of the Investors for the Purchased
Shares being purchased by them on each Closing Date and Option Closing Date
shall be as set forth on Schedule 1.3 hereto.
(j) Other Agreements. The Registration Rights Agreement and
the Stock Restriction Agreement shall have been executed and delivered by BCC
and each of the parties named therein.
(k) Non-Competition Agreements. Each of the following persons
shall have entered into a Non-Competition Agreement with BCC in the form
attached as Exhibit F (collectively, the "Non-Competition Agreements"), and
copies thereof shall have been delivered to counsel for the Investors: Brad E.
Hollinger, Robert Sutton, Brian Barth, Kevin Meyer and Russell DiGillio.
(1) Charter. The Charter shall read in its entirety as set
forth in Exhibit A.
(m) Employee Agreements. BCC's By-laws shall have been
amended, if necessary in accordance with the provisions of Section 4.20.
(n) Employee Agreements. Copies of the Employee Nondisclosure
and Developments Agreements shall have been delivered to counsel for the
Investors.
(o) [Reserved].
(p) Election of Directors. The number of directors
constituting the entire Board of Directors shall have been fixed at 7 and the
following persons shall have been elected as the directors and shall each hold
such position as of the First Closing Date: David Goldsmith (as the director
elected solely by the holders of the Series B Stock) and Brad Hollinger, John
Brennan, Ken Barber, George Strong and Billy Ray Foster (as the directors
elected other than solely by the holders of the Series B Stock).
(q) Preemptive Rights. All stockholders of BCC having any
preemptive, first refusal or other rights with respect to the issuance of the
Purchased Shares, the Option Shares or the Conversion Shares shall have
irrevocably waived the same in writing.
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<PAGE> 35
(r) Termination of Shareholder's Agreement. The Shareholders'
Agreement by and among BCC and the Shareholders (as defined therein) dated as
of September 20, 1995 shall have been terminated and be of no further force and
effect.
(s) Fees of Investors' Counsel. BCC shall have paid in
accordance with Section 7.13 the fees and disbursements of Investors' counsel
invoiced at the Closing.
All such documents shall be satisfactory in form and substance to the Investors
and their counsel.
5.2 Conditions Precedent to Obligations of BCC. The obligation of BCC
to proceed with any Closing or any Option Closing under this Agreement is
subject to the fulfillment prior to or at the time of any Closing or any Option
Closing of the following conditions with respect to the Investors, any one or
more of which may be waived in whole or in part by BCC at BCC's sole option:
(a) Each of the representations of the investors contained in
this Agreement shall be true and correct in all material respects on or as of
the Closing Date or Option Closing Date, with the same force and effect as
though such representations had been made on, as of and with reference to such
date.
(b) No order of any court or any administrative agency shall
be in effect that restrains or prohibits the transaction contemplated hereby,
and there has not been any threatened, nor shall there be pending, any action
or proceeding by or before any governmental body challenging the lawfulness of
or seeking to prevent or delay any of the transactions contemplated by this
Agreement.
(c) Each Investor shall have complied with all of its
obligations hereunder in all material respects.
(d) Preemptive Rights. All stockholders of BCC having any
preemptive, first refusal or other rights with respect to the issuance of the
Purchased Shares, the Option Shares or the Conversion Shares shall have
irrevocably waived the same in writing.
SECTION 6 RIGHT OF FIRST REFUSAL
6.1 Right of First Refusal. BCC shall, prior to any issuance by BCC of
any of its securities (other than debt securities with no equity feature),
offer to each Investor by written notice the right, for a period of thirty (30)
days, to purchase all of such securities for cash at an amount equal to the
price or other consideration for which such securities are to be issued;
provided, however, that the first offer rights of the Investors pursuant to
this Section 7.1 shall not apply to (i) securities issued (A) upon conversion
of any of the Purchased Shares or Option Shares, (B) as a stock dividend or
upon any subdivision of shares of Common Stock, provided that the securities
issued pursuant to such stock dividend or subdivision are limited to additional
shares of Common Stock, (C) pursuant to subscriptions, warrants, options,
convertible securities, or other rights which are listed in Schedule 3.2 as
being outstanding on the date of this
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<PAGE> 36
Agreement, including without limitation warrants for the purchase of up to
1,006,490 shares of Common Stock issued prior to or after the date hereof to
Meditrust Mortgage Investments, Inc. (the "Meditrust Warrants") (D) solely in
consideration for the acquisition (whether by merger or otherwise) by BCC or
any of its subsidiaries of all or substantially all of the stock or assets of
any other entity, (E) pursuant to a firm commitment underwritten public
offering, (F) pursuant to the exercise of options to purchase Common Stock
granted to directors, officers, employees or consultants of BCC in connection
with their service to BCC, not to exceed in the aggregate 750,000 shares
(appropriately adjusted to reflect stock splits, stock dividends, combinations
of shares and the like with respect to the Common Stock) less the number of
shares (as so adjusted) issued pursuant to stock options outstanding on the
date of this Agreement and listed in Schedule 3.2 (the shares exempted by this
clause (F) being hereinafter referred to as the "Reserved Employee Shares"),
and (G) upon the exercise of any right which was not itself in violation of the
terms of this Section 6.1. BCC's written notice to the Investors shall describe
the securities proposed to be issued by BCC and specify the number, price and
payment terms. Each Investor may accept BCC's offer as to the full number of
securities offered to it or any lesser number, by written notice thereof given
by it to BCC prior to the expiration of the aforesaid thirty (30) day period,
in which event BCC shall promptly sell and such Investor shall buy, upon the
terms specified, the number of securities agreed to be purchased by such
Investor. Notwithstanding the foregoing, if the Investors agree, in the
aggregate, to purchase more than the full number of securities offered by BCC,
then each Investor accepting BCC's offer shall first be allocated the lesser of
(i) the number of securities which such Investor agreed to purchase and (ii)
the number of securities as is equal to the full number of securities offered
by BCC multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock held by such Investor as of the date of BCC's notice of
offer (treating such Investor, for the purpose of such calculation, as the
holder of the number of shares of Common Stock which would be issuable to such
Investor upon conversion, exercise or exchange of all securities (including but
not limited to the Purchased Shares and any Option Shares) held by such
Investor on the date such offer is made that are convertible, exercisable or
exchangeable into or for (whether directly or indirectly) shares of Common
Stock) and the denominator of which shall be the aggregate number of shares of
Common Stock (calculated as aforesaid) held on such date by all Investors who
accepted BCC's offer, and the balance of the securities (if any) offered by BCC
shall be allocated among the Investors accepting BCC's offer in proportion to
their relative equity ownership interests in BCC (calculated as aforesaid),
provided that no Investor shall be allocated more than the number of securities
which such Investor agreed to purchase and provided further that in cases
covered by this sentence all Investors shall be allocated among them the full
number of securities offered by BCC. BCC shall be free at any time prior to
ninety (90) days after the date of its notice of offer to the Investors, to
offer and sell to any third party or parties the number of such securities not
agreed by the Investors to be purchased by them, at a price and on payment
terms no less favorable to BCC than those specified in such notice of offer to
the Investors. However, if such third party sale or sales are not consummated
within such ninety (90) day period, BCC shall not sell such securities as shall
not have been purchased within such period without again complying with this
Section 6.1.
In the event that Meditrust (or any affiliate thereof) does not
purchase shares of Series B Stock pursuant to the Agreement, the Investors'
rights of first refusal in this Section 6 shall be
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<PAGE> 37
subject to Meditrust's rights of first refusal contained in capital stock
purchase warrants for the purchase of up to 1,000,000 shares of BCC Common
Stock.
SECTION 7 MISCELLANEOUS.
7.1 Modification or Waiver. Except as otherwise provided herein, this
Agreement may be amended, modified or superseded and any of the terms,
covenants, representations or warranties hereof may be waived, but only by a
written instrument executed by BCC and holders of a majority of the shares of
the Series B Stock, or, in the case of a waiver, by the party waiving
compliance. The failure of a party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such party at a
later time to enforce the same.
7.2 Notices. Whenever this Agreement requires or permits any consent,
approval, notice, request or demand from one Party to another, such consent,
approval notice, request or demand must be in writing to be effective and shall
be deemed to be delivered and received (i) if personally delivered or if
delivered by telex or telecopy with telephonic confirmation, when actually
received by the party to whom notice is sent, (ii) if delivered by mail
(whether actually received or not), at the close of business on the third
business day next following the day when placed in the United States mail,
postage prepaid, or (iii) if delivered by overnight mail the next business day
after mailing to the parties at the following addresses:
If to BCC, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg. PA 17055
Attention: Brad E. Hollinger, Chairman and CEO
Telecopier No.: 717 796-6150
with a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
Attention: John C. Rodney, Esq.
Telecopier No.: 412 355-6501
and if to an Investor to: at the address
set forth on Schedule l.l to this Agreement.
with a copy to:
Linda DeRenzo, Esq.
Testa, Hurwitz & Thibeault, LLP
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<PAGE> 38
125 High Street
Boston, MA 02110
Telecopier: 617 248-7100
A party may change the persons or addresses to which notices or other
communications are to be sent to it by giving written notice to the other
parties of any such change in the manner provided herein for giving notice.
7.3 Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the parties
hereto; provided, however, that no assignment of any rights or delegation of
any obligations provided for herein may be made by a party hereto without the
prior express written consent of the other parties hereto, which consent shall
not be unreasonably withheld.
7.4 Exhibits, Schedules and Entire Agreement. All Exhibits and
Schedules attached hereto and the documents and instruments referred to herein
or required to be delivered simultaneously herewith are expressly made a part
of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any such Exhibits, Schedules,
documents or instruments shall be deemed to refer to and include all such
Exhibits, Schedules, documents and instruments. Unless otherwise specified
herein, all references to sections herein shall refer to the sections of this
Agreement. This Agreement, together with all such Exhibits, Schedules,
documents and instruments, contains the entire agreement between the parties
hereto with respect to the subject matter hereof, and there are no
representations, warranties covenants, conditions, understandings or agreements
other than those expressly set forth herein or therein.
7.5 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws applicable to agreements made and to be performed
entirely within the State of Delaware.
7.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but which together shall constitute
one and the same instrument.
7.7 Section Headings. The section headings contained in this Agreement
are inserted for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement.
7.8 Survival of Agreement. All covenants, agreements, representations
and warranties made herein, the Registration Rights Agreement and the Stock
Restriction Agreement, or any certificate or instrument delivered to the
Investors pursuant to or in connection with this Agreement, the Registration
Rights Agreement and the Stock Restriction Agreement, shall survive the
execution and delivery of this Agreement, the Registration Rights Agreement and
the Stock Restriction Agreement, the issuance, sale and delivery of the
Purchased Shares, the Option Shares and the issuance and delivery of the
Conversion Shares, and all statements contained in
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<PAGE> 39
any certificate or other instrument delivered by BCC hereunder or thereunder or
in connection herewith or therewith shall be deemed to constitute
representations and warranties made by BCC.
7.9 Brokerage. Each party hereto will indemnify and hold harmless the
others against and in respect of any claim for finders' fees, brokerage or
other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.
7.10 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Investors shall inure to the benefit of any and all subsequent
holders from time to time of Purchased Shares, Option Shares or Conversion
Shares.
7.11 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
7.12 Expense Reimbursement. Each party hereto will pay its own
expenses in connection with the transactions contemplated hereby, whether or
not consummated, provided that BCC shall pay the Investors up to $50,000, in
the aggregate, for their reasonable legal expenses associated with the sale of
the Purchased Shares upon the presentment of invoices for such expenses to BCC.
[Signature pages follow immediately.]
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<PAGE> 40
IN WITNESS WHEREOF the parties hereto, intending to be legally bound
as set forth above, have executed this Series B Stock Purchase Agreement, or
have caused this Series B Stock Purchase Agreement to be executed, the day and
year first above written.
BALANCED CARE CORPORATION
By: /s/ Brad E. Hollinger
-----------------------------------
BRAD E. HOLLINGER, Chairman and CEO
INVESTORS:
OMEGA VENTURES II, L.P.,
By: Omega Ventures II Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
OMEGA VENTURES II CAYMAN, L.P.
By: Omega Ventures II Management, L.L.C.
Its Administrative General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
CROSSOVER FUND II, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
CROSSOVER FUND IIA, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
<PAGE> 41
BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Company
Private Equity Group, L.L.C.,
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorizing Signatory
DAVID L. GOLDSMITH AND DIANE D.
GOLDSMITH, TRUSTEES, GOLDSMITH
FAMILY TRUST 3/29/85
By: /s/ David L. Goldsmith
------------------------------------
DAVID L. GOLDSMITH, Trustee
By: /s/ Diane D. Goldsmith
------------------------------------
DIANE D. GOLDSMITH, Trustee
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S WEST
PENSION TRUST
By: /s/ David C. Cummings
---------------------------------
Name: David C. Cummings
Title: Trust Officer
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S WEST
BENEFIT ASSURANCE TRUST
By: /s/ David C. Cummings
---------------------------------
Name: David C. Cummings
Title: Trust Officer
HCO PARTNERS IV-BCC
By: /s/ F. David Carr
------------------------------------
F. DAVID CARR
Managing Partner
<PAGE> 42
NOTICE TO PENNSYLVANIA RESIDENTS: Section 2.07(m) of the Pennsylvania
Securities Act (the "Pennsylvania Act") provides that, each person who accepts
an offer to purchase securities in Pennsylvania which is exempted from
registration under Section 2.03(d) of the Pennsylvania Act shall have the right
to withdraw acceptance and to receive a full refund of all moneys paid within
two business days after the date of receipt by BCC of his/her or its written
binding contract of purchase, or if there is no written binding contract of
purchase, within two business days after he/she or it makes the initial payment
for the shares. Such withdrawal will be without any further liability to any
person. An Investor who is a Pennsylvania resident may withdraw acceptance
within two business days of the applicable event by giving telephone, telegram
or letter notice of the Investor's intention to withdraw to BCC as designated
in Section 8.3 herein. Any telegram or letter should be sent or postmarked
prior to the end of the second business day. Any such letter should be sent by
certified mail, return receipt requested, to ensure its receipt and to evidence
the time of mailing. Any oral requests should include a request for written
confirmation. Any of the Investors below who are Pennsylvania residents
confirms by its signature below that it has been informed of its right pursuant
to Section 2.07(m) of the Pennsylvania Securities Act to withdraw its
subscription for shares within two business days after the date of receipt by
BCC of his/her or its written binding contract of purchase or if there is no
such contract, within two business days after he/she or it makes the initial
payment for the shares. Any Investor below who is a Pennsylvania resident,
also confirms by its signature below that it also hereby agrees that it will
not sell, transfer, exchange or otherwise dispose of its Purchased Shares or
any Option Shares, within twelve months after the date of purchase and also
agrees to the placement on the shares of a legend restricting transferability
of such shares.
JULIET CHALLENGER, INC.* *Delaware Resident not a Pennsylvania Resident
By: /s/ Darlene Clarke
---------------------------
Name: Darlene Clarke
Title: Vice President
HENRY L. HILLMAN, ELSIE HILLIARD
HILLMAN AND C.G. GREFENSTETTE,
TRUSTEES OF THE HENRY L. HILLMAN
TRUST U/A DATED NOVEMBER 18, 1985
By: C. G. Grefenstette
----------------------------
Trustee:
<PAGE> 43
NOTICE TO PENNSYLVANIA RESIDENTS: Section 2.07(m) of the Pennsylvania
Securities Act (the "Pennsylvania Act") provides that, each person who accepts
an offer to purchase securities in Pennsylvania which is exempted from
registration under Section 2.03(d) of the Pennsylvania Act shall have the right
to withdraw acceptance and to receive a full refund of all moneys paid within
two business days after the date of receipt by BCC of his/her or its written
binding contract of purchase, or if there is no written binding contract of
purchase, within two business days after he/she or it makes the initial payment
for the shares. Such withdrawal will be without any further liability to any
person. An Investor who is a Pennsylvania resident may withdraw acceptance
within two business days of the applicable event by giving telephone, telegram
or letter notice of the Investor's intention to withdraw to BCC as designated
in Section 8.3 herein. Any telegram or letter should be sent or postmarked
prior to the end of the second business day. Any such letter should be sent by
certified mail, return receipt requested, to ensure its receipt and to evidence
the time of mailing. Any oral requests should include a request for written
confirmation. Any of the Investors below who are Pennsylvania residents
confirms by its signature below that it has been informed of its right pursuant
to Section 2.07(m) of the Pennsylvania Securities Act to withdraw its
subscription for shares within two business days after the date of receipt by
BCC of his/her or its written binding contract of purchase or if there is no
such contract, within two business days after he/she or it makes the initial
payment for the shares. Any Investor below who is a Pennsylvania resident,
also confirms by its signature below that it also hereby agrees that it will
not sell, transfer, exchange or otherwise dispose of its Purchased Shares or
any Option Shares, within twelve months after the date of purchase and also
agrees to the placement on the shares of a legend restricting transferability
of such shares.
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF JULIET LEA HILLMAN
SIMONDS
By: /s/ T.G. Bigley
------------------------------
Trustee:
By: /S/ C.G. Grefenstette
------------------------------
Trustee
<PAGE> 44
NOTICE TO PENNSYLVANIA RESIDENTS: Section 2.07(m) of the Pennsylvania
Securities Act (the "Pennsylvania Act") provides that, each person who accepts
an offer to purchase securities in Pennsylvania which is exempted from
registration under Section 2.03(d) of the Pennsylvania Act shall have the right
to withdraw acceptance and to receive a full refund of all moneys paid within
two business days after the date of receipt by BCC of his/her or its written
binding contract of purchase, or if there is no written binding contract of
purchase, within two business days after he/she or it makes the initial payment
for the shares. Such withdrawal will be without any further liability to any
person. An Investor who is a Pennsylvania resident may withdraw acceptance
within two business days of the applicable event by giving telephone, telegram
or letter notice of the Investor's intention to withdraw to BCC as designated
in Section 8.3 herein. Any telegram or letter should be sent or postmarked
prior to the end of the second business day. Any such letter should be sent by
certified mail, return receipt requested, to ensure its receipt and to evidence
the time of mailing. Any oral requests should include a request for written
confirmation. Any of the Investors below who are Pennsylvania residents
confirms by its signature below that it has been informed of its right pursuant
to Section 2.07(m) of the Pennsylvania Securities Act to withdraw its
subscription for shares within two business days after the date of receipt by
BCC of his/her or its written binding contract of purchase or if there is no
such contract, within two business days after he/she or it makes the initial
payment for the shares. Any Investor below who is a Pennsylvania resident,
also confirms by its signature below that it also hereby agrees that it will
not sell, transfer, exchange or otherwise dispose of its Purchased Shares or
any Option Shares, within twelve months after the date of purchase and also
agrees to the placement on the shares of a legend restricting transferability
of such shares.
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF WILLIAM TALBOTT
HILLMAN
By: /s/ T. G. Bigley
------------------------------
Trustee:
By: /s/ C. G. Grefenstette
------------------------------
Trustee:
<PAGE> 45
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF HENRY L. HILLMAN, JR.
By: /s/ T. G. Bigley
------------------------------
Trustee:
By: /s/ C. G. Grefenstette
------------------------------
Trustee:
<PAGE> 46
NOTICE TO PENNSYLVANIA RESIDENTS: Section 2.07(m) of the Pennsylvania
Securities Act (the "Pennsylvania Act") provides that, each person who accepts
an offer to purchase securities in Pennsylvania which is exempted from
registration under Section 2.03(d) of the Pennsylvania Act shall have the right
to withdraw acceptance and to receive a full refund of all moneys paid within
two business days after the date of receipt by BCC of his/her or its written
binding contract of purchase, or if there is no written binding contract of
purchase, within two business days after he/she or it makes the initial payment
for the shares. Such withdrawal will be without any further liability to any
person. An Investor who is a Pennsylvania resident may withdraw acceptance
within two business days of the applicable event by giving telephone, telegram
or letter notice of the Investor's intention to withdraw to BCC as designated
in Section 8.3 herein. Any telegram or letter should be sent or postmarked
prior to the end of the second business day. Any such letter should be sent by
certified mail, return receipt requested, to ensure its receipt and to evidence
the time of mailing. Any oral requests should include a request for written
confirmation. Any of the Investors below who are Pennsylvania residents
confirms by its signature below that it has been informed of its right pursuant
to Section 2.07(m) of the Pennsylvania Securities Act to withdraw its
subscription for shares within two business days after the date of receipt by
BCC of his/her or its written binding contract of purchase or if there is no
such contract, within two business days after he/she or it makes the initial
payment for the shares. Any Investor below who is a Pennsylvania resident,
also confirms by its signature below that it also hereby agrees that it will
not sell, transfer, exchange or otherwise dispose of its Purchased Shares or
any Option Shares, within twelve months after the date of purchase and also
agrees to the placement on the shares of a legend restricting transferability
of such shares.
DBH SEC IV, L.P.
By: /s/ Howard B. Hillman
------------------------
Name: Howard B. Hillman
Title: Managing General Partner
<PAGE> 47
Counterpart Signature Page to that certain Series B Stock Purchase
Agreement dated as of September 20, 1996 by and between Balanced Care
Corporation and the Investors (as defined therein).
**
MEDITRUST MORTGAGE INVESTMENTS, INC.
By: /s/ Michael S. Benjamin
---------------------------------
Name: MICHAEL S. BENJAMIN, Esq.
Title: Senior Vice President
**The Declaration of Trust establishing Meditrust, the sole
shareholder of Meditrust Mortgage Investments, Inc. dated August 6, 1985, as
amended (the "Declaration of Trust"), a copy of which, together with all
amendments thereto, is duly filed in the office of the Secretary of State of
the Commonwealth of Massachusetts, provides that the name "Meditrust" refers to
the Trustees under the Declaration of Trust collectively as Trustees, but not
individually or personally; and that no trustee, officer, shareholder, employee
or agent of Meditrust or any of its subsidiaries shall be held to any personal
liability, jointly or severally, for any obligation of, or claims against
Meditrust or any of its subsidiaries. All persons dealing with Meditrust or any
of its subsidiaries, including without limitation Meditrust Mortgage
Investments, Inc., in any way, shall look only to the respective assets of
Meditrust or any of its subsidiaries, including without limitation Meditrust
Mortgage Investments, Inc., for the payment of any sum or the performance of
any obligations. All parties hereto specifically acknowledge and agree that
Meditrust is neither a party to this agreement nor shall Meditrust assume or
have any liability hereunder of any kind or nature whatsoever.
<PAGE> 1
Exhibit 4.3
AGREEMENT OF AMENDMENT
AGREEMENT OF AMENDMENT dated as of October 25, 1996 is made by and
among Balanced Care Corporation ("BCC"), and certain of the persons listed on
Attachment I hereto who have executed a counterpart to this Agreement of
Amendment.
WHEREAS, BCC and certain Investors consummated the purchase and sale
of 2,460,877 shares (the "Initial Shares") of BCC's Series B Stock, $.001 par
value (the "Series B Stock"), and the granting of options to purchase up to an
additional 2,460,873 shares of Series B Stock as of September 20, 1996 (the
"Initial Sale");
WHEREAS, in connection with the Initial Sale, BCC and certain
Investors entered into a Series B Stock Purchase Agreement dated as of
September 20, 1996 (the "Stock Purchase Agreement"), and BCC, the Investors
listed in Schedule 1.1 to the Stock Purchase Agreement, the Series A Holder and
certain Common Stockholders entered into a Registration Rights Agreement (the
"Registration Rights Agreement") and BCC, certain Securityholders and certain
Purchasers entered into a Stock Restriction Agreement (the "Stock Restriction
Agreement"), each dated as of September 20, 1996;
WHEREAS, BCC wishes to sell to RS Pacific Venture L.P., Mal Serure,
Stanley Cayre, Frieda Cayre as Trustee for the trusts of Jack S. Cayre, Amin
Cayre, David Cayre and Robert Cayre (collectively the "Additional Investors"),
and HCO Partners IV-BCC and the Additional Investors and HCO Partners IV-BCC
wish to purchase an aggregate of 264,000 shares of Series B Stock and obtain an
option to purchase up to an additional 264,000 shares of Series B Stock (the
"Additional Shares") on substantially the same terms and conditions as the
Initial Sale;
WHEREAS, the Additional Shares cause the total number of shares of
Series B Stock which BCC wishes to sell and the total number of options to
purchase additional shares of Series B Stock to exceed the 2,460,877 shares of
Series B Stock and the 2,460,873 options contemplated by the Stock Purchase
Agreement;
WHEREAS, the Stock Purchase Agreement contemplated that the
consummation of the sale and purchase of the Series B Stock would take place at
three (3) closings and the sale and purchase of the Series B Stock will now
include a fourth (4th) closing (the "Additional Closing");
WHEREAS, the sale of the Additional Shares to the Additional Investors
and HCO Partners III and the Additional Closing will further the interests of
BCC and BCC's existing stockholders as stockholders of BCC; and
WHEREAS, in order to effect the purchase and sale of the Additional
Shares by the Additional Investors and the Additional Closing, the parties
hereto desire to amend certain of the
<PAGE> 2
terms of the Stock Purchase Agreement, the Registration Rights Agreement and
the Stock Restriction Agreement;
NOW, THEREFORE, consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as set forth below.
A. AMENDMENTS TO STOCK PURCHASE AGREEMENT. The Stock Purchase Agreement is
hereby amended as follows:
1. Each of the Additional Investors is deemed to be an "Investor" for
all purposes under the Stock Purchase Agreement, as amended.
2. The first sentence of the first paragraph on page one (1) is
amended by inserting the phrase "and amended on October __, 1996" immediately
after the phrase "dated as of September 20, 1996".
3. The second paragraph on page one (1) is amended by (a) deleting the
number "2,460,875" in the seventh (7th) line and inserting in lieu thereof the
number "2,504,877" and (b) deleting the number "2,460,875" in the eight (8th)
line and inserting in lieu thereof the number "2,504,873."
4. The first paragraph of Section 1.3 is amended to read in its
entirety as follows:
"1.3 Closings. The consummation of the purchase and sale of
the Purchased Shares shall take place at four closings (each
a "Closing" and, collectively, the "Closings"). The first
such Closing (the "First Closing") shall take place on the
date specified on Schedule 1.3 hereto under the heading
"First Closing", the second such closing (the "Second
Closing") shall take place on the date specified on Schedule
1.3 hereto under the heading "Second Closing". The third
closing (the "Third Closing") shall take place on the date
specified on Schedule 1.3 hereto under the heading "Third
Closing". The fourth closing (the "Fourth Closing") shall
take place on or before the day that is 30 days following the
Third Closing. The date of any Closing shall be referred to
herein as a "Closing Date." Each Closing shall take place at
the offices of Kirkpatrick & Lockhart LLP, 1500 Oliver
Building, Pittsburgh, Pennsylvania, or at such other time,
date or place as the parties agree."
5. The second paragraph of Section 1.3 is deleted in its entirety.
6. The first sentence of Section 3.2(a) is amended by deleting the
number "4,921,750" and inserting in lieu thereof the number "5,009,750".
7. The fourth line of Section 5.1(f)(ii)(B) is amended by inserting
the phrase "the Agreement of Amendment dated as of October __, 1996 by and
among BCC and the Investors (the "Agreement of Amendment") immediately after
the phrase "Stock Restriction Agreement".
- 2 -
<PAGE> 3
8. The eighth line of Section 5. 1(f)(ii)(B) is amended by inserting
the phrase "and the Agreement of Amendment" immediately after the phrase "the
Stock Restriction Agreement".
9. Section 5.l(f)(ii)(D) is amended by inserting the phrase "the
Agreement of Amendment," immediately after the phrase "the Stock Restriction
Agreement,".
10. Section 5.1(j) is amended by inserting the phrase "and the
Agreement of Amendment has been executed by holders of a majority of the shares
of the Series B Stock" immediately after the phrase "each of the parties named
therein".
11. Section 6.1(i)(C) is amended by inserting the phrase "or its
affiliates" immediately after the phrase "Meditrust Mortgage Investments, Inc."
12. Schedule 1.1 to the Stock Purchase Agreement shall read in its
entirety as set forth in Attachment I to this Agreement.
13. Schedule 1.3 to the Stock Purchase Agreement shall read in its
entirety as set forth in Attachment II to this Agreement.
14. Exhibit A to the Stock Purchase Agreement shall read in its
entirety as set forth in Attachment III to this Agreement.
B. AMENDMENTS TO THE REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement is hereby amended as follows:
1. Each of the Additional Investors is deemed to be an "Investor" for
all purposes under the Registration Rights Agreement, as amended.
2. The first sentence of the first paragraph is amended by (a)
inserting the phrase "and amended on October __, 1996" after "made as of
September 20, 1996" and (b) deleting the phrase "the date hereof" and inserting
in lieu thereof the phrase "September 20, 1996, as amended October __, 1996".
3. The seventh line of the definition of "Common Shares" in Section 1
is amended by inserting the phrase "or its affiliates" immediately after the
phrase "issuable to Meditrust".
C. AMENDMENTS TO THE STOCK RESTRICTION AGREEMENT. The Stock Restriction
Agreement is hereby amended as follows:
1. Each of the Additional Investors is deemed to be a "Purchaser" for
all purposes under the Stock Restriction Agreement, as amended.
- 3 -
<PAGE> 4
2. The first paragraph on page one (1) is amended by inserting the
phrase "and amended on October __, 1996" after "made as of the 20th day of
September 1996".
3. The third paragraph on page one (1) is amended by (a) deleting the
number "4,921,750" and inserting in lieu thereof the number "5,009,750" and (b)
deleting the phrase "the date hereof," and inserting in lieu thereof the phrase
"as of September 20, 1996, as amended October __, 1996".
By their execution of this Agreement of Amendment, the Additional
Investors are made parties to, and agree to be bound by the terms and
provisions of, the Stock Purchase Agreement, the Registration Rights Agreement
and the Stock Restriction Agreement, each as amended by this Agreement of
Amendment. In addition, by their execution of this Agreement of Amendment, each
Additional Investor represents and warrants that (i) it has reviewed the
representations and warranties of the Investors contained in Section 2 of the
Stock Purchase Agreement, (ii) that such representations and warranties are
true and correct with respect to such Additional Investor and (iii) that such
Additional Investor hereby makes the same representations and warranties to
BCC.
Except as amended hereby, the Stock Purchase Agreement, the
Registration Rights Agreement and the Stock Restriction Agreement shall remain
in full force and effect.
Except as the context may otherwise require, capitalized terms used
herein and not defined herein shall have the meaning ascribed to such term in
the agreement with respect to which the term is used.
By their execution of this Agreement of Amendment, each of the parties
hereto hereby waive any and all preemptive rights, rights of first refusal or
other rights to purchase capital stock of BCC in connection with BCC's sale of
the Additional Shares or the conversion of any shares of Series B Stock,
including without limitation those rights set forth in Section 6 of the Stock
Purchase Agreement.
This Agreement of Amendment may be signed 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.
[Signature pages follow immediately.]
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
BALANCED CARE CORPORATION
By /s/ Brad E. Hollinger
-----------------------------------
Brad E. Hollinger, Chairman and CEO
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
INVESTORS:
OMEGA VENTURES II, L.P.
By: Omega Ventures II Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
OMEGA VENTURES II CAYMAN, L.P.
By: Omega Ventures II Management, L.L.C.
Its Administrative General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
CROSSOVER FUND II, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
CROSSOVER FUND IIA, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
- 6 -
<PAGE> 7
BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Company
Private Equity Group, L.L.C.,
Its General Partner
By: /s/ Michael J. Stark
---------------------------------
Authorized Signatory
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
DAVID L. GOLDSMITH AND DIANE D.
GOLDSMITH, TRUSTEES,
GOLDSMITH FAMILY TRUST 3/29/85
By: /s/ David L. Goldsmith
------------------------
David L. Goldsmith, Trustee
By: /s/ Diane D. Goldsmith
------------------------
Diane D. Goldsmith, Trustee
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S
WEST PENSION TRUST
By: /s/ David C. Cummings
-----------------------
Name: David C. Cummings
Title: Trust Officer
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S
WEST BENEFIT ASSURANCE TRUST
By: /s/ David C. Cummings
-----------------------
Name: David C. Cummings
Title: Trust Officer
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
HCO PARTNERS IV-BCC
By: /s/ F. David Carr
-----------------
F. David Carr
Managing Partner
- 10 -
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
JULIET CHALLENGER, INC.
By: /s/ Darlene Clarke
------------------
Name: Darlene Clarke
Title: Vice President
- 11 -
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
HENRY L. HILLMAN, ELSIE HILLIARD
HILLMAN AND C.G. GREFENSTETTE,
TRUSTEES OF THE HENRY L. HILLMAN
TRUST U/A DATED NOVEMBER 18, 1985
By: /s/ C. G. Grefenstette
------------------------------
Trustee:
- 12 -
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
THOMAS G. BIGLEY AND C.G. GREFENSTETTE,
TRUSTEES UNDER AGREEMENT OF TRUST
DATED 12/30/76 FOR THE CHILDREN OF
JULIET LEA HILLMAN SIMONDS
By: /s/ T. G. Bigley
------------------------------
Trustee:
By: /s/ C. G. Grefenstette
------------------------------
Trustee:
THOMAS G. BIGLEY AND C.G. GREFENSTETTE,
TRUSTEES UNDER AGREEMENT OF TRUST
DATED 12/30/76 FOR THE CHILDREN OF
AUDREY HILLMAN FISHER
By: /s/ T. G. Bigley
------------------------------
Trustee
By: /s/ C. G. Grefenstette
------------------------------
Trustee
THOMAS G. BIGLEY AND C.G. GREFENSTETTE,
TRUSTEES UNDER AGREEMENT OF TRUST
DATED 12/30/76 FOR THE CHILDREN OF
WILLIAM TALBOTT HILLMAN
By: /s/ T. G. Bigley
------------------------------
Trustee:
By: /s/ C. G. Grefenstette
------------------------------
Trustee:
- 13 -
<PAGE> 14
THOMAS G. BIGLEY AND C.G. GREFENSTETTE,
TRUSTEES UNDER AGREEMENT OF TRUST
DATED 12/30/76 FOR THE CHILDREN OF HENRY
L. HILLMAN, JR.
By: /s/ T.G. Bigley
--------------------------------
Trustee:
By: /s/ C.G. Grefenstette
--------------------------------
Trustee:
- 14 -
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
DBH SEC IV, L.P.
By: /s/ Howard B. Hillman
--------------------------
Name: Howard B. Hillman
Title: Managing General Partner
- 15 -
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
MEDITRUST MORTGAGE INVESTMENTS, INC.
By: /s/ Michael S. Benjamin
---------------------------
Name: Michael S. Benjamin, Esq.
Title: Senior Vice President
- 16 -
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
R.S. PACIFIC VENTURE LP
By: Robertson, Stephens & Company, L.L.C.
By: /s/ [Illegible]
-------------------------------
Authorized Signatory
- 17 -
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
/s/ Mal Serure
----------------------------------
Mal Serure
- 18 -
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
JACK S. CAYRE IRREVOCABLE GRANTOR
TRUST U/A/D/ 2/22/95
By: /s/ Frieda Cayre
-----------------------------
Frieda Cayre, Trustee
AMIN CAYRE IRREVOCABLE GRANTOR
TRUST U/A/D 2/23/95
By: /s/ Frieda Cayre
-----------------------------
Frieda Cayre, Trustee
DAVID CAYRE IRREVOCABLE GRANTOR
TRUST U/A/D 2/23/95
By: /s/ Frieda Cayre
-----------------------------
Frieda Cayre, Trustee
ROBERT CAYRE IRREVOCABLE GRANTOR
TRUST U/A/D/ 2/23/95
By: /s/ Frieda Cayre
-----------------------------
Frieda Cayre, Trustee
- 19 -
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Amendment as of the day and year first above written.
/s/ Stanley Cayre
--------------------------------
Stanley Cayre
- 20 -
<PAGE> 1
EXHIBIT 4.4
EXECUTION COPY
--------------
STOCK RESTRICTION AGREEMENT
AGREEMENT, made as of the 20th day of September 1996, by and among
Balanced Care Corporation, a Delaware corporation (the "Company"), Brad E.
Hollinger, Robert Sutton, Brian Barth, Kurt Meyer, William McCarthy and Russell
DiGillio (each, a "Securityholder" and, collectively, the "Securityholders"),
and the persons listed as Purchasers in the signature pages hereto, or who
executes a counterpart signature page hereto on or after the date above
(collectively, the "Purchasers" and individually, a "Purchaser").
WHEREAS, the Securityholders are the holders of shares and/or options
for the purchase of shares totaling an aggregate of 2,279,200 shares of common
stock, $.001 par value, of the Company (the "Common Stock");
WHEREAS, the Purchasers are acquiring an aggregate of up to 4,921,750
shares of Series B Convertible Preferred Stock of the Company pursuant to the
terms of a Series B Convertible Preferred Stock Purchase Agreement dated the
date hereof between the Company and the Purchasers (the "Purchase Agreement")
pursuant to either a Closing or any Option Closing thereunder (as such terms
are defined in the Purchase Agreement); and
WHEREAS, it is a condition to the obligations of the Purchasers under
the Purchase Agreement that this Agreement be executed by the parties hereto,
and the parties are willing to execute this Agreement and to be bound by the
provisions hereof;
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
stockholders, the parties hereby agree with each other as follows:
1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Stock" shall mean and include all shares of Common
Stock, and all other securities of the Company which may be issued in exchange
for or in respect of shares of Common Stock (whether by way of stock split,
stock dividend, combination, reclassification, reorganization, or any other
means).
(b) "Shares" shall mean and include all shares of Stock now
owned or hereafter acquired by either (i) a Securityholder or (ii) any
Purchaser.
2. Prohibited Transfers. (a) No Securityholder shall sell,
assign, transfer, pledge, hypothecate, mortgage, encumber or otherwise dispose
of all or any of his Shares except to the
<PAGE> 2
Company or as expressly provided in this Agreement. Notwithstanding the
foregoing, any Securityholder may transfer all or any of his Shares (i) by way
of gift to any member of his family or to any trust for the benefit of any such
family member or such Securityholder, provided that any such transferee shall
agree in writing with the Company and the Purchasers, as a condition to such
transfer, to be bound by all of the provisions of this Agreement to the same
extent as if such transferee were such Securityholder, or (ii) by will or the
laws of descent and distribution, in which event each such transferee shall be
bound by all of the provisions of this Agreement to the same extent as if such
transferee were the Securityholder. As used herein, the word "family" shall
include any spouse, lineal ancestor or descendant, brother or sister.
(b) In addition to the foregoing, if requested by the
underwriters for the initial underwritten public offering of securities of the
Company, each Securityholder shall agree not to sell, assign, transfer, pledge,
hypothecate, mortgage, encumber or otherwise dispose of all or any of his
Shares, without the written consent of such underwriters, for a period of not
more than 270 days following the effective date of the registration statement
relating to such offering. This Section 2(b) shall expressly survive a
termination of this Agreement pursuant to clause (a) of Section 7 hereof.
3. Right of First Refusal on Dispositions.
(a) If at any time a Securityholder desires to sell for cash
all or any part of his Shares pursuant to a bona fide offer from a third party
(the "Proposed Transferee"), the Securityholder shall submit a written offer
(the "Offer") to sell such Shares (the "Offered Shares") to the Purchasers on
terms and conditions, including price, not less favorable to the Purchasers
than those on which the Securityholder proposes to sell such Offered Shares to
the Proposed Transferee. The Offer shall disclose the identity of the Proposed
Transferee, the Offered Shares proposed to be sold, the total number of Shares
owned by the Securityholder, the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
Offer shall further state that the Purchasers may acquire, in accordance with
the provisions of this Agreement, all or any portion of the Offered Shares for
the price and upon the other terms and conditions, including deferred payment
(if applicable), set forth therein.
(b) Each Purchaser shall have the absolute right to purchase
that number of Offered Shares as shall be equal to the number of Offered Shares
multiplied by a fraction, the numerator of which shall be the number of Shares
then owned by such Purchaser and the denominator of which shall be the
aggregate number of Shares then owned by all of the Purchasers. For purposes of
Sections 3, 4 and 12, all of the Stock which a Purchaser has the right to
acquire from the Company upon the conversion, exercise or exchange of any of
the securities of the Company then owned by such Purchaser shall be deemed to
be Shares then owned by such Purchaser. (The amount of Offered Shares that each
Purchaser is entitled to purchase under this Section 3(b) shall be referred to
as its "Pro Rata Fraction").
(c) The Purchasers shall have a right of oversubscription
such that if any Purchaser fails to accept the Offer as to its Pro Rata
Fraction, the other Purchasers shall, among them, have the right to purchase up
to the balance of the Offered Shares not so purchased. Such
-2-
<PAGE> 3
right of oversubscription may be exercised by a Purchaser by accepting the Offer
as to more than its ProRata Fraction. If, as a result thereof, such
oversubscriptions exceed the total number of Offered Shares available in respect
of such oversubscription privilege, the oversubscribing Purchasers shall be cut
back with respect to their oversubscriptions on a pro rata basis in accordance
with their respective Pro Rata Fractions or as they may otherwise agree among
themselves.
(d) If a Purchaser desires to purchase all or any part of the
Offered Shares, said Purchaser shall communicate in writing its election to
purchase to the Securityholder, which communication shall state the number of
Offered Shares said Purchaser desires to purchase and shall be given to the
Securityholder in accordance with Section 11 below within thirty days of the
date the Offer was made. Such communication shall, when taken in conjunction
with the Offer, be deemed to constitute a valid, legally binding and
enforceable agreement for the sale and purchase of such Offered Shares (subject
to the aforesaid limitations as to a Purchaser's right to purchase more than
its Pro Rata Fraction). Sales of the Offered Shares to be sold to purchasing
Purchasers pursuant to this Section 3 shall be made at the offices of the
Company on the 45th day following the date the Offer was made (or if such 45th
day is not a business day, then on the next succeeding business day). Such
sales shall be effected by the Securityholder's delivery to each purchasing
Purchaser of a certificate or certificates evidencing the Offered Shares to be
purchased by it, duly endorsed for transfer to such purchasing Purchaser,
against payment to the Securityholder of the purchase price therefor by such
purchasing Purchaser.
(e) If the Purchasers do not purchase all of the Offered
Shares, the Offered Shares not so purchased may be sold by the Securityholder
at any time within 90 days after the date the Offer was made, subject to the
provisions of Sections 4, 5 and 6. Any such sale shall be to the Proposed
Transferee, at not less than the price and upon other terms and conditions, if
any, not more favorable to the Proposed Transferee than those specified in the
Offer. Any Offered Shares not sold within such 90-day period shall continue to
be subject to the requirements of a prior offer pursuant to this Section 3. If
Offered Shares are sold pursuant to this Section 3 to any purchaser who is not
a party to this Agreement, the Offered Shares so sold shall no longer be
subject to this Agreement.
(f) The Purchasers' right of first refusal provided in this
Section 3 shall not apply with respect to sales of Shares to the Company or
transfers permitted pursuant to Section 2(a)(i) or (ii).
4. Right of Participation in Sales.
(a) If at any time the Securityholder desires to sell for
cash all or any part of the Shares owned by him to any person or entity other
than one or more of the Purchasers (the "Buyer"), each of the Purchasers shall
have the right to sell to the Buyer, as a condition to such sale by the
Securityholder, at the same price per share and on the same terms and
conditions as involved in such sale by the Securityholder, the same percentage
of the Shares owned by such Purchaser as the Shares to be sold by the
Securityholder to the Buyer represents with respect to
-3-
<PAGE> 4
the Shares owned by the Securityholder immediately prior to the sale of any of
his Shares to the Buyer.
(b) Each Purchaser wishing to so participate in any sale
under this Section 4 shall notify the Securityholder in writing of such
intention as soon as practicable after such Purchaser's receipt of the Offer
made pursuant to Section 3, and in any event within twenty days after the date
the Offer was made. Such notification shall be given to such Securityholder in
accordance with Section 11 below.
(c) The Securityholder and each participating Purchaser shall
sell to the Buyer all, or at the option of the Buyer, any part of the Shares
proposed to be sold by them at not less than the price and upon other teens and
conditions, if any, not more favorable to the Buyer than those in the Offer
provided by the Securityholder under Section 3 above; provided, however, that
any purchase of less than all of such Shares by the Buyer shall be made from
the Securityholder and each participating Purchaser pro rata based upon the
relative amount of the Shares that the Securityholder and each participating
Purchaser is otherwise entitled to sell pursuant to Section 4(a).
(d) Any Shares sold by the Securityholder or a participating
Purchaser pursuant to this Section 4 shall no longer be subject to this
Agreement.
(e) The Purchasers' right to participate in sales pursuant to
this Section 4 shall not apply with respect to sales of Shares to the Company
or transfers permitted pursuant to Section 2(a)(i) or (ii).
5. Further Limitation as to Transfers by Securityholders. In
addition to the other restrictions provided in this Agreement, each
Securityholder who holds shares of Common Stock on the date hereof agrees that
until the earlier to occur of the third anniversary of the date of this
Agreement or the date on which he is no longer employed in any capacity by the
Company or any of its subsidiaries, the aggregate number of Shares which he may
transfer pursuant to Sections 3 and 4 shall not exceed 30% of the Shares owned
by him on the date hereof (subject to equitable adjustment for any stock split,
stock dividend, combination of shares or the like and based upon Common Stock or
Common Stock equivalents).
6. [RESERVED]
7. Term. This Agreement shall terminate (a) immediately prior to
the consummation of the first firm commitment underwritten public offering
pursuant to an effective registration statement on Form S-1 (or its then
equivalent) under the Securities Act of 1933, as amended, pursuant to which the
aggregate net proceeds to the Company from the sale of Stock is at least
$30,500,000 at an offering price to the public of at least $8.00 per share
(which price shall be adjusted appropriately in the event of a stock split,
stock dividend, or other recapitalization of the Company's capital stock) or (b)
on the tenth anniversary of the date of this Agreement, whichever occurs first.
-4-
<PAGE> 5
8. Failure to Deliver Shares. If a Securityholder becomes
obligated to sell any Shares to a Purchaser or the Company under this Agreement
and fails to deliver such Shares in accordance with the terms of this Agreement,
such Purchaser or the Company, as the case may be, may, at its option, in
addition to all other remedies it may have, send to such Securityholder the
purchase price for such Shares as is herein specified. Thereupon, the Company
upon written notice to such Securityholder, (a) shall cancel on its books the
certificate or certificates representing the Shares to be sold and (b) shall
issue, in lieu thereof, in the name of such Purchaser or the Company, as the
case may be, a new certificate or certificates representing such Shares, and
thereupon all of such Securityholder's rights in and to such Shares shall
terminate.
9. Specific Enforcement. Each Securityholder expressly agrees
that the Purchasers and the Company will be irreparably damaged if this
Agreement is not specifically enforced. Upon a breach or threatened breach of
the terms, covenants and/or conditions of this Agreement by a Securityholder,
the Purchasers and the Company shall, in addition to all other remedies, each be
entitled to a temporary or permanent injunction, without showing any actual
damage, and/or a decree for specific performance, in accordance with the
provisions hereof.
10. Legend. Each certificate evidencing any of the Shares shall
bear a legend substantially as follows:
"The shares represented by this certificate are subject to
restrictions on transfer and may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except in accordance
with and subject to all the terms and conditions of a certain Stock
Restriction Agreement dated as of September 20, 1996, a copy of which
the Company will furnish to the holder of this certificate upon
request and without charge."
11. Notices. Notices given hereunder shall be deemed to have been
duly given on the date of personal delivery, on the date of postmark if mailed
by certified or registered mail, return receipt requested, or on the date sent
by telecopier or telex to the party being notified at his or its address
specified on the applicable signature page hereto or, in the case of the
Purchasers, its address as set forth on Schedule 1.1 to the Purchase Agreement,
or such other address as the addressee may subsequently notify the other parties
of in writing.
12. Entire Agreement and Amendments. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and neither this Agreement nor any provision hereof may be waived, modified,
amended or terminated except by a written agreement signed by the parties
hereto; provided, however, that Purchasers owning a majority of the Shares owned
by all Purchasers may effect any such waiver, modification, amendment or
termination on behalf of all of the Purchasers. To the extent any term or other
provision of any other indenture, agreement or instrument by which any party
hereto is bound conflicts with this Agreement, this Agreement shall have
precedence over such conflicting term or provision.
13. Governing Law; Successors and Assigns. This Agreement shall
be governed by the laws of Delaware and shall be binding upon the heirs,
personal representatives, executors, administrators, successors and assigns of
the parties.
-5-
<PAGE> 6
14. Waivers. No waiver of any breach or default hereunder shall
be considered valid unless in writing, and no such waiver shall be deemed a
waiver of any subsequent breach or default of the same or similar nature.
15. Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
16. Captions. Captions are for convenience only and are not deemed
to be part of this Agreement.
17. Continuation of Employment. Nothing in this Agreement shall
create an obligation on the Company or the Purchasers to continue any
Securityholder's employment with the Company.
18. 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.
[Signature page follows immediately.]
-6-
<PAGE> 7
IN WITNESS WHEREOF, this Stock Restriction Agreement has been executed
as of the date and year first above Written.
COMPANY:
BALANCED CARE CORPORATION
By: /s/ William T. McCarthy
-----------------------------
Title: Vice President
------------------------------
Address: 5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
INVESTORS:
OMEGA VENTURES II, L.P.
By: Omega Ventures II Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
-----------------------------
Authorized Signatory
OMEGA VENTURES II CAYMAN, L.P.
By: Omega Ventures II Management, L.L.C.
Its Administrative General Partner
By: /s/ Michael J. Stark
-----------------------------
Authorized Signatory
CROSSOVER FUND II, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
-----------------------------
Authorized Signatory
-7-
<PAGE> 8
CROSSOVER FUND IIA, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
------------------------------
Authorized Signatory
BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Company
Private Equity Group, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
------------------------------
Authorized Signatory
DAVID L. GOLDSMITH AND DIANE D.
GOLDSMITH, TRUSTEES, GOLDSMITH
FAMILY TRUST 3/29/85
By: /s/ David L. Goldsmith
-----------------------------
DAVID L. GOLDSMITH, Trustee
By: /s/ Diane D. Goldsmith
-----------------------------
DIANE D. GOLDSMITH, Trustee
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S WEST
PENSION TRUST
By: /s/ David C. Cummings
------------------------------
Name: David C. Cummings
Title: Trust Officer
-9-
<PAGE> 9
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S WEST
BENEFIT ASSURANCE TRUST
By: /s/ David C. Cummings
------------------------------
Name: David C. Cummings
Title: Trust Officer
JULIET CHALLENGER, INC.
By: /s/ Darlene Clarke
------------------------------
Name: Darlene Clarke
Title:
HENRY L. HILLMAN, ELSIE HILLIARD
HILLMAN AND C.G. GREFENSTETTE,
TRUSTEES OF THE HENRY L. HILLMAN
TRUST U/A DATED NOVEMBER 18, 1985
By: /s/ C.G. Grefenstette
------------------------------
Trustee:
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF JULIET LEA HILLMAN
SIMONDS
By: /s/ T.G. Bigley
------------------------------
Trustee:
By: /s/ C.G. Grefenstette
------------------------------
Trustee:
-10-
<PAGE> 10
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF AUDREY HILLMAN
FISHER
By: /s/ T. G. Bigley
______________________________
Trustee:
By: /s/ C. G. Grefenstette
______________________________
Trustee:
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF WILLIAM TALBOTT
HILLMAN
By: /s/ T. G. Bigley
_____________________________
Trustee:
By: /s/ C. G. Grefenstette
______________________________
Trustee:
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF HENRY L. HILLMAN, JR.
By: /s/ T. G. Bigley
______________________________
Trustee:
By: /s/ C. G. Grefenstette
______________________________
Trustee:
-11-
<PAGE> 11
DBH SEC IV, L.P.
By: /s/ Howard B. Hillman
______________________________
Name: Howard B. Hillman
Title: Managing General Partner
HCO Partners III, L.P.
By: /s/ F. David Carr
______________________________
F. David Carr
Managing Director
SECURITYHOLDERS:
/s/ Brad E. Hollinger
_________________________________
Brad E. Hollinger
Address:_________________________
_________________________
_________________________
/s/ Robert Sutton
_________________________________
Robert Sutton
Address:_________________________
_________________________
_________________________
/s/ Brian Barth
_________________________________
Brian Barth
Address:_________________________
_________________________
_________________________
-12-
<PAGE> 12
/s/ Kurt Meyer
_________________________________
Kurt Meyer
Address: 253 Indian Creek Drive
Mechanicsburg, PA 17055
/s/ William McCarthy
_________________________________
Willliam McCarthy
Address: 386 Penn Rd.
Wynewood, PA 19096
/s/ Russell DiGilio
_________________________________
Russell DiGilio
Address: 115 Cambridge Rd.
Landenberg, PA 19350
-13-
<PAGE> 13
Counterpart Signature Page to that certain Stock Restriction Agreement
dated as of September 20, 1996 by and among Balanced Care Corporation, the
Securityholders (as defined therein) and the Purchasers (as defined therein).
**
MEDITRUST MORTGAGE INVESTMENTS, INC.
By: /s/ Michael S. Benjamin
-----------------------------
Name:
Title: Michael S. Benjamin, Esq.
Senior Vice President
**The Declaration of Trust establishing Meditrust, the sole
shareholder of Meditrust Mortgage Investments, Inc. dated August 6, 1985, as
amended (the "Declaration of Trust"), a copy of which, together with all
amendments thereto, is duly filed in the office of the Secretary of State of
the Commonwealth of Massachusetts, provides that the name "Meditrust" refers to
the Trustees under the Declaration of Trust collectively as Trustees, but not
individually or personally; and that no trustee, officer, shareholder, employee
or agent of Meditrust or any of its subsidiaries shall be held to any personal
liability, jointly or severally, for any obligation of, or claims against
Meditrust or any of its subsidiaries. All persons dealing with Meditrust or any
of its subsidiaries, including without limitation Meditrust Mortgage
Investments, Inc., in any way, shall look only to the respective assets of
Meditrust or any of its subsidiaries, including without limitation Meditrust
Mortgage Investments, Inc., for the payment of any sum or the performance of
any obligations. All parties hereto specifically acknowledge and agree that
Meditrust is neither a party to this agreement nor shall Meditrust assume or
have any liability hereunder of any kind or nature whatsoever.
-14-
<PAGE> 1
EXHIBIT 4.5
EXECUTION COPY
--------------
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made as of September 20, 1996 by
and among Balanced Care Corporation, a Delaware corporation (the "Company"),
the investors listed in Schedule 1.1 to that certain Series B Stock Purchase
Agreement (the "Purchase Agreement") between such investors and the Company
dated the date hereof (including any Additional Investor (as defined therein)
and who executes a counterpart to this Agreement) (each an "Investor" and,
collectively the "Investors"), the holder of Convertible Series A Preferred
Stock, $.001 par value, of the Company (the "Series A Holder") and certain
holders of shares, or rights to purchase shares, of Common Stock, $.001 par
value, of the Company (the "Common Stockholders"), each as set forth in the
signature pages hereto.
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" shall mean any person controlled by, controlling
or under common control with any other person.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
"Common Shares" shall mean (i) the aggregate 3,100,000 shares
of Common Stock held by the Common Stockholders other than the Series A Holder;
(ii) the aggregate 528,444 shares of Common Stock held by, or issuable upon the
exercise of certain capital stock purchase warrants of the Company held by, the
Series A Holder (subject to adjustment pursuant to the terms of such warrants);
(iii) the Series A Conversion Shares; and (iv) in the event that Meditrust
Mortgage Investments, Inc. ("Meditrust") is an Investor, up to 1,006,490 shares
of Common Stock issuable to Meditrust upon the exercise of capital stock
purchase warrants outstanding on the date hereof or to be issued hereafter by
the Company (subject to adjustment pursuant to the terms of such warrants),
plus any additional shares of Common Stock issued in respect of the above
shares, excluding Common Shares which have been (a) registered under the
Securities Act pursuant to an effective registration statement filed thereunder
and disposed of in accordance with such registration statement or (b) publicly
sold pursuant to Rule 144 under the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value,
of the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued
upon conversion of the Preferred Shares.
<PAGE> 2
- 2 -
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"Preferred Shares" shall mean the shares of Series B
Convertible Preferred Stock, par value $.001, of the Company, issued pursuant
to the Purchase Agreement (whether as Purchased Shares or Option Shares (as
such terms are defined in the Purchase Agreement)).
"Registration Expenses" shall mean the expenses so described
in Section 8.
"Restricted Stock" shall mean the issued or issuable
Conversion Shares, excluding Conversion Shares which have been (a) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (b) publicly sold pursuant to Rule 144 under the Securities
Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Series A Conversion Shares" shall mean shares of Common
Stock issued or issuable on conversion of the 1,150,958 shares of Series A
Stock outstanding on the date hereof, excluding Series A Conversion Shares
which have been (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with such registration statement or (b) publicly sold pursuant to Rule 144
under the Securities Act.
"Series A Stock" shall mean the Convertible Series A
Preferred Stock, $.001 par value, of the Company.
"Series B Stock" shall mean the Series B Convertible
Preferred Stock, $.001 par value, of the Company.
"Selling Expenses" shall mean the expenses so described in
Section 8.
2. Restrictive Legend. Each certificate representing Preferred
Shares, Conversion Shares, Series A Conversion Shares or Common Shares shall,
except as otherwise provided in this Section 2 or in Section 3 be stamped or
otherwise imprinted with a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
<PAGE> 3
- 3 -
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault
shall be satisfactory) the securities represented thereby may be publicly sold
without registration under the Securities Act and any applicable state
securities laws.
3. Notice of Proposed Transfer. Prior to any proposed transfer of
any Preferred Shares, Conversion Shares, Series A Stock or Common Shares (other
than under the circumstances described in Sections 4, 5 or 6), the holder
thereof shall give written notice to the Company of its intention to effect such
transfer. Each such notice shall describe the manner of the proposed transfer
and, if requested by the Company, shall be accompanied by an opinion of counsel
satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault,
LLP shall be satisfactory) to the effect that the proposed transfer may be
effected without registration under the Securities Act and any applicable state
securities laws, whereupon the holder of such STOCK shall be entitled to
transfer such stock in accordance with the terms of its notice; provided,
however, that no such opinion of counsel shall be required for a transfer to one
or more partners of or to an Affiliate of the transferor. Each certificate for
Preferred Shares, Conversion Shares, Series A Stock or Common Shares transferred
as above provided shall bear the legend set forth in Section 2, except that such
certificate shall not bear such legend if (i) such transfer is in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 3 shall not apply
to securities which are not required to bear the legend prescribed by Section 2
in accordance with the provisions of that Section.
4. Required Registration.
(a) At any time after the earliest of (i) six months after
any registration statement covering a public offering of securities of the
Company under the Securities Act shall have become effective, (ii) six months
after the Company shall have become a reporting company under Section 12 of the
Exchange Act, and (iii) the third anniversary of the date of this Agreement,
the holders of Restricted Stock constituting at least 40% of the total shares
of Restricted Stock then outstanding may request the Company to register under
the Securities Act all or any portion of the shares of Restricted Stock held by
such requesting holder or holders for sale in the manner specified in such
notice, provided that the reasonably anticipated aggregate price to the public
of such shares of Restricted Stock shall be at least $5,000,000. The only
securities which the Company shall be required to register pursuant hereto
shall be shares of Common Stock, provided, however, that, in any underwritten
public offering contemplated by this Section 4 or Sections 5 and 6, the holders
of Preferred Shares shall be entitled to sell such Preferred Shares to the
underwriters for conversion and sale of the shares of Common Stock issued upon
conversion thereof. Notwithstanding anything to the contrary contained herein,
no request may be made under this Section 4 within 120 days after the effective
date of a registration statement filed by the Company covering a firm
commitment underwritten public offering in which the holders of Restricted
Stock shall have been entitled to join pursuant to
<PAGE> 4
- 4 -
Sections 5 or 6 and in which there shall have been effectively registered all
shares of Restricted Stock as to which registration shall have been requested.
(b) Following receipt of any notice under this Section 4, the
Company shall (in addition to any other notices required to be made by the
Company hereunder or otherwise) immediately notify all holders of Restricted
Stock from whom notice has not been received and shall use its best efforts to
register under the Securities Act, for public sale in accordance with the
method of disposition specified in such notice from requesting holders, the
number of shares of Restricted Stock specified in such notice (and in all
notices received by the Company from other holders within 30 days after the
giving of such notice by the Company). If such method of disposition shall be
an underwritten public offering, the holders of a majority of the shares of
Restricted Stock to be sold in such offering may designate the managing
underwriter of such offering, subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed. The Company shall be
obligated to register Restricted Stock pursuant to this Section 4 on two
occasions only, provided, however, that such obligation shall be deemed
satisfied only when a registration statement covering at least 80% of the
shares of Restricted Stock specified in notices received as aforesaid, for sale
in accordance with the method of disposition specified by the requesting
holders, shall have become effective and, if such method of disposition is a
firm commitment underwritten public offering, all such shares shall have been
sold pursuant thereto.
(c) The Company shall be entitled to include in any
registration statement referred to in this Section 4, for sale in accordance
with the method of disposition specified by the requesting holders, shares of
Common Stock to be sold by the Company for its own account, and shares of
Common Stock to be sold for other securityholders of the Company (including
Common Shares) except as and to the extent that, in the opinion of the managing
underwriter (if such method of disposition shall be an underwritten public
offering), such inclusion would adversely affect the marketing of the
Restricted Stock to be sold, provided that if, after all shares of Common Stock
to be sold by the Company and by security holders of the Company other than (i)
the holders of Restricted Stock and (ii) the holders of Common Shares have been
excluded from the registration statement, an additional reduction of the number
of shares is required by the managing underwriter, 80% of such reduction shall
be made out of the Common Shares and 20% of such reduction shall be made out of
the Restricted Stock requested to be included in such offering. Any reductions
in shares of Restricted Stock or Common Shares shall be made pro rata among the
holders of Restricted Stock and/or Common Shares requesting registration
hereunder, as the case may be, based upon such holder's percentage of the total
number of shares of Restricted Stock or Common Shares (as the case may be) held
by all requesting holders. Except for registration statements on Form S-4, S-8
or any successor thereto, the Company will not file with the Commission any
other registration statement with respect to its Common Stock, whether for its
own account or that of other stockholders, from the date of receipt of a notice
from requesting holders pursuant to this Section 4 until the completion of the
period of distribution of the registration as determined pursuant to Section
7(b) hereof.
5. Incidental Registration. If the Company at any time (other
than pursuant to Section 6) proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with
<PAGE> 5
- 5 -
respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Restricted Stock for sale to the public), each
such time it will give written notice to all holders of outstanding Restricted
Stock and Common Shares of its intention so to do. Upon the written request of
any such holder, received by the Company within 30 days after the giving of any
such notice by the Company, to register any of its Restricted Stock and Common
Shares, the Company will use its best efforts to cause the Restricted Stock and
Common Shares as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the holder of such Restricted Stock and/or Common Shares so
registered. In the event that any registration pursuant to this Section 5 shall
be, in whole or in part, an underwritten public offering of Common Stock, the
number of shares of Restricted Stock and/or Common Shares to be included in such
an underwriting may be reduced if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company therein, with 80% of
such reduction to be made out of the Common Shares and 20% to be made out of the
shares of Restricted Stock to be included in such offering, provided that no
such reductions shall be made if any shares are to be included in such
underwriting for the account of any person other than the Company or requesting
holders of Restricted Stock and/or Common Shares. Any reductions in shares of
Restricted Stock or Common Shares shall be made pro rata among the holders of
Restricted Stock and/or Common Shares requesting registration hereunder, as the
case may be, based upon such holder's percentage of the total number of shares
of Restricted Stock or Common Shares (as the case may be) held by all requesting
holders. In the event that Meditrust is not an Investor under the Purchase
Agreement, and there is proposed a reduction in the shares of Restricted Stock
or Common Shares to be made in order for Meditrust to include shares of capital
stock in a registration statement hereunder pursuant to other contractual
registration rights of Meditrust, such reduction shall be made entirely out of
the Common Shares held by the Common Stockholders other than the Series A Holder
on a pro rata basis or as otherwise agreed among such Common Stockholders.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 5 without thereby incurring
any liability to the holders of Restricted Stock or Common Shares.
6. Registration on Form S-3. If at any time (i) a holder or
holders of Restricted Stock request that the Company file a registration
statement on Form S-3 or any successor thereto for a public offering of all or
any portion of the shares of Restricted Stock held by such requesting holder or
holders, the reasonably anticipated aggregate price to the public of which would
exceed $1,000,000, and (ii) the Company is a registrant entitled to use Form S-3
or any successor thereto to register such shares, then the Company shall use its
best efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of shares of Restricted Stock specified in such
notice. Whenever the Company is required by this Section 6 to use its best
efforts to effect the registration of Restricted Stock, each of the procedures
and requirements of Section 4 (including but not limited to the requirement that
the Company notify all holders of Restricted Stock from whom notice has not been
received and provide them with the opportunity to participate in the offering)
shall apply to such registration, provided, however, that there shall be no
limitation on the number of registrations on Form S-3 which may be requested and
obtained under this Section 6, and provided, further, however, that the
requirements contained in
<PAGE> 6
- 6 -
the first sentence of Section 4(a) shall not apply to any registration on Form
S-3 which may be requested and obtained under this Section 6.
7. Registration Procedures. (a) If and whenever the Company is
required by the provisions of Sections 4, 5 or 6 to use its best efforts to
effect the registration of any shares of Restricted Stock and/or Common Shares
under the Securities Act, the Company will, as expeditiously as possible:
(i) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 4, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for the period specified in paragraph (a) above and comply with the
provisions of the Securities Act with respect to the disposition of all
Restricted Stock and/or Common Shares covered by such registration statement in
accordance with the sellers' intended method of disposition set forth in such
registration statement for such period;
(iii) furnish to each seller of Restricted Stock and/or
Common Shares, as the case may be, and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or other disposition of such Restricted
Stock and/or Common Shares covered by such registration statement;
(iv) use its best efforts to register or qualify the
Restricted Stock and/or Common Shares covered by such registration statement
under the securities or "blue sky" laws of such jurisdictions as the sellers of
Restricted Stock and/or Common Shares or, in the case of an underwritten public
offering, the managing underwriter reasonably shall request, provided, however,
that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(v) use its best efforts to list the Restricted Stock and/or
Common Shares covered by such registration statement with any securities
exchange on which the Common Stock of the Company is then listed;
(vi) immediately notify each seller of Restricted Stock
and/or Common Shares, as the case may be, and each underwriter under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or
<PAGE> 7
- 7 -
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;
(vii) if the offering is underwritten and at the request of
any seller of Restricted Stock and/or Common Shares, as the case may be, use
its best efforts to furnish on the date that Restricted Stock and/or Common
Shares, as the case may be, is delivered to the underwriters for sale pursuant
to such registration: (i) an opinion dated such date of counsel representing
the Company for the purposes of such registration, addressed to the
underwriters to such seller, stating that such registration statement has
become effective under the Securities Act and that (A) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are pending
or contemplated under the Securities Act, (B) the registration statement, the
related prospectus and each amendment or supplement thereof comply as to form
in all material respects with the requirements of the Securities Act (except
that such counsel need not express any opinion as to financial statements
contained therein) and (C) to such other effects as reasonably may be requested
by counsel for the underwriters or by such seller or its counsel and (ii) a
letter dated such date from the independent public accountants retained by the
Company, addressed to the underwriters and to such seller, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act, and such
letter shall additionally cover such other financial matters (including
information as to the period ending no more than five business days prior to
the date of such letter) with respect to such registration as such underwriters
reasonably may request; and
(viii) make available for inspection by each seller of
Restricted Stock and/or Common Shares, as the case may be, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by such seller or underwriter,
all financial and other records, pertinent corporate documents and properties
of the Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
(b) For purposes of Section 7(a)(i) and (ii) and of Section 6, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock and/or Common Shares, as the case may be, in
any other registration shall be deemed to extend until the earlier of the sale
of all Restricted Stock covered thereby and 120 days after the effective date
thereof.
(c) In connection with each registration hereunder, the sellers of
Restricted Stock and/or Common Shares, as the case may be, will furnish to the
Company in writing such information with respect to themselves and the proposed
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
<PAGE> 8
- 8 -
(d) In connection with each registration pursuant to Sections 4, 5 or
6 covering an underwritten public offering, the Company and each seller agree
to enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
(e) Each holder of Restricted Stock and Common Shares agrees that, at
any time when a prospectus relating to the sale of Restricted Stock and/or
Common Shares is required to be delivered by such holder under the Securities
Act, upon receipt of written notice from the Company of the occurrence of any
event described in Section 7(a)(vi) hereof (the "Notice"), such holder shall
forthwith discontinue disposition of such Restricted Stock and/or Common Shares
until such holder has received (at the Company's expense) copies of a
supplemented or amended prospectus, or until such holder is advised in writing
(the "Advice") by the Company that use of the prospectus may be resumed. Each
such holder shall, at the Company's request and expense, return to the Company
all copies then in the holder's possession (other than permanent file copies)
of the prospectus covering such Restricted Stock and/or Common Shares current
at the time of receipt of the Notice. In the event that the Company shall give
any such Notice, the period of distribution with respect to the registration
statement (as determined pursuant to this Section 7) shall be extended by the
number of days during the period from and including the date of the Notice and
including the date on which each holder of Restricted Stock and/or Common
Shares being sold pursuant to the prospectus shall have received either (a) the
number of copies of the supplemented or amended prospectus as is reasonably
requested by the holder or (b) the Advice.
8. Expenses. All expenses incurred by the Company in complying
with Sections 4, 5 and 6, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fees and disbursements of one counsel for the sellers of Restricted Stock, but
excluding any Selling Expenses, are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection
with each registration statement under Sections 4, 5 or 6. All Selling Expenses
in connection with each registration statement under Sections 4, 5 or 6 shall
be borne by the participating sellers in proportion to the number of shares
sold by each, or by such participating sellers other than the Company (except
to the extent the Company shall be a seller) as they may agree.
9. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted
Stock and/or Common Shares, as the case may be, under the Securities Act
pursuant to Sections 4, 5 or 6, the Company will indemnify and hold harmless
each seller of such securities thereunder, each underwriter of such securities
thereunder and each other person, if any, who controls such seller
<PAGE> 9
- 9 -
or underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act pursuant to
Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each such seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any of the Restricted
Stock and/or Common Shares, as the case may be, under the Securities Act
pursuant to Sections 4, 5 or 6, each seller of such securities thereunder,
severally and not jointly, will indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of the Securities
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Restricted Stock and/or Common
Shares were registered under the Securities Act pursuant to Sections 4, 5 or 6,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that such seller will be liable
hereunder in any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such,
furnished in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of each seller hereunder shall be limited to the pro-rata portion of
any such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of the shares sold by such seller
under such registration statement bears to the total public offering price of
all securities sold thereunder, but not in any
<PAGE> 10
- 10 -
event to exceed the proceeds received by such seller from the sale of Restricted
Stock and/or Common Shares, as the case may be, covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to such indemnified party other than under this Section 9 and
shall only relieve it from any liability which it may have to such indemnified
party under this Section 9 if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel satisfactory to such indemnified party, and, after notice
from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 9 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with
counsel so selected, provided, however, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by
the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i) any
holder of Restricted Stock and/or Common Shares exercising rights under this
Agreement, or any controlling person of any such holder, makes a claim for
indemnification pursuant to this Section 9 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 9 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling holder or any such controlling person in circumstances for which
indemnification is provided under this Section 9; then, and in each such case,
the Company and such holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such holder is responsible for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such holder will be required to contribute any amount in excess of
the public offering price of all such securities offered by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within
<PAGE> 11
- 11 -
the meaning of Section 11 (f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Common Stock or Preferred Stock. If, and as often
as, there is any change in the Common Stock, Series A Stock or Series B Stock by
way of a stock split, stock dividend, combination or reclassification, or
through a merger, consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the provisions hereof so
that the rights and privileges granted hereby shall continue with respect to the
Common Stock, Series A Stock or Series B Stock as so changed.
11. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Stock and Common Shares to the public
without registration, at all times after 90 days after any registration
statement covering a public offering of securities of the Company under the
Securities Act shall have become effective, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock and Common
Shares forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing such holder to sell any
Restricted Stock and Common Shares without registration.
12 Representations and Warranties of the Company. The Company
represents and warrants as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency
of government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties
or assets is bound, conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Company.
(b) This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
<PAGE> 12
- 12 -
13. Miscellaneous.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto, whether
so expressed or not, provided, however, that registration rights conferred
herein shall only inure to the benefit of a transferee of Restricted Stock or
Common Shares if (i) there is transferred to such transferee at least 20% of
(x) the total shares of Restricted Stock originally issued pursuant to the
Purchase Agreement to the direct or indirect transferor of such transferee, in
the case of Restricted Stock, and (y) of the total number of the Common Shares,
in the case of a holder of Common Shares, or (ii) such transferee is a partner,
shareholder or Affiliate of a party hereto.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier
or telex, addressed as follows:
if to the Company or any Investor, at the address of such
party set forth in the Purchase Agreement;
if to the Series A Holder or any Common Stockholder, at the
address of such party set forth in the signature pages hereto;
if to any subsequent holder of Preferred Shares, Restricted
Stock or Common Shares, to it at such address as may have been furnished to the
Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Restricted
Stock or Common Shares) or to the holders of Restricted Stock or Common Shares
(in the case of the Company) in accordance with the provisions of this
paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written of the Company and the
holders of a majority of the outstanding shares of Restricted Stock and, with
respect to Sections 5, 7, 8, 9 and 13, holders of a majority of the aggregate
number of outstanding Common Shares.
(e) 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.
(f) The obligations of the Company to register securities
under Sections 4, 5 or 6 shall terminate on the fifteenth anniversary of the
date of this Agreement.
<PAGE> 13
- 13 -
(g) If requested in writing by the underwriters for the
initial underwritten public offering of securities of the Company, each holder
of Restricted Stock and Common Shares who is a party to this Agreement shall
agree not to sell publicly any shares of Restricted Stock or any other shares
of Common Stock (other than shares of Restricted Stock, Common Shares or other
shares of Common Stock being registered in such offering), without the consent
of such underwriters, within the fifteen (15) days prior to and for a period of
not more than 180 days following the effective date of the registration
statement relating to such offering; provided, however, that all persons
entitled to registration rights with respect to shares of Common Stock who are
not parties to this Agreement, all other persons selling shares of Common Stock
in such offering, all persons holding in excess of 1% of the capital stock of
the Company on a fully diluted basis and all executive officers and directors
of the Company shall also have agreed not to sell publicly their Common Stock
under the circumstances and pursuant to the terms set forth in this Section
13(g).
(h) Notwithstanding the provisions of Section 7(a)(i), the
Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for a
period not to exceed 90 days in any 18-month period if there exists at the time
material non-public information relating to the Company which, in the
reasonable opinion of the Company, should not be disclosed.
(i) The Company shall not grant to any third party any
registration rights more favorable than or inconsistent with any of those
contained herein, so long as any of the registration rights under this
Agreement remains in effect.
(j) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any
manner affect or render illegal, invalid or unenforceable any other provision
of this Agreement, and this Agreement shall be carried out as if any such
illegal, invalid or unenforceable provision were not contained herein.
(k) In the event that Meditrust is an Investor, by its
execution of a counterpart signature page to this Agreement, Meditrust hereby
agrees that all registration rights held by it on the date of execution shall
be terminated and superseded by its registration rights as described hereunder.
In the event that Meditrust is an Investor, Meditrust further agrees to execute
any other documents and take all necessary actions reasonably requested by the
Company in connection with the termination of such rights.
[Signature pages follow immediately.]
<PAGE> 14
- 14 -
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
COMPANY:
BALANCED CARE CORPORATION
By: /s/ William T. McCarthy
---------------------------------
Name: William T. McCarthy
Title: Vice President
INVESTORS:
OMEGA VENTURES II, L.P.
By: Omega Ventures II Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
------------------------------
Authorized Signatory
OMEGA VENTURES II CAYMAN, L.P.
By: Omega Ventures II Management, L.L.C.
Its Administrative General Partner
By: /s/ Michael J. Stark
------------------------------
Authorized Signatory
CROSSOVER FUND II, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
-------------------------------
Authorized Signatory
CROSSOVER FUND IIA, L.P.
By: Crossover Investment Management, L.L.C.
Its General Partner
By: /s/ Michael J. Stark
-------------------------------
Authorized Signatory
<PAGE> 15
- 16 -
BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Company
Private Equity Group, L.L.C.,
Its General Partners
By: /s/ Michael J. Stark
---------------------------
Its Authorized Signatory
DAVID L. GOLDSMITH AND DIANE
D. GOLDSMITH, TRUSTEES, GOLDSMITH
FAMILY TRUST 3/29/85
By: /s/ David L. Goldsmith
--------------------------------
David L. Goldsmith, Trustee
By: /s/ Diane D. Goldsmith
--------------------------------
Diane D. Goldsmith, Trustee
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S WEST
PENSION TRUST
By: /s/ David C. Cummings
--------------------------------
Name: David C. Cummings
Title: Trust Officer
BOSTON SAFE DEPOSIT AND TRUST
COMPANY'S TRUSTEE FOR U S WEST
BENEFIT ASSURANCE TRUST
By: /s/ David C. Cummings
--------------------------------
Name: David C. Cummings
Title: Trust Officer
<PAGE> 16
- 17 -
BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Company
Private Equity Group, L.L.C,
Its General Partner
By: /s/ Michael J. Stark
---------------------------
Its Authorized Signatory
DAVID L. GOLDSMITH AND DIANE
D. GOLDSMITH, TRUSTEES, GOLDSMITH
FAMILY TRUST 3/29/85
By: /s/ David L. Goldsmith
-------------------------------
David L. Goldsmith, Trustee
By: /s/ Diane D. Goldsmith
-------------------------------
Diane D. Goldsmith, Trustee
BOSTON SAFE DEPOSIT AND TRUST
COMPANY AS TRUSTEE FOR U S WEST
PENSION TRUST
By: /s/ David C. Cummings
--------------------------------
Name: David C. Cummings
Title: Trust Officer
BOSTON SAFE DEPOSIT AND TRUST
COMPANY S TRUSTEE FOR U S WEST
BENEFIT ASSURANCE TRUST
By: /s/ David C. Cummings
--------------------------------
Name: David C. Cummings
Title: Trust Officer
<PAGE> 17
- 18 -
HCO PARTNERS IV-BCC
By: /s/ F. David Carr
-------------------------------
F. David Carr
Managing Partner
JULIET CHALLENGER, INC.
By: /s/ Darlene Clarke
--------------------------------
Name: Darlene Clarke
Title: Vice President
HENRY L. HILLMAN, ELSIE HILLIARD
HILLMAN AND C.G. GREFENSTETTE,
TRUSTEES OF THE HENRY L. HILLMAN
TRUST U/A DATED NOVEMBER 18, 1985
By: /s/ C.G. Grefenstette
--------------------------------
Trustee
THOMAS G. BIGLEY AND
C.G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR
THE CHILDREN OF JULIET LEA HILLMAN
SIMONDS
By: /s/ T.G. Bigley
--------------------------------
Trustee
By: /s/ C.G. Grefenstette
--------------------------------
Trustee
<PAGE> 18
- 19 -
DBH SEC IV, L.P.
By: /s/ Howard B. Hillman
-------------------------------
Name: Howard B. Hillman
Title: Managing General Partner
SERIES A HOLDER AND COMMON
STOCKHOLDER:
/s/ John Brennan
_______________________________
John Brennan
Address:___________________________
___________________________
___________________________
COMMON STOCKHOLDERS:
/s/ Brad E. Hollinger
______________________________
Brad E. Hollinger
Address:___________________________
___________________________
___________________________
/s/ Robert Sutton
_______________________________
Robert Sutton
Address:___________________________
___________________________
___________________________
/s/ Brian Barth
_______________________________
Brian Barth
Address:___________________________
___________________________
___________________________
K.D INVESTMENT
<PAGE> 19
- 20 -
By: /s/ David Barber
-------------------------------
Name: David Barber
Title: Managing Partner
Address: 111 Brindle Road
Mechanicsburg, PA 17055
SAE PARTNERS
By: /s/ F. David Carr
-------------------------------
Name: F. David Carr
Title: Managing Director
Address: 585 Edgewood Road
San Marco, CA 94402
<PAGE> 20
Counterpart Signature Page to that certain Registration Rights
Agreement dated as of September 20, 1996 by and among Balanced Care
Corporation, the Investors (as defined therein), the Series A Holder (as
defined therein) and the Common Stockholders (as defined therein).
**
MEDITRUST MORTGAGE INVESTMENTS, INC.
By: /s/ Michael S. Benjamin
-------------------------------------
Name: Michael S. Benjamin, Esq.
Title: Senior Vice President
**The Declaration of Trust establishing Meditrust, the sole
shareholder of Meditrust Mortgage Investments, Inc. dated August 6, 1985, as
amended (the "Declaration of Trust"), a copy of which, together with all
amendments thereto, is duly filed in the office of the Secretary of State of
the Commonwealth of Massachusetts, provides that the name "Meditrust" refers to
the Trustees under the Declaration of Trust collectively as Trustees, but not
individually or personally; and that no trustee, officer, shareholder, employee
or agent of Meditrust or any of its subsidiaries shall be held to any personal
liability, jointly or severally, for any obligation of, or claim against
Meditrust or any of its subsidiaries. All persons dealing with Meditrust or any
of its subsidiaries, including without limitation Meditrust Mortgage
Investments, Inc., in any way, shall look only to the respective assets of
Meditrust or any of its subsidiaries, including without limitation, Meditrust
Mortgage Investments, Inc., for the payment of any sum or the performance of
any obligations. All parties hereto specifically acknowledge and agree that
Meditrust is neither a party to this agreement nor shall Meditrust assume or
have any liability hereunder of any kind or nature whatsoever.
<PAGE> 1
EXHIBIT 4.6
TERMINATION AND RELEASE AGREEMENT
This Termination and Release Agreement ("Agreement") is
entered into as of this 20th day of September 1996 by and among JOHN BRENNAN,
BRAD E. HOLLINGER, ROBERT SUTTON, BRIAN BARTH, all individuals, K.D.
INVESTMENT, and SAE PARTNERS each a Pennsylvania general partnership, which
constitute all of the holders of common or preferred stock of Balanced Care
Corporation (collectively, the "Shareholders"), and BALANCED CARE CORPORATION,
INC., a Delaware corporation ("BCC").
W I T N E S S E T H:
WHEREAS, on September 20, 1995 the Shareholders executed a
Shareholders' Agreement (the Shareholders' Agreement") for the purpose of
agreeing upon certain aspects of the relationship between them as shareholders
of Balanced Care Corporation ("BCC"); and
WHEREAS, in order to obtain additional equity, BCC is
proposing to sell a Series B Convertible Preferred Stock issue in a private
placement to a small group of accredited investors (collectively, the
"Investors") pursuant to the terms of that certain Series B Stock Purchase
Agreement dated the ____ day of September 1996 (the "Stock Purchase
Agreement"); and
WHEREAS, it is a condition of the Stock Purchase Agreement
that the Shareholders' Agreement be terminated; and
WHEREAS, the Shareholders wish to terminate their respective
rights under the Shareholders' Agreement and release each other from all
further obligations and duties under the Shareholders' Agreement.
NOW, THEREFORE, for the mutual promises contained herein and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
1. The Shareholders hereby agree that the Shareholders'
Agreement shall terminate as of the Effective Date (as hereinafter defined)
without any further action of any party hereto.
2. As of the Effective Date, the Shareholders and their
respective successors and assigns, and BCC and its successors and assigns fully
release, remise and forever discharge each other and their respective
successors and assigns from any and all actions, causes of action, debts,
obligations, claims, suits, dues, demands, duties, damages, liabilities and
expenses (including reasonable attorneys' fees) whether in law or equity or
otherwise, which the Shareholders or BCC ever had, now have or may have, past,
present or future, by reason of, involving, relating to, or arising in
connection with the Shareholders' Agreement, it being understood that such
release and discharge does not constitute a release or discharge of claims
<PAGE> 2
between and among the Shareholders individually based upon or arising out of
their respective individual statutory or common law rights against each other
as shareholders of BCC.
3. The Effective Date, as used herein, shall be the date upon
which the Investors first purchase shares of the Series B Convertible Preferred
Stock from BCC in accordance with the terms and conditions of the Stock
Purchase Agreement.
4. The parties agree that they will do all things that may be
necessary, including, without limitation, the execution of any and all
additional documents as may reasonably be required to implement and effectuate
this Agreement.
5. This Agreement shall be binding upon, and shall inure to
the benefit of, the respective parties hereto and their respective successors
and assigns. Any person executing this Agreement on behalf of BCC, K.D.
Investment, and SAE Partners represents and warrants that he/she has the
requisite power and authority to execute and deliver this Agreement and to bind
their respective entity to the terms and conditions hereof.
6. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware, excluding its conflict of
law provisions. This Agreement represents the entire understanding of the
parties hereto with respect to the subject matter herein, and may not be
amended or modified except by a writing executed by all parties hereto.
IN WITNESS WHEREOF, each of the parties hereto have executed
this Agreement on this 20 day of September, 1996.
BALANCED CARE CORPORATION, INC.
a Delaware Corporation
By: /s/ William T. McCarthy
--------------------------------
Name: William T. McCarthy
Title: Chief Financial Officer
SHAREHOLDERS:
/s/ Brad E. Hollinger /s/ Robert J. Sutton
- ------------------------------------ -----------------------------------
BRAD E. HOLLINGER ROBERT J. SUTTON
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE> 3
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/ Brian L. Barth /s/ John Brennan
- -------------------------------------- -----------------------------------
BRIAN L. BARTH JOHN BRENNAN
K.D. INVESTMENT SAE PARTNERS,
a Pennsylvania partnership a Pennsylvania partnership
By: /s/ David Barber By: /s/ F. David Carr
----------------------------------- -------------------------------
Name: David Barber Name: F. David Carr
Title: Managing Partner Title: Managing Partner
<PAGE> 1
EXHIBIT 4.7
WAIVER
THIS WAIVER (the "Waiver") is executed effective as of the 30th day of
August, 1996, by John Brennan, an individual ("Brennan"), in connection with
that certain Shareholders' Agreement dated September 20, 1995 (together with
any modifications or amendments thereto, the Shareholders' Agreement), executed
by and among Balanced Care Corporation, a Delaware corporation (the
"Corporation") and Brennan, Brad E. Hollinger, an individual, Robert J. Sutton,
an individual, Brian L. Barth, an individual, K.D. Investment, a Pennsylvania
partnership and SAE Partners, a Pennsylvania partnership (hereinafter, any term
used but not defined herein shall have the meaning ascribed to such term in the
Shareholders' Agreement).
Pursuant to Section 6 of the Shareholders' Agreement, Brennan has the
right of first offer to purchase Additional Shares, on terms and conditions
more specifically set forth therein (the "Right of First Offer").
By signing this Waiver, Brennan hereby waives any and all rights
arising under or in connection with said Right of First Offer in connection
with that certain Capital Stock Purchase Warrant (the "Warrant") to be executed
by the Corporation in favor of Hawthorn Health Properties, Inc., a California
corporation (together with any subsequent transferees of all or any portion of
said Warrant, the "Holder"), which Warrant entitles the Holder thereof to
subscribe for and purchase up to 50,000 Shares of the Corporation.
IN WITNESS WHEREOF, intending to be legally bound hereby, Brennan has
caused this Waiver to be executed and delivered on the date first above
written.
SHAREHOLDER:
/s/ John Brennan
-----------------------------------
JOHN BRENNAN
This Waiver is hereby acknowledged by and among the following:
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ William T. McCarthy
------------------------------------
Name: WILLIAM T. MCCARTHY
Title: CHIEF FINANCIAL OFFICER
<PAGE> 2
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
SHAREHOLDERS:
/s/ Brad E. Hollinger
- ----------------------------------
BRAD E. HOLLINGER
/s/ Robert J. Sutton
- ----------------------------------
ROBERT J. SUTTON
/s/ Brian L. Barth
- ----------------------------------
BRIAN L. BARTH
K.D. INVESTMENT,
a Pennsylvania partnership
By: /s/ David Barber
-------------------------------
Name: David Barber
Title: Managing Partner
SAE PARTNERS,
a Pennsylvania partnership
By: /s/ F. David Carr
-------------------------------
Name: F. David Carr
Title: Managing Partner
<PAGE> 1
EXHIBIT 4.8
WAIVER
THIS WAIVER (the "Waiver") is executed effective as of the 30th day of
August, 1996, by John Brennan, an individual ("Brennan"), in connection with
that certain Shareholders' Agreement dated September 20, 1995 (together with
any modifications or amendments thereto, the Shareholders' Agreement), executed
by and among Balanced Care Corporation, a Delaware corporation (the
"Corporation") and Brennan, Brad E. Hollinger, an individual, Robert J. Sutton,
an individual, Brian L. Barth, an individual, K.D. Investment, a Pennsylvania
partnership and SAE Partners, a Pennsylvania partnership (hereinafter, any term
used but not defined herein shall have the meaning ascribed to such term in the
Shareholders' Agreement).
Pursuant to Section 6 of the Shareholders' Agreement, Brennan has the
right of first offer to purchase Additional Shares, on terms and conditions
more specifically set forth therein (the "Right of First Offer").
By signing this Waiver, Brennan hereby waives any and all rights
arising under or in connection with said Right of First Offer in connection
with that certain Capital Stock Purchase Warrant (the "Warrant") to be executed
by the Corporation in favor of Meditust Mortgage Investments, Inc., a Delaware
corporation (together with any subsequent transferees of all or any portion of
said Warrant, the "Holder"), which Warrant entitles the Holder thereof to
subscribe for and purchase up to 6,490 Shares of the Corporation.
IN WITNESS WHEREOF, intending to be legally bound hereby, Brennan has
caused this Waiver to be executed and delivered on the date first above
written.
SHAREHOLDER:
/s/ John Brennan
-----------------------------------
JOHN BRENNAN
This Waiver is hereby acknowledged by and among the following:
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ William T. McCarthy
------------------------------
Name: WILLIAM T. McCARTHY
Title: CHIEF FINANCIAL OFFICER
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE> 2
[SIGNATURES CONTINUED FROM PREVIOUS PAGES]
SHAREHOLDERS:
/s/ Brad E. Hollinger
- -----------------------------
BRAD E. HOLLINGER
/s/ Robert J. Sutton
- -----------------------------
ROBERT J. SUTTON
/s/ Brian L. Barth
- -----------------------------
BRIAN L. BARTH
K.D. INVESTMENT,
a Pennsylvania partnership
By: /s/ David Barber
--------------------------
Name: DAVID BARBER
Title: MANAGING PARTNER
SAE PARTNERS,
a Pennsylvania partnership
By: /s/ F. David Carr
--------------------------
Name: F. DAVID CARR
Title: MANAGING PARTNER
<PAGE> 1
EXHIBIT 4.9
FORM OF CAPITAL STOCK PURCHASE WARRANT
TO SUBSCRIBE FOR AND PURCHASE CAPITAL STOCK OF
BALANCED CARE CORPORATION
----------------------------------------------
THIS CERTIFIES that, for value received,___________________,
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from Balanced Care
Corporation, a Delaware corporation (hereinafter called the "Company"), at the
Exercise Price as defined in Section 3, up to that number of fully paid and
non-assessable shares of the Company's Capital Stock as set forth in Section 2.
1. Definitions. As used herein the following terms
shall have the following meanings:
"Capital Stock" means each and every class or series
of authorized capital stock and Convertible Securities of the Company,
including but not limited to common stock, preferred stock or any form of
convertible capital stock, regardless of voting, dividend and liquidation
rights and regardless of any other powers, preferences and relative
participating, optional or other special rights, qualifications, limitations or
restrictions.
"Common Stock" means all stock of any class or
classes (however designated) of the Company, authorized upon the date hereof or
thereafter, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in
the absence of contingencies, be entitled to vote for the election of a
majority of directors of the Company (even though the right so to vote has been
suspended by the happening of such a contingency).
"Convertible Securities" means any evidences of
indebtedness, shares (other than shares of Capital Stock) or other securities
convertible into or exchangeable for Capital Stock.
"Person" means, without limitation, an individual, a
partnership, a corporation, a limited liability company, a trust, a joint
venture, an unincorporated organization, a government or any department or
agency thereof or any other entity.
"Shares" means the shares of the Company's Capital
Stock as set forth in Section 2 issued or issuable to the Holder upon the
exercise of this Warrant and any other shares of capital stock of the Company
issued with respect to such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, mergers, consolidations, or similar
events) as provided in Section 8 hereof.
<PAGE> 2
2. The Shares Subject to this Warrant. This Warrant
shall be exercisable for up to ______ shares of Common Stock, as the same may
be adjusted pursuant to the terms of this Warrant.
3. The Exercise Price. The exercise price per share of
the Shares subject to this Warrant shall be $________ per share subject to
adjustment in accordance with Section 8 hereof (the "Exercise Price").
4. Term. The purchase rights represented by this
Warrant are exercisable by the Holder, in whole or in part, at any time and
from time to time commencing on the date hereof and ending on the tenth
anniversary of the date hereof.
5. Method of Exercise, Payment and Issuance. Subject to
Section 4 above, the purchase rights represented by this Warrant may be
exercised, in whole or in part and from time to time, by (a) the surrender of
this Warrant and the duly executed Notice of Exercise (the form of which is
attached hereto as Exhibit A) at the principal office of the Company and by the
payment to the Company, by check or wire transfer, in an amount equal to the
Exercise Price multiplied by the number of Shares then being purchased or (b)
if in connection with a registered public offering of the Company's securities,
the surrender of this Warrant and the duly executed Notice of Exercise (the
form of which is attached as Exhibit A-1) at the principal office of the
Company together with notice of arrangements reasonably satisfactory to the
Company for payment to the Company either by check or wire transfer or from the
proceeds received from the sale of Shares to be sold by the Holder in such
public offering of an amount equal to the then applicable Exercise Price
multiplied by the number of Shares then being purchased. Upon exercise, the
Holder shall be entitled to receive, within a reasonable time, and in any event
within thirty (30) days of receipt of such Notice, a certificate or
certificates, issued in the Holder's name or in such name or names as the
Holder may direct, for the number of Shares so purchased, and, unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be issued to the Holder as soon as possible
and in any event within such thirty (30) day period. The Shares so purchased
shall be deemed to be issued as of the close of business on the date on which
this Warrant shall have been exercised.
6. Shares to be Issued; Reservation of Shares. The Company
covenants that all Shares that may be issued upon the exercise of the purchase
rights represented by this Warrant will, upon issuance, be fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Capital Stock
to provide for the exercise of the rights represented by this Warrant. The
Company represents to the Holder that John Brennan has consented to the
issuance of this Warrant and the Shares issuable upon exercise of this Warrant
and has waived any right of first offer, first refusal or preemption that he
might have pursuant to that certain Shareholders' Agreement dated September 20,
1995 among the shareholder of the Company (the "Shareholders' Agreement").
- 2 -
<PAGE> 3
7. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu thereof, a cash payment shall
be made equal to such fractional multiplied by the fair market value of such
shares of Capital Stock, as determined in good faith by the Company's Board of
Directors.
8. Adjustments of Number of Shares. In the event of any
subdivision or combination of the outstanding shares of Common Stock, stock
dividend in respect to its Common Stock, recapitalization, or reclassification
of shares of Common Stock, the number of and kind of shares issuable upon
exercise of this Warrant, and the Exercise Price per share, shall be equitably
adjusted by the Company's Board of Directors as the Board deems necessary to
prevent dilution of the rights of the Holder set forth in this Warrant.
Promptly following any such adjustment, the Company shall provide the Holder
with a certificate stating the nature of the event giving rise to the
adjustment and setting forth the adjusted Exercise Price and number and kind of
shares for which this Warrant is then exercisable. Provided, however, the
Holder hereof shall have no right to any adjustment of the number of Shares
associated with the issuance by the Company of any Preferred Stock.
9. Notices of Record Date, etc. In the event of:
a. any taking by the Company of a record of the
holders of any Capital Stock for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of Capital Stock or any
other securities or property, or to receive any other right; or
b. any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock or any transfer of all
or substantially all of the assets of the Company to or consolidation or merger
of the Company with or into any other Person; or
c. any voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then and in each such event the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right,
and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Such notice shall be mailed at
least twenty (20) days prior to the date therein specified.
10. No Rights as Stockholder. This Warrant does not entitle
the Holder to any voting rights or other rights as a stockholder of the Company
prior to exercise of this
- 3 -
<PAGE> 4
Warrant and the payment for the shares of Capital Stock so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are distributed to holders of the Capital
Stock of the Company concurrently with the distribution thereof to the
stockholders. Upon valid exercise of this Warrant and payment for the shares of
Capital Stock so purchased in accordance with the terms of the Warrant, the
Holder or the Holder's designee, as the case may be, shall be deemed a
stockholder of the Company.
11. Modifications and Waivers. This Warrant may not be
changed, waived, discharged or terminated except by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required
or permitted to be given or delivered to the Holder hereof or the Company shall
be delivered or shall be sent by certified or registered mail, postage prepaid,
if to the Holder, at its address shown on the books of the Company and if to
the Company, at the address indicated therefor on the signature page of this
Warrant.
13. Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Warrant.
14. Binding Effect on Successors. This Warrant shall be
binding upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Shares issuable upon exercise of
this Warrant shall survive the exercise and termination of this Warrant and all
of the covenants and agreements of the Company shall inure to the benefit of
the successors and assigns of the Holder. This Warrant is fully transferable
and the Company may treat the registered Holder of this Warrant as such Holder
appears on the Company's books at any time as the Holder for all purposes.
15. Governing Law. This Warrant shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of Delaware.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, Balanced Care Corporation has caused this
Warrant to be executed under seal by its officer thereunto duly authorized.
Dated: _________, 1996
CORPORATE BALANCED CARE CORPORATION
SEAL
By:
--------------------------------
Name:
Title:
ATTEST
- -----------------------------
Name:
Title:
Address:
5021 Louise Drive
Suite 200
Mechanicsburg, Pennsylvania 17055
- 5 -
<PAGE> 6
SCHEDULE TO EXHIBIT 4.9 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(A) OF
REGULATION S-K
CAPITAL STOCK WARRANT
<TABLE>
<CAPTION>
Purchase Exercise
Holder Shares Date/Term Price Schedule
- ------ ------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Susan McBroom 10,000 10/1/96; $2.50/share
5 years
George Strong 35,000 10/1/96; $2.50/share 3/26/97 -
10 years 35,000 warrants
Roger Breed 21,972 10/1/96; $2.50/share 4/1/97 -
5 years 21,972 warrants
</TABLE>
<PAGE> 1
EXHIBIT 4.10
FORM OF CAPITAL STOCK PURCHASE WARRANT
TO SUBSCRIBE FOR AND PURCHASE CAPITAL STOCK OF
BALANCED CARE CORPORATION
--------------------------------------------------
THIS CERTIFIES that, for value received, ____________________________
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from Balanced Care
Corporation, a Delaware corporation (hereinafter called the "Company"), at the
Warrant Purchase Price as defined in Section 3, up to that number of fully paid
and non-assessable shares of the Company's Capital Stock as set forth in Section
2.
1. Definitions. As used herein the following terms shall have the
following meanings:
"Act" means the Securities Act of 1933 as amended, or a similar Federal
statute and the rules and regulations of the Commission issued under that Act,
as they each may, from time to time be in effect.
"Capital Stock" means each and every class or series of authorized
capital stock and Convertible Securities of the Company, including but not
limited to common stock, preferred stock or any form of convertible capital
stock, regardless of voting, dividend and liquidation rights and regardless of
any other powers, preferences and relative participating, optional or other
special rights, qualifications, limitations or restrictions.
"Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the securities laws of the United
States.
"Common Stock" means all stock of any class or classes (however
designated) of the Company, authorized upon the date hereof or thereafter, the
holders of which shall have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended
by the happenings of such a contingency).
"Convertible Securities" means any evidences of indebtedness, shares
(other than shares of Capital Stock) or other securities convertible into or
exchangeable for Capital Stock.
"Exchange Act" means the Securities Exchange Act of 1934 as amended, or
a similar Federal statute and the rules and regulations
<PAGE> 2
of the Commission issued under the Exchange Act, as they each may, from time to
time, be in effect.
"Options" means rights, options or warrants to subscribe for, purchase
or otherwise acquire either Capital Stock or Convertible Securities.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or other) which the
Holder of this Warrant at any time shall be entitled to receive, or shall have
received, upon the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or Other Securities pursuant
to Section 8.2 hereof or otherwise.
"Person" means, without limitation, an individual, a partnership, a
corporation, a limited liability company, a trust, a joint venture, an
incorporated organization, a government or any department or agency thereof or
any other entity.
"Registration Statement" means a registration statement on Form S-1,
Form S-2, Form S-3, Form S-11 Or Form S-18 or any successor form or forms used
for the purpose specified by such forms filed by the Company with the
Commission under the Act for a public offering and sale of securities of the
Company.
"Shares" means the shares of the Company's Capital Stock as set forth
in Section 2 issued or issuable to the Holder upon the exercise of this Warrant
and any other shares of capital stock of the Company issued with respect to
such shares (because of stock splits, stock dividends, reclassifications,
recapitalizations, mergers, consolidations, or similar events); provided,
however, that any shares previously sold by the Holder to the public pursuant to
a registered public offering or Rule 144 under the Act shall cease to be within
the definition of "Shares" as used herein.
2. The Shares Subject to this Warrant. This Warrant shall be exercisable
for up to ( ) shares of Common Stock,
as the same may be adjusted pursuant to the terms of this Warrant. The Company
certifies that the only Capital Stock or Options outstanding on the date hereof
are set forth in Exhibit A attached hereto.
3. The Warrant Purchase Price. The aggregate purchase price for all of
the Shares shall be Dollars ($ ) (the "Warrant Purchase
Price").
4. Term. The purchase rights represented by this Warrant are exercisable
by the Holder, in whole or in part, at any time and from time to time commencing
on the date hereof and ending on .
-2-
<PAGE> 3
5. Method of Exercise, Payment and Issuance. Subject to Section 4
above, the purchase rights represented by this Warrant may be exercised, in
whole or in part and from time to time, by (a) the surrender of this Warrant
and the duly executed Notice of Exercise (the form of which is attached hereto
as Exhibit B) at the principal office of the Company and by the payment to the
Company, by check or wire transfer, in an amount equal to the Warrant Purchase
Price multiplied by the percentage which the number of Shares then being
purchased bears to the total number of Shares subject to this Warrant, or (b)
if in connection with a registered public offering of the Company's securities,
the surrender of this Warrant and the duly executed Notice of Exercise (the
form of which is attached as Exhibit B-1) at the principal office of the
Company together with notice of arrangements reasonably satisfactory to the
Company for payment to the Company either by check or wire transfer or from the
proceeds received from the sale of Shares to be sold by the Holder in such
public offering of an amount equal to the then applicable Warrant Purchase Price
multiplied by the percentage which the number of Shares then being purchased
bears to the total number of Shares subject to this Warrant. Upon exercise, the
Holder shall be entitled to receive, within a reasonable time, and in any event
within thirty (30) days of receipt of such Notice, a certificate or
certificates, issued in the Holder's name or in such name or names as the
Holder may direct, for the number of Shares so purchased, and, unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be issued to the Holder as soon as possible
and in any event within such thirty (30) day period. The Shares so purchased
shall be deemed to be issued as of the close of business on the date on which
this Warrant shall have been exercised.
6. Shares to be Issued; Reservation of Shares. The Company covenants
that all Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance, be fully paid in
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
this warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Capital Stock
to provide for the exercise of the rights represented by this Warrant. The
Company represents to the Holder that John Brennan has consented to the issuance
of this Warrant and the Shares issuable upon exercise of this Warrant and has
waived any right of first offer, first refusal or preemption that he might have
pursuant to that certain Shareholders' Agreement dated September 20, 1995 among
the shareholders of the Company (the "Shareholders' Agreement").
7. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash
-3-
<PAGE> 4
payment shall be made equal to such fraction multiplied by the fair market
value of such shares of Capital Stock, as determined in good faith by the
Company's Board of Directors.
8. Adjustments of Number of Shares.
8.1 Adjustments for Stock Splits, Etc. If the Company shall at any time
after the date hereof subdivide its outstanding Common Stock or Other
Securities, by split-up or otherwise, or combine its outstanding Common Stock
or Other Securities, or issue additional shares of its Capital Stock in payment
of a stock dividend in respect of its Common Stock or Other Securities, the
number of shares issuable on the exercise of the unexercised portion of this
Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of
combination, but the Warrant Purchase Price then applicable to Shares covered
by the unexercised portion of this Warrant shall not be changed. The issuance
of Capital Stock as a dividend or other payment on shares of the Company's
Series A Preferred Stock or as a dividend in lieu of a preferred cash dividend
or interest payment on any class of Capital Stock or Other Security shall not
result in an increase in the number of shares issuable upon exercise of this
Warrant.
8.2 Adjustment for Reclassification, Reorganization, Etc. In case of
any reclassification, capital reorganization, or change of the outstanding
Common Stock or Other Securities (other than as a result of a subdivision,
combination or stock dividend), or in the case of any consolidation of the
Company with, or merger of the Company into, another Person (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the outstanding
Common Stock or Other Securities of the Company), or in case of any sale or
conveyance to one or more Persons of the property of the Company as an entirety
or substantially as an entirety at any time prior to the expiration of this
Warrant, then, as a condition of such reclassification, reorganization, change,
consolidation, merger, sale or conveyance, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder of this Warrant, so that the Holder of this
Warrant shall have the right at any time prior to the expiration of this
Warrant to purchase, at a total price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock or Other
Securities of the Company as to which this Warrant was exercisable immediately
prior to such reclassification, reorganization, change, consolidation, merger,
sale or conveyance, and in any such case appropriate provision shall be made
with respect to the rights and interests of the Holder of this Warrant to the
end that the
-4-
<PAGE> 5
provisions hereof (including, without limitation, the number of shares
purchasable upon exercise of this Warrant) shall thereafter be applicable in
relation to any shares of stock, and other securities and property, thereafter
deliverable upon exercise hereof.
8.3 Certificate of Adjustment. Whenever the number of shares
issuable hereunder is adjusted, as herein provided, the Company shall promptly
deliver to the registered Holder of this Warrant a certificate of the Treasurer
of the Company, which certificate shall state (i) the number of shares of Common
Stock (or Other Securities) issuable hereunder after such adjustment, (ii) the
facts requiring such adjustment, and (iii) the method of calculation for such
adjustment and increase or decrease.
9. No Dilution of Impairment. The Company will not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any shares of
Capital Stock receivable on the exercise of the warrant above the amount
payable therefor on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Capital Stock on the exercise of
the Warrant from time to time, and (c) will not transfer all or substantially
all of its properties and assets to any other Person (corporate or otherwise),
or consolidate with or merge into any other Person or permit any such Person to
consolidate with or merge into the Company (if the Company is not the surviving
Person), unless such other Person shall expressly assume in writing and agree
to be bound by all the terms of this Warrant.
10. Right of First Refusal.
(a) Subject to the rights of John Brennan existing on the date
hereof, the Company hereby grants to the Holder a right of first refusal to
purchase, on a pro rata basis, all or any part of New Securities (as defined
below) which the Company may, from time to time, propose to sell and
issue, subject to the terms and conditions set forth below. The Holder's pro
rata share, for purposes of this Section 10, shall equal a fraction, the
numerator of which is the number of shares of Common Stock then held by the
Holder as a result of the exercise of this Warrant and/or issuable
-5-
<PAGE> 6
upon exercise of this Warrant, and the denominator of which is the total number
of shares of Common Stock then outstanding, plus the number of shares of Common
Stock issuable upon conversion or exercise of then outstanding Capital Stock.
(b) "New Securities" shall mean any Capital Stock, whether or not now
authorized, and Options; provided, however, that the term "New Securities" does
not include (i) the Shares issuable under this Warrant; (ii) securities issued
as a result of any stock split, stock dividend or reclassification of Common
Stock, distributable on a pro rata basis to all holders of Common Stock or
(iii) Capital Stock issued to employees of the Company pursuant to any
compensatory stock option plan or pursuant to an employee stock purchase plan.
(c) In the event the Company intends to issue New Securities, it shall
give the Holder written notice of such intention, describing the type of New
Securities to be issued, the price thereof and the terms upon which the Company
proposes to effect such issuance. The Holder shall have thirty (30) days from
the date of any such notice to agree to purchase all or part of its pro rata
share of such New Securities for the price and upon the terms and conditions
specified in the Company's notice by giving written notice to the Company
stating the quantity of New Securities to be so purchased.
(d) In the event the Holder fails to exercise the foregoing right of
first refusal with respect to any New Securities within such thirty (30)-day
period, the Company may within one hundred twenty (120) days thereafter sell any
or all of such New Securities not agreed to be purchased by the Holder, at a
price and upon terms no more favorable to the purchasers thereof than specified
in the notice given to the Holder pursuant to paragraph (c) above. In the event
the Company has not sold such New Securities within such one hundred twenty
(120)-day period, the Company shall not thereafter issue or sell any New
Securities, without first offering such New Securities to the Holder in the
manner provided above.
(e) The provisions of this Section 10 shall expire on, and shall not be
available in connection with, the occurrence of the initial public offering of
the Company.
11. Notices of Record Date Etc. In the event of:
(a) any taking by the Company of a record of the holders of any Capital
Stock for the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution, or any right to subscribe for,
purchase, or otherwise acquire any shares of Capital Stock or any other
securities or property, or to receive any other right; or
-6-
<PAGE> 7
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the Capital Stock or any transfer of all or substantially
all of the assets of the Company to or consolidation or merger of the Company
with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company; or
(d) any proposed issue or grant by the Company of any shares of Capital
Stock, or any right or option to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities of the Company (other
than (i) the issue of Common Stock (or Other Securities) on the exercise of this
Warrant, (ii) stock options to purchase shares of Common Stock which may be
granted to employees of the Company or the issuance of such shares pursuant to
the exercise of such options, and (iii) any shares issued in transactions to
which Sections 8.1 or 8.2 of this Warrant applies);
then and in each such event the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock of any class or other securities of
the Company, or rights or options with respect thereto, proposed to be issued or
granted, the date of such proposed issue or grant and the persons or class of
persons to whom such proposed issue or grant is to be offered or made. Such
notice shall be mailed at least twenty (20) days prior to the date therein
specified.
12. Registration.
12.1 Registration of Shares. If at any time the Company proposes to
register any shares of its Capital Stock under the Act (other than pursuant to a
registration statement on Forms S-8, S-4 or similar or successor forms) for its
own account or the account of any security holders, it shall promptly (but not
less than thirty (30) days prior to and no more than sixty (60) days prior to
the filing date of such registration statement pursuant to this Section 12) give
written notice to the Holder, or if this Warrant has been exercised in full or
in part, to the Holder and to the
-7-
<PAGE> 8
record holder of the Shares issued upon exercise of this Warrant, of its
intention to do so (which notice shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under the
applicable blue sky, or other state securities laws and the estimated filing
date for the registration statement). For purposes of this Section 12, the
Holder and the record holder of such Shares are referred to as the "Holder".
Upon the written request, given within thirty (30) days after receipt of any
such notice, of each Holder (the "Selling Shareholders") to register any Shares
(which request shall specify the Shares intended to be sold or disposed of by
such Holders and shall state the intended method of disposition of such Shares
by the prospective seller), the Company shall use its best efforts to cause all
such Shares to be registered under the Act promptly upon receipt of the written
request of such Holders for the registration, all to the extent required to
permit the sale or other disposition (in accordance with the intended methods
thereof, as aforesaid) by the prospective seller or sellers of the Shares so
registered. However, the Company shall not be required to include such Shares in
any such registration if and to the extent that, in the opinion of the managing
underwriter for such offering, in the event that the proposed registration under
this Subsection 12.1 is, in whole or in part, an underwritten public offering,
the inclusion of such Shares would adversely affect the marketing of such
proposed offering or if the Selling Shareholders have not agreed to enter into
an underwriting agreement in customary form with the underwriters and to refrain
from selling any additional Shares for such reasonable period following the
effective date of the offering as such managing underwriter may request. If the
number of Shares to be offered by the Selling Shareholders is so reduced (but
the Selling Shareholders are permitted to include some Shares in such
registration), then the Shares that may be included by the Selling Stockholders
shall be allocated in proportion, as nearly as practicable, to the respective
amounts of Shares initially sought to be registered by such Selling Shareholders
in connection with such registration statement.
12.2. Registration Mechanics. If and whenever the Company is required to
use its best efforts to effect or cause the registration of any Shares under the
Act as provided in this Warrant, the Company shall, as expeditiously as
possible:
12.2.1. use its best efforts to prepare and file with the Commission
within ninety (90) days after receipt of a request for registration with respect
to such Shares, a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Shares in accordance with the intended
methods of distribution thereof, and use its best efforts to cause such
registration statement to become effective; provided that before filing with the
Commission a registration statement or prospectus or any amendments or
-8-
<PAGE> 9
supplements thereto, the Company will (i) furnish to one counsel selected
by such Selling Shareholders copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel and (ii) notify
each Selling Shareholder of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered;
12.2.2 prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than one hundred twenty (120) days or such shorter period which will
terminate when all Shares covered by such registration statement have been sold
(but not before the expiration of the applicable prospectus delivery period
referred to in Section 4(3) of the Act and Rule 174, or any successor thereto,
thereunder, if applicable), and comply with the provisions of the Act with
respect to the disposition of all Shares covered by such registration statement
during such period in accordance with the intended methods of disposition by the
Selling Shareholders set forth in such registration statement;
12.2.3. furnish to each Selling Shareholder and each underwriter, if any,
of Shares covered by such registration statement such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto), and the prospectus included in such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Act, and such other documents as such Selling
Shareholder may reasonably request in order to facilitate the disposition of the
shares owned by such Selling Shareholder;
12.2.4 use its best efforts to register or qualify such shares under such
other state securities or "blue sky" laws of such jurisdictions as any Selling
Shareholder and underwriter, if any, of Shares covered by such registration
statement reasonably requests, including without limitation Massachusetts, and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Selling Shareholder and each underwriter, if any, to
consummate the disposition in such jurisdiction of the Shares owned by such
Selling Shareholder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph 12.2.4; (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction;
12.2.5. use its best efforts to cause the Shares covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the
-9-
<PAGE> 10
Company to enable the Selling Shareholders thereof to consummate the
disposition of such Shares;
12.2.6. immediately notify each Selling Shareholder of such
Shares during a time when a registration statement relating thereto is
effective under the Act of the happening of any event which comes to the
Company's attention if as a result of such event the prospectus included in
such registration statement contains any untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and the
Company will promptly prepare and furnish to such Selling Shareholder and file
with the Commission a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares, such prospectus will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
12.2.7. enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
the Selling Shareholders of a majority (by number of Shares) of the Shares
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Shares, including customary
indemnification;
12.2.8. make available for inspection by any Selling
Shareholder, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such Selling Shareholder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information and respond to all inquiries reasonably requested by any
such Person in connection with such registration statement;
12.2.9. use its best efforts to obtain a "cold comfort" letter
from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by "cold comfort" letters
as the Selling Shareholders who hold a majority of the Shares being sold or the
underwriter reasonably request; and
12.2.10. otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its shareholders, as soon as reasonably practicable, an earnings
statement covering a period of at least twelve (12) months, beginning with the
first fiscal quarter ending after the effective date of the registration
statement (as the term "effective date" is defined in Rule 158(c) under the
Act), which
-10-
<PAGE> 11
earnings statement shall satisfy the provisions of Section 11(a) of the Act and
Rule 158 thereunder.
12.3. Expenses. The Company shall pay all expenses incurred in
connection with each registration pursuant to this Section 12, including,
without limitation, all Commission and blue sky registration and filing fees,
underwriting discounts, commissions and expenses, printing expenses, transfer
agents' and registrars' fees, the fees and disbursements of the Company's legal
counsel and accountants used by the Company in connection with said
registration and the fees and disbursements for one legal counsel representing
all of the Selling Shareholders; except that the Selling Shareholder shall pay
all underwriting discounts and commissions attributable to the inclusion in the
offering of the Shares being sold by such Selling Shareholder, and the fees and
disbursements of any additional legal counsel.
12.4. Restrictions on Public Sale.
12.4.1. Each Selling Shareholder, if requested by the managing
underwriter or underwriters in connection with any initial public offering of
Shares of the Company, agrees not to effect any public sale or distribution of
Shares during the five (5) business days prior to, and during the 180-day
period beginning on, the effective date of such initial public offering.
12.4.2. If the Company has previously filed a Registration
Statement, with respect to Shares, and if such previous registration has not
been withdrawn or abandoned, the Company will not file or cause to be effected
any other registration of any of its Shares under the Act (except on Forms S-4
or S-8 or such other forms as shall be prescribed under the Act for the same
purpose) until a period of at least ninety (90) days has elapsed from the
effective date of such previous registration.
12.5. Indemnification.
12.5.1. The Company will indemnify, to the full extent
permitted by law, each Selling Shareholder, its officers and directors and each
person who controls such Selling Shareholder (within the meaning of the Act and
the Exchange Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of a material fact contained
in any registration statement, Prospectus or Preliminary Prospectus or any
omission or alleged omission to state therein a material fact necessary to make
the statements therein (in the case of the Prospectus or any Preliminary
Prospectus, in light of the circumstances under which they were made) not
misleading, except insofar as the same are caused by or contained in any
information with respect to such Selling Shareholder furnished in writing to
the Company by such Selling Shareholder expressly for use therein. The Company
will also indemnify underwriters, selling brokers,
-11-
<PAGE> 12
dealer managers and similar securities industry professionals participating in
the distribution, their officers and directors and each person who controls
such persons (within the meaning of the Act) to the same extent as provided
above with respect to the indemnification of the holders of the Company.
12.5.2. In connection with any registration hereunder, each
Selling Shareholder will furnish to the Company in writing such information and
affidavits with respect to such Selling Shareholder as the Company reasonably
requests for use in connection with any registration statement or Prospectus
and agrees to indemnify, to the full extent permitted by law, the Company, its
directors and officers, and each person who controls such persons (within the
meaning of the Act and the Exchange Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of a material fact or any omission or alleged omission to state a material fact
necessary to make the statements in the registration statement or Prospectus or
Preliminary Prospectus (in the case of the Prospectus or any Preliminary
Prospectus, in light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in any information or affidavit with respect to such
Selling Shareholder so furnished in writing by such Selling Shareholder. In no
event shall the liability of any Selling Shareholder hereunder be greater in
amount than the dollar amount of the net proceeds received by such holder upon
the sale of the Shares giving rise to such indemnification obligation. The
Company shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information with respect to such persons so furnished in writing by
such persons specifically for inclusion in any Prospectus or registration
statement.
12.5.3. Any Person entitled to indemnification hereunder will
(x) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification, and (y) unless in such indemnified
party's reasonable judgment a conflict of interest may exist between such
indemnified and indemnifying parties with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or elects not, to,
assume the defense of a claim
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<PAGE> 13
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgement of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional
counsel or counsels.
12.5.4. if for any reason the indemnification provided for in
clauses 12.5.1 and 12.5.2 is unavailable to an indemnified party as contemplated
by clauses 12.5.1 and 12.5.2, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that no Selling Shareholder shall be required to contribute in an
amount greater than the difference between the net proceeds received by such
Selling Shareholder with respect to the sale of any Shares and the sum of the
cost to the Selling Shareholders of such Shares and all amounts already expended
by such Selling Shareholder with respect to such claims.
12.6. Co-ordination with Shareholders' Agreement. The provisions
of this Section 12 are intended to work in an identical manner as the similar
provisions set forth in the Shareholders' Agreement and for that purpose the
term "Selling Shareholders" as used herein shall include all Persons who
exercise registration rights under the Shareholders' Agreement.
13. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit
the sale of the Shares to the public without registration, at all times after
ninety (90) days after any Registration Statement shall have become effective,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act;
(b) use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Act and the
Exchange Act; and
(c) furnish to each Holder, promptly upon request, a written statement
by the Company as to its compliance with the reporting requirements of Rule
144, the Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such holder
-13-
<PAGE> 14
may reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any Shares without registration.
14. Rights and Obligations Survive Exercise and Expiration of Warrant.
The rights and obligations of the Company and the Holder set forth in Sections
12 and 13 shall survive the exercise and expiration of this Warrant.
15. No Rights as Stockholder. This Warrant does not entitle the Holder
to any voting rights or other rights as a stockholder of the Company prior to
exercise of this Warrant and the payment for the shares of Capital Stock so
purchased. Notwithstanding the foregoing, the Company agrees to transmit to the
Holder such information, documents and reports as are distributed to holders of
the Capital Stock of the Company concurrently with the distribution thereof to
the stockholders. Upon valid exercise of this Warrant and payment for the
shares of Capital Stock so purchased in accordance with the terms of the
Warrant, the Holder or the Holder's designee, as the case may be, shall be
deemed a stockholder of the Company.
16. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
17. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid,
if to the Holder, at its address shown on the books of the Company and if to
the Company, at the address indicated therefor on the signature page of this
Warrant.
18. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant, or like tenor, in lieu of the
lost, stolen, destroyed or mutilated Warrant.
19. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Shares issuable upon exercise of this Warrant
shall survive the exercise and termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the Holder. This Warrant is fully
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<PAGE> 15
transferable and the Company may treat the registered Holder of this Warrant
as such Holder appears on the Company's books at any time as the Holder for all
purposes.
20. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
21. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Balanced Care Corporation has caused this Warrant
to be executed under seal by its officer thereunto duly authorized.
DATED:
BALANCED CARE CORPORATION
CORPORATE
SEAL
By: /s/ Brian L. Barth
------------------------------
Name: Brian L. Barth
Title: Vice President
WITNESS:
/s/ Robin L. Barber
- -----------------------------
Name: Robin L. Barber
-15-
<PAGE> 16
SCHEDULE TO EXHIBIT 4.10 FILED PURSUANT TO INSTRUCTION 2 TO
ITEM 601(a) OF REGULATION S-K
CAPITAL STOCK WARRANT
______________________________________________________________________________
<TABLE>
<CAPTION>
Holder Transaction Shares Date/Term Purchase Price
- -------- ----------- ------ --------- --------------
<S> <C> <C> <C> <C>
Meditrust Mortgage Harmony Manor 61,237 5/2/96; $100.00/aggregate
Investments, Inc. 10 years
Meditrust Mortgage Foster 552,439 8/30/96; $600.00/aggregate
Investments, Inc. as ascribed
to the Loan
Agreement
Meditrust State College 82,820 8/2/96; $100.00/aggregate
Acquisition & Altoona as ascribed
Corporation, II to the State
College Lease
Meditrust Arkansas 213,997 11/1/96; $214.00/aggregate
Acquisition as ascribed
Corporation, II to the Facility
Lease between
Holder and
Balanced Care
at Blytheville,
Inc.
Meditrust Reading 41,804 2/27/97; $42.00/aggregate
Acquisition as ascribed
Corporation, II to the Facility
Lease between
Holder and
BCC at Reading,
Inc.
</TABLE>
<PAGE> 1
EXHIBIT 4.11
FORM OF CAPITAL STOCK PURCHASE WARRANT
TO SUBSCRIBE FOR AND PURCHASE CAPITAL STOCK OF
BALANCED CARE CORPORATION
THIS CERTIFIES that, for value received, ______________________
______________________________________ (together with any subsequent
transferees of all or any portion of this Warrant, the "Holder"), is entitled,
upon the terms and subject to the conditions hereinafter set forth, to
subscribe for and purchase from Balanced Care Corporation, a Delaware
corporation (hereinafter called the "Company"), at the Warrant Purchase Price
as defined in Section 3, up to that number of fully paid and non-assessable
shares of the Company's Capital Stock as set forth in Section 2.
1. Definitions. As used herein the following terms shall have the
following meanings:
"Act" means the Securities Act of 1933 as amended, or a similar Federal
statute and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
"Capital Stock" means each and every class or series of authorized
capital stock and Convertible Securities of the Company, including but not
limited to common stock, preferred stock or any form of convertible capital
stock, regardless of voting, dividend and liquidation rights and regardless of
any other powers, preferences and relative participating, optional or other
special rights, qualifications, limitations or restrictions.
"Common Stock" means all stock of any class or classes (however
designated) of the Company, authorized upon the date hereof or thereafter, the
holders of which shall have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
"Convertible Securities" means any evidences of indebtedness, shares
(other than shares of Capital Stock) or other securities convertible into or
exchangeable for Capital Stock.
"Options" means rights, options or warrants to subscribe for, purchase
or otherwise acquire either Capital Stock or Convertible Securities.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or other) which the
Holder of this Warrant at any time shall be
<PAGE> 2
entitled to receive, or shall have received, upon the exercise of this Warrant,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 8.2 hereof or otherwise.
"Person" means, without limitation, an individual, a partnership, a
corporation, a limited liability company, a trust, a joint venture, an
unincorporated organization, a government or any department or agency thereof or
any other entity.
"Shares" means the shares of the Company's Capital Stock as set forth in
Section 2 issued or issuable to the Holder upon the exercise of this Warrant and
any other shares of capital stock of the Company issued with respect to such
shares (because of stock splits, stock dividends, reclassifications,
recapitalizations, mergers, consolidations, or similar events); provided,
however, that any shares previously sold by the Holder to the public pursuant to
a registered public offering or Rule 144 under the Act shall cease to be within
the definition of "Shares" as used herein.
"Term" shall have the same meaning ascribed to such term under that
certain Facility Lease Agreement of even date by and among ________________
and the Holder.
2. The Shares Subject to this Warrant. This Warrant shall be exercisable
for up to ( ) shares of Common Stock,
as the same may be adjusted pursuant to the terms of this Warrant. The Company
certifies that the only Capital Stock or Options outstanding on the date hereof
are as set forth in Exhibit A attached hereto and that there are no other
contractual arrangements with any of the Company's stockholders or holders of
Options other than as set forth on Exhibit A attached hereto.
3. The Warrant Purchase Price. The aggregate purchase price for all of
the Shares shall be Dollars ($ ) (the "Warrant Purchase Price").
4. Term. The purchase rights represented by this Warrant are exercisable
by the Holder, in whole or in part, at any time and from time to time commencing
on the date hereof and .
5. Method of Exercise, Payment and Issuance. Subject to Section 4 above,
the purchase rights represented by this Warrant may be exercised, in whole or in
part and from time to time, by (a) the surrender of this Warrant and the duly
executed Notice of Exercise (the form of which is attached hereto as Exhibit B)
at the principal office of the Company and by the payment to the Company, by
check or wire transfer, in an amount equal to the Warrant Purchase Price
multiplied by the percentage which the number of
-2-
<PAGE> 3
Shares then being purchased bears to the total number of Shares subject to this
Warrant, or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant and the duly executed Notice
of Exercise (the form of which is attached as Exhibit B-1) at the principal
office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or wire
transfer or from the proceeds received from the sale of Shares to be sold by the
Holder in such public offering of an amount equal to the then applicable Warrant
Purchase Price multiplied by the percentage which the number of Shares then
being purchased bears to the total number of Shares subject to this Warrant.
Upon exercise, the Holder shall be entitled to receive, within a reasonable
time, and in any event within thirty (30) days of receipt of such Notice, a
certificate or certificates, issued in the Holder's name or in such name or
names as the Holder may direct, for the number of Shares so purchased, and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the Holder as
soon as possible and in any event within such thirty (30) day period. The Shares
so purchased shall be deemed to be issued as of the close of business on the
date on which this Warrant shall have been exercised.
6. Shares to be Issued; Reservation of Shares. The Company covenants
that all Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance, be fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
this Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Capital Stock
to provide for the exercise of the rights represented by this Warrant. The
Company represents to the Holder that all parties whose consent is necessary for
the issuance of this Warrant and the Shares issuable upon exercise of this
Warrant have so consented and that all parties having any rights of first offer,
first refusal or preemption have waived any such rights.
7. No Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Capital
Stock, as determined in good faith by the Company's Board of Directors.
8. Adjustments of Number of Shares.
8.1 Adjustments for Stock Splits, Etc. If the Company shall at any
time after the date hereof subdivide its outstanding Common Stock or Other
Securities, by split-up or otherwise, or
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<PAGE> 4
combine its outstanding Common Stock or Other Securities, or issue additional
shares of its Capital Stock in payment of a stock dividend in respect of its
Common Stock or Other Securities, the number of shares issuable on the
exercise of the unexercised portion of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of combination, but the Warrant Purchase
Price then applicable to Shares covered by the unexercised portion of this
Warrant shall not be changed. The issuance of Capital Stock as a dividend or
other payment on shares of the Company's Series A or Series B Preferred Stock
or as a dividend in lieu of a preferred cash dividend or interest payment on
any class of Capital Stock or Other Security shall not result in an increase
in the number of shares issuable upon exercise of this Warrant.
8.2. Adjustment for Reclassification, Reorganization, Etc. In case of
any reclassification, capital reorganization, or change of the outstanding
Common Stock or Other Securities (other than as a result of a subdivision,
combination or stock dividend), or in the case of any consolidation of the
Company with, or merger of the Company into, another Person (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the outstanding
Common Stock or Other Securities of the Company), or in case of any sale or
conveyance to one or more Persons of the property of the Company as an entirely
or substantially as an entity at any time prior to the expiration of this
Warrant, then, as a condition of such reclassification, reorganization, change
consolidation, merger, sale or conveyance, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder of this Warrant, so that the Holder of this
Warrant shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price not to exceed that payable upon the exercise of
the unexercised portion of this Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such reclassification,
reorganization, change, consolidation, merger, sale or conveyance by a holder of
the number of shares of Common Stock or Other Securities of the Company as to
which this Warrant was exercisable immediately prior to such reclassification,
reorganization, change, consolidation, merger, sale or conveyance, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, the number of shares purchasable upon exercise
of this Warrant) shall thereafter be applicable in relation to any shares of
stock, and other securities and property, thereafter deliverable upon exercise
hereof.
8.3 Certificate of Adjustment. Whenever the number of shares issuable
hereunder is adjusted, as herein provided, the
<PAGE> 5
Company shall promptly deliver to the registered Holder of this Warrant a
certificate of the Treasurer of the Company, which certificate shall state (i)
the number of shares of Common Stock (or Other Securities) issuable hereunder
after such adjustment, (ii) the facts requiring such adjustment, and (iii) the
method of calculation for such adjustment and increase or decrease.
9. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of Capital Stock
receivable on the exercise of the Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Capital Stock on the exercise of the Warrant from time
to time, and (c) will not transfer all or substantially all of its properties
and assets to any other Person (corporate or otherwise), or consolidate with or
merge into any other Person or permit any such Person to consolidate with or
merge into the Company (if the Company is not the surviving Person), unless
such other Person shall expressly assume in writing and agree to be bound by
all the terms of this Warrant.
10. Right of First Refusal. Meditrust Mortgage Investments, Inc. has
certain rights of first refusal pursuant to the terms and conditions of Section
6 of that certain Series B Stock Purchase Agreement dated as of September 20,
1996, as amended, among the Company and the Investors (as defined in such
agreement).
11. Notices of Record Date Etc. In the event of:
(a) any taking by the Company of a record of the holders of any
Capital Stock for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of Capital Stock or
any other securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock or any transfer of
all or substantially all of the assets of the Company to or consolidation or
merger of the Company with or into any other Person; or
-5-
<PAGE> 6
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
(d) any proposed issue or grant by the Company of any shares of
Capital Stock, or any right or option to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities of the Company
(other than (i) the issue of Common Stock (or Other Securities) on the exercise
of this Warrant, (ii) stock options to purchase shares of Common Stock which
may be granted to employees of the Company or the issuance of such shares
pursuant to the exercise of such options, and (iii) any shares issued in
transactions to which Sections 8.1 or 8.2 of this Warrant applies);
then and in each such event the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or Other Securities) shall be entitled
to exchange their shares of Common Stock (or Other Securities) for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up, and (iii) the amount and character of any stock of any class or
other securities of the Company, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least twenty (20) days prior to
the date therein specified.
12. Registration. The Holder has certain registration rights with
respect to the Shares pursuant to the terms and conditions of that certain
Registration Rights Agreement dated as of September 20, 1996, as amended, among
the Company and its security holders.
13. Intentionally Deleted.
14. Intentionally Deleted.
15. No Rights as Stockholder. This Warrant does not entitle the Holder
to any voting rights or other rights as a stockholder of the Company prior to
exercise of this Warrant and the payment for the shares of Capital Stock so
purchased. Notwithstanding the foregoing, the Company agrees to transmit to the
Holder such information, documents and reports as are distributed to holders of
the Capital Stock of the Company concurrently with the distribution thereof to
the stockholders. Upon valid exercise of this Warrant
-6-
<PAGE> 7
and payment for the shares of Capital Stock so purchased in accordance with the
terms of the Warrant, the Holder or the Holder's designee, as the case may be,
shall be deemed a stockholder of the Company.
16. Modifications and Waivers. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
17. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid,
if to the Holder, at its address shown on the books of the Company and if to
the Company, at the address indicated therefor on the signature page of this
Warrant.
18. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and of an indemnity or security reasonable satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Warrant.
19. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Shares issuable upon exercise of this Warrant
shall survive the exercise and termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the Holder. This Warrant is fully transferable and
the Company may treat the registered Holder of this Warrant as such Holder
appears on the Company's books at any time as the Holder for all purposes.
20. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
21. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the Commonwealth of Massachusetts.
-7-
<PAGE> 8
IN WITNESS WHEREOF, Balanced Care Corporation has caused this Warrant
to be executed under seal by its officer thereunto duly authorized.
DATED:
---------------------
BALANCED CARE CORPORATION
CORPORATE
SEAL
By: /s/ Brian L. Barth
----------------------------
Name: BRIAN L. BARTH
Title: VICE PRESIDENT
ATTEST:
/s/ Robin L. Barber
- -----------------------
Name: Robin Barber
Title: Asst. Secretary
-8-
<PAGE> 9
SCHEDULE TO EXHIBIT 4.11 PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
<TABLE>
<CAPTION>
CAPITAL STOCK WARRANT
Holder Transaction Shares Date/Term Purchase Price
- ------ ----------- ------ --------- --------------
<S> <C> <C> <C> <C>
Hawthorn Series B 50,000 8/30/96; $2.50/share
Health 10 years
Properties, Inc.
Meditrust Series B 1,387 8/30/96; $2.50/share
Mortgage 10 years
Investments,
Inc.
John Brennan Series B 184,000 8/30/96; $2.25/share
10 years
Meditrust Series B 5,103 8/30/96; $2.25/share
Mortgage 10 years
Investments, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 4.12
FIRST AMENDMENT TO CAPITAL STOCK PURCHASE WARRANT
TO SUBSCRIBE FOR AND PURCHASE CAPITAL STOCK OF
BALANCED CARE CORPORATION
THIS FIRST AMENDMENT TO CAPITAL STOCK PURCHASE WARRANT TO SUBSCRIBE FOR
AND PURCHASE CAPITAL STOCK OF BALANCED CARE CORPORATION is made as of the 15th
day of April, 1997 by and among (i) BALANCED CARE CORPORATION, a Delaware
corporation having its principal place of business at 5021 Louise Drive, Suite
200, Mechanicsburg, PA 17055 (the "Company") and (ii) MEDITRUST ACQUISITION
CORPORATION II, a Delaware corporation having its principal place of business at
c/o Meditrust, 197 First Avenue, Needham Heights, Massachusetts 02194 (the
"Holder").
W I T N E S S E T H:
WHEREAS, the Holder and certain wholly-owned subsidiaries of the
Company (collectively, the "Lessees") are parties to one or more of the
Facility Lease Agreements described in EXHIBIT B attached hereto and
incorporated herein by reference (collectively, the "Leases");
WHEREAS, the Lessees have requested that the Leases be amended to
change the calculation of "Rent" thereunder;
WHEREAS, the Company has guaranteed the obligations of the Lessees
under the Leases and will receive direct and indirect benefits from the
proposed amendment thereto;
WHEREAS, as a condition to the execution and delivery of the Reading
Lease (as defined in EXHIBIT B), the Company issued to the Holder that certain
Capital Stock Purchase Warrant To Subscribe For And Purchase Capital Stock Of
Balanced Care Corporation, dated as of February 27, 1997 (the "Warrant");
NOW THEREFORE, for good and valuable consideration paid by each of the
parties hereto to the other, the receipt and sufficiency of which is hereby
acknowledged and in consideration of the covenants and agreements set forth
herein, the Company and the Holder agree as follows:
1. Section 1 of the Warrant is hereby amended to add the definition of
the term "First Amendment" set forth below, so that the definition of First
Amendment hereafter immediately follows the definition of Convertible
Securities in said Section 1:
"First Amendment" means that certain First Amendment to
Capital Stock Purchase Warrant To Subscribe For And Purchase
Capital Stock Of Balanced Care Corporation, dated as of April
15, 1997, by and between the Holder and the Company.
<PAGE> 2
2. Section 2 of the Warrant is hereby deleted in its entirety and is
restated to hereafter read as follows:
2. The Shares Subject to this Warrant. This Warrant shall be
exercisable for up to eighty-nine thousand five hundred seven (89,507)
shares of Common Stock, as the same may be adjusted pursuant to the
terms of this Warrant. The Company certifies that the only Capital Stock
or Options outstanding as of the date of the First Amendment are as set
forth in EXHIBIT A attached hereto and that there are no other
contractual arrangements with any of the Company's stockholders or
holders of Options other than as set forth on EXHIBIT A attached hereto.
3. Section 3 of the Warrant is hereby deleted in its entirety and is
restated to hereafter read as follows:
3. The Warrant Purchase Price. The aggregate purchase price for
all of the Shares shall be Ninety Dollars ($90.00) (the "Warrant
Purchase Price").
4. Exhibit A of the Warrant is hereby deleted in its entirety and is
replaced with EXHIBIT A attached hereto.
5. The Company represents to the Holder that all parties whose consent
is necessary for the execution and delivery of this Amendment and the issuance
of the Shares issuable upon exercise of the Warrant, as amended hereby, have so
consented and that all parties having any rights of first offer, first refusal
or preemption have waived any such rights.
6. This Amendment shall be deemed to amend the Warrant solely as
expressly set forth herein, and as amended hereby, the Warrant is hereby
ratified, approved and confirmed in every aspect and is valid, binding and in
full force and effect.
7. This Amendment shall be binding upon the Company and the Holder and
their respective successors and assigns.
8. This Amendment shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
under seal as of the day and year first above written.
WITNESS: COMPANY
BALANCED CARE CORPORATION, a
Delaware corporation
/s/ Brian L. Barth By: /s/ Robin L. Barber
- ---------------------------- -------------------------------
Name: Brian L. Barth Name: ROBIN L. BARBER
Title: ASST. SECRETARY
WITNESS: MEDITRUST ACQUISITION
CORPORATION II, a
Delaware corporation
/s/ Amelia C. Gentry By: /s/ Michael S. Benjamin
- ---------------------------- -------------------------------
Name: Amelia C. Gentry Name: MICHAEL S. BENJAMIN, ESQ.
Title: SENIOR VICE PRESIDENT
<PAGE> 1
EXHIBIT 10.1
BALANCED CARE CORPORATION
1996 STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED, EFFECTIVE JULY 25, 1997
Adopted: September 13,1996
Amended and Restated: October 17, 1996
Amended and Restated: July 25, 1997
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. BACKGROUND AND PURPOSE
1.1 Purpose........................................................... 1
1.2 Establishment of Plan............................................. 1
SECTION 2. DEFINITIONS
2.1 "Affiliate"....................................................... 1
2.2 "Beneficiary"..................................................... 1
2.3 "Board"........................................................... 1
2.4 "Change of Control"............................................... 1
2.5 "Code"............................................................ 2
2.6 "Committee"....................................................... 2
2.7 "Corporation"..................................................... 2
2.8 "Corporation Voting Securities"................................... 2
2.9 "Disabled" or "Disability"........................................ 2
2.10 "Eligible Employee"............................................... 3
2.11 "Fair Market Value"............................................... 3
2.12 "Fiscal Year"..................................................... 3
2.13 "Incentive Stock Option".......................................... 3
2.14 "Non-Employee Director"........................................... 3
2.15 "Non-Employee Director Award"..................................... 3
2.16 "Nonqualified Stock Option"....................................... 3
2.17 "Option".......................................................... 3
2.18 "Participant"..................................................... 4
2.19 "Performance Share"............................................... 4
2.20 "Performance Unit"................................................ 4
2.21 "Plan"............................................................ 4
2.22 "Restricted Stock"................................................ 4
2.23 "Retirement"...................................................... 4
2.24 "Significant Shareholder"......................................... 4
2.25 "Stock"........................................................... 5
SECTION 3. SHARES SUBJECT TO THE PLAN
3.1 Shares............................................................ 5
3.2 Performance Units................................................. 5
SECTION 4. STOCK OPTIONS
4.1 Participation..................................................... 5
4.2 Option Terms and Conditions....................................... 6
4.3 Stock Appreciation Rights......................................... 8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.4 Issuance of Certificates.......................................... 8
SECTION 5. RESTRICTED STOCK
5.1 Participation..................................................... 9
5.2 Restricted Stock Awards........................................... 9
SECTION 6. PERFORMANCE SHARES AND PERFORMANCE UNITS
6.1 Participation..................................................... 9
6.2 Performance Awards................................................ 9
6.3 Performance Period and Targets.................................... 10
6.4 Earning a Performance Award....................................... 10
6.5 Payment of Performance Awards..................................... 10
SECTION 7. OTHER STOCK-BASED AWARDS
7.1 Grant of Other Awards............................................. 11
7.2 Terms of Other Awards............................................. 11
SECTION 8. TERMINATION OF EMPLOYMENT
8.1 General Rule...................................................... 12
8.2 Exceptions for Death, Disability or Retirement.................... 12
8.3 Other Acceleration of Benefits.................................... 14
8.4 Certain Transactions.............................................. 14
SECTION 9. GENERAL PROVISIONS
9.1 Stockholder Privileges............................................ 15
9.2 Shareholder Approval.............................................. 15
9.3 Holding Requirement............................................... 16
9.4 Amendment, Suspension, Modification and Termination of Plan....... 16
9.5 Administration.................................................... 16
9.6 Indemnification................................................... 16
9.7 Expenses.......................................................... 16
9.8 Rights of Participants............................................ 17
9.9 Nontransferability................................................ 17
9.10 Governing Law..................................................... 17
</TABLE>
ii
<PAGE> 4
BALANCED CARE CORPORATION
1996 STOCK INCENTIVE PLAN
SECTION 1. BACKGROUND AND PURPOSE
1.1 PURPOSE. Balanced Care Corporation (the
"Corporation") wishes to establish various equity-related incentive
compensation programs in order to provide employees with a direct stake in
company growth. The Corporation hereby adopts these programs to encourage and
enable the acquisition of a larger proprietary stake in the Corporation by its
employees to attract and retain qualified and committed executives, to develop
and maintain a competent management team, to provide key employees with
long-term incentives to improve corporate performance, to enhance shareholder
investment values and to provide a competitive compensation package which
includes participation in the long-term financial success of the Corporation.
1.2 ESTABLISHMENT OF PLAN. The Corporation desires to
combine these various equity compensation programs into one plan. This Plan
shall be known as the Balanced Care Corporation 1996 Stock Incentive Plan and
shall be effective upon adoption by the Board of Directors of the Corporation,
subject to the approval of the shareholders of the Corporation in accordance
with Section 9.2 of this Plan, and extend until terminated as provided herein.
SECTION 2. DEFINITIONS
Unless the context requires otherwise, when capitalized the
terms listed below shall have the following meanings when used in this or any
other section of the Plan:
2.1 "AFFILIATE" is any corporation, business trust,
division, partnership or joint venture in which the Corporation owns (either
directly or indirectly) fifty percent (50%) or more of the voting stock or
rights analogous to voting stock, but only for the period such ownership
exists.
2.2 "BENEFICIARY" shall have the meaning given it under
Section 8.2.
2.3 "BOARD" is the Board of Directors of the
Corporation, as elected from time to time.
2.4 "CHANGE IN CONTROL" means any of the events set
forth below; provided, however, that the Committee, in its sole discretion, may
specify a more restrictive definition of Change in Control in any award
agreement and, in such event, the definition of Change in
Page 1
<PAGE> 5
Control set forth in the award agreement shall apply to the award granted under
such award agreement:
(a) The acquisition in one or more transactions, other than
from the Corporation, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended) of a number of Corporation Voting Securities in excess of 30%
of the Corporation Voting Securities unless such acquisition has been
approved by the Board; or
(b) Any election has occurred of persons to the Board that
causes two-thirds of the Board to consist of persons other than (i)
persons who were members of the Board on October 1, 1996 and (ii)
persons who were nominated for elections as members of the Board at a
time when two-thirds of the Board consisted of persons who were
members of the Board on October 1, 1996; provided, however, that any
person nominated for election by a Board at least two-thirds of whom
constituted persons described in clauses (i) and/or (ii) or by persons
who were themselves nominated by such Board shall, for this purpose,
be deemed to have been nominated by a Board composed of persons
described in clause (i); or
(c) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, unless, following such
reorganization, merger or consolidation, all or substantially all of
the individuals and entities who were the respective beneficial owners
of the Corporation Voting Securities immediately prior to such
reorganization, merger or consolidation, following such
reorganization, merger or consolidation beneficially own, directly or
indirectly, more than 60% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the entity resulting from such
reorganization, merger or consolidation in substantially the same
proportion as their ownership of the Corporation Voting Securities
immediately prior to such reorganization, merger of consolidation, as
the case may be; or
(d) Approval by the stockholders of the Corporation of (i) a
complete liquidation or dissolution of the Corporation or (ii) a sale
or other disposition of all or substantially all the assets of the
Corporation.
2.5 "CODE" is the Internal Revenue Code of 1986, as
amended.
2.6 "COMMITTEE" shall mean the committee provided for in
Section 9.5 hereof.
2.7 "CORPORATION" is Balanced Care Corporation, a
Delaware corporation.
2.8 "CORPORATION VOTING SECURITIES" means the combined
voting power of all outstanding voting securities of the Corporation entitled
to vote generally in the election of the Board.
Page 2
<PAGE> 6
2.9 "DISABLED" OR "DISABILITY" is a physical or mental
incapacity which qualifies an individual to collect a disability benefit under
any long-term disability plan maintained by the Corporation, or such other
condition which the Committee in its discretion may determine is a Disability.
2.10 "ELIGIBLE EMPLOYEE" is any employee of the
Corporation or an Affiliate who is selected for participation in the Plan by
the Committee.
2.11 "FAIR MARKET VALUE" is, as of a particular date, the
average of the high and low prices of a share of Stock on the relevant date as
reported by a recognized national stock exchange as selected by the Committee
or as otherwise determined using procedures established by the Committee (i) if
the Common Stock is listed on a national securities exchange or is authorized
for quotation in The Nasdaq Stock Market's National Market ("NNM"), the closing
price, regular way, of the Common Stock on such exchange or NNM, as the case
may be, or if no such reported sale of the Common Stock shall have occurred on
such date, on the next preceding date on which there was such a reported sale;
or (ii) if the Common Stock is not listed for trading on a national securities
exchange or authorized for quotation on NNM, the closing bid price as reported
by The Nasdaq Stock Market or The Nasdaq SmallCap Market (if applicable), or if
no such prices shall have been so reported for such date, on the next preceding
date for which such prices were so reported; or (iii) if the Common Stock is
not listed for trading on a national securities exchange or authorized for
quotation on NNM, The Nasdaq Stock Market or The Nasdaq SmallCap Market (if
applicable), the last reported bid price published in the "pink sheets" or
displayed on the National Association of Securities Dealers, Inc. ("NASD")
Electronic Bulletin Board, as the case may be; or (iv) if the Common Stock is
not listed for trading on a national securities exchange, or is not authorized
for quotation on NNM, The Nasdaq Stock Market or The Nasdaq SmallCap Market, or
is not published in the "pink sheets" or displayed on the NASD Electronic
Bulletin Board, the Fair Market Value of the Common Stock as determined in good
faith by the Committee.
2.12 "FISCAL YEAR" is the twelve (12) consecutive month
period beginning July 1 and ending June 30.
2.13 "INCENTIVE STOCK OPTION" OR "ISO" is any Option
granted under this Plan which is designated as an Incentive Stock Option by the
Committee and which is intended to qualify as such under Code section 422.
2.14 "NON-EMPLOYEE DIRECTOR" is a Director of the
Corporation who is not then and has not been for one year prior to the relevant
time a common law employee of the Corporation.
2.15 "NON-EMPLOYEE DIRECTOR AWARD" is a grant of
Nonqualified Stock Option to a Non-Employee Director as described in Section
4.l(b) hereof.
Page 3
<PAGE> 7
2.16 "NONQUALIFIED STOCK OPTION" or "NSO" is any Option
granted under this Plan which is not an ISO.
2.17 "OPTION" is the right granted pursuant to this Plan
to purchase Stock subject to the terms and conditions specified at the time of
grant.
2.18 "PARTICIPANT" is any Eligible Employee who has been
selected by the Committee to receive a benefit of any kind under the Plan. An
Eligible Employee may be a Participant with respect to one, some or all of the
types of benefits available under the Plan.
2.19 "PERFORMANCE SHARE" is a share of Restricted Stock
awarded by the Committee, subject to any performance targets or other
restrictions which the Committee may determine at the time of award.
2.20 "PERFORMANCE UNIT" is an amount equal to (i) the
value of one share of Stock determined at such time as a Performance Unit is
awarded or (ii) such other dollar amount as the Committee may determine at such
time as a Performance Unit is awarded.
2.21 "PLAN" is the Balanced Care Corporation 1996 Stock
Incentive Plan, as amended from time to time.
2.22 "RESTRICTED STOCK" is Stock issued or transferred to
a Participant by means of an award that is subject to the following
restrictions, and such other restrictions as may be imposed from time to time
by the Committee in its sole discretion, and which will remain subject to
applicable restrictions until such time as the restrictions by their terms,
lapse:
(1) Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated, or otherwise
disposed of during a restriction period.
(2) Except as otherwise herein provided, unless the
Participant remains continuously employed by the
Corporation or an Affiliate until such time as the
conditions for the removal of restrictions, as
determined by the Committee in its sole discretion,
have been satisfied, Restricted Stock shall be
forfeited and returned to the Corporation, and all
rights of a participant to such Restricted Stock
shall terminate without any payment or consideration
by the Corporation.
2.23 "RETIREMENT" is the time a Participant withdraws
from his or her principal business activity at the corporation, and from active
employment generally, and is eligible to receive a retirement income benefit
from a tax qualified retirement plan maintained by the Corporation (or an
Affiliate), or from the federal social security program.
2.24 "STOCK APPRECIATION RIGHT" OR "SAR" shall have the
meaning given it under Section 4.3.
Page 4
<PAGE> 8
2.25 "SIGNIFICANT SHAREHOLDER" is an Eligible Employee
who owns more than ten percent ( 10%) of the total combined voting power of all
classes of stock issued by the Corporation as of the date an Option under the
Plan is granted. For this purpose, the provisions of Code sections 422 and 424
shall apply.
2.26 "STOCK" is the common stock, par value $0.001 per
share, of the Corporation.
SECTION 3. SHARES SUBJECT TO THE PLAN
3.1 SHARES.
(A) NUMBER OF SHARES. The maximum number of shares of
Stock which may be issued for any purpose or any type of benefit under the Plan
shall be 1,500,000 subject to adjustment as provided herein.
(B) UNUSED SHARES. Any shares of Stock subject to an
Option which is canceled, expires or otherwise terminates without having been
exercised in full (unless such cancellation is due to the exercise of a related
SAR), or subject to any Restricted Stock Performance Shares or Performance
Units which are forfeited, shall again be available for grants or awards under
the Plan.
(C) ANTIDILUTION. In the event of any change in the
number or class of outstanding shares of Stock by reason of a stock dividend or
split, recapitalization, reclassification, merger, consolidation, or other
similar corporate change, the number of shares as to which grants of Options or
other awards may be made shall be adjusted proportionately to the nearest whole
share. Any such action shall be within the discretion of the Committee, whose
determination shall be conclusive, and the Committee's discretion shall be
directed to preserving the economic value and prevent dilution of in the value
of awards in any form granted.
In the event of such an adjustment with respect to shares
subject to an Option under the Plan, the number of shares and the Option price
per share shall be adjusted proportionately so that the aggregate price to be
paid upon exercise of such option shall not change.
3.2 PERFORMANCE UNITS. The maximum number of Performance
Units denominated other than by the value of Stock which may be awarded under
the Plan is 1,500,000 (not in addition to the number of shares reserved under
the Plan). If such a Performance Unit is awarded, but the value of such
Performance Unit is never paid, then such Performance Unit may again be made
subject to awards under the Plan.
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SECTION 4. STOCK OPTIONS
4.1 PARTICIPATION.
(A) ELIGIBLE EMPLOYEES. The Committee shall from time to
time and in its absolute discretion select Participants who shall be granted
Options (i.e. Option Participants) from among the Eligible Employees of the
Corporation and its Affiliates. Option Participants may be granted ISOs, NSOs,
SARs or any combination thereof.
(B) NON-EMPLOYEE DIRECTORS. Each Non-Employee Director
shall be granted an NSO to purchase 15,000 Shares effective on the (i) date
this Plan is adopted by the shareholders of the Corporation for Non-Employee
Directors who are members of the Board on the date of such approval and (ii)
for Non-Employee Directors elected after the date of adoption by the
shareholders, on the date he or she is initially elected to the Board. Each
Non-Employee Director shall be granted an additional NSO to purchase 5,000
Shares if, and upon the date of the Non-Employee Director is re-elected to the
Board, in each case subject to the availability of Shares under the Plan for
such grants. Each such NSO shall (i) be exercisable for Fair Market Value on
the date of grant, (ii) be fully vested on grant, (iii) have a duration for the
shorter of ten (10) years or the Director's term as a Director and (iv) shall
be no longer exercisable after the 91st day following the date the Director's
term ends. The Committee shall have no authority to amend or vary the terms of
NSO granted to Non-Employee Directors.
4.2 OPTION TERMS AND CONDITIONS.
(A) GRANT OF OPTION. Subject to the provisions of this
Section 4, Options may be granted at any time as determined by the Committee.
Except as otherwise limited by the Plan, the Committee shall have complete
discretion to determine the number of Options to be granted to any Option
Participant, the type of Option and the term and conditions of an Option.
Notwithstanding the foregoing, the Committee shall not cause any Option to be
granted with a schedule for vesting (that is, the date upon which an Option is
in whole or in part exercisable, subject to the terms of the Plan) calling for
vesting more rapid than 50% in any year or for full vesting to occur earlier
than the second anniversary (i) for options granted on or before September 30,
1996, of the date the employee began employment with the Corporation and (ii)
for options granted on or after October 1, 1996, of the grant of the Option.
(B) ISO EXERCISE LIMIT. With respect to Options
designated as ISOs at the time of grant, to the extent the aggregate Fair
Market Value of Stock, determined as of the date of grant, with respect to
which ISOs are exercisable for the first time by an Option Participant during
any calendar year exceeds $100,000, such Options shall be treated as
Nonqualified Stock Options. In applying this limit, Options shall be taken into
account in the order granted.
(C) OPTION PRICE. The Option price of each Option shall
be no less than the Fair Market Value of the Stock on the date the Option is
granted; provided, however, that if an ISO is granted to a Significant
Shareholder, the Option price shall be not less than 110% of the Fair Market
Value of the Stock on the date the option is granted.
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(D) TERM OF OPTION. Each Option, regardless of type,
shall expire at the time specified by the Committee when granting the Option.
The Committee may not fix a term which is shorter than required under any
applicable state or federal statute or regulation, nor which is longer than
five (5) years from the date the Option is granted. The term of an Option may
extend beyond the Plan's termination date.
(E) MANNER OF EXERCISE. An Option Participant wishing to
exercise an Option shall give written notice to the Corporation in the form and
manner as prescribed by the Committee. Options may be either completely or
partially exercised. Payment for the Stock to be acquired pursuant to the
exercise of an Option must accompany such written notice.
(F) PAYMENT FOR OPTIONS.
(1) GENERAL. Full payment for all Stock to be
acquired pursuant to the exercise of an Option shall be made at the time such
Option, or any part thereof, is exercised. No Stock certificate shall be issued
to an Option Participant until payment of the Option exercise price and all
required withholding taxes has been made. The Corporation shall be entitled to
deduct and withhold any withholding taxes from any cash payments to be made to
the Option Participant, whether under this Plan or otherwise. Payment of the
Option exercise price shall be made in cash or in such other form as is
acceptable to the Committee, provided that in the case of an ISO, no form of
payment shall be allowed which would prevent the Option that is intended to be
an ISO from qualifying as such under Code section 422.
(2) PAYMENT WITH STOCK. With the approval of
and subject to any restrictions or limitations imposed by the Committee, the
Option Participant, in lieu of or in combination with a payment in cash, may
transfer to the Corporation a sufficient number of shares of Stock to satisfy
all or any part of the Option price, and/or any applicable state or federal
withholding taxes. Such Stock may be Stock already owned by the Option
Participant, or Stock which will be acquired by exercise of the Option (which
process is sometimes referred to as a pyramid exercise). For this purpose, the
value of the Stock shall be the Fair Market Value as of the date of exercise.
Where payment is made in whole or in part by Stock, the Option Participant may
not transfer fractional shares of Stock. The Option Participant may not
transfer a number of shares of Stock which would have an aggregate Fair Market
Value in excess of the Option price plus applicable withholding taxes.
(3) INTERIM BROKER LOAN. The Committee may,
in its sole discretion, arrange with a stock brokerage or other similar agent to
loan to an Option Participant some or all of the cash needed to exercise an
Option. Upon application by and receipt of written notice of exercise of an
Option from an Option Participant, the broker will pay to the Corporation the
amount requested by the Option Participant as necessary to permit the exercise
of an Option and to pay any applicable withholding taxes. The Corporation will
promptly deliver to such broker a certificate representing the total number of
shares of Stock which will be acquired by the exercise of said Option. The
broker will then sell part or all of these shares and pay to the Option
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Participant the proceeds from the sale, less the loan principal and any
interest charged on the loan from the date the broker receives the notice of
exercise until the date the broker is reimbursed.
(4) OTHER PAYMENT METHODS. The Committee may,
in its sole discretion, authorize payment of the Option exercise price and
applicable withholding taxes by other methods or forms, within the limitations
imposed by this Section 4, by the Plan generally, and any applicable state or
federal laws or regulations.
(G) NO TANDEM OPTIONS. No ISO granted under this Plan
shall contain terms which would limit or otherwise affect an Option
Participant's right to exercise any other option, nor shall any NSO contain
terms which will limit or otherwise affect the Option Participant's right to
exercise any other Option in such a manner that the Option intended to be an
ISO would fail to qualify as such Code section 422.
4.3 STOCK APPRECIATION RIGHTS.
(A) GRANT OF STOCK APPRECIATION RIGHTS. The Committee
may, in its sole discretion, grant stock appreciation rights ("SARs") to Option
Participants who have been granted Options. These SARs may relate to any number
of shares, not to exceed the number of shares the Option Participant may
acquire by exercise of the underlying Option. An SAR shall expire no later than
the expiration date of the underlying Option. SARs may be for no more than 100%
of the difference between the Option price and the Fair Market Value of the
Stock subject to the Option, determined on the day the SARs are exercised.
(B) EXERCISE. SARs may be exercised at the same time and
to the same extent and subject to the same conditions as the Options related
thereto. SARs may be exercised only when the Fair Market Value of the Stock
subject to the Option exceeds the Option price. The exercise of an SAR shall
cancel the related Option and the exercise of an Option shall cancel the
related SAR.
(C) PAYMENT OF STOCK APPRECIATION RIGHTS. Upon exercise
of an SAR, but subject to all applicable tax withholding requirements, the
Option Participant shall be paid in cash, Stock, Restricted Stock, or a
combination thereof, as the Committee shall determine. To the extent payment is
made in Stock or Restricted Stock, the shares shall be valued at the Fair
Market Value on the date the SAR is exercised.
4.4 ISSUANCE OF CERTIFICATES.
(A) DELIVERY. As soon as practicable after either the
exercise of an Option and the delivery of payment therefor, or the exercise of
an SAR which is to be paid in Stock or Restricted Stock, the Corporation shall
deliver to the Option Participant a certificate or certificates for the number
of shares of Stock acquired. Consistent with applicable state or federal laws
and regulations, the Committee may fix a minimum or maximum period of time
during which a Participant may not sell any such Stock or Restricted Stock.
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(B) DESIGNATION. Shares acquired pursuant to the
exercise of an ISO shall be designated as such on the stock transfer records of
the Corporation, to the extent the value of such shares does not exceed the
$100,000 exercise limit of Section 4.2(b). Any shares acquired by the exercise
of an Option which exceed this $100,000 limit shall be designated on the
Corporation's stock transfer records as shares acquired pursuant to an NSO.
SECTION 5. RESTRICTED STOCK
5.1 PARTICIPATION. The Committee shall, from time to
time, and in its absolute discretion, select Participants who shall be awarded
Restricted Stock from among the Eligible Employees of the Corporation and its
Affiliates.
5.2 RESTRICTED STOCK AWARDS.
(A) WRITTEN AGREEMENT. Each Restricted Stock award shall
be evidenced by a written agreement, executed by the Participant and the
Corporation. Such agreement shall specify the number of shares of Restricted
Stock so awarded and any terms and conditions which the Committee may require,
including but not limited to, an escrow condition.
(B) RESTRICTION PERIOD. At the time of a Restricted
Stock award, the Committee shall fix a period of time (restriction period)
during which the restrictions as set forth in the Plan or as otherwise imposed
by the Committee shall remain in effect. Such restrictions shall lapse upon
expiration of the restriction period, or sooner as otherwise provided in the
Plan.
SECTION 6. PERFORMANCE SHARES AND PERFORMANCE UNITS
6.1 PARTICIPATION. The Committee, from time to time and
in its absolute discretion, shall select Participants who shall be granted
awards of Performance Shares and/or Performance Units (i.e. Performance
Participants) from among the Eligible Employees of the Corporation and its
Affiliates.
6.2 PERFORMANCE AWARDS.
(A) PERFORMANCE AGREEMENT. Each award of Performance
Shares and Performance Units shall be evidenced by a written agreement,
executed by the Performance Participant and the Corporation. Such agreement
shall contain all terms and conditions for the payment of a Performance Share
or Performance Unit award as the Committee may determine.
(B) PERFORMANCE ACCOUNTS. At such time as a performance
award is made, the Corporation shall establish an account ("Performance
Account") for each Performance Participant and shall credit Performance Units
and Performance Shares awarded to a
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Performance Participant to such account. Any Performance Shares credited to a
Performance Account shall be in the form of Restricted Stock, shall be
registered in the name of the Performance Participant and deposited, together
with a stock power endorsed in blank, with the Corporation before the
Performance Participant's Account shall be credited with such shares. Dividends
paid with respect to such Restricted Stock may be credited to the Participant's
Performance Account pursuant to Section 9.l(c). The maintenance of Performance
Accounts is solely a bookkeeping function, and does not entitle a Performance
Participant to payment of any awards hereunder, or to the payment of any
dividends which may be credited to a Performance Account.
6.3 PERFORMANCE PERIOD AND TARGETS.
(A) PERFORMANCE PERIOD. The period over which the
Participant must meet the criteria established in a performance agreement to be
entitled to payment of an award hereunder shall be established by the Committee
at the time of the award. This period may differ for each award in existence
for any one Performance Participant.
(B) PERFORMANCE TARGETS. At the time of a performance
award, the Committee, in its discretion but in connection with the
Corporation's on-going business planning processes, shall establish performance
targets to be achieved within the performance period. Examples of such targets
include performance by the Corporation, by an Affiliate, by the individual
Performance Participant, or by any combination thereof. Successful completion
of performance targets shall be determined by the Committee, using such
measures of performance during the performance period as are specified in the
performance agreement.
6.4 EARNING A PERFORMANCE AWARD. Attainment of
performance targets in all respects during the Performance Period shall earn
one hundred percent (100%) of the related award for the Performance
Participant. Failure to meet any of the performance targets means the
Performance Participant will earn no part of the performance award. The
Committee may in its sole discretion, pay a portion of a performance award to a
Performance Participant based on the degree of attainment of performance
targets during the Performance Period.
6.5 PAYMENT OF PERFORMANCE AWARDS.
(A) TIME FOR PAYMENT. No performance award shall be
payable until after earned in accordance with the terms and conditions of the
performance agreement, unless otherwise provided in the Plan or in the sole
discretion of the Committee. Any Performance Shares, Performance Units or other
amounts credited to a Performance Account shall be paid to the Performance
Participant only when, and to the extent, the Committee determines to make such
payment. All such determinations shall be made during the four (4) month period
immediately following the end of the Performance Period as established in the
performance agreement. Payment of dividends credited to a Performance Account,
together with interest credited to such dividends, if any, shall be paid to the
Performance Participant at such time as the performance targets with respect to
the underlying Performance Shares have been satisfied or such shares are
otherwise released.
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(B) FORM OF PAYMENT. Payment of Performance Shares shall
be in the form of Stock or Restricted Stock, or a combination thereof as
determined by the Committee, to be delivered to the Performance Participant.
Payment of Performance Units and any related dividends or other amounts,
including interest, if any, credited to a Performance Account shall be made in
cash, Stock, Restricted Stock or any combination thereof, as the Committee
shall determine. To the extent payment is made in Stock or Restricted Stock,
the shares shall be valued at Fair Market value on the date of payment.
SECTION 7. OTHER STOCK-BASED AWARDS
7.1 GRANT OF OTHER AWARDS. Other awards, valued in whole
or in part by reference to or otherwise based on Stock, may be granted either
alone or in addition to or in conjunction with other awards under the Plan.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom and the time or times at
which such awards shall be made, the number of shares of Stock to be granted
pursuant to such awards, and all other conditions of the awards. Any such award
shall be confirmed by an award agreement executed by the Corporation and the
Participant, which award agreement shall contain such provisions as the
Committee determines to be necessary or appropriate to carry out the intent of
this Plan with respect to such award.
7.2 TERMS OF OTHER AWARDS. In addition to the terms and
conditions specified in the award agreement, awards granted pursuant to this
Section 7 shall be subject to the following:
(A) NONTRANSFERABILITY. Any Stock subject to awards made
under this Section 7 may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the Stock is issued, or, if
later, the date on which any applicable restriction, performance or deferral
period lapses.
(B) DIVIDENDS. Unless otherwise provided by the
Committee in the award agreement, the recipient of an award under this Section
7 shall be entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the Stock covered by the award, and the
Committee, in its sole discretion, may provide in the award agreement that such
amounts be reinvested in additional shares of Stock.
(C) TERMINATION OF EMPLOYMENT. The award agreement with
respect to any award granted pursuant to this Section 7 shall contain
provisions dealing with the disposition of such award in the event of a
termination of employment prior to the exercise, realization or payment of such
award, whether such termination occurs because of Retirement, Disability, death
or other reason, with such provisions to take account of the specific nature
and purpose of the award, as well as appropriate provisions regarding
acceleration of exercise, realization or payment of such award upon the
occurrence of a Change in Control, and the Committee, in its
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sole discretion, may waive any or all of the restrictions imposed with respect
to any award under this Section 7.
(D) CONSIDERATION FOR ISSUANCE. Stock issued pursuant to
this Section 7 shall be issued for such consideration as the Committee shall
determine in its sole discretion.
SECTION 8. TERMINATION OF EMPLOYMENT
8.1 GENERAL RULE. Except as otherwise provided in the
Plan, Options may be exercised and Restricted Stock, Performance Share or
Performance Unit awards may be paid to a Participant only in accordance with
the terms and conditions attached to such benefit by the Committee at the time
it is granted or otherwise awarded. The provisions of Section 8.2 shall govern
the treatment of awards upon termination of a Participant's employment unless
other provisions are approved by the Committee and set forth in the applicable
award agreement.
8.2 EXCEPTIONS FOR DEATH, DISABILITY OR RETIREMENT.
(A) DEATH OF PARTICIPANT. If a Participant's employment
terminates due to death, any benefits under the Plan shall be transferred by
the provisions of such Participant's will, or if there is no will, by the laws
of descent and distribution of the state in which the Participant is a resident
on the date of death, but only to the extent hereinafter set forth. The
individual who succeeds to the Participant's benefits under the Plan, that is,
the Beneficiary may:
(1) exercise any outstanding Options to the same extent
the Participant was entitled to exercise such
Options, together with any Options the Committee
may, in its sole discretion, accelerate, at any time
prior to the earlier of twelve (12) months from the
date of the Participant's death, or the date the
Option would otherwise expire by its terms (or such
later date as the Committee may approve in its sole
discretion);
(2) receive payment of any shares of Restricted Stock
granted under Section 5 based on a deemed lapse of
the restrictions, provided that such payment of
Restricted Stock shall be either prorated based on
the ratio of the number of months since the date the
award was made to the total number of months
contained in the restriction period at the time the
award was granted, or otherwise paid as determined
by the Committee in its sole discretion;
(3) receive payment of Performance Shares or Units, as
determined in the sole discretion of the Committee,
by considering the degree to which performance
targets had been attained as of the date of the
Participant's death.
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(B) DISABILITY OF PARTICIPANT. A Participant who
becomes Disabled may:
(1) exercise outstanding Options that are otherwise
exercisable, together with any Options the Committee
may, in its sole discretion, accelerate, at any time
prior to the earlier of twelve (12) months of the
date of Disability or the date the option would
otherwise expire by its terms (or such later date as
the Committee may approve in its sole discretion);
(2) be paid a prorated amount of a Restricted Stock
granted under Section 5, determined by application
of the payment provisions in Section 8.2(a)(ii),
based on a deemed lapse of restrictions;
(3) be paid a Performance Share or Unit award prior to
the expiration of a Performance Period, as
authorized in the sole discretion of the Committee,
which may consider the degree of attainment of
performance targets in fixing the amount of any such
payment.
(C) RETIREMENT. At the time of Retirement, a
Participant may:
(1) exercise outstanding Options that are otherwise
exercisable, together with any Options the Committee
may, in its sole discretion, accelerate, at any time
prior to the earlier of thirty (30) days following
Retirement, or the date the Option would otherwise
expire by its terms (or such later date as the
Committee may approve in its sole discretion);
(2) receive a prorated payment of an award of Restricted
Stock granted under Section 5, determined by
application of the payment provisions in Section
8.2(a)(2), based on a deemed lapse of restrictions;
(3) receive a payment of Performance Shares or Units as
authorized in the sole discretion of the Committee,
which may consider the degree to which performance
targets have been attained in determining the amount
of any such payment.
(D) OTHER TERMINATION OF EMPLOYMENT.
(1) TERMINATION NOT FOR CAUSE. In the event
of a termination of employment for reasons other than those listed in this
Section 8.2 or in Section 8.4, outstanding Options may be exercised no later
than the earlier of ninety (90) days following such termination, or the date
the Option would, by its term, otherwise expire (or such later date as the
Committee may approve in its sole discretion). In the event any portion of an
Option would have vested during the ninety (90) day period commencing on the
date of termination not for Cause, then such portion of the Option shall become
vested as scheduled and shall be exercisable in accordance with this
subsection. The Committee may, in its sole and exclusive discretion, accelerate
payment of any other benefits under the Plan.
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(2) TERMINATION FOR CAUSE. In the event a
Participant's services are terminated for cause, as determined by the Committee
in good faith ("Cause"), all Options, Restricted Stock, Performance Shares and
Performance Units under the Plan, to the extent not vested and already exercised
or otherwise paid, shall immediately terminate. Options vested on the date of
such termination may be exercised by the Participant for ninety (90) days
following the date of termination for Cause.
8.3 OTHER ACCELERATION OF BENEFITS. The Committee shall
have the discretion to accelerate the exercise date of an Option or the time at
which Stock restrictions lapse, to remove any Stock restrictions or to
accelerate the expiration of a Performance Period, or to take any such similar
action whenever it may decide, in its absolute discretion, that such action is
in the best interests of the Corporation and is equitable to a Participant (or
such Participant's heirs or beneficiaries), based on changes in applicable tax
or other laws, or such other changes of circumstances as may arise after the
date of an award under the Plan.
8.4 CERTAIN TRANSACTIONS.
(A) CHANGE IN CONTROL. In the event a Change in Control
occurs:
(1) Any and all Options and Stock Appreciation Rights,
whether such Options and SAR were previously vested
or unvested, shall become immediately exercisable;
(2) Any restriction periods and restrictions imposed on
Restricted Stock shall lapse and within ten (10)
business days after the occurrence of a Change in
Control the stock certificates representing
Restricted Stock, without any restrictions or
legends thereon, shall be delivered to the
applicable Participant; and
(3) The target values attainable under all Performance
Shares and Units shall be deemed to have been fully
earned for the entire award period as of the
effective date of the Change in Control.
(B) MERGER.
(1) OPTIONS. With respect to Options
outstanding at the time of a merger or consolidation of the Corporation with
another corporation, an Option granted under the Plan shall be deemed to apply
to that number of shares (or shares with a value equivalent to the value of the
merger consideration if not in shares) which a holder of the same number of
shares not subject to an Option would have been entitled to receive under the
terms of such merger or consolidation. If the Corporation is not the surviving
entity after such merger or consolidation, then the Option Participant shall,
no less than seven (7) days prior to the effective time of the merger, receive
(contingent only upon the happening of the then contemplated merger) a
substitute option in exchange for the Option. In the substitute option, the
surviving entity shall
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grant to the Participant an option to purchase that entity's stock on terms and
conditions which substantially preserve the rights, benefits and value of the
outstanding Option granted by the Corporation. If a substitute option is not
timely delivered, the then outstanding Option shall be fully vested and
exercisable and the Participant shall be entitled to exercise the Option and
exchange the shares received for the merger consideration.
(2) RESTRICTED STOCK. If the Corporation is
consolidated or merged with another corporation, each Participant who has been
awarded Restricted Stock shall be entitled to the sale rights and privileges
due to the merger as any other stockholder; provided, however, that any shares
of the Corporation stock received in connection with the merger shall be
subject to the same restrictions as were imposed on the underlying shares of
Restricted Stock unless otherwise accelerated.
SECTION 9. GENERAL PROVISIONS
9.1 STOCKHOLDER PRIVILEGES.
(A) OPTION PARTICIPANT. Until such time as a Stock
certificate is issued, an Option Participant, or any other person entitled to
exercise an Option under the Plan, shall not have any of the privileges of a
stockholder with respect to Stock covered by an Option granted under this Plan.
(B) OTHER PARTICIPANTS. Upon delivery of Restricted
Stock to a Participant (or to the escrow holder, if applicable) pursuant to a
Restricted Stock award, such Participant shall have all of the rights of a
shareholder with respect to the Restricted Stock, subject to the restrictions
imposed, including the right to receive dividends (subject to the provisions of
subparagraph (c) below) and to vote the shares of Restricted Stock. In the
event of forfeiture, the certificate or certificates representing such
Restricted Stock shall be delivered to the Corporation, accompanied by executed
instruments of transfer. If the Restricted Stock is held in escrow, the
Corporation shall be entitled to have the certificates representing the
Restricted Stock redelivered to it out of escrow.
(C) PAYMENT OF DIVIDENDS TO ACCOUNTS. The Committee may,
in its sole and exclusive discretion, provide that amounts equivalent to
dividends, with respect to each share of Restricted Stock awarded, shall be
credited to a Participant's Performance Account, as the case may be, rather
than paid directly to the Participant.
(D) INTEREST. The Committee may also provide that
interest shall be payable with respect to Performance Units or dividends
credited to a Participant's account. The rate of any interest credited
hereunder shall be determined in the sole discretion of the Committee.
(E) SALE OF STOCK OR RESTRICTED STOCK. The Committee may
fix a period during which any Stock or Restricted Stock acquired under the Plan
may not be sold, provided
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that the Committee may not fix any period which is less than or which exceeds
such requirements as may be imposed by any applicable state or federal law or
regulation.
9.2 SHAREHOLDER APPROVAL. This Plan shall be subject to
approval by the affirmative vote of the holders of a majority of the
Corporation's Stock present or represented and entitled to vote thereon at a
meeting of shareholders and all awards made under the Plan prior to approval of
the Plan by the shareholders shall be made contingent upon receipt of
shareholder approval.
9.3 HOLDING REQUIREMENT. No Participant may dispose of
any grants or awards made hereunder for a period of six (6) months from the
time of the grant or award by the Corporation; provided, however, that a
Participant may exercise any Options or otherwise convert any other awards to
Stock, as permitted by the terms of the Plan, within six (6) months of the
grant or award, but he shall be prohibited from disposing of the underlying
Stock for a period of six (6) months after the date on which the Option or
other award is granted.
9.4 AMENDMENT. SUSPENSION, MODIFICATION AND TERMINATION
OF PLAN. The Committee, subject to approval by the Board, may amend or modify
the Plan, or any section of the Plan, at any time to conform to any change in
applicable laws or regulations or in any other respect deemed to be in the best
interest of the Corporation. Pursuant to Code Section 422, no such amendment
shall, without shareholder approval (i) materially increase the number of
shares of Stock as to which ISOs may be granted under the Plan, (ii) materially
modify the requirements as to eligibility to receive Options under the Plan,
(iii) materially increase the benefits accruing to Participants under the ISO
portion of the Plan, (iv) reduce an ISO Option price below the Fair Market
Value on the day the Option is awarded, (v) extend the period during which an
Option may be granted or exercised, or (vi) extend the termination date of the
provisions of the Plan which permit the granting of ISOs. No amendment or
modification of the Plan shall adversely affect any Participant under the Plan,
or any section thereof, without such Participant's consent.
9.5 ADMINISTRATION. The Plan shall be administered by
the Compensation Committee of the Board of Directors of the Corporation or such
other committee membership as the Board of Directors shall determine. Provided
that the Committee shall always consist of a committee of two or more
directors, each of whom is a "non-employee director" within the meaning of Rule
16b-3 of the Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder. The actions of the Committee shall be reviewed by the
Board. The Committee is authorized to (i) select employees for participation in
the plan, (ii) make all decisions concerning the timing, pricing and amount of
grants or awards under the Plan to the extent such matters are left to the
discretion of the Committee by the terms of the Plan, (iii) interpret and
construe the Plan, (iv) adopt, amend, or rescind rules and regulations relating
to the Plan, and (v) make all other determinations necessary or advisable for
the administration of the Plan. Any actions, determinations or other
interpretations made by the Committee within the scope of its authority shall
be final, binding and conclusive for all purposes on all persons.
9.6 INDEMNIFICATION. To the extent permitted by law,
members of the Committee and the Board shall be indemnified and held harmless
by the Corporation with
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respect to any loss, cost, liability or expense that may be reasonably incurred
in connection with any claim, action, suit or proceeding which arises by reason
of any act or omission under the Plan so long as such act or omission is taken
within the scope of the authority delegated herein.
9.7 EXPENSES. The expense of maintaining and
administering this Plan shall be borne by the Corporation.
9.8 RIGHTS OF PARTICIPANTS. Nothing in this Plan shall
interfere with or limit in any way the right of the Corporation or an Affiliate
to terminate any individual's employment at any time, with or without cause.
This Plan does not, nor is it intended to, confer upon any employee the right
to continue in the employment of the Corporation or an Affiliate.
9.9 NONTRANSFERABILITY. Except as provided in
Section 8.2(a) of the Plan (relating to death), Options, awarded under the
Plan shall not be transferable.
9.10 GOVERNING LAW. To the extent not preempted by
applicable federal law or as necessary to comply with the laws of the State of
Delaware, this Plan shall be construed and interpreted in accordance with the
laws of the Commonwealth of Pennsylvania other than the conflict of law
provisions of such laws.
Page 17
<PAGE> 1
EXHIBIT 10.2
MASTER DISTRIBUTION AGREEMENT
Master Distribution Agreement (this "Agreement"), dated March 3, 1997,
between SYSCO CORPORATION and those of its operating subsidiaries and/or
divisions listed in Exhibit A (collectively, "SYSCO") and Balanced Care
Corporation ("Customer").
BACKGROUND
A. SYSCO performs purchasing, marketing, warehousing, quality control,
product research and development, transportation and distribution services for
foodservice customers.
B. Customer and/or Customer's wholly-owned subsidiaries operate the
establishments listed in Exhibit B (the "Customer Locations").
C. Customer desires to contract with SYSCO as its primary distributor for
foodservice products (i.e., supplying 80% or more of such products) to all of
its Customer Locations and SYSCO desires to perform these services.
In consideration of the mutual obligations set forth below, the
parties agrees as follows:
1. APPOINTMENT OF DISTRIBUTOR
Customer appoints SYSCO to serve as its primary distributor to the
Customer Locations of foodservice products within the product categories
described in Article 2 ("Products"). As "primary distributor", SYSCO will be
entitled to not less than 80% of Customer's purchase requirements for Products.
Customer's purchase requirements will be determined on an aggregate dollar
volume basis.
2. PRODUCTS COVERED BY THIS AGREEMENT
Products covered by this Agreement will be in the following
categories:
1. Canned & Dry 7. Seafood - Fresh & Frozen
2. Frozen Fruits, Vegetables, *8. Paper, Plastics and Disposables
Bakery Items, Etc. *9. Janitorial Supplies & Cleaning
3. Dairy Chemicals
4. Meat - Fresh & Frozen 10. Beverage
5. Fresh Fruit and Vegetables *11. Smallwares and Equipment
6. Poultry - CVP & Frozen *12. Medical Supplies
*Optional
Products will include SYSCO(R) brand, national brand and other
products as specified by Customer and stocked by SYSCO. Unless otherwise
specified, SYSCO(R) brand products will be
<PAGE> 2
utilized to insure consistency of quality and to minimize costs. A description
of SYSCO(R) brand quality levels is attached as Exhibit C.
All Products in any of the Product categories in this Section 2 will be priced
using the margin on sell set forth in Section 6.2 for that product category,
whether or not such Products are set forth in the order guides described in
Section 5.
3. SERVICE OBLIGATIONS OF SYSCO
3.1 Account Executive - SYSCO will assign an Account Executive and/or
a Customer Service Representative to service Customer's account. The Account
Executive and/or Customer Service Representative will maintain contact with
Customer Locations, on a mutually agreed basis, to review service requirements.
3.2 Purchasing Guides; Orders - SYSCO, with assistance from Customer,
will prepare purchase order guides to be used by Customer when placing orders.
Orders will be placed directly by Customer Locations ordering by item number as
specified in the purchase order guide.
3.3 Policies and Procedures - A policies and procedures guide will be
provided by SYSCO to all Customer Locations. Reasonable notice will be given to
Customer Locations when policies and procedures are changed by SYSCO. Credits,
pickups and other requests for service will be initiated by local Customer
Location personnel according to the guide.
3.4 Restocking - The delivering operating company reserves the right
to collect a restocking fee of 10% for returns due to Customer error or the
refusal to take delivery of Products ordered by Customer and/or such Customer
Locations if the delivery is made in the mutually predetermined delivery window
times on the established delivery days.
3.5 Marketing Funds - Sysco, because of the competitive nature of our
pricing and Terms of Sale, has no additional marketing monies available to fund
requests for special customer requests, sponsored events, donations, etc. other
than national conventions.
4. DELIVERY OBLIGATIONS OF SYSCO
Each SYSCO operating company will establish a delivery schedule that
is acceptable to each Customer Location within its market area and will use
reasonable, good faith efforts to make on-time deliveries.
5. DATA PROCESSING OBLIGATIONS OF SYSCO
SYSCO will provide the below listed reports:
A. Monthly Order Inventory Control Guide
B. Weekly Commodity Pricing
*C. Monthly Product Movement
*D. Quarterly Vendor Tracking
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<PAGE> 3
*Mailed to Customer's corporate office.
If Customer requests customized reports in addition to those noted above, SYSCO
will use reasonable efforts to provide such reports. In order to cover the
additional expenses of providing such reports, SYSCO will establish a
reasonable charge for doing so and, if such charge is acceptable to Customer,
will prepare and furnish such reports to Customer.
Sysco will also provide, at its expense, a personal computer software
system for Customer Locations to place orders directly with the delivering
operating company through the Customer Companion system which will generate a
Customer purchase order. Customer must supply whatever personal computer
hardware is necessary to enable it to utilize such order entry software system.
Computer hardware is not provided under the terms of this agreement; however,
it can be obtained through Sysco with an increase in the margin schedule.
6. PRICE
6.1. Definition of Cost - The price to Customer for all Products sold
under this Agreement (the "Sell Price") will be calculated on the basis of
Cost. "Cost" is defined as the cost of the Product as shown on the invoice to
the SYSCO operating company, plus applicable freight. The invoice used to
determine Cost will be the invoice issued to the SYSCO operating company by the
vendor or by the Sysco Merchandising Services department of SYSCO Corporation.
Cost is not reduced by cash discounts for prompt payment available to SYSCO or
SYSCO operating companies.
Applicable freight, in those cases where the invoice cost to the SYSCO
operating company is not a delivered cost, means that a reasonable freight
charge for delivering Products to the SYSCO operating companies has been added.
Freight charges may include common or contract carrier charges by the Product
vendor or a carrier, or charges billed by Alfmark, SYSCO's freight management
service. Applicable freight for any Product will not exceed the rate charged by
nationally recognized carriers operating in the same market for the same type
of freight service.
6.2. Calculation of Sell Price - The Sell Price of each Product sold
under this Agreement will equal (i) the Cost of such Product divided by (ii)
100% minus the percentage margin on sell specified below for such Product
Category, less (iii) promotional allowances reflected on invoices to SYSCO
operating companies which will be passed along as a temporary reduction in the
Sell Price for the term of the promotion.
<TABLE>
<CAPTION>
Margin on Sell (%)
Product Category Tier I Tier II
- ----------------
<S> <C> <C> <C>
1. Canned & Dry 10.0% 12.0%
2. Frozen Fruits, Vegetables, Bakery Items, Etc. 10.0% 12.0%
3. Dairy 10.0% 12.0%
4. Meat - Fresh & Frozen 8.5% 10.5%
5. Fresh Fruit and Vegetables -Market- -Market-
6. Poultry - CVP & Frozen 8.5% 10.5%
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
7. Seafood - Fresh & Frozen 8.5% 10.5%
8. Paper, Plastics and Disposables 15.0% 17.0%
9. Janitorial Supplies & Cleaning Chemicals 15.0% 17.0%
Exception: EcoLab -Contract- -Contract-
10. Beverage without Equipment or Service 15.% 17.0%
with Equipment and Service -Contract- -Contract-
11. Smallwares and Equipment 15.0% 17.0%
12. Medical Supplies 15.0% 17.0%
</TABLE>
TIER I - All of the pricing outlined within the Tier I pricing structure will
be utilized for all Customer Locations serviced by the following Sysco
operating companies:
Deaktor/Sysco Food Services Company
Mid-Central/Sysco Food Services, Inc.
Sysco Food Services of Arkansas, Inc.
Sysco Food Services of Central Pennsylvania, Inc.
Sysco Food Services - Horseheads
TIER II - The Tier II pricing structure will be utilized for all Customer
Locations serviced by Baraboo-Sysco Food Services.
All of the above margin percentages outlined within the Tier I pricing
structure would be based upon each individual Balanced Care facility
maintaining a minimum average order size of $1,300 per delivery.
EXHIBIT F - CPAS
- ----------------
$0-$1,499 Margins Stated
$1,500+ -.50%
$2,500+ -1.0%
$3,500+ -1.5%
For Example, a Product with a Cost of $10.00 per case, a margin on
sell of 10% and a promotional allowance of $.50 per case will have a Sell Price
calculated as follows:
calculate base price from margin $10.00 = $11.11
------
90%
less promotional allowance (.50)
------
Sell Price $10.61
======
The Sell Price for each Product on an order guide described in Section
5 will be calculated at the time the order guide is prepared. Sell Prices for
all Products on the order guide will be maintained until the next order guide
is prepared and sent to the Customer Location except that (i) all produce will
be priced at the time of invoicing and (ii) the Sell Prices of all
- 4 -
<PAGE> 5
other Products which are market commodity products (as determined by Sysco)
will change weekly to reflect declines and advances in the cost of those market
commodities.
6.3. Substitutions - Should a substitution be necessary, the SYSCO
operating company will ship a comparable product with Customer approval at a
Sell Price calculated using the same percentage of margin as on the original
Product.
6.4. Merchandising Services - SYSCO performs value-added services for
suppliers of SYSCO(R) brand and other products over and above procurement
activities typically provided. These value-added services include national
marketing, freight management, consolidated warehousing, quality assurance and
performance-based product marketing. SYSCO may recover the costs of providing
these services and may also be compensated for these services and considers
this compensation to be earned income. Receipt of such cost recovery or earned
income does not affect Cost and does not diminish SYSCO's commitment to provide
competitive prices to its customers.
6.5. Proprietary or Special Order Items - To offset the additional
costs associated with handling Products bearing Customers' trademarks or logos
as well as other Products purchased exclusively for Customer, an additional 2%
will be added to the margin on sell for all such proprietary items. No
participating SYSCO operating company will have an obligation to carry a
proprietary item if Customer purchases less than five cases per week of that
item from such operating company.
If SYSCO and Customer cease doing business for any reason, Customer
will purchase, or cause a third party to purchase, all remaining
proprietary/special order items in SYSCO's inventory at SYSCO's Cost plus a
reasonable transfer and warehouse handling charge not to exceed 50% of the Cost
of such proprietary/special order items. In such an event, Customer will
purchase or cause to be purchased all perishables within seven (7) days of the
termination of this Agreement and all frozen and dry proprietary/special order
items within fifteen (15) days of the termination of this Agreement.
SYSCO's policy is that all suppliers provide indemnity agreements and
insurance coverage for products purchased by SYSCO. In order to protect SYSCO
when it stocks proprietary/special order items at Customer's request and if and
only if the vendor of such items will not provide an indemnity, Customer will
defend, indemnify and hold harmless SYSCO and its employees, officers and
directors from all actions, claims and proceedings, and any judgments, damages
and expenses resulting therefrom, brought by any person or entity for injury,
illness and/or death or for damage to property in either case arising out of
the delivery, sale, resale, use or consumption of any proprietary/special order
item except to the extent such claims are caused by the negligence of SYSCO,
its agents or employees.
6.6. Increase in Sell Price for Split Cases - Due to the added costs
associated with handling less than full cases, a special handling charge of 5%
will be added to the Sell Price of all Product sold in split cases.
- 5 -
<PAGE> 6
6.7. Adjustment in Margins for Unanticipated Problems - If the
operating costs of SYSCO or any particular operating company are increased as a
direct result of a significant regional or national economic problem, including
but not limited to fuel cost increases and power shortages, SYSCO may with the
prior consent of Customer increase the margin on sell specified in Section 6.2
to compensate for such increased costs during the period such increases are
experienced.
6.8. National Agreements - The pricing specified in this Agreement is
based on Customer's representations concerning its service needs, including but
not limited to its anticipated purchase volumes, drop sizes, Product mix,
location of Customer Locations and number of deliveries, as well as Customer's
compliance with its payment and other obligations specified in this Agreement.
If Sysco determines after ninety (90) days from the date of this Agreement that
Customer requires service which varies materially from the levels contemplated
in Customer's representations made to Sysco in negotiating this Agreement,
Sysco reserves the right to request an increase in the margin on sell specified
in Section 6.4. If the parties are unable to agree on such an increase and
Customer's service requirements and/or contract compliance continue to vary
from that contemplated or required by this Agreement, Sysco may terminate this
Agreement on thirty (30) days written notice to Customer.
6.9. Program Review - The pricing specified in this Agreement is based
on Customer's representations concerning its service needs, including but not
limited to its anticipated purchase volumes, drop sizes, Product mix, location
of Customer Locations and number of deliveries, as well as Customer's
compliance with its payment and other obligations specified in this Agreement.
If SYSCO determines after one hundred eighty (180) days from the date of this
Agreement that Customer requires service which varies materially from the
levels contemplated in Customer's representations made to SYSCO in negotiating
this Agreement, SYSCO reserves the right to request an increase in the margin
on sell specified in Section 6.4. If the parties are unable to agree on such an
increase and Customer's service requirements and/or contract compliance
continue to vary from that contemplated or required by this Agreement, SYSCO
may terminate this Agreement on thirty (30) days written notice to Customer.
7. Credit Terms
7.1. Payment Obligation
A. Payment is due twenty-eight (28) days from the date of the
invoice (delinquent on the 29th day).
**B. Payment is due on the thirty (30) day EOM (delinquent on the
31st day). Example:
<TABLE>
<CAPTION>
December 1996 Purchases
S M T W T F S
<S> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
</TABLE>
- 6 -
<PAGE> 7
<TABLE>
<S> <C> <C>
29 30 31
</TABLE>
<TABLE>
<CAPTION>
January 1997
S M T W T F S
<S> <C> <C> <C> <C> <C> <C>
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30* 31
</TABLE>
*Payment for December invoices is due on January 30th.
**Payment terms outlined within Section 7.1/B are only for
those Foster Care locations serviced by Mid-Central Sysco.
SYSCO may also modify, with thirty (30) days written notice, its
payment terms specified in this Section 7.1 if payments are not made when due
and/or the financial condition of the Customer materially deteriorates.
7.2. Service Charge - If invoices are not paid when due, a service
charge of one and one-half percent (1.5%) will be assessed to Customer;
provided, however, if such service charge is deemed to be in excess of the
maximum amount permitted by law, said service charge will be reduced to the
lawful maximum amount. Unpaid invoice balances and finance charges due to SYSCO
will be deducted from any credits due to Customer.
7.3. Guarantees and Applications - Customer will complete, execute and
deliver a new account form to SYSCO before this Agreement becomes binding upon
SYSCO. If required by SYSCO, Customer will submit a guarantee of Customer's
obligations under this Agreement executed by a third party mutually agreed upon
by Customer and Sysco.
7.4. Financial Information - The continuing creditworthiness of
Customer is of central importance to SYSCO. In order to enable SYSCO to monitor
Customer's financial condition, within ninety (90) days of Customer's fiscal
year end. Customer will supply annual financial statements to SYSCO consisting
of an income statement, balance sheet and statement of cash flow. SYSCO may
request such further financial information from Customer from time to time as
will reasonably enable SYSCO to accurately assess Customer's financial
condition.
8. INCENTIVE PAYMENTS TO CUSTOMER
Allowances earned by each Customer Location are based on obtaining or
qualifying for the minimum average order size specified on Exhibit F in each
calendar month, and will only be awarded if each invoice is paid within the
agreed payment terms specified in Section 7.1 of this Agreement. Allowances
will not be paid on sales of items the price of which is calculated on the
basis of Cost plus a fixed fee. Allowances also will not be paid on sales of
Products where Customer and the Product vendor have agreed on the selling price
to SYSCO. Customer allowances and minimum order size requirements are set
forth on Exhibit F.
- 7 -
<PAGE> 8
Customer will defend, indemnify and hold harmless SYSCO, its operating
companies their officers and employees from any suits, claims, demands, losses
or damages arising out of SYSCO's payment of the allowances specified in this
Agreement.
9. PRICE VERIFICATION
Customer will be allowed one annual price verification for purchases
made under this Agreement. SYSCO will furnish computer verification of Costs
for the Products to be price verified, subject to the following limitations:
1. Date, time and place of price verification must be mutually
agreed;
2. Fifteen (15) working days notice to SYSCO;
3. Items to be price verified should not exceed fifteen (15) line
items, and will be taken from the price list or purchasing order
guide;
4. The period for which pricing is to be verified not to begin more
than twelve (12) months prior to the date of the price
verification.
It is understood that Customer's price verification will consist of
reviewing SYSCO's computer verification of Costs.
10. TERM
The term of this Agreement will begin on March 3, 1997, and terminate
three (3) year(s) from such date. This Agreement may be terminated prior to
such date:
(a) By either party upon thirty (30) days written notice to the
other party for failure of the other party to comply with any
provision of this Agreement;
(b) By SYSCO upon written notice to Customer if Customer's financial
position deteriorates materially, determined by SYSCO in its
sole judgment; and
(c) By either party upon sixty (60) days prior written notice to the
other party.
Upon such termination, Customer agrees (i) to fully comply with its
obligations under Section 6.5 of this Agreement and (ii) to pay all invoices at
the earlier of the time they are due under Section 7.1 above or two (2) weeks
from the date of the last shipment to Customer or a Customer Location.
11. MISCELLANEOUS
11.1. Assignment - Neither party may assign this Agreement without the
prior written consent of the other party (which consent shall not unreasonably
be withheld) provided that SYSCO may utilize its operating companies to perform
as indicated in this Agreement. Subject to this limitation, this Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
each of the parties.
11.2. Entire Agreement - The parties expressly acknowledge that this
Agreement contains the entire agreement of the parties with respect to the
relationship specified in this
- 8 -
<PAGE> 9
Agreement and supersedes any prior arrangements or understandings between the
parties with respect to such relationship.
11.3. Amendments - This Agreement may only be amended by a written
document signed by each of the parties.
11.4. Notices - Any written notice called for in this Agreement may be
given by personal delivery, first class mail, overnight delivery service for
facsimile transmission. Notices given by personal delivery will be effective on
delivery; by overnight service on the next business day; by first class mail
five business days after mailing; and by facsimile when an answer back is
received. The address of each party is set forth below.
Executed as of the date set forth at the beginning of this Agreement.
SYSCO CORPORATION
Richard E. Abbey
Regional Vice President,
Multi-Unit Sales By: /s/ Richard E. Abbey
__________________________
71 Fuller Road
Albany, NY 12205
Telephone: (518) 437-6257 Its: Regional Vice President,
Facsimile: (518) 435-9365 Multi-Unit Sales
___________________________
Copy to:
Dave Smallwood
SYSCO Corporation
1390 Enclave Parkway
Houston, Texas 77077-2099
Telephone: (713) 584-1390
Facsimile: (713) 584-1744
BALANCED CARE CORPORATION
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055 By: /s/ Russell DiGilio
__________________________
Attention: Russell DiGilio
Telephone: 717-796-6100 Its: Vice President
Facsimile: 717-796-6150 --------------------------
Copy: Director of Legal Services
- 9 -
<PAGE> 1
EXHIBIT 10.3
SUBLEASE
1. PARTIES. This Sublease, dated, for reference purposes only, January 16,
1997, is made by and between RYDER TRUCK RENTAL, INC., a Florida corporation
whose address is 3600 NW 82 Avenue, Miami, FL 33166 (the "Sublessor") and
BALANCED CARE CORPORATION, whose address is 5021 Louise Drive, Mechanicsburg,
PA 17055 (the " Sublessee").
2. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor for the term, at the rental, and upon all of the
conditions set forth herein, that certain real property situated in the City of
Mechanicsburg, State of Pennsylvania, commonly known as Corporate Center 15,
4900 Ritter Road and described as 6,218 rentable square feet or 5,633 usable
square feet on the 2nd floor. Said real property, includes the land and all
improvements thereon (the "Premises"). Sublessor will retain use of 1,246 sq.
ft. of the Premises until May 31, 1997.
3. TERM.
3.1 TERM. The term of this Sublease shall be for eighteen (18) months
commencing on February 15, 1997 and ending on August 14, 1998 unless sooner
terminated pursuant to any provision hereof.
3.2 DELAY IN COMMENCEMENT. Notwithstanding said commencement date, if for
any reason Sublessor cannot deliver possession of the Premises to Sublessee on
said date. Sublessor shall not be subject to any liability therefore, nor shall
such failure affect the validity of this Sublease or the obligations of
Sublessee hereunder or extend the term hereof, but in such case Sublessee shall
not be obligated to pay rent until possession of the Premises is tendered to
Sublessee; provided, however, that if Sublessor shall not have delivered
possession of the Premises within fifteen (15) days from said commencement
date. Sublessee may, at Sublessee's option, by notice in writing to Sublessor
within five (5) days thereafter, cancel this Sublease, in which event the
parties shall be discharged from all obligations thereunder. If Sublessee
occupies the Premises prior to said commencement date, such occupancy shall be
subject to all provisions hereof, such occupancy shall not advance the
termination date and Sublessee shall pay rent for such period at the initial
monthly rates set below.
4. RENT. Sublessee shall pay to Sublessor as rent for the Premises equal
monthly payments of Five Thousand Nine Hundred Ninety-seven and 54/100 Dollars
($5,597.54) from February 15, 1997 through May 31, 1997 and Seven Thousand Five
Hundred and 00/100 Dollars ($7,500.00), for the balance of the term, in advance
on the 1st day of each month of the term hereof. Sublessee shall pay Sublessor
upon the execution hereof Seven Thousand Five Hundred and 00/100 Dollars
($7,500.00) as rent for the month of March, 1997. Rent for any period during
the term hereof which is for less than one month shall be a prorata portion of
the monthly installment. Rent shall be payable in lawful money of the United
States to Sublessor at the following address: Ryder Truck Rental, Inc., Attn:
Environmental & Facilities Services, 3600
<PAGE> 2
NW 36th Street, Miami, Florida 33166, or to such other persons or at such other
places as Sublessor may designate in writing.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon execution
hereof Seven Thousand Five Hundred and 00/100 Dollars ($7,500.00) as security
for Sublessee's faithful performance of Sublessee's obligations hereunder. If
Sublessee fails to pay rent or other charges due hereunder or otherwise
defaults with respect to any provision of this Sublease, Sublessor may use,
apply or retain all or any portion of said security deposit for the payment of
any rent or other charge in default or for the payment of any other sum to
which Sublessor may become obligated by reason of Sublessee's default, or to
compensate Sublessor for any loss or damage which Sublessor may suffer thereby.
If Sublessor so uses or applies all or any portion of said security deposit,
Sublessee shall within ten (10) days after written demand therefore deposit
cash with Sublessor in an amount sufficient to restore said security deposit to
the full amount hereinabove stated and Sublessee's failure to do so shall be a
material breach of this Sublease. Sublessor shall not be required to keep said
security deposit separate from its general accounts. If Sublessee performs all
of Sublessee's obligations hereunder, said security deposit, or so much thereof
as has not theretofore been applied by Sublessor, shall be returned, without
payment of interest or other increment for its use to Sublessee at the
expiration of the term hereof, and after Sublessee has vacated the Premises. No
trust relationship is created herein between Sublessor and Sublessee with
respect to said Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for office purposes
and for no other purpose. There shall be no fueling at the Premises.
6.2 COMPLIANCE WITH LAW.
(a) Sublessee shall, at Sublessee's expense, comply with all
applicable laws and environmental statutes, ordinances, rules, regulations,
orders of any federal, state, or municipal government in effect at any time
during the term, restrictions of record, and requirements in effect during the
term or any part of the term hereof regulating the use by Sublessee of the
Premises. Sublessee shall not use or permit the use of the Premises in any
manner that will tend to create waste or a nuisance or, if there shall be more
than one tenant of the building containing the Premises, which shall tend to
disturb such other tenants.
(b) Sublessee will not take any action which could result in a lien
being imposed on the Premises by the state or federal government under any
environmental statute. Furthermore, Sublessee shall not generate, store or
dispose of any hazardous, toxic or regulated waste, materials or substances on
or at the Premises without Sublessor's prior written consent, which consent may
be withheld in Sublessor's sole and unlimited discretion.
6.3 CONDITION OF PREMISES. Sublessee hereby accepts the Premises in their
condition existing as of the date of the execution hereof, subject to all
applicable zoning, municipal, county and state laws, ordinances, and
regulations governing the use of the Premises, and accepts this Sublease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto.
2
<PAGE> 3
Sublessee acknowledges that neither Sublessor nor Sublessor's agents have made
any representation or warranty as to the suitability of the Premises for the
conduct of Sublessee's business.
7. MASTER LEASE.
7.1 Sublessor is the lessee of the Premises by virtue of a Lease, wherein
Szeles Real Estate Development Company is the lessor (the "Master Lessor"),
true copies of which are attached hereto as Exhibit A (the "Master Lease").
7.2 This Sublease is and shall be at all times subject and subordinate to
the Master Lease.
7.3 The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and conditons of
the Master Lease except for those provisions of the Master Lease which are
directly contradicted by this Sublease in which event the terms of this
Sublease document shall control over the Master Lease. Therefore, for the
purposes of this Sublease, wherever in the Master Lease the word "Landlord" is
used it shall be deemed to mean the Sublessor herein and wherever in the Master
Lease the word "Tenant" is used it shall be deemed to mean the Sublessee
herein.
7.4 During the term of this Sublease (and for all periods subsequent for
obligations which have arisen prior to the termination of this Sublease),
Sublessee does hereby expressly assume and agree to perform and comply with for
the benefit of Sublessor and Master Lessor, each and every obligation of
Sublessor under the Master Lease except for the following paragraphs which are
excluded therefrom: Section 3., 4., 22. and the Special Provisions 1., 3. and
4..
7.5 The obligations that Sublessee has assumed under paragraph 7.4 hereof
are hereinafter referred to as the "Sublessee's Assumed Obligations". The
obligations that Sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the "Sublessor's Remaining Obligation."
7.6 Sublessee shall hold Sublessor free and harmless of and from all
liability, judgments, costs, damages, claims or demands, including reasonable
attorneys fees, arising out of Sublessee's failure to comply with or perform
Sublessee's Assumed Obligations.
7.7 Sublessor agrees to maintain the Master Lease during the entire terms
of this Sublease, subject, however, to any earlier termination of the Master
Lease without the fault of the Sublessor, and to comply with or perform
Sublessor's Remaining Obligations and to hold Sublessee free and harmless of
and from all liability, judgments, costs, damages, claims or demands arising
out of Sublessor's failure to comply with or perform Sublessor's Remaining
Obligations.
7.8 Sublessor represents to Sublessee that the Master Lease is in full
force and effect and that no default exists on the part of any party to the
Master Lease.
3
<PAGE> 4
8. CONSENT OF MASTER LESSOR. In the event that the Master Lease requires that
Sublessor obtain the consent of Master Lessor to any subletting by Sublessor
then this Sublease shall not be effective unless within five (5) days of the
date hereof, Sublessor delivers to Sublessee written evidence that Master
Lessor has given its consent to this Subletting.
9. ATTORNEY'S FEES. If any party named herein brings an action to enforce the
terms hereof or to declare rights hereunder, the prevailing party in any such
action, on trial and appeal, shall be entitled to his reasonable attorneys'
fees to be paid by the losing party.
10. EVENTS OF DEFAULT/REMEDIES. In the event that Sublessee shall default in
the performance, keeping, or observance of any covenant, condition or
undertaking to be performed, kept, or observed by Sublessee hereunder and fails
to cure such default on or before five (5) days following the receipt of
written notice of such default by Sublessor to Sublessee, Sublessor shall have
all remedies as described in the Master Lease, or Sublessor may terminate this
Sublease and repossess the Sublease Premises or Sublessor may exercise any and
all rights as provided under the law of the State where the Sublease Premises
are located.
11. ADDITIONAL PROVISIONS.
(a) If at any time after the execution of this Sublease, it shall become
necessary or convenient for one of the parties hereto to serve any notice,
demand or communication upon the other party, such notice, demand or
communication shall be in writing signed by the party serving the same,
deposited in the registered or certified United States mail, return receipt
requested, postage prepaid, or by prepaid air courier service, and (i) if
intended for Sublessee shall be addressed to:
Balanced Care Corporation
5021 Louise Dr.
Mechanicsburg, PA 17055
and (ii) if intended for Sublessor shall be addressed to:
RYDER TRUCK RENTAL, INC.
Attn: Environmental & Facilities Services
P.O. Box 020816, Miami, FL 33102-0816
or, for air courier purposes: 3600 NW 82nd Avenue, Miami, FL 33166
or to such other address as either party may have furnished to the other in
writing as a place for the service of notice. Any notice so mailed shall be
deemed to have been given as of the time the same deposited in the United
States mail or picked up by the overnight delivery service.
(b) Sublessee shall not compete with Sublessor nor service any competitors
of Sublessor at the Premises.
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<PAGE> 5
(c) This Sublease must be accepted or rejected by Sublessee and returned
to Sublessor within five (5) days of Sublessor's date of execution hereof, or
at Sublessor's option, it shall be deemed void and of no effect.
IN WITNESS WHEREOF, the undersigned have executed this Sublease Agreement
as of the dates specified below.
BALANCED CARE CORPORATION RYDER TRUCK RENTAL, INC.
Don Napoli
By: /s/ Robert J. Sutton By: /s/ Don Napoli
_________________________ _________________________
Title: Vice President Title: Director - Properties & Construction
______________________ Date: January 16, 1997
Date: January 16, 1997 _______________________
________________________ TIN: 59-0747035
TIN: ________________________
5
<PAGE> 1
EXHIBIT 10.4
SUBLEASE AGREEMENT
AGREEMENT made this 26th day of June, 1996, between LIBERTY MUTUAL
INSURANCE COMPANY, a Massachusetts corporation, having a usual place of
business at 175 Berkeley Street, Boston, Massachusetts (hereinafter called the
"Tenant"), and Balanced Care Corporation, a Delaware corporation, with a usual
place of business at 3507 Market Street, Camp Hill, Pennsylvania (hereinafter
called the "Subtenant").
WITNESSETH THAT
WHEREAS, by a lease dated July 7, 1989, as amended on November 20, 1993
(hereinafter called the "Main Lease"), Elliott & Associates, Inc., successor in
interest to Rossmoyne Business Partners III (hereinafter called the
"Landlord"), currently leases 15,115 rentable square feet of space in the
building located at 5021 Louise Drive, Mechanicsburg, Pennsylvania (the
"Building") to the Tenant for a term which ends on August 31, 2001; and
WHEREAS, a true and accurate copy of the Main Lease and all amendments thereto
is attached hereto as Exhibit "A" and incorporated herein by reference; and
WHEREAS, the Tenant has agreed to sublease the area outlined in red on the Plan
attached hereto as Exhibit "B," containing approximately 6,243 rentable square
feet (the "Premises") to the Subtenant on the terms stated herein.
NOW, THEREFORE, it is agreed between the parties hereto as follows:
1. (a) Tenant hereby leases to the Subtenant, and Subtenant hereby
takes and leases from the Tenant, the Premises for a period commencing
on the latest date written below as the date of execution by both
parties and the date of acceptance hereof by Landlord (the "Access
Date") and terminating on August 31, 2001 (the "Term"). In the event
Tenant cannot provide Subtenant access to the Premises on the Access
Date for reasons beyond the reasonable control of Tenant, the Term
shall commence on such date as Tenant notifies Subtenant that it may
occupy the Premises, and the Commencement Date, as defined below,
shall be one month from the Access Date. The Term shall not be
extended, and Tenant shall have no further liability to Subtenant for
failure to grant access to the Premises at the commencement of this
Sublease.
(b) Subtenant shall have access to the Premises commencing June 1,
1996 for purposes of constructing its improvements to the Premises at
Subtenant's sole cost. Rent shall commence as of July 1, 1996 (the
"Commencement Date"), which date shall be used for purposes of
calculating anniversary dates and other time periods required
hereunder.
(c) It is expressly understood and agreed that this Sublease is
subject to all of the terms and provisions of the Main Lease. In the
event that the Main Lease is terminated for any reason whatsoever,
this Sublease shall automatically terminate effective as of the
<PAGE> 2
termination date of the Main Lease. Tenant agrees to forward promptly
to Subtenant any default notices received from Landlord under the Main
Lease.
(d) Notwithstanding the foregoing, Tenant shall have the right,
exercisable on no less than 90 days' written notice as of the end of
the second and third year from the Commencement Date, to terminate
this Sublease without liability except as set forth in this paragraph
in the event Subtenant had no later than 180 days prior to the end of
such year notified Tenant of its need for a specified amount of
additional space in the Building, and Tenant was unable to accommodate
such needs. It shall be a further condition of the exercise of this
right of termination that Subtenant provide Tenant with a copy of the
lease or sublease actually executed by Subtenant with another landlord
for an amount of space at least equal to that in the Premises plus the
additional space requested by Subtenant pursuant to this paragraph;
and that Subtenant pay Tenant a fee for such termination equal to
three months' Fixed Rent if this Sublease is terminated effective the
end of the second year, and two months' Fixed Rent if this Sublease is
terminated effective the end of the third year.
(e) The parties acknowledge that approximately 1,278 rentable square
feet of the Premises (the "SLC Space") are currently occupied by
Sylvan Learning Center ("SLC"), and that SLC may hold over as a tenant
at sufferance of Landlord pending its vacation of its space. Tenant's
failure to furnish immediate access to the SLC Space to Subtenant as
of the Access Date shall not affect the commencement or validity of
this Sublease except for the rental adjustments set forth in Section
3(c) below. Tenant shall use its best efforts to assure that Landlord
diligently pursues eviction proceedings against SLC to obtain
possession of the SLC Space for Tenant and Subtenant.
2. Subtenant acknowledges and agrees that it has had a full and complete
opportunity to review the Main Lease (which includes all addenda thereto).
Subtenant hereby expressly agrees and covenants to the Landlord, who has signed
its written consent to this Sublease Agreement, and to the Tenant, that
Subtenant assumes, is bound by and shall faithfully perform all of the
obligations of the Tenant as tenant under the Main Lease in respect of the
Premises and the other areas to which Subtenant has access hereunder, except as
otherwise expressly provided for herein. It is understood and agreed that the
interest of the Subtenant hereunder and in and to the Premises is subject and
subordinate to the Main Lease. It is further agreed that the relationship
between, and rights of, the Subtenant and Tenant shall, except as expressly
provided for herein, be governed by the Main Lease and that the Tenant
specifically shall have all the rights granted to the Landlord under the Main
Lease with respect to the enforcement of the provisions of this Sublease
Agreement and the termination hereof, provided however, that the Tenant shall
not be deemed to guarantee performance by the Landlord of its obligations under
the Main Lease and the Tenant shall have no obligation to the Subtenant for any
default in this Sublease Agreement caused by the default or any other act of
the Landlord under the Main Lease. It is further agreed that performance by
Tenant shall be conditional upon the performance by the Landlord of its
obligations under the Main Lease, which obligations Tenant agrees to use its
best efforts to enforce insofar as they directly relate to Subtenant's use and
occupancy of the Premises. Tenant
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<PAGE> 3
shall have, as against Subtenant, all the rights and remedies of Landlord as
against Tenant in the Main Lease with respect to defaults by Subtenant
hereunder.
3. Subtenant covenants and agrees with Tenant to pay to Tenant as Rent during
the term hereof, without prior notice or demand and without deductions,
counterclaims or setoff:
(a) Fixed Rent - During the Term, Subtenant agrees to pay to Tenant
the annual sums set forth below, payable in equal monthly installments
due on the first day of each month in advance, commencing on the
Commencement Date. In the event that the Term commences or terminates
on a day other than the first day of the month, the Fixed Rent for
such period of less than a month, shall be calculated on a pro rata
basis.
<TABLE>
<CAPTION>
RENT PERIOD ANNUAL RENT MONTHLY PAYMENT
<S> <C> <C>
July 1, 1996-June 30, 1997 $76,500.00 $6,375.00
July 1, 1997-June 30, 1998 78,000.00 6,500.00
July 1, 1998-June 30, 1999 79,500.00 6,625.00
July 1, 1999-June 30, 2000 81,000.00 6,750.00
July 1, 2000-June 30, 2001 82,500.00 6,875.00
July 1, 2001-Aug. 31, 2001 14,000.00 7,000.00
</TABLE>
(b) Notwithstanding the foregoing, Subtenant shall be entitled to a
partial abatement of Fixed Rent in the amount of $2,000 per month for
the first three months of the Term, and $1,000 per month for the
second three months of the Term.
(c) Rental payments for any period during which Subtenant does not
have access to the SLC Space shall be reduced by $1,357.88 per month,
and the abatement described in subsection (b) above shall be equal to
$1,500 per month for any month during the first six months of the Term
during which Subtenant does not have such access.
(d) Fixed Rent payable by Subtenant hereunder shall be paid to Tenant
at the following address: Liberty Mutual Insurance Company,
Disbursement Department, 100 Main Street, Dover, New Hampshire 03820,
or such other place as Tenant may from time to time designate in
writing.
4. Tenant acknowledges receipt from Subtenant of a Security Deposit in the
amount of one month's rent ($6,375.00) to be held by Tenant as security, for
and during the term and any extension thereof, which deposit shall be returned
to Subtenant without interest within 30 days following the termination of this
Sublease provided there has been no breach of the undertakings of the
Subtenant. In no instance shall the amount of the Security Deposit be
considered a measure of liquidated damages. All or any part of the Security
Deposit may be applied by Tenant in total or partial satisfaction of any
default by Subtenant. The application of all or any part of the Security
Deposit to any obligation or default of Subtenant under this Sublease shall not
deprive Tenant of any other rights or remedies Tenant may have nor shall such
application by Tenant constitute a waiver by Tenant.
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<PAGE> 4
5. Subtenant acknowledges that certain services to the Premises and the
Building are to be provided by Landlord under the Main Lease but, that to the
extent such services are to be paid for by Tenant under the Main Lease, Tenant
will continue to do so, except for services such as after-hours electric and
HVAC usage, dependent on the particular activities of Subtenant, and janitorial
services, which shall be paid for directly by Subtenant. Subtenant agrees that
it shall look solely to Landlord for the provision of Landlord's services under
the Main Lease, and hereby releases Tenant from any liability in connection
therewith. Tenant agrees to use its best efforts to have Landlord clean the
windows and walls of the Building prior to the Commencement Date. Subtenant
shall, with respect to the Premises, have the same rights as Tenant under the
Main Lease to effect cure of Landlord's defaults in providing the services
required of Landlord thereunder; provided, however, that should Landlord
successfully contest any withholding or offset of rent relating to repairs
effected or other alleged defaults cured by Subtenant, then Subtenant shall pay
to Tenant the amount by which its deduction from rent was adjudged to have been
excessive. In any proceeding in connection with the foregoing sentence,
Subtenant shall have the right to participate at its own expense in defense of
its own interests.
6. Subtenant covenants and agrees to use the Premises for general of fire use
and for no other purpose. During Subtenant's use and occupancy of the Premises,
Subtenant shall comply with all of the provisions of the Main Lease and any
Rules and Regulations thereunder, as if Subtenant were the Tenant under the
Main Lease, except to the extent expressly inconsistent with the provisions of
this Sublease. Subtenant acknowledges and agrees that the Premises are being
leased to Subtenant in their "AS IS" condition and Tenant does not warrant and
represent the adequacy or sufficiency of the Premises, the Building, the Common
Areas, any improvements or furnishings therein or thereto or the real estate of
which they constitute a part, or any part thereof, for Subtenant's present or
future operations.
7. Subtenant shall not undertake or make any alterations, additions,
improvements or changes in or to the Premises except in accordance with the
terms of the Main Lease (including the requirement of Landlord's prior written
consent) and with the prior written consent of Tenant, including, without
limitation, Tenant's prior written approval of all plans, drawings and
specifications relating to any such alteration, addition, improvement or
change. Subtenant shall keep the Premises and the Building free from
mechanics, materialmen's and all other liens arising out of any work performed,
labor supplied, materials furnished or other obligations incurred by Subtenant.
If any such lien is filed against the Premises or the Building, Subtenant
shall, at its sole cost and expense, cause the same to be discharged by payment
or bonding not later than ten (10) days after the date on which such lien is
filed.
8. Subtenant shall, at its sole cost and expense, keep in full force and effect
during the term hereof, with companies acceptable to Tenant and authorized to
do business in the Commonwealth of Pennsylvania, the insurance required to be
maintained by Tenant under the terms of the Main Lease. Subtenant shall, upon
request by Tenant, furnish Tenant with a certificate of such policy or policies
and thereafter with any renewals thereof. Such policies shall name Tenant and
Landlord as additional insureds and shall be primary and non-contributing with
any insurance carried by Tenant. Said policies shall provide that they shall
not be canceled or modified without thirty (30) days prior written notice to
Tenant.
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<PAGE> 5
9. Subtenant shall, at Subtenant's sole cost and expense, keep the Premises,
equipment, facilities, fixtures and furniture therein, neat, clean and in as
good order, repair and condition as when Subtenant took possession, ordinary
wear and tear excepted, and shall perform all obligations of Tenant under the
Main Lease with respect thereto, it being agreed and understood that Tenant
shall not be required to repair or maintain any part or portion of the
Premises. Except as may otherwise be provided in this Sublease, Tenant shall
not now or at any time in the future be required to make any expenditures
whatsoever with respect to the Premises and does not assume any obligation to
perform the terms, covenants and conditions contained in the Main Lease on the
part of Landlord to be performed, and in the event that Landlord should fail to
perform any of the terms, covenants and conditions contained in the Main Lease,
Tenant shall be under no obligation or liability whatsoever to Subtenant. Upon
the expiration or earlier termination hereof, Subtenant shall deliver
possession of the Premises to Tenant in as good order, condition and repair as
when Subtenant took possession thereof, ordinary wear and tear thereof only
excepted.
10. Subtenant shall comply with all of the requirements of all governmental
authorities and insurance carriers now or hereafter in force and applicable to
the Premises or any part thereof, and Tenant shall likewise so comply with
respect to its activities directly affecting the Premises. Each party (the
"first party") shall indemnify and hold the other (the "second party") harmless
from and against any loss, cost, damage, liability and expense by reason of
failure so to comply in any respect or by reason of any accident, injury
(including death), loss or damage, resulting to person or property by reason of
any wrongful act done or wrongful failure to act upon or about the Premises as
against the second party by the first party or its agents, employees, invitees
and/or contractors.
Neither Tenant nor its agents, employees or contractors shall be liable for any
accident, injury (including death), loss or damage resulting to any person or
property sustained by Subtenant or Subtenant's agents, employees, invitees
and/or contractors, or any occupant of the Building or anyone claiming by or
through them resulting from any latent defect in the Building or the Premises,
or in any equipment or appurtenances in same, or resulting from any accident or
occurrence in or about the Building or the Premises, or resulting directly or
indirectly from any acts of negligence of any tenant or occupant of the
Building, or of any person whatsoever other than Tenant, its employees and
agents. All property of Subtenant, Subtenant's agents, employees, contractors
and invitees, or of any occupant or user of the Premises shall be at the sole
risk of such person only, and Tenant shall not be liable for any damage thereto
other than such as results directly from the negligence or willful wrongdoing
of Tenant, its employees or agents (except such as may directly result from the
negligence or willful misconduct of Tenant, its employees or agents).
Subtenant agrees to indemnify and hold the Tenant harmless from and against any
claim of the Landlord under the Main Lease (except in respect of obligations
specifically assumed by Tenant hereunder), and against any claim for injury to
persons, including death, and for property damage, arising out of the occupancy
and use of the Premises by Subtenant, its officers, partners, employees, agents
or invitees.
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<PAGE> 6
A party entitled to indemnification under this Sublease (the "indemnitee")
shall give notice to the indemnifying party (the "indemnitor") of a claim or
other circumstances likely to give rise to a request for indemnification,
promptly after the indemnitee becomes aware of the same. The indemnitor shall
be afforded the opportunity to undertake the defense of and to settle by
compromise or otherwise any claim for which indemnification is available under
this Sublease. The indemnitor's selection of legal counsel is subject to the
indemnitee's approval, which approval shall not be unreasonably withheld. If an
indemnitor so assumes the defense of any claim, the indemnitee may participate
in such defense with legal counsel of the indemnitee's selection at the expense
of the indemnitee. If the indemnitor, before expiration of fifteen (15) days
after receipt of notice of a claim by the indemnitee under this provision, has
not assumed the defense thereof, the indemnitee may thereupon undertake the
defense thereof on behalf of, and at the risk and expense of, the indemnitor,
with all reasonable costs and expenses of such defense to be paid by the
indemnitor.
11. This Sublease, and the rights and obligations of all parties hereto, is
subject to the condition precedent of the consent of Landlord to this Sublease,
such consent to be in form and substance satisfactory to the Tenant.
12. With respect to any damage or destruction by fire or other casualty, or any
taking by eminent domain, the provisions of the Main Lease shall govern; it
being understood that Tenant shall have the right, without Subtenant's consent,
to make whatever elections are provided to Tenant under the Main Lease at
Tenant's sole discretion. Without limiting such discretion, Tenant agrees, to
the extent reasonably practical and pertinent to the Premises, to consult with
Subtenant in making any such elections, and to notify Subtenant as soon as
possible of Tenant's elections.
13. If Subtenant retains possession of the Premises or any part thereof after
the termination of the term of this Agreement whether by lapse of time or
otherwise, without limiting any other rights and remedies which Tenant may have
on account of such holding over by Subtenant, Subtenant shall pay to Tenant all
direct and consequential damages suffered by Tenant on account of such holding
over by Subtenant, including, without limitation, any rents, costs, and
expenses which the Landlord charges to the Tenant on account thereof.
14. Notwithstanding any provision in the Main Lease to the contrary, Subtenant
shall not sublet the Premises, or any portion thereof, or assign in any way
this Sublease, or suffer or permit the same to be assigned or transferred by
operation of law or otherwise. The foregoing shall not apply, so long as
Subtenant is not in default hereunder, to any sublease by Subtenant to a
company controlling, controlled by, or under common control with Subtenant;
provided Subtenant shall give Tenant notice thereof no less than one month in
advance, together with a copy of the proposed sublease; and provided further
that Tenant shall be entitled to require such changes as are reasonably
required to prevent any default under this Sublease or the Main Lease.
15. All property of Subtenant remaining on the Premises after the expiration or
other termination of this Sublease Agreement shall be deemed abandoned and
Tenant may dispose thereof in its sole discretion without any obligation to
account to Subtenant therefor.
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<PAGE> 7
16. The Tenant hereby reserves the right to enter onto the Premises during
business hours from time to time to ascertain whether the Subtenant is in
compliance with the provisions of this Sublease Agreement.
17. The Tenant warrants and represents that it has no knowledge of any default
by itself or by the Landlord under the Main Lease; that the Main Lease is in
full force and effect and that the Tenant has a good right to sublease its
interest in the same as herein provided, subject to the written consent of the
Landlord; that the leasehold interest of the Tenant is not encumbered; and that
the Tenant has done nothing to defeat or impair this Sublease Agreement. The
Tenant further warrants and covenants that it will pay all rents as they become
due under the Main Lease and that the Subtenant, upon the performance of its
obligations hereunder and subject to the provisions hereof, shall for the term
hereof with respect to the Premises, succeed to all rights of Tenant under the
Main Lease and will have quiet possession of the Premises unless the Main Lease
be terminated for any reason; provided, however, that Subtenant has no right
and by this Sublease Agreement is granted no right to exercise any right to
extend the term or right to expand the Premises which may have been granted by
Landlord to Tenant under the Main Lease or any extension or amendment thereof.
This Sublease shall be in all respects subject to the Main Lease and if the
Main Lease shall terminate during the term hereof for any reason, this Sublease
Agreement shall terminate upon such termination with the same force and effect
as if such termination date had been named herein as the termination date
hereof and if any provisions of this Sublease Agreement shall be in violation
of the provisions of the Main Lease, the provisions of the Main Lease shall be
deemed to limit the provisions hereof. It is expressly understood and agreed,
however, that nothing stated in this Paragraph 17 shall be deemed to confer
upon the Subtenant any greater rights than are set forth herein nor limit any
of the Subtenant's obligations hereunder.
18. (a) Subtenant agrees to do nothing which will subject the Main Lease to
termination by the Landlord under the provisions of the Main Lease, and it is
further agreed that if the Subtenant is in default of the provisions of the
Main Lease, the Tenant may, but not need, cure said default specifically on
behalf of and for the account of the Subtenant but in which case all costs,
damages, and expenses incurred by the Tenant in connection therewith shall be
paid to the Tenant by Subtenant immediately upon Tenant's demand therefor as
additional rent hereunder. By curing the Subtenant's default on its behalf and
count, as aforesaid, the Tenant shall not be deemed to have waived any of its
rights nor have released the Subtenant from any of its obligations under this
Sublease Agreement. It is agreed, however, that the Tenant may cure said
default on its own account to preserve its interest in the Main Lease, and may
terminate this Sublease Agreement pursuant to the terms hereof by reason of
said default by the Subtenant, if the Subtenant does not pay as additional rent
to the Tenant all costs, damages and expenses incurred by it in connection with
such cure within the applicable grace period, if any, provided for by the
Landlord in the Main Lease, or as otherwise provided by law. In the event that
the Main Lease is terminated by the Landlord by reason of Subtenant's default,
the Subtenant shall indemnify and hold the Tenant harmless from such damages as
Tenant may become liable to pay under the Main Lease resulting from such
default, plus all other expenses and costs related thereto, including, without
limitation, reasonable attorney's fees.
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<PAGE> 8
(b) In the event of a default by Tenant under the Main Lease that
would result in the termination of Subtenant's estate (unless same be converted
to a direct tenancy and otherwise materially undisturbed), then unless such
default is the subject of good faith dispute between Landlord and Tenant,
Subtenant shall have the right to cure such default and deduct the reasonable
cost of such cure from the rent otherwise payable hereunder.
19. All notices to be given under this Sublease Agreement shall be sent by
prepaid registered mail, return receipt requested, and if addressed to the
Subtenant shall be sent to Balanced Care Corporation, 5021 Louise Drive,
Mechanicsburg, Pennsylvania 17055-2007 Attention: Robert Sutton and if
addressed to the Tenant shall be sent addressed to Liberty Mutual Insurance
Company, 173 Bedford Street, Lexington, Massachusetts 02173 Attention: Director
of Corporate Real Estate, unless in either case a different address is
specified by either party to the other in writing by prepaid registered mail,
return receipt requested.
20. If any provision of this Sublease Agreement, or the particular application
thereof, shall to any extent be held invalid or unenforceable by a court of
competent jurisdiction, the invalidity of such provision shall not be deemed to
affect the validity of any other provision of this Sublease Agreement. Such
invalid provisions shall be deemed to be stricken from this Sublease Agreement,
which shall otherwise continue in full force and effect in all respects.
21. This Sublease Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, heirs and legal
representatives, but this provision shall not operate to permit any assignment,
subletting, mortgage, lien, charge, or other transfer or encumbrance contrary
to the provisions of this Sublease.
22. This Sublease Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
23. All capitalized terms used and not otherwise defined herein shall have the
same meaning herein as affixed to them in the Main Lease.
24. No modification, waiver or amendment of this Sublease or of any of its
conditions or provisions shall be binding upon Tenant unless the same be in
writing and consented to by Tenant.
25. Subtenant's use of the Premises will not result in or involve the use,
generation, manufacture, refining, transportation, treatment, storage, handling
or disposal of, or the conduct or performance of any activity in connection
with, any hazardous substance or hazardous waste, as such terms are defined
under state or federal law, which would subject the Premises or Tenant to any
liability, including damages, penalties or fines, or any lien on the Premises
under such laws or regulations. Subtenant shall indemnify and hold harmless
Landlord and Tenant, their respective directors, officers, partners and any of
their respective employees, from and against all costs incurred (including
without limitation amounts paid pursuant to penalties, fines, orders), arising
out of any claim made by Federal, State or local agencies or departments or
private litigants or third parties with respect to violations by Subtenant, its
agents or employees of
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<PAGE> 9
environmental or health laws, rules, regulations, orders or common law, provided
such violations are caused by Subtenant or are related to Subtenant's use of the
Premises.
Tenant states that it has not during its use and occupancy of the Premises
brought any hazardous materials onto the Premises or into the Building.
26. Subtenant acknowledges and agrees that Landlord is responsible for
maintaining and repairing the Building and Common Areas and for providing
building services to tenants. Tenant is not and will not be responsible in any
manner for these obligations but agrees to assist Subtenant, to the extent
reasonably practicable, in resolving any issues which Subtenant may have with
the Landlord for Landlord's failure to perform such obligations.
27. Tenant and Subtenant, for themselves and on behalf of their respective
agents, covenant and agree to keep the terms of this Sublease Agreement and all
negotiations relating hereto in strictest confidence and agree not to
disseminate or disclose any such information to any third party other than
Landlord or said party's attorneys, accountants or lenders, to the extent such
persons are under and acknowledge like obligations of confidentiality. Neither
Tenant or Subtenant shall issue any press release or other public statement or
otherwise make known to the media the terms of this Sublease Agreement or any
negotiations in connection herewith, without the prior written consent of the
other party. Each party acknowledges and agrees that the other party cannot and
will not be responsible for the actions of third parties who may choose to
advertise or make a public statement regarding this transaction.
28. Provided Subtenant is not in default of the provisions hereof, Subtenant
shall, during the Term, have a right of first refusal on all other portions of
the Building leased to Tenant by Landlord (the "Available Space").
Notwithstanding the foregoing, Subtenant's right of first refusal shall
automatically terminate and be of no further force and effect with respect to
all or any portion of the Available Space for which Tenant is successful in
reaching an agreement with Landlord, which agreement is acceptable to Tenant in
its sole discretion, to relinquish such space to Landlord and be relieved of
its obligations with respect thereto.
29. Subtenant shall be entitled to use up to 21 parking spaces (26 spaces upon
Subtenant's occupancy of the SLC Space) out of the amount allocated to Tenant
under the Main Lease, for the use of its employees and visitors, in common with
other tenants in the Building, subject to Landlord's regulations with respect
thereto.
30. Subtenant shall be allowed, at its own expense, to install signage on the
existing freestanding monument sign at the Building. Such signage, not to
exceed one-third of the total space of the monument sign, shall be subject to
all applicable local ordinances and building codes and subject to Landlord's
and Tenant's approval, which approval shall not be unreasonably withheld.
WITNESS the execution hereof under seal this 26 day of June, 1996.
Tenant: Liberty Mutual Insurance Company
9
<PAGE> 10
By: [/s/ missing]
-----------------------------------
Title:
Date:
Subtenant: Balanced Care Corporation
By: /s/ Robert J. Sutton
-----------------------------------
Title: Vice President
Date: June 26, 1996
Accepted and consented to:
Landlord: Elliott & Associates, Inc.
By: [/s/ missing]
-----------------------------------
Title:
Date:
10
<PAGE> 1
EXHIBIT 10.5
LEASE WITH OPTION TO PURCHASE
THIS LEASE WITH OPTION TO PURCHASE ("Lease") made and entered this
16th day of January, 1997, by and between Cherokee Assisted Living, L.L.C.
("Cherokee L.L.C."), a Limited Liability Company organized under the laws of
the state of Missouri, and Nevada Independent Living, L.L.C. ("Nevada,
L.L.C."), a Limited Liability Company organized under the laws of the state of
Missouri (Cherokee, L.L.C. and Nevada, L.L.C. are sometimes hereinafter
referred to collectively as "Lessor"), and Balanced Care Corporation, a
Delaware corporation, or its permitted assigns ("Lessee").
WITNESSETH:
Lessor and Lessee, in consideration of the rentals hereinafter
reserved and the agreements, conditions and covenants hereinafter contained,
and intending to be legally bound hereby, covenant and agree as follows:
1. THE PREMISES. Cherokee, L.L.C. hereby leases to Lessee or its
permitted assigns all of the operating assets of the facility known as Cherokee
Residential Care Center ("Cherokee"), situate at 3540 East Cherokee,
Springfield, Greene County, Missouri including, but not limited to the land,
buildings, furniture, fixtures, machinery, equipment, inventory, supplies,
accounts receivable, licenses, including but not limited to a certain assisted
living license under which Cherokee is currently operating, trademarks, logos,
trade names, customer lists, advertising materials, contract rights and leases
in connection therewith the real property and personal property of Cherokee are
described with particularity in Exhibits A and B); Nevada L.L.C. leases to
Lessee or its permitted assigns all of the operating assets of the facility
known as Nevada Park Terrace Apartments ("Nevada"), situate on Highland Street,
Nevada, Vernon County, Missouri, including, but not limited to the land,
buildings, furniture, fixtures, machinery, equipment, inventory, supplies,
accounts receivable, licenses, including but not limited to a certain assisted
living license under which Nevada is currently operating, trademarks, logos,
trade names, customer lists, advertising materials, contract rights and leases
in connection therewith (the real property and personal property of Nevada are
described with particularity in Exhibits C and D, respectively) (the land, the
facilities and all of the operating assets of Cherokee, L.L.C. and Nevada,
L.L.C., as defined herein, are collectively referred to as the "Assets") (the
facilities at Cherokee and Nevada, together with the Assets are sometimes
referred to collectively as the "Premises").
2. TERM. This Lease shall be for a term of three (3) years, beginning
February 1, 1997 and ending January 31, 2000 (the "Initial Term"). Lessee shall
have the option to extend the Initial Term for two additional one-year periods
(each, an "Extended Term") (hereinafter, the Initial Term, together with the
Extended Terms, if any, may be collectively referred to as the
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"Term"). Lessee's extension options shall be exercised by Lessee by giving
written notice to Lessor of each such extension 60 days prior to the end of the
then existing Term. During each Extended Term, the terms and conditions of this
Lease shall continue in full force and effect.
3. RENT. Lessee shall pay rent to Cherokee, L.L.C. in monthly
installments of $15,500.00 for the first six-month period of the Initial Term
and $15,500 for the second six-month period of the Initial Term. Beginning the
second year of the Initial Term, Lessee's monthly rent to Cherokee, L.L.C.
shall be increased by 3%, compounded each year on each anniversary of the
commencement date of the Lease. Lessee shall pay rent to Nevada, L.L.C. in
monthly installments of $11,000 for the first year of the Initial Term and
$15,500 for the second year of the Initial Term. Beginning the third year of
the Initial Term, Lessee's monthly rent to Nevada, L.L.C. shall be increased by
3%, compounded each year, on each anniversary of the commencement date of the
Lease. Each monthly installment shall be due on or before the first day of
each calendar month for the ensuing month in lawful money of the United States.
Lessee's liability for rent under this Lease shall cease when the Lease expires
by its terms or upon closing pursuant to Lessee's election to exercise its
Purchase Option, as defined in Section 23 herein.
4. USE. The Premises shall be used to provide independent and/or
assisted living services and such other uses necessary or incidental to such
use ("Intended Use"). Lessee shall maintain and operate Cherokee and Nevada in
compliance with all ordinances, laws, rules, regulations and procedures and any
municipality, county or state government or any bureau or department thereof.
5. ACCOUNTS. All accounts receivable which are earned on or before
January 31, 1997 shall remain the property of Lessor, pro rata, and all
accounts receivable which are earned after January 31, 1997 shall be the
property of Lessee, pro rata. All accounts payable incurred on or before
January 31, 1997 shall remain the liability of Lessor, pro rata, and all
accounts payable incurred after January 31, 1997 shall be the liability of
Lessee, pro rata.
6. USES PROHIBITED. Lessee shall not use the Premises for purposes
other than Lessee's Intended Use, and no use shall be made or permitted to be
made, nor acts done, which will increase the existing rate of insurance upon
the Premises, or cause cancellation of insurance policies covering the
Premises.
7. ASSIGNMENT AND SUBLETTING. Lessee may assign or sublet this Lease
to one or more of its wholly-owned subsidiaries, without advance notice to
Lessor. Lessee shall notify Lessor in writing of such assignment or sublet.
8. LEGAL REQUIREMENTS. Lessee shall comply with all federal, state,
county, municipal or other governmental statutes, laws, rules, policies, codes,
guidance, orders, regulations, ordinances, permits, licenses, covenants,
conditions, restrictions, judgments, decrees and injunctions affecting, whether
now or hereinafter enacted and in force, occasioned by or affecting Lessee, the
Premises or Lessee's Intended Use of the Premises (collectively, the "Legal
Requirements").
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9. MAINTENANCE, REPAIRS, ALTERATIONS. Lessee shall make all necessary
repairs and shall maintain the Premises in good order and repair (ordinary wear
and tear excepted), including but not limited to the heating and air
conditioning system, plumbing written consent of Lessor, which consent will not
be unreasonably withheld.
10. ENTRY AND INSPECTION. Lessee shall permit Lessor or Lessor's
agents to enter upon the Premises at reasonable times and upon reasonable
notice to inspect the same.
11. INDEMNIFICATION OF LESSOR. Lessee shall protect, indemnify, save
harmless and defend Lessor from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses, including
reasonable attorneys' fees, imposed upon or incurred by or asserted against
Lessor by reason of: (i) any accident, injury to or death of persons or loss of
or damage to property occurring on or about the Premises during the term of
this Lease; (ii) any use, misuse, condition, maintenance or repair of the
Premises (for which Lessee is obligated to perform under this Lease); (iii) any
failure or non-performance on the part of Lessee to comply with the provisions
of this Lease; (iv) any claim for malpractice, negligence or misconduct
committed by any person on or working for Lessee on the Premises and (v) the
violation of any Legal Requirement.
12. POSSESSION. Lessee shall be entitled to immediate possession.
13. INSURANCE. Lessee, at its expense, shall maintain medical
professional liability insurance and commercial general liability insurance
covering bodily injury or property damage insuring Lessee and Lessor with
minimum coverage not less than the applicable industry standards. Lessee's
insurance may be blanket insurance covering the Premises as well as other
Premises owned or operated by lessee or its subsidiaries or affiliates;
provided, however, the coverage afforded Lessor will not be diminished or
reduced or otherwise be different from that which would exist if provided under
a separate policy of insurance. Lessee shall pay the premiums therefor, and
upon lessor's request, shall deliver such policies or certificates thereof to
Lessor. Each insurer shall agree, by endorsement to the policy, that it will
give Lessor not less than ten (10) days' written notice before the policy or
policies shall be altered, allowed to expire or canceled.
All proceeds payable by reason of any loss or damage to the Premises,
or any portion thereof, under any policy of insurance required to be paid
hereunder shall be paid to Lessor for the reasonable costs of reconstruction or
repair, as the case may be. Any excess proceeds of insurance remaining after
completion of restoration, reconstruction or refurbishing of the Premises (or
in the event that no repair or restoration is elected or required, all such
insurance proceeds ) shall be released to Lessee, provided Lessee is not
otherwise in default hereunder.
To the maximum extent permitted by insurance policies which may be
owned by Lessor or Lessee, Lessee and Lessor waive any and all rights of
subrogation which might otherwise exist.
14. TAXES. Lessee shall be responsible for all real estate and
personal property taxes associated with the Assets which accrue during the Term
of the Lease.
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15. UTILITIES. Lessee agrees that it shall be responsible for the
payment of all utilities, including water, gas, electricity, heat and other
services delivered to the Premises.
16. SIGNS. Lessor reserves the exclusive right to the roof, side and
rear walls of the Premises. Lessee shall not construct any projecting sign or
awning without the prior written consent of Lessor which consent may be
withheld in the sole and absolute discretion of Lessor.
17. ABANDONMENT OF PREMISES. Lessee shall not vacate or abandon the
Premises at any time during the Term hereof, and if Lessee shall abandon or
vacate the Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Lessee left upon the Premises shall be deemed to
be abandoned, at the option of Lessor.
18. CONDEMNATION. If any part of the Premises shall be taken or
condemned for public use, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall, as to the part taken, terminate as of
the day immediately preceding the date upon which the condemnor acquires
possession, and thereafter Lessee shall be required to pay such proportion of
the rent for the remaining Term as the value of the Premises remaining bears to
the total value of the Premises at the date of condemnation; provided, however,
that Lessor may at its option, terminate this Lease as of the day immediately
preceding the date upon which the condemnor acquires possession. In the event
that the demised Premises are condemned in whole, or that such portion is
condemned that the remainder is not susceptible for use hereunder, this Lease
shall terminate upon the day immediately preceding the date upon which the
condemnor acquires possession. All sums which may be payable on account of any
condemnation shall belong to Lessor; provided, however, that Lessee shall be
entitled to retain any amount awarded to Lessee for Lessee's trade fixtures and
moving expenses.
19. TRADE FIXTURES. Any and all improvements made to the Premises
during the Term hereof shall belong to Lessor, except trade fixtures of Lessee,
unless Lessee purchases the Assets pursuant to the Option hereunder. Lessee may
upon termination hereof remove all of Lessee's trade fixtures, but shall repair
or pay for all repairs necessary for damages to the Premises occasioned by
removal.
20. DESTRUCTION OF PREMISES. If, during the Term of this Lease, said
Premises are damaged to the extent that they are wholly untenantable, Lessor
may, at its option, terminate this Lease by giving Lessee written notice
thereof within thirty (30) days after such damage, and prepaid rent from the
date of such damage shall be refunded. If Lessee has provided Lessor with the
Exercise Notice as herein defined prior to the destruction of the Premises,
Lessee may withdraw its Exercise Notice, at its option, by giving Lessor
written notice, within fifteen days of the destruction of the Premises, of
Lessee's withdrawal of said Exercise Notice and shall have no further
obligation with respect to the Option.
If said Premises shall be damaged to the extent that they are wholly
untenantable and the same cannot be restored to a condition substantially as
good as prior to said damage within sixty (60) days, Lessee may terminate this
Lease by giving Lessor thirty (30) days' written notice of its intent to
terminate, and in case of such termination, Lessee shall be entitled to a
refund of prepaid rent from the date of damage.
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In case said Premises are damaged, but not rendered wholly
untenantable, the rent shall abate proportionately until the Premises are
restored and Lessor shall repair the same as promptly as possible; provided,
however, that if it is not restored within sixty (60) days, Lessee may, at its
election, terminate the Lease by giving Lessor thirty (30) days written notice
of its intention to do so.
If in the case of destruction of the Premises as aforesaid neither
party elects to terminate the Lease as above provided, Lessor shall restore the
same with all reasonable speed and for that purpose shall have the right to
enter the said Premises for the purpose of restoring the Premises.
21. INSOLVENCY. In the event that a receiver shall be appointed to
take over the business of Lessee, or in the event that Lessee shall make a
general assignment for the benefit of creditors, or Lessee shall take or suffer
any action under any insolvency or bankruptcy act, the same shall constitute
breach of this Lease by Lessee.
22. REMEDY UPON DEFAULT. Lessee's failure to pay any monthly
installment of rent within seven days of the date it is due shall constitute a
default hereunder. If said rent remains unpaid seven (7) days after written
notice of such default is given to Lessee or if after thirty (30) days written
notice setting forth any default by Lessee in the performance of any other
covenant, agreement, or condition contained in this Lease by Lessee such
default shall continue, Lessor shall have the right to re-enter and take
possession of the Premises, and Lessee shall peacefully surrender possession
thereof and all rights and interests of Lessee shall cease and terminate but
nothing herein contained shall affect Lessor's right of the rent for the Term
specified. Upon taking possession hereunder, Lessor may, at its election,
terminate and end this Lease by giving Lessee written notice thereof, or Lessor
may relet the Premises and Lessee shall be liable for and will pay as it
accrues, the difference in the rental for the balance of the Term. Lessee shall
pay to Lessor any late fee incurred by Lessor to its lender caused by Lessee's
failure to timely pay its monthly installment of rent.
23. SECURITY. Lessor does not require a security deposit.
24. LESSEE'S OPTION TO PURCHASE. Lessee shall have the exclusive right
to purchase the Assets ("Purchase Option"), but only if (a) at the time of
exercise of the Purchase Option and on the date of closing thereon, there then
exists no default under the Lease, as hereinafter defined; and (b) Lessee
strictly complies with the provisions of this Section 23.
(a) Lessee may exercise the Purchase Option during the Initial
Term or during any one of the Renewal Terms, by providing Lessor written notice
of its intent to purchase the Assets ("Exercise Notice") at least sixty days
prior to any one-year anniversary from the date of this Lease. The Exercise
Notice shall specify the date, time and place of the settlement (the
"Settlement"). Settlement shall be made on or before the 30th day (the
"Settlement Date") following the date of the Exercise Notice, said time to be
of the essence of this Agreement, unless extended by mutual consent in writing
signed by the parties hereto. Upon the exercise by Lessee of the Purchase
Option in accordance with the provisions of this Agreement, this Agreement
shall become a binding contract of sale by and between Lessor and Lessee.
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(b) The purchase price for the Premises will be mutually agreed
upon by the parties but in no event during the first three years of the lease
term will it exceed $4,100,000 (the "Purchase Price"). After the expiration of
the third year of the lease term, a purchase price shall be negotiated between
the parties hereto. The Purchase Price shall be paid by Lessee at the time of
closing, by certified, cashier's, treasurer's or bank check or wire transfer.
(c) If the Purchase Option is exercised by Lessee in accordance
with the terms hereof, Lessor shall convey good and marketable absolute fee
simple title to the Assets, free and clear of all claims, liens and
encumbrances, except for Permitted Exceptions, to Lessee by executing and
delivering at closing a general warranty deed, in the case of real property,
and a bill of sale and assignment, in the case of personal property. The
transfer or conveyance of the Premises shall include all right, title and
interest, if any, of Lessor in and to any land lying in the bed of any street
opened or proposed in front of or adjoining the Premises to the centerline
thereof.
(d) Lessee and Lessor represent and warrant that no finder's fee
or brokerage commission will be payable in connection with the Lease or the
Lessee's purchase of the Premises pursuant to the Purchase Option hereunder.
Each party shall defend, indemnify and save the other party harmless from any
liability for any finder's fee or broker's fee or commission agreed to by the
indemnifying party in connection with the sale or purchase of the Premises or
any part thereof. The indemnity obligations of this section shall survive
termination or expiration of this Lease and Settlement.
25. LESSEE'S CONTINGENCIES. Lessor acknowledges and agrees that,
following Lessee's providing Lessor with the Exercise Notice, Lessee's
obligation to purchase the Premises at Settlement are expressly contingent and
conditioned upon the satisfaction of each of the following express conditions
precedent on or prior to Settlement:
(a) Lessor shall have performed each and all of the covenants and
obligations required to be performed by Lessor on or prior to Settlement.
(b) Each and all of the representations and warranties of Lessor
hereunder shall be true and correct on and as of the Settlement Date, as though
given on the Settlement Date.
(c) At its own cost and expense, Lessee shall have received and
approved a commitment for title insurance (the "Title Commitment") issued by a
title insurer acceptable to Lessee at regular rates showing good and
indefeasible title to the Premises in fee simple vested in Lessee as of
Settlement, subject only to liens for taxes, assessments and governmental
charges not yet past due and payable or delinquent and such other title
exceptions and Lessee and/or Lessee's financing source(s) may approve in their
reasonable discretion (the "Permitted Exceptions"). Such title insurance
policy, when issued, shall be in a form and amount, and shall include such
coverage and endorsements, as required by Lessee and/or Lessee's financing
source(s) in their reasonable discretion.
(d) At its own cost and expense, Lessee shall have received and
approved an ALTA survey of the Premises (the "Survey"), in a form and content
acceptable to Lessee and/or
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Lessee's financing source(s) in their reasonable discretion, which Survey shall
be certified to Lessee, Lessee's financing source(s) and Lessee's title insurer
as being true and accurate.
(e) Lessee shall have received confirmation acceptable to Lessee
in its reasonable discretion from all governmental authorities or otherwise
satisfied itself that (i) all utilities, including without limitation,
telephone, gas, electric power, sewer, storm sewer and water are or will be
available to service the Premises; (ii) such utilities are or will be adequate
for Lessee's intended use of the Premises and (iii) the means of ingress and
egress, access to public streets and drainage facilities are or will be
adequate for Lessee's intended use of the Premises.
(f) Lessee shall have received confirmation acceptable to Lessee
in its reasonable discretion from all governmental authorities or otherwise
satisfied itself that (i) the applicable zoning ordinances, the general plans,
the plot plans, the subdivisions and all other land use regulations of the
applicable municipal jurisdictions and all covenants, conditions and
restrictions, if any, affecting the Premises permit the transfer of the
Property and Lessee's intended use thereof as a matter of right for an
unlimited time period and not merely as a non-conforming use or (ii) the
Premises can be rezoned, if necessary, in order to permit the transfer of the
Premises and Lessee's intended use thereof as a matter of right for an
unlimited time period and not merely as a non-conforming use.
(g) At its own cost and expense, Lessee shall have received and
approved a written report from a qualified geotechnical or engineering firm
acceptable to Lessee, in form and content acceptable to Lessee and/or Lessee's
financing source(s) in their reasonable discretion, concerning the presence,
handling, treatment and disposal of Hazardous Substances (as defined below) in,
on or under the Premises.
(h) No condemnation or eminent domain proceedings shall be pending
or threatened with respect to the Premises.
(i) Lessee shall have received a written binding commitment from a
real estate investment trust or other financing source(s) to provide the
necessary financing for Lessee's purchase of the Premises under terms and
conditions satisfactory to Lessee in its sole and absolute discretion.
(j) Lessee shall have received approval by its board of directors
of the transactions contemplated in this Lease.
If any of the foregoing express conditions precedent are not satisfied
(including without limitation approval or acceptance by Lessee where indicated)
or waived on or before Settlement, upon written notice to Lessor, Lessee may,
in Lessee's discretion, terminate the Option and its obligation to purchase the
Premises shall cease.
26. LESSOR'S CONTINGENCIES. Lessee acknowledges and agrees that upon
its providing Lessor with the Exercise Notice, Lessor's obligations and
liabilities hereunder, are expressly contingent and conditioned upon the
satisfaction of each of the following express conditions precedent on or prior
to Settlement:
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(a) Lessee shall have performed each and all of the covenants
and obligations required to be performed by Lessee on or prior to Settlement.
(b) Each and all of the representations and warranties of Lessee
hereunder shall be true and correct on and as of the Settlement Date, as though
given on the Settlement Date.
If any of the foregoing express conditions precedent are not satisfied
or waived on or before Settlement, upon written notice to Lessee, Lessor, at
Lessor's option, may terminate the Purchase Option and its obligation to convey
the Premises to Lessee at Settlement shall cease.
27. LESSOR'S REPRESENTATIONS AND WARRANTIES. Lessor represents and
warrants to Lessee as follows:
(a) Lessor has the full power, authority and legal right to
execute and deliver and perform and observe the provisions of this Lease,
including the Purchase Option and all other instruments provided for herein and
the Exhibits hereto to which Lessor is a party, and to otherwise carry out the
transactions contemplated hereunder and thereunder.
(b) This Lease has been, and on the Settlement Date any other
instruments provided for herein and the Exhibits hereto to which Lessor is a
party will have been, duly executed and delivered by Lessor, and constitute and
will constitute the valid and binding obligations of Lessor enforceable against
Lessor in accordance with their respective terms.
(c) The execution and delivery of this Lease and all other
instruments provided for herein and the Exhibits hereto to which Lessor is a
party, compliance with the provisions hereof and thereof and the consummation
of the transactions contemplated herein and therein will not result in (i) the
breach or violation of (A) any law, statute, rule or regulation of any court or
governmental authority now in effect and applicable to Lessor or the Premises,
(B) any judgment, order or decree of any court or governmental authority
binding on Lessor or the Premises or (C) any contract, instrument or other
Lease to which Lessor is a party or by which Lessor is bound or (ii) the
creation of any lien upon the Premises (other than pursuant to this Lease and
the Permitted Exceptions).
(d) Lessor is solvent and there are no actions, proceedings or
investigations, including without limitation eminent domain, condemnation or
bankruptcy proceedings, pending or threatened, against or affecting Lessor or
the Premises, seeking to enjoin or challenge the ability of Lessor to carry out
the transactions contemplated hereunder or under any of the other instruments
provided for herein and in the Exhibits hereto to which Lessor is a party, or
which in any way challenge, affect or would challenge or affect Lessor's
ownership of the Premises.
(e) Lessor has good and marketable absolute fee simple title to
the Premises described on Exhibit A, free and clear of all liens, claims or
encumbrances (except for the Permitted Exceptions).
(f) (i) There are no underground tanks or hazardous substances
(as defined in the Comprehensive Environmental Response, Compensation and
Liability Act, as amended), solid
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wastes, hazardous wastes or any other substance for which any governmental
authority with jurisdiction over Lessor or the Premises requires special
handling in its generation, handling, use, collection, storage, treatment or
disposal (collectively, the "Hazardous Substances") currently located on the
Premises, no such tanks have ever been located on the Premises and no such
Hazardous Substances have ever been present, used, stored, treated, released
from or disposed of on the Premises; (ii) no enforcement, cleanup, removal or
other governmental or regulatory actions have, at any time, been instituted or,
to the best of Lessor's knowledge, threatened with respect to the Premises;
(iii) there is no current or, to the best of Lessor's knowledge, prior
violation or state of noncompliance with any environmental law relating to
Hazardous Substances with respect to the Premises; (iv) no claims have been
made or, to the best of Lessor's knowledge, threatened by any third party with
respect to the Premises relating to damage, contribution, cost recovery,
compensation, loss or injury resulting or related to any Hazardous Substances
and (v) to the best of Lessor's knowledge, there are no current, and have been
no, businesses engaged in the storage, treatment or disposal of Hazardous
Substances on any Premises adjacent to the Premises.
(g) The Premises is not located within an area of special risk
with respect to natural or man-made disasters or hazards, including any flood
hazard area.
(h) There are no adverse geological or soil conditions affecting
the Premises.
(i) The land upon which Cherokee and Nevada each sit constitute
legal lots or parcels which for all purposes may be mortgaged, conveyed and
otherwise dealt with as separate lots or parcels and are taxed as separate
parcels.
(j) The premises are zoned __________, and Lessor does not have
any knowledge of any law, ordinance, regulation, general plan, plot plan,
subdivision or other applicable land use regulation or any private covenant,
condition or restriction which would prevent the Premises from being
transferred or used by Lessee for Lessee's intended use pursuant to this Lease
or prevent the Premises from being rezoned, if necessary, in order to permit
Lessee's intended use of the Premises.
(k) On or prior to Settlement (i) all utilities, including
without limitation, telephone, gas, electric power, sewer, storm sewer and
water are or will be available to service the Premises; (ii) such utilities are
or will be adequate for Lessee's intended use of the Premises and (iii) the
means of ingress and egress, access to public streets and drainage facilities
are or will be adequate for Lessee's intended use of the Premises.
(l) Lessor is not a "foreign person" as that term is defined in
the U.S. Internal Revenue Code and the regulations thereunder.
(m) No person or entity other than Lessee has any right to
possession of or option to acquire the Premises, or any part thereof.
These representations and warranties shall be true and correct in all
respects on and as of Settlement. Should any such warranty or representation be
false, inaccurate or misleading at
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Settlement, then Lessee, at its option, may terminate the Option and its
obligation to purchase the Premises at Settlement shall cease.
28. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and
warrants to Lessor as follows:
(a) Lessee is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, is duly qualified and
authorized to do business in the state of Missouri and has full power,
authority and legal right to execute and deliver and to perform and observe the
provisions of this Lease and all other instruments provided for herein and the
Exhibits hereto to which Lessee is a party, and to otherwise carry out the
transactions contemplated hereunder and thereunder.
(b) This Lease has been, and on the Settlement Date any other
instruments provided for herein and the Exhibits hereto to which Lessee is a
party will have been, duly authorized, executed and delivered by Lessee, and
constitute and will constitute the valid and binding obligations of Lessee
enforceable against Lessee in accordance with their respective terms.
(c) The execution and delivery of this Lease and all other
instruments provided for herein and the Exhibits hereto to which Lessee is a
party, compliance with the provisions hereof and thereof and the consummation
of the transactions contemplated herein and therein will not result in (i) the
breach or violation of (A) any law, statute, rule or regulation of any court or
governmental authority now in effect and applicable to Lessee; (B) the articles
of incorporation and bylaws of Lessee; (C) any judgment, order or decree of any
court or governmental authority binding on Lessee or (D) any instrument,
contract or other Lease to which Lessee is a party or by which Lessee is bound.
These representations and warranties shall be true and correct in all
respects on and as of Settlement. Should any such representation and warranty
be false, inaccurate or misleading at Settlement, then Lessor, at its option,
may terminate the Purchase Option and its obligation to sell the Premises at
Settlement shall cease.
29. ADDITIONAL COVENANTS OF LESSOR. Lessor further covenants and
agrees as follows:
(a) Except as may otherwise be provided herein, Lessor shall not
enter into any other Lease, option to purchase, or grant any easement, license
or other encumbrance with respect to the Premises, or permit the Premises to be
encumbered in any way unless such lease, easement, license or encumbrance will
be terminated prior to Settlement or is created with the prior written consent
of Lessee.
(b) Upon request, Lessor shall furnish to the title company
selected by Lessee such documentation as may be required by it to issue a title
insurance policy without exception as to the capacity, authority and execution
of this Lease and all other instruments provided for herein and the Exhibits
hereto to which Lessor is a party.
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(c) Lessor shall produce, execute and/or deliver all other
consents, instruments, certificates, documents and information to which Lessee
may be entitled under any other provisions of this Lease or that Lessee may
reasonably request in order to complete the Settlement, including but not
limited to lien certificates, tax certificates and FIRPTA certificates.
30. PROPRIETARY INFORMATION. In order to facilitate the transaction
contemplated, each party may deem it necessary to disclose to the other party
certain of its proprietary and/or confidential information. As used herein, the
term "proprietary and/or confidential information" shall mean all information
of, or relating to, such party that is not generally available or disclosed to
the public, including, but not limited to, financial information, proprietary
systems and methods for the delivery of services. Each party acknowledges that
all such information constitutes confidential and/or proprietary information of
such other party and agrees it will (i) keep such information confidential in
accordance with the terms of this Lease and to the extent permitted by law,
(ii) use such information solely for the purpose of performing its obligations
hereunder, (iii) disclose such information only to those employees and agents
who require such information to perform their obligations hereunder or in
connection herewith and (iv) not otherwise disclose or make use of such
information except in accordance with the terms of this Lease and to the extent
required by law.
31. NON-COMPETITION.
(a) The following definitions shall apply to this Section 30:
(i) Business Activities. "Business Activities" shall include
managing, leasing, owning, operating or providing consulting
services to skilled nursing facilities, assisted living or
personal care centers, residential care facilities, independent
living apartments for the elderly, subacute care operations,
pharmacies, home health agencies, or physical therapy, speech
therapy and/or occupational therapy agencies within the
ninety-mile geographic area surrounding any facility owned by
Lessee or its subsidiary.
(ii) Business Contacts. "Business Contacts" shall include
(A) those persons or entities that Lessee personnel sold to,
solicited or serviced during the Term of the Lease and for five
(5) years after Lessee's purchase of the Assets hereunder, if
any, and (B) those persons or entities about which Lessor had
access to Proprietary Information (as defined in Section hereof)
during the Term of the Lease and for five (5) years after
Lessee's purchase of the Assets hereunder, if any.
(b) Restriction on Solicitation. During the Term of this Lease
and for five years after Lessee's purchase of the Assets, if any, Lessor agrees
not to do any of the following: (i) directly or indirectly solicit or encourage
any Business Contact to deal with Lessor or any other person or entity other
than Lessee in connection with any Business Activities, or assist or aid others
to do so; (ii) directly or indirectly solicit or encourage other personnel
subject to the provisions of this Section 30 to engage in any of the activities
restricted in this Lease; or
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(iii) directly or indirectly solicit or encourage for Lessor's benefit or the
benefit of others the employment or services of any then-present Lessor of
Lessee.
(c) Restriction on Unfair Competition. During the Term of this
Lease and for five (5) years after Lessee's purchase of the Assets hereunder,
if any, Lessor agrees not to do any of the following within a twenty (20) mile
geographic are surrounding Cherokee and Nevada, with the exception of Fosters
RCF: (i) directly or indirectly own an interest in, manage, or control a
business engaged in the Business Activities; or (ii) otherwise engage in the
business Activities in a fashion which competes with Lessee or the
Subsidiaries; or (iii) provide to a competitor of Lessee consulting service or
services as a Lessor, partner or owner, which services relate to the Business
Activities.
32. INTERPRETATION. It is expressly understood and agreed that
although Lessor considers the restrictions contained in Sections 29 and 30
hereof reasonable for the purpose of preserving for Lessee and/or Lessee's
proprietary rights, business value as a going concern and goodwill, if a final
judicial determination is made by a court having jurisdiction that the time or
any other restriction contained in Sections 29 or 30 is an unenforceable
restriction against Lessor, the provision containing such restriction shall not
be rendered void but shall be deemed amended to apply as to such maximum time
and territory and to such other extent as such court may judicially determine
or indicate to be reasonable.
33. REMEDIES.
(a) Lessor expressly agrees to indemnify and hold harmless
Lessee, its subsidiaries and affiliates, directors and officers from and with
respect to any and all loss, damage, expense or cost (including reasonable
attorneys' fees and disbursements attendant thereto) arising out of or in any
way connected with Lessor's material breach of any covenant herein contained.
(b) Lessor acknowledges and agrees that Lessee's remedy at law
for a breach or threatened breach of any of the provisions of Sections 29 or 30
hereof would be inadequate and, in recognition of this fact, in the event of a
breach or threatened breach by Lessor of any of the provisions of Sections 29
or 30 hereof it is agreed that, in addition to its remedy at law, Lessee shall
be entitled to equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available. Lessor acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent injunction
merely prohibiting the use of Proprietary Information would not be an adequate
remedy on breach or threatened breach, and consequently agrees, on any such
breach or threatened breach, to the granting of injunctive relief prohibiting
Lessor's engaging in any Business Activities other than as specifically
provided for in this Agreement. Nothing herein contained shall be construed as
prohibiting Lessee from pursuing any other remedies available to it for such
breach or threatened breach.
34. ENVIRONMENTAL INDEMNITY. Lessor agrees to indemnify, defend and
hold Lessee and Lessee's Agents harmless from any claims, judgments, damages,
penalties, fines, costs, or losses (including reasonable fees for attorneys,
consultants, and experts) that arise as a
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result of the presence in or on the Premises of any toxic or Hazardous
Substances arising from any activity of Lessor or during Lessor's ownership of
the Premises. Without limiting the generality of the foregoing, Lessor's
indemnity obligation shall include costs incurred in connection with any site
investigation or any remedial, removal, or restoration work required by any
local, state, or federal agency because of the presence or suspected presence
of Hazardous Substances on or under the said Premises, whether in the soil,
groundwater, air, or any other receptor, but shall not include incidental or
consequential damages.
35. COUNTERPARTS. This Lease may be executed in one (1) or more
counterparts. Each full counterpart shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument.
36. FORMAL TENDER WAIVED. Formal tender of the executed general
warranty deed, the bill of sale and assignment and the Purchase Price are
hereby waived; provided, however, that such waiver shall not relieve Lessor of
Lessor's obligation to deliver the general warranty deed and Lessee of Lessee's
obligation to pay the Purchase Price.
37. RECORDATION. This Lease shall not be recorded. Immediately upon
the execution and delivery of this Lease by the parties hereto, Lessor and
Lessee shall execute and cause to be recorded in each of the Offices of the
___________________________ in and for the Counties of Greene and Vernon,
Missouri, a Memorandum of Option to Purchase Real Estate in the form of Exhibit
E attached hereto.
38. ATTORNEY'S FEES. In case suit should be brought for recovery of
the Premises, or for any sum due hereunder, or because of any act which may
arise out of the possession of the Premises, by either party the prevailing
party shall be entitled to all costs incurred in connection with such action,
including reasonable attorneys' fees.
39. WAIVER. No failure of Lessor to enforce any term hereof shall be
deemed to be a waiver thereof.
40. NOTICES. All notices and other communications given or made
pursuant to this Lease shall be in writing and shall be deemed to have been
duly given or made (i) the second business day after the date of mailing, if
delivery by registered or certified mail, postage prepaid, (ii) upon delivery,
if hand-delivered, (iii) upon delivery, if sent by prepaid courier, with a
record of receipt, or (iv) the next day after the date of dispatch, if sent by
cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, postage prepaid, return receipt requested), to
the parties at the following addresses:
If to Lessor, to:
Cherokee Assisted Living, L.L.C.
Nevada Independent Living, L.L.C.
426 South Jefferson
Springfield, MO 65806-2351
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Attn: Bill R. Foster
Telephone: (417) 831-7383
FAX: (417) 831-7215
If to Lessee, to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Attn: Roger Breed
Telephone: (717) 796-6100
FAX: (717) 796-6150
41. HOLDING OVER. If Lessee shall for any reason remain in possession
of the Premises after the expiration or earlier termination of the Term of this
Lease, such possession shall become a month-to-month tenancy during which time
Lessee shall pay rent each month in an amount equal to twice the rent payable
during the prior Term. During such period of month-to-month tenancy, Lessee
shall be obligated to perform and observe all of the terms, covenants and
conditions of this Lease, but shall have no rights hereunder, other than the
right, to the extent given by law to month-to-month tenancies, to continue its
occupancy and use of the Premises. Nothing herein shall constitute the consent,
express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.
42. TIME. Time is of the essence of this Lease.
43. ENTIRE LEASE. The foregoing constitutes the entire Lease between
the parties and may be modified only by a writing signed by both parties.
44. GOVERNING LAW. The transaction contemplated herein shall be
governed by the laws of the State of Missouri.
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IN WITNESS WHEREOF, intending to be legally bound hereby, the
parties hereto have executed this Lease as of the date first set forth above.
LESSOR:
Witness/Attest Cherokee Assisted Living, L.L.C., a Missouri
limited liability company
/s/ Gregory A. Smith By: /s/ Bill R. Foster
- -------------------- -------------------
Name: Gregory A. Smith Name: Bill R. Foster
Title: Title: Manage Member
Witness/Attest Nevada Independent Living, L.L.C., a Missouri
limited liability company
/s/ Gregory A. Smith By: /s/ Bill R. Foster
- ----------------------- ---------------------
Name: Gregory A. Smith Name: Bill R. Foster
Title: Title: Manage Member
LESSEE:
Witness/Attest Balanced Care Corporation, a Delaware
corporation
/s/ Gregory A. Smith By: /s/ Brad Hollinger
- -------------------- ------------------
Name: Gregory A. Smith Name: Brad Hollinger
Title: Title: CEO
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<PAGE> 1
EXHIBIT 10.6
L E A S E
THE STATE OF MISSOURI
COUNTY OF PULASKI
THIS LEASE, made and entered into as of the 25th day of January, 1990,
by and between Dixon CareCentre, Inc., A Missouri Corporation, represented
herein by Richard B. Griffin, President, hereinafter called "Landlord" and
Dixon Oaks Health Centre, Inc., A Missouri Corporation, represented herein by
Wayne R. Wheeler, President, hereinafter called "Tenant";
W I T N E S S E T H:
Landlord, in consideration of the rent to be paid and the covenants
and agreements to be performed by Tenant, as hereinafter set forth, does hereby
LEASE, DEMISE and LET unto Tenant and Tenant hereby takes and accepts the
premises described in Exhibit Number One attached hereto and made a part hereof
together with all rights, privileges, easements, and appurtenances belonging to
or in any way pertaining to the said premises and together with the building
and other improvements now situated or to be erected on the said premises and
together with the furnishings, fixtures, and equipment (hereinafter called the
"Personal Property") described in Exhibit Number Two attached hereto and made a
part hereof (all of the foregoing hereinafter collectively called the "leased
premises") for the term hereinafter stated.
The leased premises are leased by Landlord to Tenant and are accepted
and are to be used and possessed by Tenant subject to the following terms,
provisions, covenants, agreements, and conditions.
1. Term. The term of this lease shall be TEN (10) years beginning on
the 1st day of February, 1990 (herein called the "Commencement Date"), and
ending on the 31st day of January, 2000, unless sooner terminated as herein
provided.
2. Rent. Tenant covenants and agrees to pay to Landlord in currency
of the United States of America that at the time of payment is legal tender for
public and private dates, without any setoff or deduction whatsoever, rental in
advance on or before the first day of each month during the term of this lease
as follows:
a. During the first twelve (12) moths of the term of this lease the
annual rental shall be $213,462.00 payable at the rate of
$16,852.00 per month for the first six months and $18,725.00 per
month for the second six months and due on or before the first
day of each and every month. It Tenant is denied SNF licensure
for the additional 20 beds (presently granted as RCF beds) within
the first twelve (12) months of the term of this lease, the
Landlord will refund to the Tenant the amount of 11,238.00
($18,725.00 - $16,852.00 = $1,873.00 X 6 months = $11,238.00).
Landlord and Tenant agree that Tenant will make every effort to
<PAGE> 2
secure SNF licensure for said 20 beds and will apply for said
licensure at the time deemed most appropriate by the staff of
Baird Kurtz, & Dobson of Springfield, Missouri.
b. Commencing with the thirteenth (13th) month the base annual
rental shall be $224,700.00 payable at the rate of $18,725.00 per
month on or before the first day of each and every month of the
term of the lease. The "Base Rent" shall be adjusted annually ten
(10) days prior to the anniversary date of the lease.
c. During the twenty-fifth (25th) and subsequent months of the term
of the lease the rental shall be the greater of the following:
(i) The base rent of $224,700.00 per annum at the rate
of $18,725.00 per month.
OR
(ii) Twenty percent (20%) of the previous years gross
revenue. (See examples of rent calculations attached and labeled
Exhibit Number Three)
OR
(iii) The Base Rent increases or decreases due to
fluctuations in gross Revenue as described in (ii) above but said
rent shall not decrease below the original Base Rent ($224,700.00
per annum/$18,725.00 per month).
d. The formula to be used for calculating gross revenue ten days
prior to anniversary date of the lease is as follows: Divide the
gross revenue for eleven (11) months by eleven (11) to determine
the average monthly income and multiply the result by twelve
(12). The calculation shall be submitted to the Landlord as
outlined in Exhibit Four. This formula will provide an
approximate gross revenue. Final gross revenue figures as
determined from the annual audited financial statements will be
taken into consideration as soon as they are available.
Adjustments will be made up or down based upon the final figures
and shall be retroactive to the beginning of the current period.
Tenant shall furnish Landlord a copy of the annual financial
statements, certified by an officer of Tenant, and cost report as
soon as available.
Should this lease commence on a day other than the first day of a
calendar month or terminate on a day other than the last day of a
calendar month, the rent for such partial month shall be
prorated. The first installment of rent, whether for a full
calendar month or a portion thereof, shall be paid on the
Commencement Date of this lease. Such installments of rent shall
be paid to Landlord at the address specified in this lease or
elsewhere as designated from time to time by written notice from
Landlord to Tenant.
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<PAGE> 3
The Landlord acknowledges that the Tenant voiced concern regarding the
possibility that the State of Missouri could change the formula for Medicaid
reimbursement in such a manner as to substantially decrease, state wide, the
nursing home revenues derived from Medicaid payments. Such a reduction in
payments would obviously necessitate dialogue and attempted resolutions between
Landlords and Tenants concerning the effect such revenue decreases would have
on Tenant's ability to meet rent payment while still maintaining adequate
profits.
3. Real Estate Taxes and Assessments.
a. Subject to subparagraph d. below, Tenant shall pay
before they become delinquent all real estate taxes and
assessments (herein called "Impositions") lawfully levied or
assessed against the leased premises during the term of this
lease. Tenant may pay any Imposition in installments, if payment
may be so made without penalty, except that any Imposition which
Tenant has elected to pay in installments shall be paid in full
by Tenant prior to sixty (60) days before the expiration of the
lease term. All Impositions for the tax year in which the lease
shall terminate shall be apportioned between Landlord and Tenant
as of the expiration date hereof, provided that Tenant shall not
be entitled to receive any such apportionment if Tenant shall be
in default in the performance of any of Tenant's covenants,
agreements, and undertakings to be performed by it hereunder.
b. Nothing contained in this lease shall require Tenant to
pay any franchise, corporate, estate, inheritance, income,
profits, or revenue tax or any other tax, assessment, charge or
levy upon the rent payable by Tenant under this lease; provided,
however that if at any time during the term of this lease, under
the laws of the State of Missouri or any political subdivision
thereof, the methods of taxation prevailing at the commencement
of the term hereof shall be altered so as to cause the whole or
any part of the real estate taxes or general assessments levied
or assessed against the leased premises to be levied, assessed,
and imposed on the rents received therefrom, then all such taxes
and assessments shall be deemed to be included within the term
"Impositions" for the purposes hereof to the extent that such
Impositions would be payable if the leased premises were the only
property of Landlord subject to such Impositions and Tenant shall
pay and discharge the same as herein provided in respect of the
payment of Impositions.
c. Tenant shall furnish to Landlord, within thirty (30)
days after the date when any Imposition would become delinquent,
official receipts of the appropriate taxing authority or other
evidence satisfactory to Landlord evidencing the payment thereof.
The failure of Tenant to furnish Landlord with such receipts or
other evidence shall not be deemed a default unless Tenant fails
to comply within fifteen (15) days after any written request
therefor by Landlord.
d. Tenant shall not be required to pay, discharge, or
remove any Imposition so long as Tenant shall contest the amount
or validity of such
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<PAGE> 4
Imposition by appropriate proceeding which shall operate to
prevent or stay the collection of the Imposition so contested and
if Tenant shall have provided Landlord with a bond satisfactory
in form to Landlord and from a bonding company satisfactory to
Landlord in an amount equal to the amount so contested and
unpaid, together with all interest and penalties in connection
therewith and all charges that may or might be assessed against
or become a charge on the leased premises or any part thereof in
such proceedings. During such contest Landlord shall have no
right to pay the Imposition contested except as provided herein.
Upon the termination of such proceeding, Tenant shall deliver to
Landlord proof of the amount of the Imposition as finally
determined and shall pay such Imposition, in which event the said
bond will be returned by Landlord to Tenant. If such Imposition
is not paid by Tenant upon termination of such proceeding, said
bond may be cashed and applied by Landlord to the payment,
removal, and discharge of such Imposition, and the interest and
penalties in connection therewith any costs, fees, or other
liability accruing in any such proceedings and the balance, if
any, shall be returned to Tenant and any deficiency shall be paid
by Tenant. If during such proceeding, Landlord shall deem the
bond deposited with it insufficient, Tenant shall upon demand
deposit with Landlord such additional bond or bonds as Landlord
may reasonably request, and upon failure of Tenant to do so, the
bond or bonds theretofore deposited may be cashed and applied by
Landlord to the payment, removal, and discharge of such
Imposition, and the interest and penalties in connection
therewith any costs, fees, or other liability accruing in any
such proceeding, and the balance, if any shall be returned to
Tenant. Tenant shall give Landlord written notice of any such
contest and Landlord, at Tenant's sole expense, shall join in any
such proceeding if any law, rule, or regulation at the time in
effect shall so require. Any proceeding for contesting the
validity or amount of any Imposition or to recover any Imposition
paid by Tenant may be brought by Tenant in the name of Landlord
or in the name of Tenant or both as Tenant may deem advisable.
Landlord shall not be subjected to any liability for the payment
of any costs or expenses in connection with any proceedings and
Tenant will indemnify and save Landlord harmless from any such
costs and expenses.
e. If Tenant shall default in the payment of any Imposition
required to be paid hereunder by Tenant, Landlord shall have the
right (but not the obligation) to pay the same together with any
penalties and interest, in which event the amount so paid by
Landlord shall be paid by Tenant to Landlord upon demand plus ten
percent (10%) per annum from ten (10) days after such demand
until payment.
4. Insurance.
a. Tenant, at its sole cost and expense, shall keep the
leased premises insured during the term of this lease against
loss or damage by fire and such other risks as may be included in
the broadest form of extended coverage
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<PAGE> 5
insurance from time to time available in amounts sufficient to
prevent Landlord or Tenant from becoming a co-insurer under the
terms of the applicable policies, but in any event in an amount
not less than ninety percent (90%) of the then "full replacement
cost", the term "full replacement cost" to mean the actual
replacement cost less physical depreciation of the building,
including foundation and excavation costs. Landlord and Tenant
shall agree on the initial value of the leased premises at the
commencement of this lease which shall be increased annually by
building cost index factors as may be determined by the Marshall
Stevens Valuation Guide or other appraisal source mutually agreed
upon by Landlord and Tenant.
b. Tenant, at its sole cost and expense, shall also
maintain worker's compensation insurance and malpractice
insurance in amounts reasonably required by Landlord and such
other insurance against other insurable hazards which from time
to time are insured against by Tenant in the case of property
leased or owned by Tenant which is similar to the leased
premises, due regard being or to be given to the height and type
of the building forming a part of the leased premises, its
construction, use, and occupancy.
c. All insurance provided for in the paragraph shall be
effected under valid and enforceable policies issued by insurers
of recognized responsibility which have been approved in writing
by Landlord, such approval not to be unreasonably withheld. Upon
the execution of this lease and thereafter not less than thirty
(30) days prior to the expiration dates of the expiring policies
theretofore furnished pursuant to this paragraph or any other
paragraph of this lease, originals of the policies or
certificates relating thereto bearing notations evidencing the
payment of premiums or accompanied by other evidence satisfactory
to Landlord of such payment shall be delivered by Tenant to the
Landlord.
d. All policies of insurance provided for in this paragraph
shall name Landlord and Tenant and the holder of any first
mortgage on the leased premises as the insureds, as the
respective interests may appear, and shall otherwise comply with
the requirements of said first mortgage.
e. Each such policy provided for in this paragraph shall
contain an agreement by the insurer that such policy shall not be
cancelled without at least thirty (30) days prior written notice
to Landlord and to the holder of any first mortgage of the leased
premises and an agreement that any loss otherwise payable
thereunder shall be payable notwithstanding any act of negligence
of Landlord or Tenant which might, absent such agreement, result
in a forfeiture of all or a part of such insurance payment and
notwithstanding the following:
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<PAGE> 6
(i) The occupation or use of the leased premises for
purposes more hazardous than permitted by the terms of such
policy.
(ii) Any foreclosure or other action or proceeding taken
pursuant to any provision of any mortgage upon the
happening of an event of default thereunder; or
(iii) Any change in title or ownership of the leased
premises.
f. All insurance policies in force at the termination of this
lease shall be cancelled and Tenant shall receive all premium refunds.
g. Tenant may provide any insurance required by this lease in the
form of a blanket policy, provided that Tenant shall furnish satisfactory proof
that such blanket policy complies in all respects with the provisions of this
lease, and that the coverage thereunder is at least equal to the coverage which
would have been provided under a separate policy covering only the leased
premises.
h. Landlord shall not be required to prosecute any claim against
or contest any settlement proposed by any insurer provided that Tenant may at
its expense prosecute any such claim or contest any such settlement. In such
event, Tenant may bring such prosecution or contest in the name of Landlord,
Tenant or both and Landlord will join therein at Tenant's written request upon
the receipt by Landlord of an indemnity from Tenant against all costs,
liabilities, and expenses in connection with such prosecution or contest.
i. Insurance claims by reason of damage to or destruction of any
portion of the leased premises shall be adjusted by Landlord. Any such proceeds
shall be paid to Landlord, to be held subject to the provision of Paragraph 18.
j. If Tenant shall default in the obtaining or maintaining of any
insurance required hereunder, Landlord shall have the right (but not the
obligation) to take whatever action is necessary and to pay all appropriate
premiums to obtain or maintain such insurance, in which event any amount paid
for premiums by Landlord shall be paid by Tenant to Landlord upon demand plus
ten percent (10%) per annum interest from ten days after such demand until
payment.
5. Security Deposit. Landlord acknowledges receiving EIGHTEEN THOUSAND
SEVEN HUNDRED TWENTY FIVE AND NO/100 DOLLARS ($18,725.00) as security for the
full and faithful performance by Tenant of Tenant's covenants and obligations
hereunder. Such Security Deposit shall not bear interest and shall not be
considered an advance payment of rental or a measure of Landlord's damages in
case of default in the performance of any of the covenants and obligations to
be performed by it hereunder, including but not limited to the payment of all
rent to be paid hereunder, Landlord may, from time to time, without prejudice
to any other remedy, use such Security Deposit to the extent necessary to make
good any arrearages in rent or any sum as to which Tenant is in default and any
other damages or deficiency in the reletting of the leased premises, whether
such damages or deficiency may accrue before or after termination
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<PAGE> 7
of this lease. If landlord assigns its interests in the leased premises during
the lease term, Landlord may assign the Security Deposit; provided, however,
that such Assignee shall agree to undertake in writing to return such Security
Deposit upon expiration of this lease. The provisions of the preceding sentence
shall apply to every transfer or assignment made of the Security Deposit to a
new Landlord. Tenant agrees that it will not assign or encumber or attempt to
assign or encumber the moneys deposited herein as security and that Landlord
and its successors and assigns shall not be bound by any such actual or
attempted assignment of this lease by Tenant, Landlord may return the security
deposit to the original Tenant, in the absence of evidence satisfactory to
Landlord of an assignment of the right to receive such Security Deposit or any
part of the balance thereof.
6. Commencement of Rent. The rental under this lease shall commence on
the Commencement Date.
7. Acceptance of Leased Premises by Tenant. Tenant has examined the
leased premises and accepts such premises in their present condition and
without any representation on the part of the Landlord as to the present or
future condition of such property, except that Tenant does not waive any rights
against the general contractor or any subcontractor under guarantees with
respect to defects that may now exist or may hereafter occur as a result of
construction of the leased premises. Landlord warrants that the leased premises
will be licensable as a nursing home under the law of the State of Missouri.
Landlord hereby assigns to Tenant any and all warranties issued to Landlord in
connection with the construction of the leased premises. Landlord further
agrees to promptly correct all deficiencies regarding the physical plant of the
leased premises noted in the first survey of the facility by the Missouri
Department of Health after the Commencement Date of this lease. Landlord shall
not be liable, except in the event of gross negligence or willful misconduct,
to Tenant or any of its agents, employees, licensees, servants, or invitees for
any design or any defect in the leased premises or its mechanical systems and
equipment which may exist or occur, and Tenant, with respect to itself and its
agents, employees, licensees, servants, and invitees, hereby expressly assumes
all risks of injury or damage to person or property, either proximate or
remote, by reason of the condition of the leased premises.
8. Repair and Maintenance by Tenant. Landlord shall not be required to
make any repairs or improvements of any kind upon the leased premises. Tenant
shall keep the leased premises including all fixtures and improvements
installed by Tenant in good and tenantable repair and condition and shall
promptly make all necessary repairs and replacements thereto except those
caused by fire or other casualty covered by insurance on the premises under
policies naming Landlord as the insured, all at Tenant's sole expense, under
the supervision and with the approval of Landlord. Said repairs and
replacements shall be in quality and class equal to the original work and shall
include without limitation repairs and all necessary replacements to the roof,
foundation, underground or otherwise concealed plumbing, interior plumbing,
exterior walls, windows, window glass, plate glass, doors, interior walls,
columns and partitions, lighting, plumbing and sewage facilities, heating and
air conditioning equipment (including the cooling tower), fire protection
sprinkler system, and elevators, and shall also include the reasonable care of
landscaping and regular mowing of grass and maintenance of any outside paving
and any
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<PAGE> 8
railroad siding. Tenant shall keep the leased premises free of insects,
rodents, and pests. Without diminishing such obligation of Tenant, if Tenant
fails to make such repairs and replacements after the necessity therefor arises
within thirty (30) days after written demand therefor stating the respects in
which this covenant is not being performed, or if such repairs or replacements
cannot be made within thirty (30) days and diligently continue same, Landlord
may at its option make such repair and Tenant shall pay Landlord for the cost
thereof upon demand, plus ten percent (10%) per annum interest from ten (10)
days after such demand until payment.
9. Mechanic's Liens. Tenant will not permit any mechanic's lien or
liens to be placed upon the leased premises during the term hereof caused by or
resulting from any work performed, materials furnished, or obligation incurred
by or at the request of Tenant and nothing in this lease contained 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 materialman for the performance of any labor or the
furnishing of any materials for any specific improvement, alteration, or repaid
of or to the leased premises or any part thereof, nor 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 mechanic's or other liens against the interest of Landlord in the leased
premises. In the case of filing of any lien on the interest of Landlord or
Tenant in the leased premises, Tenant shall cause the same to be discharged of
record within sixty (60) days after filing of same. If Tenant shall fail to
discharge such mechanic's lien or remedy of Landlord, Landlord may, but shall
not be obligated to discharge the same either by paying the amount claimed to
be due or by procuring the discharge of such lien by deposit in court or
bonding. Any amount paid by Landlord for any of the aforesaid purposes, or for
the satisfaction of any other lien, cost caused or claimed to be caused by
Landlord and all reasonable legal and other expenses of Landlord, including
reasonable counsel fees, in defending any such action or in or about procuring
the discharge therewith, shall be paid by Tenant to Landlord on demand, plus
ten percent (10%) per annum interest from ten (10) days after such demand until
payment.
10. Alterations and Additions by Tenant. Tenant shall not make or
allow to be made any openings in the roof or exterior walls or any building
forming a part of the leased premises or any alterations, improvements, or
additions in or to the leased premises without first obtaining the written
consent of Landlord, and all alterations, additions, and improvements made to
or fixtures or other improvements placed in or upon the leased premises,
whether temporary or permanent in character, by either party shall be deemed a
part of the leased premises and the property of the Landlord at the time same
are placed in or upon the leased premises, without compensation to Tenant.
11. Use and Occupancy. Tenant agrees that the leased premises shall be
used and occupied only as and for a nursing home and for no other purpose.
Landlord and Tenant shall cooperate with each other in obtaining the necessary
governmental licenses and permits required to operate a nursing home on the
leased premises and each shall bear its own expense in connection therewith.
Tenant agrees to use and maintain the leased premises in a clean, careful, safe
and proper manner and to comply with all applicable laws, ordinances, orders,
rules, and regulations of all governmental bodies (state, federal, and
municipal) and in a manner that the
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leased premises shall at all times qualify as a licensed nursing home under the
laws and regulations of the State of Missouri. Tenant will not in any manner
deface or injure the leased premises or any part thereof or overload the floors
on the leased premises. Tenant agrees to pay Landlord on demand for any damage
to the leased premises caused by any negligence or willful act or any misuse or
abuse (whether or not any such misuse or abuse results from negligence or
willful act) by the Tenant or any of its agents, employees, licensees, or
invitees, or any other person not prohibited, expressly or impliedly, by Tenant
from entering upon the leased premises. Tenant agrees not to use or allow or
permit the leased premises to be used for any purpose prohibited by any law of
the United States or of the State of Missouri or by any ordinance of the City
of Dixon, and Tenant agrees not to commit waste or suffer or permit waste to be
committed or to allow or permit any nuisance on or in the leased premises.
Tenant will not use the leased premises for any immoral or illegal purposes.
Tenant shall not use the leased premises or allow or permit sale to be used in
any way or for any purpose that Landlord may deem to be extra hazardous on
account of the possibility of fire or other casualty or which will increase the
rate of fire or other insurance for the leased premises or its contents or in
respect of the operation of the leased premises or which may render the leased
premises uninsurable at normal rates by responsible insurance carriers
authorized to do business in the State of Missouri or which may render void or
voidable any insurance on the leased premises. Tenant shall have the right to
erect a sign on the exterior walls of the building forming a part of the leased
premises, securely attached to and parallel to said walls, subject to
applicable laws and deed restrictions. Tenant shall not erect any signs other
than customary trade signs identifying its business, and shall not erect any
signs on the roof or paint or otherwise deface the exterior walls of said
building. Tenant shall remove all signs at the termination of this lease, and
shall repair any damage and close any holes caused by such removal.
12. Liability of Landlord. Landlord shall not be liable to Tenant or
to Tenant's employees, agents, licensees, or visitors, or any other person
whomsoever, for (i) any injury or damage to person or property due to the
leased premises or any part thereof becoming out of repair or by defect in or
failure of pipes or wiring, or by the backing up of drains or by the bursting
or leaking of pipes, faucets, and plumbing fixtures or by gas, water, steam,
electricity, or oil leaking, escaping or flowing into the leased premises,
whether or not caused by negligence of Landlord, or (ii) any loss or damage
that may be occasioned by or through the acts or omissions of any other person
whatsoever, excepting only the willful misconduct or gross negligence of duly
authorized employees and agents of Landlord, or (iii) for any loss or damage to
any property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, insurrections, war, court order, requisition or order of
governmental authority, or any other matter beyond the control of Landlord.
Tenant agrees that all personal property upon the leased premises shall be at
the risk of Tenant only, and that Landlord shall not be liable for any damage
thereto or theft thereof.
13. Tenant's Indemnification of Landlord. Tenant agrees that it will
indemnify and hold and save Landlord whole and harmless of, from, and against
(i) all fines, suits, loss, cost, liability, claims, demands, actions, and
judgments of every kind and character by reason of any breach, violation or
nonperformance of any term, provision, covenant, agreement, or demands,
actions, damages, cost, loss, liabilities, expenses, and judgments suffered by,
recovered from or
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asserted against Landlord on account of injury or damage to person or property
to the extent that any such damage or injury may be incident to, arise out of,
or be caused, either proximately or remotely, wholly or in part, by an act,
omission, negligence, or misconduct on the part of Tenant or any of its agents,
servants, employees, contractors, patrons, guests, licensees, or invitees or of
any other person entering upon the leased premises under or with the express or
implied invitation or permission of Tenant or when any such injury or damage is
the result, proximate or remote, of the violation by Tenant or any of its
guests, servants, employees, contractors, patrons, licensees, or invitees of
any law, ordinance, or governmental order of any kind, or when any such injury
or damage may in any way arise from or out of the occupancy or use by Tenant,
its agents, servants, employees, contractors, patrons, guests, licensees, or
invitees of the leased premises. Tenant covenants and agrees that in case
Landlord shall be made a party to any litigation commenced by or against Tenant
or relating to this lease or to the leased premises, then Tenant will pay all
costs and expenses, including reasonable attorneys' fees and court costs,
incurred by or imposed upon Landlord by virtue of any such litigation unless a
judgment is rendered in said litigation against Landlord or its agents or
employees based upon their negligence or willful misconduct and the amount of
all such costs and expenses, including attorneys' fees and court costs, shall
be a demand obligation owing by Tenant to Landlord bearing interest at the rate
of ten percent (10%) per annum from ten (10) days after the date of demand.
14. Liability Insurance. Tenant shall, at its sole cost and expense,
procure and maintain through the term of this lease Comprehensive General
Liability insurance and Professional Liability insurance against claims for
bodily injury or death and property damage occurring in or upon or resulting
from the leased premises, in standard form and with such insurance company or
companies as may be acceptable to Landlord, such insurance to afford immediate
protection, to the limit of not less than $1,000,000.00 in respect of any one
accident or occurrence in respect of bodily injury, death and for property
damage with a $2,000,000.00 aggregate limit, with not more than $10,000.00
deductible. Such Comprehensive General Liability insurance shall include
Blanket Contractual Liability coverage which insures contractual liability
under the indemnification of Landlord by Tenant set forth in this lease (but
such coverage or the amount thereof shall in no way limit such
indemnification). Tenant shall maintain with respect to each policy or
agreement evidencing such Comprehensive General Liability insurance and
Professional Liability insurance such endorsements as may be required by
Landlord and shall at all times deliver such maintain with Landlord a
certificate with respect to such insurance in form satisfactory to Landlord.
Tenant shall obtain a written obligation on the part of each insurance company
to notify Landlord and the holder of any first mortgage on the leased premises
at least thirty (30) days prior to cancellation of such insurance. Such
policies or duly executed certificates of insurance relating thereto shall be
promptly delivered to Landlord and renewals thereof as required shall be
delivered to Landlord at least thirty (30) days prior to the expiration of the
respective policy terms. If Tenant fails to comply with the foregoing
requirements relating to insurance, Landlord may obtain such insurance and
Tenant shall pay to Landlord on demand the premium cost thereof plus interest
at the rate of ten percent (10%) per annum from ten (10) days after the date of
demand by Landlord until repaid by Tenant.
15. Right of Entry by Landlord. Landlord shall have the right,
exercisable without notice and without liability to Tenant for damage or injury
to property, persons, or business and
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without affecting an eviction, constructive or actual, or disturbance of
Tenant's use or possession or giving rise to any claim for setoff or abatement
of rent to enter upon the leased premises at reasonable hours to inspect same
or make repairs or alterations (but without any obligation to do so, except as
expressly provided for herein) or to show the leased premises to prospective
tenants at reasonable hours and if they are vacated, to prepare them for
re-occupancy, Landlord and its authorized agents shall have the right, within
the final sixty (60) day period of the term of this lease, to erect on or about
the leased premises a customary sign advertising the leased property for lease
and shall have the right, at any time during the term of this lease, to erect
on or about the premises a customary sign advertising the leased property for
sale.
16. Utility Services. Landlord shall provide at Landlord's expense on
the Commencement Date of this lease the normal and customary utility service
connections into the leased premises. Tenant shall pay the cost of all utility
services, including but not limited to all charges for gas, water, and
electricity used on the leased premises, and for all electric light lamps or
tubes and pay for all meter deposits. Landlord shall not be liable for any
interruption in the supply of any utilities.
17. Assignment and Subletting.
a. Tenant shall not, without the prior written consent of
Landlord, which consent will not be unreasonably withheld, (i) assign or in any
manner transfer this lease or any estate or interest therein, or (ii) permit
any assignment of this lease or any estate or interest therein by operation of
law, or (iii) sublet the leased premises or any part thereof. Consent by
Landlord to one or more assignments or subletting shall not operate as a waiver
of Landlord's rights as to any subsequent assignments and sublettings.
Notwithstanding any assignments or subletting, Tenant and any guarantor of
Tenant's obligations under this lease shall at all times remain fully
responsible and liable for the payment of the rent herein specified and for
compliance with all of Tenant's other obligations under this lease. If an event
of default, as hereinafter defined, should occur while the leased premises or
any part thereof are then assigned or sublet, Landlord, in addition to any
other remedies herein provided by law, may at its option collect directly from
such assignee or sublessee all rents becoming due to Tenant under such
assignment or sublease and apply such rent against any sums due to Landlord by
Tenant hereunder and Tenant hereby authorizes and directs any such assignee or
sublessee to make such payments of rent directly to Landlord upon receipt of
notice from Landlord. No direct collection by Landlord from any such assignee
or sublessee shall be construed to constitute a novation or a release of tenant
or any guarantor of Tenant from the further performance of its obligations
hereunder. Receipt by Landlord of rent from any assignee, sublessee, or
occupant of the leased premises shall not be deemed a waiver of the covenant in
this lease contained against assignment and subletting or a release of Tenant
under this lease. The receipt by Landlord to any such assignee or sublessee
obligated to make payments of rent shall be a full and complete release,
discharge, and acquittance to such assignee or sublessee to the extent of any
such amount of rent so paid to Landlord. Landlord is authorized and empowered,
on behalf of Tenant, to endorse the name of Tenant upon any check, draft, or
other instrument payable to Tenant evidencing payment of rent, or proceeds
therefrom, in accordance with the terms hereof. Tenant shall not mortgage,
pledge, or otherwise encumber its interest in this lease or the leased
premises.
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b. Landlord shall have the right to transfer, assign, and convey,
in whole or in part, the leased premises and any and all of its rights under
this lease, and in the event Landlord assigns its rights under this lease,
Landlord shall thereby be released from any further obligations hereunder, and
Tenant agrees to look solely to such successor in interest of the Landlord for
performance of such obligations.
18. Fire or other Casualty. If the leased premises or any part thereof
shall be damaged by fire or other casualty, Tenant shall give prompt written
notice thereof to the Landlord. In case the leased premises shall be so damaged
by fire or other casualty that destruction is fifty percent (50%) or more in
value of the leased premises or in the event of any mortgagee under a mortgage
or deed of trust covering the leased premises should require that the insurance
proceeds payable as a result of said fire or other casualty be used to retire
the mortgage debt, Landlord may, at its option, terminate this lease and the
term and estate hereby granted by notifying Tenant in writing of such
termination within sixty (60) days after the date of such damage, in which
event the rent hereunder shall be abated as of the date of such damage. If
Landlord does not thus elect to terminate this lease, Landlord shall within
seventy-five (75) days after the date of such damage commence to repair and
restore the leased premises and shall proceed with reasonable diligence to
restore the leased premises (except that Landlord shall not be responsible for
delays outside its control) to substantially the same condition in which it was
immediately prior to the happening of the casualty, except that Landlord's
obligation to restore the leased premises shall be limited to the amount of
available insurance proceeds payable to Landlord (and Tenant agrees to pay all
costs of such restoration not covered by insurance proceeds) and except that
Landlord shall not be required to rebuild, repair, any part of Tenant's
Property (as hereinafter defined). Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from such damage or the repair thereof, except that,
subject to the provisions of the next sentence, Landlord shall allow Tenant a
fair diminution of rent during the time and to the extent the leased premises
are unfit for occupancy. If the leased premises are damaged by fire or other
casualty resulting from the fault or negligence of Tenant or any of Tenant's
agents, employees, or invitees, the rent hereunder shall not be diminished
during the repair of such damage, and Tenant shall be liable to Landlord for
the cost and expense of the repair and restoration of the leased premises
caused thereby to the extent such cost and expense is not covered by insurance
proceeds.
19. Condemnation. If the whole or substantially the whole of the
leased premises should be taken for any public or quasi-public use under any
governmental law, ordinance, or regulation or by right of eminent domain or
should be sold to the condemning authority under threat of condemnation so as
to render the leased premises no longer suitable as a nursing home, then this
lease shall terminate as of the date when physical possession of the leased
premises is taken by the condemning authority. In the event the portion of the
leased premises affected is used only for parking, Landlord shall have the
option of providing an equivalent number of parking spaces on other property
appurtenant to the leased premises, in which event this lease shall not
terminate. If less than the whole or substantially the whole of the leased
premises is thus taken or sold or the option in the preceding sentence is
employed by Landlord, this lease shall not be thus terminated and the rent
payable hereunder shall be diminished by an amount representing that part of
said rent as shall properly be allocable to the portion of the leased
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premises which was so taken or sold and Landlord shall, at Landlord's sole
expense, restore and reconstruct the leased premises to substantially their
former condition to the extent that the same, in Landlord's judgement, may be
feasible, but Landlord shall not in any event be required to spend for such
work an amount in excess of the amount received by Landlord as compensation or
damages (over and above amounts going to the mortgage of the property taken)
for the part of the leased premises so taken. Landlord shall be entitled to
receive all of the compensation awarded upon a taking of any part or all of the
leased premises including any award for the value of any unexpired term of this
lease and Tenant shall not be entitled to and expressly waives all claim to any
such compensation; except however, that nothing contained herein shall be
construed to preclude Tenant from prosecuting any claim directly against the
condemning authority in such condemnation proceedings for loss of business or
depreciation to, damage to, or cost of removal of, or for the value of,
personal property belonging to Tenant.
20. Waiver of Subrogation. Each party hereto waives any and every
claim which arises or may arise in its favor and against the other party hereto
during the term of this lease or any extension or renewal thereof for any and
all loss of, or damage to, any of its property which loss or damage is covered
by valid and collectable fire and extended coverage insurance policies, to the
extend that such loss or damage is recovered under said insurance policies.
Said waivers shall be in addition to, and not in limitation or derogation of,
any other waiver or release contained in this lease with respect to any loss or
damage to property of the parties hereto. Inasmuch as the above mutual waivers
will preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to any insurance company (or any other person), each party hereto
hereby agrees immediately to give to each insurance company which has issued to
it policies of fire and extended coverage insurance written notice of the terms
of said mutual waivers, and to have said insurance policies properly endorsed,
if necessary, to prevent the invalidation of said insurance coverage by reason
of said waivers.
21. Personal Property. Tenant will promptly replace all worn out or
obsolete Personal Property and will not, without the prior written consent of
Landlord, remove from the leased premises any Personal Property except for
temporary removal for repair or except such as is replaced by Tenant by an
article of equal suitability and value free and clear of any lien or security
interest. Any such replacements shall be a part of the Personal Property
hereunder and shall be the property of Landlord subject to the terms of this
lease. Tenant may place other personal property on the leased premises and,
except for property replacing Personal Property, any such personal property
shall be the property of Tenant (said property herein sometimes called
"Tenant's Property"). Any personal property which is affixed by Tenant to the
building or other improvements constituting the leased premises shall become
the property of Landlord.
22. Surrender upon Termination. At the termination of this lease,
whether caused by lapse of time or otherwise, Tenant shall at once surrender
possession of the leased premises and deliver said premises to Landlord in as
good repair and condition as at the commencement of Tenant's occupancy,
reasonable wear and tear and damage or destruction by fire or other casualty
expected, and shall deliver to Landlord all keys to the leased premises, and,
if such possession is not immediately surrendered, Landlord may forthwith enter
upon and take possession of the leased premises and expel or remove Tenant and,
subject to any applicable law, rule, or
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regulations of any governmental entity, any other person who may be occupying
said premises or any part thereof, by force, if necessary, without having any
civil or criminal liability therefor. All alterations, additions, or
improvements, whether temporary or permanent in character, made in or upon the
leased premises, either by Landlord or Tenant, and all Personal Property shall
remain on the leased premises on termination of this lease without compensation
to Tenant. All Tenant's Property may be removed by Tenant at the termination of
this lease provided that Tenant is not at that time in default under this
lease. All such removals shall be accomplished in a good workmanlike manner so
as not to damage the leased premises or the primary structure or structural
qualities of the leased premises or the plumbing, electrical lines, or other
utilities. All Tenant's Property not promptly removed after such termination
shall thereupon be conclusively presumed to have been abandoned by Tenant and
Landlord may, at its option, take over the possession of such property and
either (i) declare same to be the property of Landlord by written notice
thereof to Tenant or (ii) at the sole cost and expense of Tenant remove the
same or any part thereof in any manner that Landlord shall choose and store the
same without incurring liability to Tenant or any other person.
23. Events of Default.
a. The following events shall be deemed to be events of default by
Tenant under this lease:
(i) Tenant shall fail to pay when due any installment of the
rent hereby reserved.
(ii) Tenant shall fail to comply with any term, provision, or
covenant of this lease, other than the payment of rent and shall
not cure such failure within thirty (30) days after written notice
thereof to Tenant, provided, however, that if the default is such
that it cannot be cured within such thirty (30) day period, then
such default shall not be deemed to continue so long as Tenant,
after receiving such notice, proceeds to cure the default as soon
as reasonably possible and continues to take all steps necessary
to complete same within a period of time which, under all
prevailing circumstances, shall be reasonable. No default under
this subsection shall be deemed to continue if as so long as
Tenant shall be so proceeding to cure same in good faith or be
delayed in or prevented from curing the same by any supervening
cause or circumstance beyond the control of Tenant.
(iii) Tenant or any guarantor of Tenant's obligations hereunder
(hereinafter called "Guarantor") shall become insolvent, or shall
make a transfer in fraud of creditors, or shall commit any act of
bankruptcy or shall make an assignment for the benefit of
creditors, or Tenant or any Guarantor shall admit in writing its
inability to pay its debts as they become due.
(iv) Tenant or any Guarantor shall file a petition under any
section or chapter of the National Bankruptcy Act, as amended or
under any similar law or statute of the United States or any state
thereof, or Tenant or any Guarantor shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant or any
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Guarantor thereunder; or a petition or answer proposing the
adjudication of Tenant or any Guarantor as a bankrupt or its
reorganization under any present or future federal or state
bankruptcy or similar law shall be filed in any court and such
petition or answer shall not be discharged or denied within one
hundred twenty (120) days after the filing thereof.
(v) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant or any Guarantor or of
the leased premises or any of Tenant's Property located thereon in
any proceeding brought by Tenant or any Guarantor and shall not be
discharged within one hundred twenty (120) days after such
appointment or Tenant or such Guarantor shall consent to or
acquiesce in such appointment.
(vi) The leasehold hereunder shall be taken on execution or other
process of law in any action against Tenant.
(vii) Tenant shall abandon any substantial portion of the leased
premises.
b. If any event of default shall have occurred, Landlord shall have
the right at its election, then or at any time thereafter while such event of
default shall continue, to pursue any one or more of the following remedies:
(i) Terminate this lease by giving notice thereof to Tenant, in
which event Tenant shall immediately surrender the leased premises
to Landlord and if Tenant fails to do so, Landlord may, without
prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the leased
premises and expel or remove Tenant and, subject to any applicable
law, rule, or regulation of any other person who may be occupying
said premises, or any part thereof, by force, if necessary,
without having any civil or criminal liability therefore, and
Tenant hereby agrees to pay to Landlord on demand the amount of
all loss and damage which Landlord may suffer by reason of such
termination, whether through inability to relet the leased
premises on satisfactory terms or otherwise, specifically
including, but not limited to (ii) all reasonable expenses
necessary to relet the leased premises which shall include the
cost of renovating, repairing, and altering the leased premises
for a new Tenant or Tenants, advertisement, and brokerage fees and
(iii) any increase in insurance premiums caused by the vacancy of
the leased premises. Nothing contained in this lease shall limit
or prejudice the right of Landlord to prove for and obtain in
proceedings for bankruptcy or insolvency by reason of the
termination of this lease, 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, equal to, or less than the
amount of the loss or damages referred to above.
(ii) Enter upon and take possession of the leased premises and
expel or remove Tenant or, subject to any applicable law, rule or
regulation of any
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governmental entity, any other person who may be occupying said
premises, or any part thereof, by force, if necessary, without
having any civil or criminal liability therefor and, without
terminating this lease, Landlord may (but shall be under no
obligation to) relet the leased premises or any part thereof for
the account of Tenant, in the name of Tenant or Landlord or
otherwise, without notice to Tenant for such term or terms (which
may be greater or less than the period which would otherwise have
constituted the balance of the term of this lease) and on such
conditions (which may include concessions or free rent) and for
such uses as Landlord in its absolute discretion may determine and
Landlord may collect and receive any rents payable by reason of
such reletting; and Tenant agrees to pay Landlord on demand all
reasonable expenses necessary to relet the leased premises which
shall include the cost of renovating, repair, and altering the
leased premises for a new Tenant or Tenants, advertisements, and
brokerage fees, and Tenant further agrees to pay Landlord on
demand any deficiency that may arise by reason of such reletting.
Landlord shall not be responsible or liable for any failure to
relet the leased premises or any part thereof or for any failure
to collect any rent due upon any such reletting. No such re-entry
or taking of possession of the leased premises by Landlord shall
be construed as an election on Landlord's part to terminate this
lease, unless a written notice of such termination is given to
Tenant pursuant to subparagraph b.(i) above.
(iii) Enter upon the leased premises, by force if necessary,
without having any civil or criminal liability therefor, and do
whatever Tenant is obligated to do under the terms of this lease
and Tenant agrees to reimburse Landlord on demand for any expenses
which Landlord may incur in thus effecting compliance with
Tenant's obligations under this lease and Tenant further agrees
that Landlord shall not be liable for any damages resulting to
Tenant from such action, whether caused by the negligence of
Landlord or otherwise.
c. No repossession of or re-entering on the leased premises or any
part thereof pursuant to subparagraphs b.(ii) and (iii) above or otherwise and
no reletting of the leased premises or any part thereof pursuant to
subparagraph b.(ii) shall relieve Tenant or any Guarantor of its liabilities
and obligations hereunder all of which shall survive such repossession or
reentering. In the event of any such repossession or re-entering on the leased
premises or any part thereof by reason of the occurrence of an event of
default, Tenant will pay to Landlord the rent required to be paid by Tenant.
d. No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy and each and every right
or remedy given hereunder or now or hereafter existing at law or equity or by
statute. In addition to other remedies provided in this lease, Landlord shall
be entitled to the extent permitted by applicable law, to injunctive relief in
case of the violation, or attempted or threatened violation, of any of the
covenants, agreements, conditions, or provisions of this lease, or to a decree
compelling performance of any of the covenants, agreements, conditions, or
provisions of this lease, or to any other remedy allowed to Landlord at law or
in equity.
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24. No Implied Waiver. The failure of Landlord to insist at any time
upon the strict performance of any covenant or agreement or to exercise any
option, right, power, or remedy contained in this lease shall not be construed
as a waiver or a relinquishment thereof for the future. The waiver of or
redress for any violation of any term, covenant, agreement, or condition
contained in this lease shall not prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. No express waiver shall affect any condition other than the
one specified in such waiver and that one only for the time and in the manner
specifically stated. A receipt by Landlord of any rent with knowledge of the
breach of and covenant or agreement contained in this lease shall not be deemed
a waiver of such breach, and no waiver by Landlord of any provision of this
lease shall be deemed to have been made unless expressed in writing and signed
by Landlord.
25. Waiver by Tenant. Tenant hereby waives and surrenders for itself
and all claiming by, through, and under it, including creditors of all kinds,
(i) any right and privilege which it or any of them may have under any present
or future constitution statute, or rule of law to redeem the leased premises or
to have a continuance of this lease for the term hereby demised after
termination of Tenant's right of occupancy by order or judgment of any court or
by any legal process or writ, or under the terms of this lease, or after the
termination of the term of this lease as herein provided, and (ii) the benefits
of any present or future constitution, statute, or rule of law which exempts
property from liability for debt or for distress for rent, and (iii) the
provisions of any law relating to notice and/or delay in levy of execution in
case of eviction of a tenant for nonpayment of rent.
26. Attorneys' Fees and Legal Expenses. Should either party hereto
institute any action or proceeding in court to enforce any provision hereof or
for damages by reason of any alleged breach of any provision of this lease or
for any other judicial remedy, the prevailing party shall be entitled to
receive from the losing party all reasonable attorneys' fees and court costs in
connection with said proceeding.
27. Landlord's Lien. In addition to the statutory landlord's lien and
in order to secure payment of all rentals and other sums of money becoming due
hereunder from Tenant, and to secure payment of damages or loss which Landlord
may suffer by reason of the breach of Tenant of any covenant, agreement, or
condition contained herein, Tenant hereby grants unto Landlord a security
interest in and an express contractual lien upon all goods, wares, equipment,
fixtures, furniture, improvements, and other personal property of Tenant
presently or which may hereafter be situated upon the leased premises (except
such part of such property as may be exchanged, replaced, or sold from time to
time in the ordinary course of Tenant's operations) and all proceeds therefrom,
and such property shall not be removed therefrom without the consent of
Landlord until all arrearages in rent as well as any and all other sums of
money then due the Landlord hereunder shall first have been paid and discharged
and all the covenants, agreements, and conditions hereof have been fully
complied with and performed by Tenant. Upon the occurrence of an event of
default by Tenant, Landlord may, in addition to any other remedies provided
herein, enter upon the leased premises and take possession of any and all
goods, wares, equipment, fixtures, furniture, improvements, and other personal
property of Tenant situated on the leased premises, without liability for
trespass or conversion (and Tenant hereby waives any
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<PAGE> 18
right to notice or hearing prior to such of possession by Landlord) and sell
the same at public or private sale, with or without having such property at the
sale, after giving Tenant reasonable notice of the time and place of any public
sale or of the time after which any private sale is being made, at which sale
Landlord or its assigns may purchase 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 five (5) days before the date of the sale. Any sale
made pursuant to the provisions of this paragraph shall be deemed to have been
a public sale conducted in a commercially reasonable manner if held in the
leased premises after the time, place, and method of sale and general
description of the type of property to be sold have been advertised in a daily
newspaper published in Dixon, Missouri, for five (5) consecutive days prior to
the date of sale. The proceeds from any such disposition, less any and all
expenses connected with the taking of possession, holding, and selling of the
property (including reasonable attorneys' fees and other expenses), shall be
applied as a credit against the indebtedness secured by the security interest
granted in the paragraph. Any surplus shall be paid to Tenant or as otherwise
required by law; and the Tenant shall pay any deficiency forthwith. Upon
request by Landlord, Tenant agrees to execute and deliver to Landlord a
financing statement in form sufficient to perfect the security interest of
Landlord in the aforementioned property and proceeds thereof under the
provisions of the Business and Commerce Code in force in the State of Missouri.
The interest herein granted being in addition and supplementary thereto.
28. Subordination. This lease and all rights of Tenant hereunder are
subject and subordinate (i) to any first lien mortgage or deed of trust,
blanket or otherwise, which does now or may hereafter affect the leased
premises (and which also affect other property) and (ii) to any and all
increases, renewals, modifications, consolidations, replacements, and
extensions of any such mortgage or deed of trust. This provision is hereby
declared by Landlord and Tenant to be self operative and no further instrument
shall be required to effect such subordination of this lease. Tenant shall,
however, upon demand at any time or times by Landlord or the holder of any lien
on the leased premises execute, acknowledge, and deliver to Landlord any and
all instruments and certificates that may be necessary or proper to more
effectively subordinate this lease and all rights of Tenant hereunder to any
such mortgage or deed of trust or to confirm or evidence such subordination. In
the event the Tenant shall fail or neglect to execute, acknowledge, and deliver
any such subordination agreement or certificate, Landlord, in addition to any
other remedies it may have, may as the agent and attorney in fact of Tenant,
execute, acknowledge, and deliver the same and Tenant hereby irrevocably
nominates, constitutes and appoints Landlord Tenants proper and legal agent and
attorney in fact for such purposes. Such power of attorney shall not terminate
on disability of the principal. Tenant covenants and agrees, in the event any
proceedings are brought for the foreclosure of any such mortgage or if the
leased premises be sold pursuant to any such deed of trust, to attorn to the
purchaser upon any such foreclosure sale or trustee's sale if so requested by
such purchaser and to recognize such purchaser as the Landlord under this
lease. Tenant agrees to execute and deliver at any time and from time to time,
upon the request of Landlord or of any holder(s) of any of the indebtedness or
other obligations secured by any of the mortgages or deeds of trust referred to
in this paragraph or any such purchaser any instrument or certificate which, in
the sole judgment of Landlord or of such holder(s) of such purchaser, may be
necessary or appropriate in any such foreclosure
18
<PAGE> 19
proceedings or otherwise to evidence such attornment. Tenant hereby irrevocably
appoints Landlord and the holders of the indebtedness or other obligations
secured by the aforesaid mortgages and/or deeds of trust and any such purchaser
jointly and severally the agent and attorney in fact of Tenant to execute and
deliver for and on behalf of Tenant any such instrument or certificate. Such
power of attorney shall not terminate on disability of the principal.
29. Quiet Enjoyment. Provided Tenant pays the rent payable hereunder
as and when due and payable and keeps and fulfills all of the terms, covenants,
agreements, and conditions to be performed by Tenant hereunder, Tenant shall at
all times during the lease term peaceably and quietly enjoy the leased premises
without any disturbance from Landlord, subject to the terms, provisions,
covenants, agreements, and conditions of this lease and to the subordinate, as
hereinabove set forth.
30. Notice to Landlord and Mortgagee. In the event of any act of
omission by Landlord which would give Tenant the right to damages from Landlord
or the right to terminate this lease by reason of a constructive or actual
eviction from all or part of the leased premises or otherwise, Tenant shall not
sue for such damages or exercise any such right to terminate until (i) it shall
have given written notice of such act or omission to Landlord and to the
holder(s) of the indebtedness or other obligations secured by any first
mortgage or first deed of trust affecting the leased premises, if the name and
address of such holder (s) shall previously have been furnished to Tenant, and
(ii) a reasonable period of time for remedying such act or omission shall have
elapsed following the giving of such notice, during which time Landlord and
such holder (s), either of them, their agents or employees, shall be entitled
to enter upon the leased premise and do therein whatever may be necessary to
remedy such act or omission. During the period after the giving of such notice
and during the remedying of such act or omission, the rent payable by Tenant
for such period as provided in this lease shall be abated and apportioned only
to the extent that any part of the leased premises shall be untenantable.
31. Holding Over by Tenant. Should Tenant or any of its successors in
interest continue to hold the leased premises after the termination of this
lease, whether such termination occurs by lapse of time or otherwise, such
holding over shall constitute and be construed as a tenancy from month to month
only, at a monthly rental equal to the monthly rent provided herein at the time
of such termination hereof, Tenant shall be regarded as a tenant from month to
month; subject, however, to all of the terms, provisions, covenants, and
agreements on the part of the Tenant hereunder. No payments of money by Tenant
to Landlord after the termination of this lease shall reinstate, continue, or
extend the term of this lease and no extension of this lease after the
termination thereof shall be valid unless and until the same shall be reduced
to writing and signed by both Landlord and Tenant.
32. Estoppel Certificate and Other Information. Tenant will, at any
time and from time to time, upon not less than twenty (20) days prior request
by Landlord or holder of any first mortgage on the leased premises, execute,
acknowledge, and deliver to Landlord or such holder a statement in writing
executed by Tenant certifying that this lease is unmodified and in full effect
(or, if there have been modifications, that this lease is in full effect as
modified, and setting forth such modification) and the dates to which the rent
has been paid, and either stating that to the
19
<PAGE> 20
knowledge of the signer of such certificate no default exists hereunder or
specifying each such default of which the signer may have knowledge; it being
intended that any such statement by Tenant may be relied upon by any
prospective purchaser or mortgagee of the leased premises. Tenant further
agrees upon request to provide Landlord financial statements disclosing gross
revenue and rent roll to enable Landlord to receive the second portion of
funding from the holder of the first mortgage on the leased property and also
to comply with periodic financial reporting requirements made by said holder.
33. Notices. Each provision of this lease, or of any applicable
governmental laws, ordinances, regulations, and other requirements with
reference to the sending, mailing or delivery of any notice or with reference
to the making of any payment by Tenant to Landlord, shall be deemed to be
complied with then and if the following steps are taken:
a. All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord in Sebastian County, Arkansas,
at the address hereinbelow set forth, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance herewith.
b. Any notice or document required to be delivered hereunder shall
be deemed to be delivered, whether actually received or not, when deposited in
the United States mail, postage prepaid, registered mail, return receipt
requested, addressed to the parties hereto at the respective addresses set out
opposite their names below, or at such other address as they have heretofore
specified by written notice:
LANDLORD Richard B. Griffin or
Richard B. Griffin II
Dixon CareCentre, Inc.
610 Towson Avenue
P O Box 2106
Fort Smith, AR 72902
TENANT Wayne R. Wheeler
Dixon Oaks Health Centre, Inc.
HCR 60 Box 46
P.O. Box 46
Vienna, MO 65582
34. Real Estate Commissions. Each party hereto represents to the other
that he has not authorized any broker or finder to act on his behalf in
connection with the lease hereunder and that he has not dealt with any broker
or finder purporting to act on behalf of any other party. Each party hereto
agrees to indemnify and hold harmless the other from and against any and all
claims, losses, damages, costs, or expenses of any kind or character arising
out of or resulting from any agreement, arrangement, or understanding alleged
to have been made by such party or on his behalf with any broker or finder in
connection with this lease or the transaction contemplated hereby.
20
<PAGE> 21
35. Severability. Each and every covenant and agreement contained in
this lease is, and shall be construed to be, a separate and independent
covenant and agreement. If any term or provision of this lease or the
application thereof to any person or circumstances shall be to any extent
invalid and unenforceable, the remainder of this lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is invalid or unenforceable, shall not be affected hereby.
36. No Merger. There shall be no merger of this lease or of the
leasehold estate hereby created with the fee estate in the leased premises or
any part thereof by reason of the fact that the same person may acquire or
hold, directly or indirectly, this lease or the leasehold estate hereby created
or any interest in this lease or in such leasehold estate as well as the fee
estate in the leased premises or any interest in such fee estate.
37. Force Majeure. Whenever a period of time is herein prescribed for
action to the taking by Landlord or Tenant, such party shall not be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, any delays due to strikes, riots, acts of God, shortages of
labor or materials, war, governmental laws, regulations, or restrictions or any
other causes of any kind whatsoever which are beyond the control of each party.
38. Gender. Words of any gender used in this lease shall he held and
construed to include any other gender, and words in the singular number shall
be held to include the plural, unless the context otherwise requires.
39. No Representations. Landlord or Landlord's agents have made no
representations or promises with respect to the leased premises except as
herein expressly set forth and no rights, easements, or licenses are acquired
by Tenant by implication or otherwise except as expressly set forth in the
provisions of this lease.
40. Entire Agreement. This lease sets forth the entire agreement
between the parties and no amendment or modification of this lease shall be
binding or valid unless expressed in writing executed by both parties hereto.
41. Paragraph Headings. The paragraph headings contained in this lease
are for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several paragraphs hereof.
42. Binding Effect. All of the covenants, agreements, terms, and
conditions to be observed and performed by the parties hereto shall be
applicable to and binding upon their respective heirs, personal
representatives, successors, and, to the extent assignment is permitted
hereunder, their respective assigns.
43. Commencement Date. The Tenant hereby agrees that the Commencement
Date shall be no later than the date of Substantial Completion as described in
paragraph 45 herein.
44. Certificate of Need. This Lease agreement is subject to the
approval or waiver of a Certificate of Need review of the Missouri Health
Facilities Review Committee.
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<PAGE> 22
45. Substantial Completion. The Tenant may desire to occupy or use a
portion of the project prior to substantial completion. Substantial Completion
is hereby defined as that date, determined by the Architect (Health Care
Designers, Inc.), that the Landlord has completed the construction of the
facility. Said Substantial Completion shall include the consummation of the
Life Safety inspection by the Missouri Department of Social Services, Division
of Aging, with Life Safety deficiency items covered by a waiver by the
appropriate authority. Items or repair, touch-up and adjustments, or items that
are incomplete due to weather related causes (such items having minimal adverse
effect on occupancy) may be performed by the Landlord after the date of
Substantial Completion. The Architect shall confirm to the Landlord and Tenant,
in writing, the Notice of Substantial Completion. Tenant occupancy shall not
commence prior to a time mutually agreed to by the Landlord and Tenant.
The Landlord shall provide the temporary power, lighting and heat
necessary to accommodate the construction activities until such time as the
facility is ready to receive permanent water, gas and electric service. The
Tenant shall execute the necessary agreements and pay all deposits required by
the utility companies so as to facilitate the installation of said utilities by
the respective utility companies. The Tenant will not delay the installation of
said permanent services. The Tenant shall be responsible for the payment of all
utility bills after the installation of the permanent services.
The Landlord will reimburse the Tenant the cost of the permanent
service energy that the Landlord uses prior to Substantial Completion except
that these energy costs shall be pro-rated should the Tenant elect to occupy
any portion of the facility for endeavors such as cleaning, placement of Tenant
owned furnishings and equipment and other personal effects and other
pre-operational activities. The Tenant shall be responsible for any minimum
usage or demand charges assessed by the electric utility company.
46. Cleaning the Building. The Landlord agrees that the building will
be "Broom Cleaned" on or before the Commencement Date. Tenant may clean and wax
any time prior to the Commencement Date.
47. Lease Renewal Option. The Landlord agrees to offer the Tenant the
"First Right of Refusal" for the opportunity to renegotiate the Lease of this
facility for an additional five year period.
48. Purchase Option. The Landlord agrees to offer the Tenant the
"First Right of Refusal" for the purchase of the premises as described in
Exhibit Number One in the event the Landlord desires to sell said premises.
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<PAGE> 23
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the date first above written.
DIXON CARECENTRE, INC.
/s/ Richard B. Griffin
------------------------------
Richard B. Griffin, President
Corporate Seal
Signed, sealed and delivered
in the presence of:
/s/ Sandra Jett
- ----------------------------
Witness
/s/ Toni J. Carter
- ----------------------------
Notary Public
My Commission Expires: ______________________
Seal
DIXON OAKS HEALTH CENTRE, INC.
/s/ Wayne R. Wheeler
------------------------------
Wayne R. Wheeler, President
Corporate Seal
Signed, sealed and delivered
in the presence of:
/s/ [Illegible]
- ----------------------------
Witness
/s/
- ----------------------------
Notary Public
My Commission Expires: ______________________
Seal
23
<PAGE> 1
EXHIBIT 10.7
AMENDMENT TO LEASE AND ASSIGNMENT
THIS AMENDMENT TO LEASE AND ASSIGNMENT ("Agreement") is made and
entered into as of the 1st day of October, 1990, by and among NOBLE HOUSE OF
DIXON, INC. (formerly Dixon CareCentre, Inc.) a Missouri corporation
(hereinafter "Landlord"), DIXON OAKS HEALTH CENTER, INC., a Missouri
corporation (hereinafter "Assignor") and DIXON MANAGEMENT, INC., a Missouri
corporation (hereinafter "Assignee").
WHEREAS, Landlord and Assignor entered into a lease dated the 25th day
of January, 1990, respecting the real estate described in Exhibit A attached
hereto and incorporated herein by this reference (the "Original Lease"); and
WHEREAS, Assignor is desirous of assigning all of its right, title and
interest in and to the Original Lease, as amended by this Agreement (the
"Lease") to Assignee; and
WHEREAS, Assignee is desirous of assuming all of the right, title and
interest in and to the Lease held by Assignee; and
WHEREAS, Landlord is willing to consent to such assignment and to
release Assignor from its obligations under the Lease.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Paragraph 48 of the Original Lease is deleted in its entirety and
in its place is substituted the following:
"Tenant shall have the right of first refusal with respect to
the leased premises as set forth in this Paragraph. If at any time
during the term of this Lease, Landlord receives a bona fide offer
from a third person for the purchase of the leased premises, which
offer Landlord desires to accept, Landlord shall promptly deliver to
Tenant a copy of such offer, and Tenant may, within thirty (30) days
thereafter, elect to purchase the leased premises on the same terms as
those set forth in such offer, excepting that Tenant shall be
credited, against the purchase price to be paid by Tenant, with a sum
equal to the amount of any brokerage commission, if any, which
Landlord shall save by a sale to Tenant. If Landlord receives an offer
for the purchase of the leased premises which is not consummated by
delivering a deed to the offerer, the Tenant's right of first refusal
shall remain applicable to subsequent offers. If Landlord sells the
leased premises after failure of Tenant to exercise its right of first
refusal, such sale shall be subject to this Lease.
<PAGE> 2
If the leased premises shall be conveyed to the Tenant under
this right of first refusal, any prepaid rent shall be apportioned and
applied on account of the purchase price."
2. Assignor hereby assigns to Assignee all of Assignor's right, title
and interest in and to the Lease and Landlord hereby consents to such
assignment.
3. Assignee agrees to assume and be bound by the same
responsibilities, rights, privileges, duties, terms and conditions of the
Lease, as Assignor is presently bound to Landlord.
4. Assignee shall cause to be executed a new guaranty agreement which
shall be executed and signed by John D. Foster, a single person, and Todd A.
Spence and Sally M. Spence, husband and wife. Said guaranty agreement shall be
in substantially the same form as the guaranty agreement attached to the Lease
and previously executed.
5. Landlord releases Assignor from all rights, duties and obligations
undertaken by Assignor in the Lease.
6. Landlord, Assignor and Assignee agree that the security deposit
hereinbefore deposited by Assignor shall remain in the possession of Landlord
and that Assignor shall have no right or claim against Landlord for said
security deposit; all of the Assignor's rights to the security deposit being
assigned to Assignee.
7. Landlord specifically releases Wayne R. Wheeler and Robin Wheeler,
husband and wife, from the guarantee agreement executed by them and made part
of the Lease.
8. Except as specifically modified by this Agreement, all terms,
covenants and conditions set forth in the Lease shall remain in full force and
effect as between Assignee and Landlord and each shall be bound thereby.
9. Assignee agrees to purchase earthquake insurance in the amounts
equal to those of fire insurance and extended coverage as set out in the Lease.
10. Any notice given hereunder will be sufficient if in writing and
sent by prepaid registered or certified mail, return receipt requested or
delivered in person. All notices which are mailed pursuant to this provision
shall be deemed given when mailed. Notices which are delivered personally shall
be deemed given when personally delivered. Notices hereunder shall be directed
to the following addresses:
If to Landlord:
Richard B. Griffin or
Richard B. Griffin II
P. O. Box 2207
610 Towson Avenue
Ft. Smith, Arkansas 72902
- 2 -
<PAGE> 3
If to Assignee:
John Foster
Todd A. Spence
1308 West Katalla
Springfield, Missouri 65807
or
John Foster
Todd A. Spence
HCR 60, Box 121
Dixon, Missouri 65459
Any party may change the address to which notices are to be given to
their parties by written notice in accordance with the terms of this paragraph.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
(Seal) LANDLORD:
ATTEST: NOBLE HOUSE OF DIXON, INC.
(formerly Dixon CareCentre, Inc.)
/s/ Richard B. Griffin By /s/ Richard B. Griffin
- ----------------------------- -------------------------------
Secretary President
(Seal)
ATTEST: ASSIGNOR:
DIXON OAKS HEALTH CARE CENTRE, INC.
[/s/ Illegible] By /s/ Wayne R. Wheeler
- ---------------------------- -------------------------------
Secretary Wayne R. Wheeler, President
- 3 -
<PAGE> 1
EXHIBIT 10.8
SECOND LEASE AMENDMENT
BY AND BETWEEN
NOBLE HOUSE OF DIXON, INC.
AND
DIXON MANAGEMENT, INC.
DATED: THE 1ST DAY OF JULY, 1997
<PAGE> 2
SECOND LEASE AMENDMENT
STATE OF MISSOURI
COUNTY OF PULASKI
This Second Lease Amendment is made and entered into as of this first
day of July, 1997, by and between Noble House of Dixon, Inc., a Missouri
corporation (the "Landlord") and at Dixon Management, Inc., a Missouri
corporation (the "Tenant"):
W I T N E S S E T H:
WHEREAS, Landlord, formerly known as Dixon CareCentre, Inc., and Dixon
Oaks Health Center, Inc. ("DOHC") entered into a lease agreement dated January
25, 1990 ("Original Lease") whereby Landlord leased to DOHC a sixty (60) bed
nursing home located in Dixon, Pulaski County, Missouri (the "Facility");
WHEREAS, on October 1,1990, Landlord and DOHC entered into an
agreement "Amendment to Lease and Assignment" (the "First Amendment") whereby
Landlord consented to the assignment of DOHC's rights under the Original Lease
to Tenant;
WHEREAS, for the purposes of the Second Lease Amendment, the Original
Lease and First Amendment are collectively referred to in this document as the
"Lease" and the terms and provisions of the said Original Lease and First
Amendment are hereby incorporated herein by reference as if set out word for
word unless specifically amended; including all terms as defined or identified
in the Original Lease.
WHEREAS, Landlord and Tenant desire to amend the Lease to change the
formula for the calculation of rent to be paid by Tenant during the remaining
term of the Lease and to amend other sections to the Lease;
Page - 1 -
<PAGE> 3
WHEREAS, the State of Missouri has enacted legislation which allows a
six (6) skilled nursing bed expansion of the Facility. Tenant, in the exercise
of its sole discretion, may desire to add an addition onto the Facility which
shall contain approximately 5,502 square feet (5,175 square feet to the main
building and 327 square feet to the detached storage building) (hereinafter
"Phase II"). Phase II shall contain, among other items, the area for six (6)
additional, licensable skilled nursing beds. Phase II is shown on Exhibit One,
attached hereto, consisting of a site and floor plan prepared by Bill Stafford,
Architect (hereinafter "Architect") dated 1-8-97, labeled "Preliminary";
WHEREAS, Landlord has made application to the State of Missouri for
the six (6) additional skilled nursing facility beds (hereinafter the "CON")
and has received its approval. The CON, if utilized, would raise the number of
skilled nursing beds for the facility from sixty (60) to sixty-six (66);
WHEREAS, Tenant, in the exercise of its sole discretion, shall have
until the 1st day of September, 1997 to request Landlord to add Phase II. If
Tenant requests Landlord to proceed with the addition of Phase II, then
Landlord shall hire Architect to prepare "plans and specifications" necessary
for the Phase II addition. Upon Landlord's completion and the receipt of the
necessary building permits and any other required approvals, including any
governmental or regulatory approvals, Landlord shall construct Phase II at its
sole cost and expense. The exterior elevations and the interior finishes of
Phase II shall be similar to the existing Facility. The design and construction
of the Facility shall be under the direction of Landlord and shall be
constructed by Griffin Construction Company or a general contractor of
Landlord's choosing.
Page - 2 -
<PAGE> 4
Landlord shall provide all furniture, fixtures, and equipment
(hereinafter "FFE") to equip Phase II. The listing of FFE is to be attached
hereto as Exhibit Two, which listing shall be completed by the parties
following the Effective Date, defined below. Landlord shall not provide soft
goods such as sheets, pillows, bedspreads, pots, pans, cutlery, etc. The Tenant
shall provide all soft goods necessary for the operation of the Facility;
AND WHEREAS, provided Tenant has elected to add Phase II, Landlord and
Tenant shall cooperate with each other to secure any necessary approvals from
the State of Missouri necessary to utilize the CON for Phase II.
NOW, THEREFORE, in consideration of the promises contained herein and
other good and valuable consideration exchanged between the parties, the
receipt, sufficiency and adequacy of which are hereby acknowledged, Landlord
and Tenant hereby agree to amend the Lease as follows, said amendment to be
effective as of the 1st day of July, 1997:
1. Section 1. Term., as set forth in the Lease is deleted in its
entirety and replaced with the following:
1. Term. The term of this Lease shall be seventeen (17) years and shall
commence on the first (1st) day of February, 1990 (herein called the
"Commencement Date"), and shall end on the thirty-first (31st) day
of January, 2007, unless sooner terminated as herein provided.
2. Section 2. Rent is amended by inserting the following statement
immediately before the letter (a):
BEGINNING FEBRUARY 1,1990 AND CONTINUING THROUGH NOVEMBER 30, 1997.
Page - 3 -
<PAGE> 5
3. Section 2. Rent is amended by adding the following after the last
sentence in paragraph (d):
BEGINNING DECEMBER 1,1997 AND CONTINUING THROUGH THE END OF THE LEASE
TERM:
a. Beginning with the ninety-fifth (95th) month of the lease term
the rental shall be the greater of the following:
(i) The base rent of $264,000.00 per annum payable at
the rate of $22,000.00 per month, or
(ii) Eighteen percent (18%) of the previous year's gross
revenue.
(iii) The base rent increases or decreases due to
fluctuations in the gross revenue as described in
(ii) above but said rent shall not decrease below
the below the base rent of $264,000.00 per annum
payable at the rate of $22,000.00 per month.
b. The formula to be used for calculating gross revenue and
adjusting the Rent ten (10) days prior to the Anniversary
Date of the Lease as required under subparagraph a.(ii) above
shall be determined in the following manner. This formula
will be the means used to calculate the gross revenue subject
to the rental rate multiplier. A copy of the most recent
Financial and Statistical Report for Nursing Facilities,
Title XIX Cost Report (the "Medicaid Cost Reports") for the
Facility shall be provided to the Landlord and shall be
considered to be an attachment to the Rental Calculation
Worksheet which is attached and labeled Exhibit Five.
Landlord and Tenant agree that in the event the filing due
date for the said Medicaid Cost Report is more than twelve
(12) months before any Lease Anniversary Date, the parties
agree that the Anniversary Date shall
Page - 4 -
<PAGE> 6
be adjusted such that the said Anniversary Date shall be on
the first day of the next succeeding month in which the
Medicaid Cost Report is required to be filed. The failure to
provide a current Medicaid cost Report (or acceptable
substitute as set forth below) to Landlord in a timely manner
shall be an event of default under this lease.
In the event the Medicaid Cost Report is no longer
required to be filed or the filing of the said Medicaid Cost
Report requirement is eliminated, Landlord and Tenant agree
to retain the services of an accounting firm experienced in
skilled nursing facility financial planning, consultation,
and filings with the State of Missouri and other regulatory
agencies, and who is experienced in dealing with the
Financial and Statistical Report for Nursing Facilities,
title XIX Cost Report, who shall determine the application of
the rent formula after such change or elimination. Tenant
shall bear all reasonable expenses associated with this
determination.
"Gross revenues" as stated herein shall be
calculated using the Financial and Statistical Report for
Nursing Facilities, Title XIX Cost Report as follows:
(1) Total Net Revenues (*line 45 schedule A,
column 1)
(2) Less (-) direct cost of Ancillary Services
(*line 71 through 82 plus line 84 plus the
portion of lines 97 through 99 attributable
to therapy salaries only, schedule B,
column 1)
(3) Less (-) "N.F.A.C." (Nursing Facility
Reimbursement Allowance) (*line 156, column
1)
(4) equal (=) Gross Revenues
*or equivalent line(s) found on subsequent form(s).
Page - 5 -
<PAGE> 7
Tenant shall retain the services of an accounting firm
experienced in skilled nursing facility financial planning,
consultation, and filings with the State of Missouri and other
regulatory agencies necessary to insure compliance with existing laws
and regulations.
Tenant shall furnish to Landlord certain information as
Landlord may reasonably require during the term of this Lease. This
information shall include the following:
i. Facility census shall be provided to Landlord on the first
(1st) business day of each month between the hours of 8:00
a.m. to 5:00 p.m. This information may be furnished by
telephone or facsimile.
ii. Quarterly financial statements on Facility are to be provided
within 30 days of period ending date.
iii. Annual financial statements on Facility and Balanced Care
Corporation; a Delaware corporation and parent corporation of
Tenant ("BCC") and Medicare and Medicaid cost reports are to
be provided to Landlord within thirty (30) days of the date
prepared or filed with respect to Medicaid cost reports.
Landlord shall be furnished copies of all revisions and
adjustments to these cost reports.
iv. Other financial information Landlord or Landlord's lender may
reasonably require.
v. A copy of the initial license and/or any subsequently issued
license(s) shall be provided to Landlord within fifteen (15)
days of receipt by Tenant.
Tenant shall make rent payments and any other payment due
unto Landlord via electronic transfer of funds to an account
designated by Landlord. If Landlord does not receive from Tenant any
monthly rental payment within five (5) days after such payment is due,
Landlord, at its option, may charge Tenant a late charge and handling
fee equal to five percent (5%) of the monthly rental payment, which
shall be deemed additional rent, and such late charge and handling fee
shall be due and payable by Tenant to Landlord upon notice to Tenant.
If Landlord does not receive from Tenant any monthly rental payment
Page - 6 -
<PAGE> 8
within fifteen (15) days after such payment is due, Landlord, at its
option, may declare Tenant in default.
4. Insurance, as set forth in section 4, of the Lease and Liability
Insurance, as set forth in Section 14, is deleted in its entirety and
replaced with the following: 4. Insurance. Tenant covenants and agrees
that it shall, at its own cost, at all times during the term of this
Lease, procure and maintain certain insurance for benefit of Landlord,
Tenant, Mortgagee(s) of Landlord, and other persons having an
insurable interest in the Facility AS THEIR INTERESTS MAY APPEAR. All
insurance provided by Tenant shall be with such insurance company or
companies listed in the A.M. Best Rating System as an A or A + company
with a financial strength rating of between 10 and 15. Conditions,
Terms and Forms of such insurance required by this Lease Agreement are
as follows:
a. Property Coverage
i. Property to be Insured: All Improvements, i.e.
buildings, canopies, paving, walkways, driveways or
structures of any kind upon said leased premises,
and all fixtures and personal property installed
and/or supplied by Landlord and located on such
leased premises. Loss of rents coverage, payable
unto Landlord, for said leased premises damaged such
that the Facility cannot be occupied shall be
provided in an amount equal to, at least, one year's
lease payments.
ii. Perils of Risk to Property to be Insured: All risk
of direct physical damage to all forms of properties
heretofore mentioned. Certain
Page - 7 -
<PAGE> 9
common exclusions such as theft, flood and earthquake
coverage must be provided by endorsement to the
primary policy and/or by separate difference in
conditions insurance policy(ies).
iii. Property Insurance Deductibles: Deductibles under
above mentioned Insurance shall be no more than
$5,000 per each and every loss or as agreed in
writing by Landlord, mortgagees, and other persons
with insurable interests with exception of flood and
earthquake which may have deductibles of no greater
than $25,000 per loss.
iv. Valuation of Property Insurance: Coverage must be
provided on a replacement cost and agreed value
valuation. Replacement cost shall be defined as the
cost to repair or replace damaged items with like
kind and quality without deduction for depreciation.
Agreed value means that the insurance company agrees
that the value purchased is adequate and waives
coinsurance requirements.
v. Limits of Property Insurance:
Full replacement cost and/or as agreed - all
perils
b. Liability
i. Commercial General Liability:
(1) Limits of Liability:
(a) $2,000,000 General Aggregate -
Bodily Injury & Property Damage
Page - 8 -
<PAGE> 10
(b) $1,000,000 Each Occurrence - Bodily
Injury & Property Damage
(c) $1,000,000 Products/Completed
operations
(d) $1,000,000 Personal and Advertising
injury
(e) $500,000 Fire Damage Limit
(f) $10,000 Medical Expense
(2) Coverage:
(a) Premises/Operations
(b) Products/Completed Operations
(c) Independent Contractors
(d) Contractual Liability
(e) Broad Form Property Damage
(f) Host Liquor Liability
(3) Deductibles:
(a) Maximum of $5,000 Each Occurrence
ii. Professional/Malpractice Liability:
(1) Limits of Liability:
(a) $1,000,000 Each Medical Incident
(b) $2,000,000 Annual Aggregate
(2) Coverage:
(a) Includes or is silent on Punitive
Damages
(b) Includes Physical Abuse, Sexual
Assault and Abuse
(3) Deductibles:
(a) Maximum of $5,000 each occurrence
Page - 9 -
<PAGE> 11
iii. Automobile Liability
(1) Limits of Liability
(a) $1,000,000 each occurrence Bodily
Injury & Property Damage
(2) Deductibles (BI/PD)
(a) Maximum of $5,000 each occurrence
iv. Rent Loss
(1) Limits of Liability: Proceeds payable unto
Landlord. The amount of rent due under this
Lease Agreement for a period of up to one
year because of business interruption.
(2) Deductibles: None
v. Excess Liability
(1) Limit of Liability
(a) $2,000,000 each occurrence.
(2) Deductibles: None
c. Workers Compensation & Employers Liability
i. Limits of Liability
(1) Section A: Statutory Limits
(2) Section B: $100,000 Each Accident
$500,000 Disease - Policy Limit
$100,000 Each Employee
d. Terms and Conditions
i. Insurance provided under Sections a & b must name
Landlord (and the property owner if different from
Landlord) as a "Named Insured As Its Interest May
Appear." However, Landlord is in no way obligated to
make premiums for such coverages in Sections a & b
or any other coverage section. Insurance provided
under Section c must reflect that Landlord is a
Certificate Holder. Said coverage in Section c must
contain a Waiver of Subrogation Clause in favor of
Page - 10 -
<PAGE> 12
Section c must contain a Waiver of Subrogation Clause
in favor of Landlord. Notice of material change or
cancellation must be provided in writing to Landlord
at least thirty (30) days prior to any such action or
change taking place. Cancellation provisions of the
certificates of insurance shall not contain any such
wording as "endeavor to". and "but failure to mail
such notice shall impose no obligation or liability
of any kind upon the company, its agents or
representatives".
ii. Coverage afforded under the terms of such policy or
policies may be increased from time to time during
the term, as Landlord may, in its reasonable
discretion, require.
iii. All insurance provided shall be effective under
valid and enforceable policies issued by insurers
authorized to do business in the State of Missouri
and which meet the standards set forth in this
section. Upon execution of this Lease and thereafter
not less than thirty (30) days prior to the
expiration dates of the expiring policies furnished
pursuant to this paragraph or any other paragraph of
this Lease, an original of the certificates of
insurance relating thereto shall be delivered by
Tenant to Landlord.
iv. Tenant may provide any insurance required by this
Lease Agreement in the form of a blanket policy,
provided that Tenant shall furnish satisfactory
proof of such blanket policy complies in all
respects with the provisions of this Lease, and that
the coverage thereunder is at least equal to the
coverage which would have been provided under
separate policy covering only the Leased Premises.
v. Landlord shall not be required to prosecute any
claim against or contest any settlement proposed by
any insurer provided that Tenant may, at its
expense, prosecute any such claim or contest any
such settlement. Landlord will join therein at
Tenant's written request only upon receipt by
Landlord of an indemnity from Tenant against all
costs, liabilities and expenses in connection with
such prosecution or contest.
vi. Insurance claims by reason of damage to or
destruction of any portion of the Leased Premises
shall be adjusted by Landlord. Any such proceeding
for adjustment shall be governed by the provisions
of this Lease, including, but not limited to the
provisions regarding fire or other casualty.
vii. If Tenant shall default in the obtaining or
maintaining of any insurance required thereunder,
Landlord shall have the right, but
Page - 11 -
<PAGE> 13
not the obligation, to take whatever action necessary
to pay all appropriate premiums to obtain or maintain
such insurance, in which events any amount paid for
premiums by Landlord shall be deemed additional rent
and shall be paid by Tenant to Landlord upon demand,
plus ten (10%) percent per annum interest from ten
(10) days after such demand until payment.
viii. Each policy provided for in this paragraph shall
contain an agreement that any loss otherwise payable
thereunder shall be payable notwithstanding any act
of negligence of Landlord or Tenant which might,
absent agreement, result in the forfeiture in all or
part of such insurance payment and notwithstanding
the following:
(1) The occupation of use of the Leased
Premises for purposes more hazardous than
permitted by the terms of such policy.
(2) Any foreclosure or other action or
proceeding taken pursuant to any provision
of any mortgage of any event of default
thereunder; or
(3) Any change in title or ownership of the
Leased Premises.
ix. All insurance policies in force at the expiration or
earlier termination of this Lease shall be canceled
and Tenant shall receive all premium refunds.
5. Section 33. Notices. of the Lease is deleted In its entirety and
replaced with the following:
33. Notices Each provision of this Lease, or of any applicable
governmental laws, ordinances, regulations, and other
requirements with reference to the sending, mailing or
delivery of any notice or with reference to the making of any
payment by Tenant to Landlord, shall be deemed to be complied
with if the following steps are taken:
e. All rent and other payments required to be made by
Tenant to Landlord shall be payable to Landlord by
electronic transfer of funds to a depository account
established by Landlord or at such
Page - 12 -
<PAGE> 14
other address as Landlord may specify from time to
time by written notice delivered in accordance
herewith.
f. Any notice or document required to be delivered
hereunder shall be deemed to be delivered, whether
actually received or not, when deposited in the
United States mail, postage prepaid, registered
mail, return receipt requested, or sent via
overnight courier service with next day delivery
guaranteed, addressed to the parties hereto at the
respective addresses set out opposite their names
below, or at such other address as they have
heretofore specified by written notice:
LANDLORD: Richard B. Griffin, President
Noble House of Dixon, Inc.
610 Towson Avenue
Post Office Box 2207
Fort Smith, Arkansas 72902
(501) 783-5191
(501) 783-8397 Fax
TENANT: Brad E. Hollinger, President
Dixon Management, Inc.
c/o Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, Pennsylvania 17055
(717) 796-6100
(717) 796-6150 Fax
6. Events of Default, as set forth in section 23., paragraph a., of the
Lease, is amended by adding a new subparagraph (viii) as follows:
(viii) Tenant is issued a notice of noncompliance pursuant to Section
198.026.3 RSMo or 198.029 RSMo and fails to cure the
noncompliance in accordance with the terms of the notice
issued by the Missouri
Page - 13 -
<PAGE> 15
Department of Social Services ("MDSS"), its license is revoked
pursuant to Section 198.036 RSMo and not reinstated by the
MDSS within thirty (30) days or such period as is prescribed
by MDSS, whichever is shorter, or an action is brought against
Tenant pursuant to Section 198.067 RSMo and the same is not
discharged or dismissed within thirty (30) days.
7. Lease Renewal Option, as set forth in section 47. of the Lease, is
deleted in its entirety and replaced with the following:
47. Lease Renewal Option. Tenant shall have the right, but not the
obligation; to extend the term of the Lease for two,
consecutive, five (5) year periods under the same terms and
conditions. Tenant shall give Landlord written notice of its
election to extend or not to extend on or before one hundred,
eighty (180) days prior to the expiration of the then current
Lease term.
8. A new Section 49 is added to the Lease as follows:
49. Waiver. Upon termination of the Lease, as amended, for any
reason, including default by the Tenant, the Medicaid
contract, the then current facility license, any additional
beds granted or to be granted by the State of Missouri to the
Facility shall revert back to Landlord as both owner, at the
sole discretion of Landlord, to the extent permitted by law.
Tenant, its predecessors in interest, and Tenant's successors
and assign do by this instrument forever waive any interest
in and relinquish any right to claim an interest in the
license for the Facility, including the Certificate of Need,
as well as for any licenses for subsequent beds issued,
added, or approved for the Facility and agree that the
Certificate of Need (including
Page - 14 -
<PAGE> 16
all subsequent additions thereto) is and shall remain the sole
property of Landlord, at its sole discretion.
9. Phase II. Tenant shall have the right, but not the obligation, to
elect for Landlord to proceed with the addition of Phase II. Tenant's
election to proceed with Phase II shall be made by giving Landlord
written notice thereof on or before the 1st day of September, 1997.
The failure of Tenant to give Landlord written notice on or before
September 1, 1997 shall be deemed an election by Tenant not to proceed
with Phase II. In the event Tenant elects for Landlord to proceed with
Phase II, then upon the Effective Date (as defined below), the
following changes (numbered 10-13 herein) to the Lease shall become
effective. In the event Tenant does not elect for Landlord to proceed
with Phase II, then Landlord shall be expressly prohibited from
proceeding with Phase II, and the changes (numbered 10-13 herein) to
the Lease shall automatically become null and void on or before the
earlier to occur of
i. the date of Tenant's notice (if any) to Landlord
expressing Tenant's election not to proceed with
Phase ll, or
ii. September 1,1997.
The failure of Landlord to comply with the provisions of this
Paragraph shall constitute an event of default by Landlord hereunder
and shall entitle Tenant to terminate the Lease and its obligations
and liabilities hereunder, including, without limitation, the payment
of rent.
10. The "Effective Date" for all of the following changes or additions to
the Lease shall be the earlier:
a. the day of initial licensure of the additional nursing home
beds added by Phase II, or
Page - 15 -
<PAGE> 17
b. thirty (30) days following Substantial Completion of
construction of Phase II as determined by the Architect.
Landlord and Tenant herein agree that the Effective Date is the ______
day of _____________,19__. INITIALS: LANDLORD _____ TENANT _____.
(THESE BLANKS SHALL BE COMPLETED BY THE PARTIES FOLLOWING THE
EFFECTIVE DATE AND SHALL BE DETERMINED BY 12 A. OR B. ABOVE. THE FIRST
INSTALLMENT OF INCREASED RENT SHALL BE DUE AND PAYABLE ON OR BEFORE
THE FIRST DAY OF THE FIRST MONTH IMMEDIATELY FOLLOWING THE EFFECTIVE
DATE AND SHALL INCLUDE PRO-RATA RENTAL FOR THE DAYS BETWEEN EFFECTIVE
DATE AND THE FIRST DAY OF THE IMMEDIATELY FOLLOWING MONTH. SUCH
INSTALLMENTS OF RENT SHALL BE PAID TO LANDLORD AT THE ADDRESS
SPECIFIED IN THIS LEASE AGREEMENT OR ELSEWHERE AS DESIGNATED FROM TIME
TO TIME BY WRITTEN NOTICE FROM LANDLORD TO TENANT.)
11. Section 1. Term., as set forth in the Lease is deleted in its entirety
and replaced with the following:
1. Term. The term of this Lease shall be twenty-seven (27) years
and shall commence on the first (1st) day of February, 1990
(herein called the "Commencement Date"), and shall end on the
thirty-first (31st) day of January, 2017, unless sooner
terminated as herein provided.
12. Section 3. Rent. BEGINNING DECEMBER 1, 1997 AND CONTINUING THROUGH THE
END OF THE LEASE TERM, as set forth in the Lease, is amended by adding
the following immediately after subparagraph a.(iii), for all rent
occurring on and after the Effective Date:
On and after the Effective Date of the Phase II addition and
for the remaining term of this Lease and any extensions
thereof, the rent paid by Tenant unto Landlord shall be the
greater of the following:
(i) The BASE ANNUAL RENT of $330,000.00 per
annum at the rate of $27,500.00 per month,
or
Page - 16 -
<PAGE> 18
(ii) Eighteen percent (18%) of the previous
year's gross revenue, payable at the rate
of 1/12 per month, or
(iii) The base rent increases or decreases due to
fluctuations in gross revenue as described
above, but the rent shall not decrease
below the BASE ANNUAL RENT of $330,000.00.
Changes to the plans, specifications, or equipment following
the commencement of construction of the phase II addition,
mutually agreed upon by the Landlord and Tenant shall
increase all of the lease rates shown above by the additional
cost of the change times a multiplier of .0154. The result
shall equal the amount added to the base monthly rental rate
shown herein. In lieu of an increase in rental, the Tenant
may elect to reimburse Landlord for the cost of the changes.
There shall be no decrease in the lease rate.
13. Section 6. Security Deposit is amended by inserting the following at
the end of the Section as follows: Tenant shall increase the existing
Security Deposit from Eighteen Thousand Seven Hundred Twenty Five
Dollars ($18,725.00) to the amount of Twenty-Seven Thousand Five
Hundred Dollars ($27,500.00) as outlined below commencing with the
first rent payment following the Effective Date. The Security Deposit
shall be increased at the rate of $1,000.00 per month and shall be
paid over the first nine (9) consecutive months following the
Effective Date as defined herein.
14. All terms and conditions of the Lease Agreement and First Amendment,
not specifically changed, amended, or modified by this Second Lease
Amendment shall remain in full force and effect as if set out word for
word in this Second Lease Amendment.
Page - 17 -
<PAGE> 19
THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE TO FOLLOW.
Page - 18 -
<PAGE> 20
IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this
Second Lease Amendment effective as of the day and date first above written.
LANDLORD:
NOBLE HOUSE OF DIXON, INC.
By: /s/ Richard B. Griffin
------------------------------------
Richard B. Griffin, President
ATTEST:
/s/ Richard B. Griffin II
- ----------------------------------
Richard B. Griffin II, Secretary
(Seal)
TENANT:
DIXON MANAGEMENT, INC.
By: /s/ Brad E. Hollinger
------------------------------------
Brad E. Hollinger, President
ATTEST:
/s/ Robin Barber
- ----------------------------------
Robin Barber, Secretary
(Seal)
Page - 19 -
<PAGE> 1
EXHIBIT 10.9
SUBLEASE
THIS SUBLEASE (the "Sublease") made and entered into this 1st day of
October, 1996, by and between BCC at Mt. Royal Pines, Inc., herewith called the
"Lessor," and BCC Therapies of Pennsylvania, Inc., hereinafter called the
"Lessee."
Lessor leases the property identified on Exhibit A from Health Care
Property Investors, Inc., pursuant to a lease dated as of March 21, 1996 (the
"HCPI Lease") and desires to sublease a portion thereof to Lessee. Accordingly,
Lessor hereby subleases to Lessee, and Lessee hereby sublets from Lessor, the
premises identified on Exhibit B, and all necessary access rights
(collectively, the "Premises"), all on the terms set forth below.
1. TERM: The initial term of this Lease shall commence on the date
hereof and shall continue for a period of 3 years (the "Initial Term"). In
addition, Lessee shall have the option to extend the Initial Term for two
additional 3-year periods (each, an "Extended Term") (hereinafter, the Initial
Term, together with the Extended Terms, if any, may be collectively referred to
as the "Term"). Lessee's extension options shall be exercised by Lessee by
giving written notice to Lessor of each such extension at least 90 days, but
not more than 180 days, prior to the end of the then existing Term. During each
Extended Term, the terms and conditions of this Lease shall continue in full
force and effect.
2. RENT: During the Term of this Lease, the total rent shall be $2,000
per month payable in advance on or before the first day of each calendar month
for the ensuing month in lawful money of the United States. All payments
hereunder shall be made to Lessor at 5201 Louise Drive, Suite 200,
Mechanicsburg, PA 17055, or at such other place or to such other person as
Lessor from time to time may designate in writing to Lessee.
3. USE: The Premises are to be used to provide rehab therapy services
and such other uses necessary or incidental to such use (the "Intended Use").
Lessee covenants and agrees that it will obtain and maintain all licenses,
certifications, authorizations, permits and approvals needed to use and operate
the Premises for its Intended Use in accordance with all Legal Requirements (as
defined in section 6).
4. USES PROHIBITED: Lessee shall not use any portion of the Premises
for purposes other than Lessee's Intended Use, and no use shall be made or
permitted to be made upon the Premises, nor acts done, which will increase the
existing rate of insurance upon the property, or cause cancellation of
insurance policies covering said property. Lessee's delivery of rehab services
and related uses shall not be deemed to violate this section.
5. ASSIGNMENT AND SUBLETTING: Lessee may not assign this Sublease or
sublet the Premises without the prior written consent of Lessor, which consent
may be withheld in Lessor's sole and absolute discretion.
<PAGE> 2
6. LEGAL REQUIREMENTS: Lessee shall comply with all federal, state,
county, municipal or other governmental statutes, laws, rules, policies, codes,
guidance, orders, regulations, ordinances, permits, licenses, covenants,
conditions, restrictions, judgments, decrees and injunctions affecting, whether
now or hereinafter enacted and in force, occasioned by or affecting Lessee, the
Premises or Lessee's Intended Use of the Premises (collectively, the "Legal
Requirements").
7. MAINTENANCE, REPAIRS, ALTERATIONS: Lessee accepts the Premises in
their present condition and agrees to maintain the Premises in such condition
throughout the Sublease Term, ordinary wear and tear, deterioration by reason
of aging expected. Lessor shall be responsible for the normal maintenance and
repair of the inside of the Premises. In addition, Lessor shall be responsible
for the maintenance and repair of heating, air conditioning, plumbing and
electrical equipment. Lessor shall also be responsible for all repairs required
to be done to the roof, exterior walls and all other structural or mechanical
systems. Lessor shall be totally responsible for maintenance of Lessor's
property not included in the Premises. Lessor shall be required, at its
expense, to (i) provide routine pest control for the Premises, (ii) provide
laundry service for Lessee, (iii) provide housekeeping services for the
Premises and (iv) clean the common area ways provided for use in connection
with the offices, halls, stairways and sidewalks and to keep the common area
ways free from trash, debris or filth.
No improvement, alteration or change in the size of the Premises
shall be made without the prior written consent of Lessor, which consent may be
withheld in Lessor's sole and absolute discretion.
8. ENTRY AND INSPECTION: Lessee shall permit Lessor or Lessor's agents
to enter upon the Premises at reasonable times and upon reasonable notice, to
(i) inspect the same and (ii) exhibit the same to prospective purchasers,
sublessees or managers. Lessee shall cooperate with Lessor in exhibiting the
Premises to prospective purchasers, sublessees or managers.
9. INDEMNIFICATION OF LESSOR: Lessee shall protect, indemnify, save
harmless and defend Lessor from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses, including
reasonable attorneys' fees, imposed upon or incurred by or asserted against
Lessor by reason of: (i) any accident, injury to or death of persons or loss of
or damage to property occurring on or about the Premises; (ii) any use, misuse,
condition, maintenance or repair of the Premises (for which Lessee is obligated
to perform under this Sublease); (iii) any failure or non-performance on the
part of Lessee to comply with the provisions of this Sublease; (iv) any claim
for malpractice, negligence or misconduct committed by any person on or working
for Lessee on the Premises and (v) the violation of any Legal Requirement.
10. POSSESSION: Lessee shall be entitled to immediate possession.
11. INSURANCE: Lessee, at its expense, shall maintain medical
professional liability insurance and commercial general liability insurance
covering bodily injury or property damage insuring Lessee and Lessor with
minimum coverage not less than the applicable industry
- 2 -
<PAGE> 3
standards. Lessee's insurance may be blanket insurance covering the Premises as
well as other Premises owned or operated by affiliates of Lessee, including
Lessor; provided, however, the coverage afforded Lessor will not be diminished
or reduced or otherwise be different from that which would exist if provided
under a separate policy of insurance. Lessee shall pay the premiums therefor,
and upon Lessor's request, shall deliver such policies or certificates thereof
to Lessor. Each insurer shall agree, by endorsement to the policy, that it will
give Lessor not less than ten (10) days' written notice before the policy or
policies shall be altered, allowed to expire or canceled.
All proceeds payable by reason of any loss or damage to the Premises,
or any portion thereof, under any policy of insurance required to be paid
hereunder shall be paid to Lessor for the reasonable costs of reconstruction or
repair, as the case may be. Any excess proceeds of insurance remaining after
completion of restoration or reconstruction of the Premises (or in the event
that no repair or restoration is elected or required, all such insurance
proceeds) shall be released to Lessee, provided Lessee is not otherwise in
default hereunder.
To the maximum extent permitted by insurance policies which may be
owned by Lessor or Lessee, Lessee or Lessor, for the benefit of each other,
waive any and all rights of subrogation which might otherwise exist.
12. UTILITIES: Lessee agrees that it shall be responsible for the
payment of all utilities, including water, gas, electricity, heat and other
services delivered to the Premises.
13. SIGNS: Lessor reserves the exclusive right to the roof, side and
rear walls of the Premises. Lessee shall not construct any projecting sign or
awning without the prior written consent of Lessor which consent may be
withheld in the sole and absolute discretion of Lessor.
14. ABANDONMENT OF PREMISES: Lessee shall not vacate or abandon the
Premises at any time during the Term hereof, and if Lessee shall abandon or
vacate the Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Lessee left upon the Premises shall be deemed to
be abandoned, at the option of Lessor.
15. CONDEMNATION: If any part of the Premises shall be taken or
condemned for public use, and a part thereof remains which is susceptible of
occupation hereunder, this Sublease shall, as to the part taken, terminate as
of the day immediately preceding the date upon which the condemnor acquires
possession, and thereafter Lessee shall be required to pay such proportion of
the rent for the remaining Term as the value of the Premises remaining bears to
the total value of the Premises at the date of condemnation; provided, however,
that Lessor may at its option, terminate this Sublease as of the day
immediately preceding the date upon which the condemnor acquires possession. In
the event that the demised Premises are condemned in whole, or that such
portion is condemned that the remainder is not susceptible for use hereunder,
this Sublease shall terminate upon the day immediately preceding the date upon
which the condemnor acquires possession. All sums which may be payable on
account of any condemnation shall belong to Lessor; provided, however, that
Lessee shall be entitled to retain any amount awarded to Lessee for Lessee's
trade fixtures and moving expenses.
- 3 -
<PAGE> 4
16. TRADE FIXTURES: Any and all improvements made to the Premises
during the Term hereof shall belong to Lessor, except trade fixtures of Lessee.
Lessee may upon termination hereof remove all of Lessee's trade fixtures, but
shall repair or pay for all repairs necessary for damages to the Premises
occasioned by removal.
17. DESTRUCTION OF PREMISES: If, during the Term of this Sublease,
said Premises are damaged to the extent that they are wholly untenantable,
Lessor may, at its option, terminate this Sublease by giving Lessee written
notice thereof within thirty (30) days after such damage, and prepaid rent from
the date of such damage shall be refunded.
If said Premises shall be damaged to the extent that they are wholly
untenantable and the same cannot be restored to a condition substantially as
good as prior to the destruction within ninety (90) days, Lessee may terminate
this Sublease by giving Lessor written notice of its intent to terminate within
thirty (30) days after the damage, and in case of such termination, Lessee
shall be entitled to a refund of prepaid rent from the date of damage.
In case said Premises are damaged, but not rendered wholly
untenantable, the rent shall abate proportionately until the Premises are
restored and Lessor shall repair the same as promptly as possible; provided,
however, that if it is not restored within ninety (90) days, Lessee may, at its
election, terminate the Sublease by giving Lessor thirty (30) days written
notice of its intention to do so.
If in the case of destruction of the Premises as aforesaid neither
party elects to terminate the Sublease as above provided, Lessor shall restore
the same with all reasonable speed and for that purpose shall have the right to
enter the said premises for the purpose of restoring the property.
18. INSOLVENCY: In the event that a receiver shall be appointed to
take over the business of Lessee, or in the event that Lessee shall make a
general assignment for the benefit of creditors, or Lessee shall take or suffer
any action under any insolvency or bankruptcy act, the same shall constitute
breach of this Sublease by Lessee.
19. REMEDY UPON DEFAULT: That if any default shall be made in the
payment of rent and if said rent remains unpaid seven (7) days after written
notice of such default is given to Lessee or if after thirty (30) days written
notice setting forth the default, the default shall continue by Lessee in the
performance of any other covenant, agreement, or condition contained in this
Sublease, Lessor shall have the right to re-enter and take possession of the
Premises, and Lessee shall peacefully surrender possession thereof and all
rights and interests of Lessee shall cease and terminate but nothing herein
contained shall affect Lessor's right of the rent for the Term specified. Upon
taking possession hereunder, Lessor may, at its election, terminate and end
this Sublease by giving Lessee written notice thereof, or Lessor may relet the
Premises and Lessee shall be liable for and will pay as it accrues, the
difference in the rental for the balance of the Term.
20. SECURITY: Lessor does not require a security deposit.
- 4 -
<PAGE> 5
21. ATTORNEY'S FEES. In case suit should be brought for recovery of
the Premises, or for any sum due hereunder, or because of any act which may
arise out of the possession of the Premises, by either party the prevailing
party shall be entitled to all costs incurred in connection with such action,
including reasonable attorneys' fees.
22. WAIVER: No failure of Lessor to enforce any term hereof shall be
deemed to be a waiver thereof.
23. NOTICES: All notices and other communications given or made
pursuant to this Sublease shall be in writing and shall be deemed to have been
duly given or made (i) the second business day after the date of mailing, if
delivery by registered or certified mail, postage prepaid, (ii) upon delivery,
if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with
a record of receipt, or (iv) the next day after the date of dispatch, if sent
by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, postage prepaid, return receipt requested), to
the parties at the following addresses:
If to Lessor, to:
BCC at Mt. Royal Pines, Inc.
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
If to Lessee, to:
BCC Therapies of Pennsylvania, Inc.
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
24. HOLDING OVER: If Lessee shall for any reason remain in possession
of the Premises after the expiration or earlier termination of the Term of this
Sublease, such possession shall become a month-to-month tenancy during which
time Lessee shall pay rent each month in an amount equal to twice the rent
payable during the prior Term. During such period of month-to-month tenancy,
Lessee shall be obligated to perform and observe all of the terms, covenants
and conditions of this Sublease, but shall have no rights hereunder, other than
the right, to the extent given by law to month-to-month tenancies, to continue
its occupancy and use of the Premises. Nothing herein shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Sublease.
25. TIME: Time is of the essence of this Sublease.
26. ENTIRE AGREEMENT: The foregoing constitutes the entire agreement
between the parties and may be modified only by a writing signed by both
parties.
27. COMPLIANCE WITH HCPI LEASE: Lessee acknowledges that it has
received and reviewed a copy of the HCPI Lease. Lessee agrees that it will
comply with the terms of the HCPI Lease to the extent applicable to Lessee, and
that all of Lessee's rights hereunder are
- 5 -
<PAGE> 6
subject and subordinate to all applicable terms and conditions of the HCPI
Lease, and further, that HCPI, at its option and without any obligation to do
so, may require Lessee to attorn to HCPI, in which event HCPI shall undertake
the obligations of Lessor, as sublessor under this Sublease from the time of
exercise of such option to the termination of this Sublease and in such case
HCPI shall not be liable for any prepaid rents paid by Lessee to Lessor or for
any other prior defaults of Lessor under this Sublease. In the event that HCPI
shall not require such attornment with respect to this Sublease, then this
Sublease shall automatically terminate upon the expiration or earlier
termination of the HCPI Lease, including any early termination by mutual
agreement of HCPI and Lessor. In addition, Lessee shall furnish Lessor and/or
HCPI with such financial and operational information and information about the
physical condition of the Premises as Lessor and/or HCPI may request from time
to time.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have executed this Sublease as of the date first set forth above.
LESSOR: LESSEE:
BCC at Mt. Royal Pines, Inc. BCC Therapies of Pennsylvania, Inc.
By: /s/ Robin L. Barber By: /s/ Kurt A. Meyer
________________________ _____________________
Name: Robin L. Barber Name: Kurt A. Meyer
Title: Secretary Title: Vice President
- 6 -
<PAGE> 1
EXHIBIT 10.10
SUBLEASE
This SUBLEASE (the "Sublease") made and entered into as of the 1st day
of June, 1997, by and between BCC at State College, Inc., d/b/a Outlook Pointe
at State College, herewith called the "Lessor," and BCC Therapies of
Pennsylvania, Inc., d/b/a Balanced Care Therapies of PA, hereinafter called the
"Lessee."
Lessor leases the property identified on Exhibit A from Meditrust
Acquisition Corporation II ("Meditrust"), pursuant to that certain Amended and
Restated Facility Lease dated as of November 1, 1996 (the "Meditrust Lease")
and desires to sublease a portion thereof to Lessee. Accordingly, Lessor hereby
subleases to Lessee, and Lessee hereby sublets from Lessor, the premises
identified on Exhibit B, and all necessary access rights (collectively, the
"Premises"), all on the terms set forth below.
1. TERM: The initial term of this Lease shall commence on the date
hereof and shall continue for a period of 3 years (the "Initial Term"). In
addition, Lessee shall have the option to extend the Initial Term for two
additional 3-year periods (each, an "Extended Term") (hereinafter, the Initial
Term, together with the Extended Terms, if any, may be collectively referred to
as the "Term"). Lessee's extension options shall be exercised by Lessee by
giving written notice to Lessor of each such extension at least 90 days, but
not more than 180 days, prior to the end of the then existing Term. During each
Extended Term, the terms and conditions of this Lease shall continue in full
force and effect.
2. RENT: During the Term of this Lease, the total rent shall be $2,000
per month payable in advance on or before the first day of each calendar month
for the ensuing month in lawful money of the United States. All payments
hereunder shall be made to Lessor at 5201 Louise Drive, Suite 200,
Mechanicsburg, PA 17055, or at such other place or to such other person as
Lessor from time to time may designate in writing to Lessee.
3. USE: The Premises are to be used to provide rehab therapy services
and such other uses necessary or incidental to such use (the "Intended Use").
Lessee covenants and agrees that it will obtain and maintain all licenses,
certifications, authorizations, permits and approvals needed to use and operate
the Premises for its Intended Use in accordance with all Legal Requirements (as
defined in section 6).
4. USES PROHIBITED: Lessee shall not use any portion of the Premises
for purposes other than Lessee's Intended Use, and no use shall be made or
permitted to be made upon the Premises, nor acts done, which will increase the
existing rate of insurance upon the property, or cause cancellation of
insurance policies covering said property. Lessee's delivery of rehab services
and related uses shall not be deemed to violate this section.
Sublease by and between BCC at State College, Inc. and
BCC Therapies of Pennsylvania, Inc. Page 1
<PAGE> 2
5. ASSIGNMENT AND SUBLETTING: Lessee may not assign this Sublease or
sublet the Premises without the prior written consent of Lessor, which consent
may be withheld in Lessor's sole and absolute discretion.
6. LEGAL REQUIREMENTS: Lessee shall comply with all federal, state,
county, municipal or other governmental statutes, laws, rules, policies, codes,
guidance, orders, regulations, ordinances, permits, licenses, covenants,
conditions, restrictions, judgments, decrees and injunctions affecting, whether
now or hereinafter enacted and in force, occasioned by or affecting Lessee, the
Premises or Lessee's Intended Use of the Premises (collectively, the "Legal
Requirements").
7. MAINTENANCE, REPAIRS, ALTERATIONS: Lessee accepts the Premises in
their present condition and agrees to maintain the Premises in such condition
throughout the Sublease Term, ordinary wear and tear, deterioration by reason
of aging expected. Lessor shall be responsible for the normal maintenance and
repair of the inside of the Premises. In addition, Lessor shall be responsible
for the maintenance and repair of heating, air conditioning, plumbing and
electrical equipment. Lessor shall also be responsible for all repairs required
to be done to the roof, exterior walls and all other structural or mechanical
systems. Lessor shall be totally responsible for maintenance of Lessor's
property not included in the Premises. Lessor shall be required, at its
expense, to (i) provide routine pest control for the Premises, (ii) provide
laundry service for Lessee, (iii) provide housekeeping services for the
Premises; (iv) provide biohazardous waste removal, and (v) clean the common
area ways provided for use in connection with the offices, halls, stairways and
sidewalks and to keep the common area ways free from trash, debris or filth.
No improvement, alteration or change in the size of the Premises shall
be made without the prior written consent of Lessor, which consent may be
withheld in Lessor's sole and absolute discretion.
8. ENTRY AND INSPECTION: Lessee shall permit Lessor or Lessor's agents
to enter upon the Premises at reasonable times and upon reasonable notice, to
(i) inspect the same and (ii) exhibit the same to prospective purchasers,
sublessees or managers. Lessee shall cooperate with Lessor in exhibiting the
Premises to prospective purchasers, sublessees or managers.
9. INDEMNIFICATION OF LESSOR: Lessee shall protect, indemnify, save
harmless and defend Lessor from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses, including
reasonable attorneys' fees, imposed upon or incurred by or asserted against
Lessor by reason of: (i) any accident, injury to or death of persons or loss of
or damage to property occurring on or about the Premises; (ii) any use, misuse,
condition, maintenance or repair of the Premises (for which Lessee is obligated
to perform under this Sublease); (iii) any failure or non-performance on the
part of Lessee to comply with the provisions of this Sublease; (iv) any claim
for malpractice, negligence or misconduct committed by any person on or working
for Lessee on the Premises and (v) the violation of any Legal Requirement.
Sublease by and between BCC at State College, Inc. and
BCC Therapies of Pennsylvania, Inc. Page 2
<PAGE> 3
10. POSSESSION: Lessee shall be entitled to immediate possession.
11. INSURANCE: Lessee, at its expense, shall maintain medical
professional liability insurance and commercial general liability insurance
covering bodily injury or property damage insuring Lessee and Lessor with
minimum coverage not less than the applicable industry standards. Lessee's
insurance may be blanket insurance covering the Premises as well as other
Premises owned or operated by affiliates of Lessee, including Lessor; provided,
however, the coverage afforded Lessor will not be diminished or reduced or
otherwise be different from that which would exist if provided under a separate
policy of insurance. Lessee shall pay the premiums therefor, and upon Lessor's
request, shall deliver such policies or certificates thereof to Lessor. Each
insurer shall agree, by endorsement to the policy, that it will give Lessor not
less than ten (10) days' written notice before the policy or policies shall be
altered, allowed to expire or canceled.
All proceeds payable by reason of any loss or damage to the Premises,
or any portion thereof, under any policy of insurance required to be paid
hereunder shall be paid to Lessor for the reasonable costs of reconstruction or
repair, as the case may be. Any excess proceeds of insurance remaining after
completion of restoration or reconstruction of the Premises (or in the event
that no repair or restoration is elected or required, all such insurance
proceeds) shall be released to Lessee, provided Lessee is not otherwise in
default hereunder.
To the maximum extent permitted by insurance policies which may be
owned by Lessor or Lessee, Lessee or Lessor, for the benefit of each other,
waive any and all rights of subrogation which might otherwise exist.
12. UTILITIES: Lessee agrees that it shall be responsible for the
payment of all utilities, including water, gas, electricity, heat and other
services delivered to the Premises.
13. SIGNS: Lessor reserves the exclusive right to the roof, side and
rear walls of the Premises. Lessee shall not construct any projecting sign or
awning without the prior written consent of Lessor which consent may be
withheld in the sole and absolute discretion of Lessor.
14. ABANDONMENT OF PREMISES: Lessee shall not vacate or abandon the
Premises at any time during the Term hereof, and if Lessee shall abandon or
vacate the Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Lessee left upon the Premises shall be deemed to
be abandoned, at the option of Lessor.
15. CONDEMNATION: If any part of the Premises shall be taken or
condemned for public use, and a part thereof remains which is susceptible of
occupation hereunder, this Sublease shall, as to the part taken, terminate as
of the day immediately preceding the date upon which the condemnor acquires
possession, and thereafter Lessee shall be required to pay such proportion of
the rent for the remaining Term as the value of the Premises remaining bears to
the total value of the Premises at the date of condemnation; provided, however,
that Lessor may at its option, terminate this Sublease as of the day
immediately preceding the date upon which the condemnor acquires possession. In
the event that the demised Premises are condemned in whole, or that such
portion is condemned that the remainder is not susceptible for use hereunder,
this Sublease
Sublease by and between BCC at State College, Inc. and
BCC Therapies of Pennsylvania, Inc. Page 3
<PAGE> 4
shall terminate upon the day immediately preceding the date upon which the
condemnor acquires possession. All sums which may be payable on account of any
condemnation shall belong to Lessor; provided, however, that Lessee shall be
entitled to retain any amount awarded to Lessee for Lessee's trade fixtures and
moving expenses.
16. TRADE FIXTURES: Any and all improvements made to the Premises
during the Term hereof shall belong to Lessor, except trade fixtures of Lessee.
Lessee may upon termination hereof remove all of Lessee's trade fixtures, but
shall repair or pay for all repairs necessary for damages to the Premises
occasioned by removal.
17. DESTRUCTION OF PREMISES: If, during the Term of this Sublease,
said Premises are damaged to the extent that they are wholly untenantable,
Lessor may, at its option, terminate this Sublease by giving Lessee written
notice thereof within thirty (30) days after such damage, and prepaid rent from
the date of such damage shall be refunded.
If said Premises shall be damaged to the extent that they are wholly
untenantable and the same cannot be restored to a condition substantially as
good as prior to the destruction within ninety (90) days, Lessee may terminate
this Sublease by giving Lessor written notice of its intent to terminate within
thirty (30) days after the damage, and in case of such termination, Lessee
shall be entitled to a refund of prepaid rent from the date of damage.
In case said Premises are damaged, but not rendered wholly
untenantable, the rent shall abate proportionately until the Premises are
restored and Lessor shall repair the same as promptly as possible; provided,
however, that if it is not restored within ninety (90) days, Lessee may, at its
election, terminate the Sublease by giving Lessor thirty (30) days written
notice of its intention to do so.
If in the case of destruction of the Premises as aforesaid neither
party elects to terminate the Sublease as above provided, Lessor shall restore
the same with all reasonable speed and for that purpose shall have the right to
enter the said premises for the purpose of restoring the property.
18. INSOLVENCY: In the event that a receiver shall be appointed to
take over the business of Lessee, or in the event that Lessee shall make a
general assignment for the benefit of creditors, or Lessee shall take or suffer
any action under any insolvency or bankruptcy act, the same shall constitute
breach of this Sublease by Lessee.
19. REMEDY UPON DEFAULT: That if any default shall be made in the
payment of rent and if said rent remains unpaid seven (7) days after written
notice of such default is given to Lessee or if after thirty (30) days written
notice setting forth the default, the default shall continue by Lessee in the
performance of any other covenant, agreement, or condition contained in this
Sublease, Lessor shall have the right to re-enter and take possession of the
Premises, and Lessee shall peacefully surrender possession thereof and all
rights and interests of Lessee shall cease and terminate but nothing herein
contained shall affect Lessor's right of the rent for the Term specified. Upon
taking possession hereunder, Lessor may, at its election, terminate and end
this Sublease by giving Lessee written notice thereof, or Lessor may relet the
Premises and
Sublease by and between BCC at State College, Inc. and
BCC Therapies of Pennsylvania, Inc. Page 4
<PAGE> 5
Lessee shall be liable for and will pay as it accrues, the difference in the
rental for the balance of the Term.
20. SECURITY: Lessor does not require a security deposit.
21. ATTORNEY'S FEES: In case suit should be brought for recovery of
the Premises, or for any sum due hereunder, or because of any act which may
arise out of the possession of the Premises, by either party the prevailing
party shall be entitled to all costs incurred in connection with such action,
including reasonable attorneys' fees.
22. WAIVER: No failure of Lessor to enforce any term hereof shall be
deemed to be a waiver thereof.
23. NOTICES: All notices and other communications given or made
pursuant to this Sublease shall be in writing and shall be deemed to have been
duly given or made (i) the second business day after the date of mailing, if
delivery by registered or certified mail, postage prepaid, (ii) upon delivery,
if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with
a record of receipt, or (iv) the next day after the date of dispatch, if sent
by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, postage prepaid, return receipt requested), to
the parties at the following addresses:
If to Lessor, to:
BCC at State College, Inc.
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
If to Lessee, to:
BCC Therapies of Pennsylvania, Inc.
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
24. HOLDING OVER: If Lessee shall for any reason remain in possession
of the Premises after the expiration or earlier termination of the Term of this
Sublease, such possession shall become a month-to-month tenancy during which
time Lessee shall pay rent each month in an amount equal to twice the rent
payable during the prior Term. During such period of month-to-month tenancy,
Lessee shall be obligated to perform and observe all of the terms, covenants
and conditions of this Sublease, but shall have no rights hereunder, other than
the right, to the extent given by law to month-to-month tenancies, to continue
its occupancy and use of the Premises. Nothing herein shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Sublease.
25. TIME: Time is of the essence of this Sublease.
Sublease by and between BCC at State College, Inc. and
BCC Therapies of Pennsylvania, Inc. Page 5
<PAGE> 6
26. ENTIRE AGREEMENT: The foregoing constitutes the entire agreement
between the parties and may be modified only by a writing signed by both
parties.
27. COMPLIANCE WITH MEDITRUST LEASE: Lessee acknowledges that it has
received and reviewed a copy of the Meditrust Lease. Lessee agrees that it will
comply with the terms of the Meditrust Lease to the extent applicable to
Lessee, and that all of Lessee's rights hereunder are subject and subordinate
to all applicable terms and conditions of the Meditrust Lease, and further,
that Meditrust, at its option and without any obligation to do so, may require
Lessee to attorn to Meditrust, in which event Meditrust shall undertake the
obligations of Lessor, as sublessor under this Sublease from the time of
exercise of such option to the termination of this Sublease and in such case
Meditrust shall not be liable for any prepaid rents paid by Lessee to Lessor or
for any other prior defaults of Lessor under this Sublease. In the event that
Meditrust shall not require such attornment with respect to this Sublease, then
this Sublease shall automatically terminate upon the expiration or earlier
termination of the Meditrust Lease, including any early termination by mutual
agreement of Meditrust and Lessor. In addition, Lessee shall furnish Lessor
and/or Meditrust with such financial and operational information and
information about the physical condition of the Premises as Lessor and/or
Meditrust may request from time to time.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have executed this Sublease as of the date first set forth above.
LESSOR: LESSEE:
BCC at State College, Inc. BCC Therapies of Pennsylvania, Inc.
By: /s/ Robin L. Barber By: /s/ Kurt A. Meyer
------------------- -----------------
Name: Robin L. Barber Name: Kurt A. Meyer
Title: Secretary Title: Vice President
Sublease by and between BCC at State College, Inc. and
BCC Therapies of Pennsylvania, Inc. Page 6
<PAGE> 1
EXHIBIT 10.11
FORM OF LEASEHOLD IMPROVEMENT AGREEMENT
<PAGE> 2
SUMMARY OF TABLE OF CONTENTS
1. BACKGROUND.............................................................1
1.1 The Lessee........................................................1
1.2 The Land and Existing Improvements................................1
1.3 The Facility Lease................................................1
1.4 Project...........................................................1
1.5 Lessor's Agreement to Fund the Project and Lessee's Agreement to
Supervise the Project.............................................1
1.6 Plans; the Architect and Architect's Contract.....................2
1.7 Construction Contracts............................................2
1.8 Schedule of Work and Completion Date; Schedule of Draws...........2
1.9 Project Budget....................................................2
1.10 Use of Project Funds..............................................2
1.11 Project Funds.....................................................3
1.12 Guaranties and Indemnities........................................3
2. DEFINITIONS............................................................3
3. LEASEHOLD IMPROVEMENT FEE..............................................3
4. LEASE DOCUMENTS; COLLATERAL SECURITY...................................3
4.1 Lease Documents...................................................3
4.2 Lease Obligations.................................................5
4.3 Collateral Security...............................................5
5. REPRESENTATIONS AND WARRANTIES.........................................6
5.1 Architect's Contract and Construction Contract....................6
5.2 Project Plans.....................................................6
5.3 Prior Construction Work...........................................7
5.4 Suitability of Project Plans......................................7
5.5 Compliance with Legal Requirements and Applicable Agreements......7
5.6 Permits and Contracts.............................................7
5.7 First Advance.....................................................8
6. COVENANTS..............................................................8
6.1 Collection and Enforcement Costs..................................8
6.2 The Lessee's Agreements to Perform Certain Obligations............8
6.3 Continuing Effect of Representation and Warranties................8
6.4 Construction Covenants............................................9
6.4.1 Commencement of Construction...............................9
6.4.2 Quality of Materials and Workmanship.......................9
6.4.3 Project Budget.............................................9
6.4.4 Architect Certificates....................................10
6.4.5 Subcontractors............................................10
6.4.6 The Lessor's Consultant...................................10
<PAGE> 3
6.4.7 Title To Materials and Security Interest Granted to
Lessor......................................................11
6.4.8 Compliance With Legal Requirements And Applicable
Agreements..................................................12
6.4.9 Liens.......................................................13
6.4.10 Books And Records...........................................13
6.4.11 Inspection Of Construction..................................13
6.4.12 Notice Of Delay.............................................13
6.4.13 Bonds.......................................................14
6.4.14 Use of Project Funds........................................14
6.4.15 Occupancy of the Project....................................14
6.4.16 Seller's Improvements.......................................14
7. ADVANCES OF PROJECT FUNDS................................................15
7.1 Conditions Precedent to First Advance of Project Funds..............15
7.2 The Lessor's Right to Advance.......................................17
7.3 Submission of Requests for Advances.................................17
7.4 Advances by Wire Transfer...........................................19
7.5 Conditions Precedent to All Advances................................19
7.6 Completion of the Project...........................................22
8. THE LESSOR'S RIGHT TO MAKE PAYMENTS AND TAKE OTHER ACTION................22
9. INSURANCE; CASUALTY; TAKING..............................................23
9.1 General Insurance Requirements......................................23
9.2 Fire or Other Casualty or Condemnation..............................23
10. EVENTS OF DEFAULT........................................................23
11. REMEDIES IN EVENT OF DEFAULT.............................................25
12. GENERAL..................................................................26
EXHIBIT A DESCRIPTION OF THE LAND............................................28
EXHIBIT B PLANS AND SPECIFICATIONS...........................................29
EXHIBIT C SCHEDULE OF CONSTRUCTION...........................................30
EXHIBIT D PROJECT BUDGET.....................................................31
EXHIBIT E DEFINITIONS........................................................32
EXHIBIT F FUTURE PERMITS AND CONTRACTS REQUIRED FOR COMPLETION OF
CONSTRUCTION AND COMMENCEMENT OF OPERATION...................................37
EXHIBIT G SURVEY.............................................................41
EXHIBIT H SURVEYOR'S CERTIFICATE.............................................
EXHIBIT I ENGINEER'S/ARCHITECT'S CERTIFICATE.................................47
EXHIBIT J LESSEE'S REQUISITION CERTIFICATE...................................50
EXHIBIT K GENERAL CONTRACTOR'S REQUISITION CERTIFICATE.......................52
EXHIBIT L ARCHITECT'S REQUISITION CERTIFICATE................................54
<PAGE> 4
FORM OF LEASEHOLD IMPROVEMENT AGREEMENT
THIS LEASEHOLD IMPROVEMENT AGREEMENT is made as of _________________
by and among _______________, a _____________ corporation (the "Lessee"), and
MEDITRUST ACQUISITION CORPORATION II, a Delaware corporation (the "Lessor").
1. BACKGROUND
1.1 THE LESSEE.
The Lessee is a corporation which is a wholly-owned Subsidiary of the
Guarantor (as hereinafter defined). The Guarantor is a Delaware corporation.
1.2 THE LAND AND EXISTING IMPROVEMENTS.
The Lessor is the owner of a certain parcel of land located in _______ and more
particularly described on EXHIBIT A (the "Land"), together with the
existing buildings and other improvements, if any, located thereon
(collectively, the "Existing Improvements")
1.3 THE FACILITY LEASE.
The Lessor and the Lessee have entered into that certain Facility
Lease Agreement of even date herewith (the "Facility Lease") relating to the
Land and the Improvements (as hereinafter defined), a Notice of which is to be
recorded with the Clerk/Prothonotary of _____________________________.
1.4 PROJECT.
The Lessee proposes to cause BCC Development and Management Co., a Delaware
corporation and a wholly-owned Subsidiary of the Guarantor (the "Developer") to
construct a personal care home consisting of and other improvements,
including, without limitation, accessory parking and landscaping on the Land
(collectively, the "Improvements"). The Land, the Existing Improvements and the
Improvements are collectively referred to herein as the "Project".
1.5 LESSOR'S AGREEMENT TO FUND THE PROJECT AND LESSEE'S
AGREEMENT TO SUPERVISE THE PROJECT.
The Lessee and the Lessor have agreed that the Project will be a
benefit to the premises demised under the Facility Lease and to the Lessee's
and the Lessor's respective interests therein. The Lessor and the Lessee have
further agreed that, pursuant to, and in accordance with, the terms and
conditions of this Agreement, the Lessor shall fund an amount not to exceed
________________________________________________.
<PAGE> 5
__________________ of the cost of the Project (the "Project Funds"). The
Lessee has agreed to supervise and manage, or to cause the Developer to
supervise and manage, the construction of the Project and the Lessor has agreed
to advance the Project Funds to pay for the cost of the construction of the
Project; all pursuant to the terms and conditions of this Agreement.
1.6 PLANS; THE ARCHITECT AND ARCHITECT'S CONTRACT.
The Project is to be constructed and equipped in accordance with the plans and
specifications (collectively, the "Project Plans"), listed on EXHIBIT B
prepared by _________________(the "Architect") pursuant to the contract dated
_________________, by and between the Developer and the Architect (the
"Architect's Contract").
1.7 CONSTRUCTION CONTRACTS.
All of the Improvements are to be constructed pursuant to a guaranteed
maximum price contract (the "Construction Contract") by and between the
Developer and _______________________________ (the "General Contractor"). The
Construction Contract shall be in form and substance identical to the draft
contract between the Developer and the General Contractor previously delivered
to the Lessor for review.
1.8 SCHEDULE OF WORK AND COMPLETION DATE; SCHEDULE OF DRAWS.
The work necessary to complete and fully equip the Project is to be
(A) undertaken and completed in accordance with the schedule which is annexed
hereto as EXHIBIT C and (B) substantially completed by (the
"Completion Date").
1.9 PROJECT BUDGET.
The Lessee has submitted to the Lessor a line item budget (the "Project
Budget"), a copy of which is annexed hereto as EXHIBIT D, setting forth a
total cost of _____________________________________ for the acquisition cost of
the Land and the design and construction of the Project, including (A) the cost
of the Land, (B) a breakdown of construction costs (itemized as to trade
category, subdivision of the work to be performed and the names of each
contractor), (C) a breakdown of all soft costs in connection with the
construction of the Project, including, without limitation, costs for such
items as real estate taxes, legal and accounting fees, survey costs, permits
and inspection fees, insurance premiums, architect's and engineer's fees,
marketing, management, leasing and advertising expenses, and all amounts due in
connection with the advance of Project Funds pursuant to this Agreement, (D) a
projected draw schedule and (E) a projected progress schedule for the
construction of the Project.
1.10 USE OF PROJECT FUNDS.
The Project Funds are to be used, to the extent sufficient therefore,
solely for the payment of Project costs set forth in the Project Budget.
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1.11 PROJECT FUNDS.
Subject to all of the terms, conditions and provisions of this
Agreement, and of the agreements and instruments referred to herein, the Lessor
agrees to advance the Project Funds and the Lessee agrees to supervise and
manage, or cause the Developer to supervise and manage, the construction of the
Project and to pay the Rent (as hereinafter defined) due under the Facility
Lease (as the same may from time to time be adjusted pursuant to the terms and
conditions set forth therein); it being understood that the Lessee shall be
liable for the payment of Rent regarding such sums as shall have been advanced
from time to time under this Agreement to the Lessee.
1.12 GUARANTIES AND INDEMNITIES.
As an inducement to the Lessor to acquire the Land, enter into this
Agreement, advance the Project Funds and enter into the Facility Lease, the
Guarantor and the Developer have agreed to furnish certain guaranties as
hereinafter described.
2. DEFINITIONS
In this Agreement, except as otherwise expressly provided in the text
of this Agreement or unless the context otherwise requires, all capitalized
terms shall have the meaning ascribed to them in EXHIBIT E.
3. LEASEHOLD IMPROVEMENT FEE.
The Lessee shall pay the Leasehold Improvement Fee to the Lessor
simultaneously with the execution of this Agreement; provided, however, that,
at the Lessor's option, the Leasehold Improvement Fee shall be held in an
escrow account established with a Person designated by the Lessor pursuant to
an escrow arrangement satisfactory to the Lessor, with interest thereon
benefiting the Lessor. If the Lessor exercises its option to require that the
Leasehold Improvement Fee be held in such an escrow account (A) the Leasehold
Improvement Fee shall be disbursed from said escrow account only upon the joint
instructions of the Lessee and the Lessor (which instructions from the Lessee
shall be immediately given upon the request of the Lessor) and in no event
shall the Leasehold Improvement Fee be disbursed therefrom, in whole or in
part, unless and until so requested by the Lessor and (B) the Lessor shall bear
the risk of loss of or misappropriation of the Leasehold Improvement Fee by
such escrow agent.
4. LEASE DOCUMENTS; COLLATERAL SECURITY
4.1 LEASE DOCUMENTS.
The Project Funds shall be advanced, evidenced, administered, secured
and governed by all of the terms, conditions and provisions of each of the
following:
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A. this Agreement;
B. the Facility Lease;
C. a Collateral Assignment of Permits, Approvals, Licenses, and
Contracts of even date granted by the Lessee to the Lessor
(the "Lessee Permits Assignment") and related UCC Financing
Statements;
D. a Collateral Assignment of Permits, Approvals, Licenses, and
Contracts of even date granted by the Developer to the Lessor
(the "Developer Permits Assignment") and related UCC
Financing Statements;
E. a Security Agreement of even date by and between the Lessee
and the Lessor (the "Security Agreement");
F. a Guaranty of even date executed by the Guarantor for the
benefit of the Lessor guarantying the completion of the
Project and the satisfaction of the other Guarantied
Obligations (the "Balanced Care Guaranty");
G. a Guaranty of even date executed by the Developer for the
benefit of the Lessor guarantying the completion of the
Project and the satisfaction of the other Guarantied
Obligations (the "Developer Guaranty");
H. an Environmental Indemnity Agreement of even date by and
among the Lessee, the Guarantor, the Developer, and the
Lessor (the "Environmental Indemnity Agreement");
I. a Deposit Pledge Agreement of even date by and between the
Lessee and the Lessor (the "Deposit Pledge Agreement");
J. a Pledge Agreement of even date by and among the Lessee, the
Lessor and the Guarantor, pursuant to which the Guarantor
granted the Lessor a security interest in all of the
outstanding capital stock of the Lessee (the "Pledge
Agreement") and related stock powers;
K. an Assignment of Construction Contract to be granted by the
Lessee to the Lessor and containing the consent of the
General Contractor (the "Construction Assignment");
L. an Assignment of Architect's Contract of even date granted by
the Developer to the Lessor and containing the consent of the
Architect (the "Architect's Assignment");
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M. an Affiliated Party Subordination Agreement of even date by
and among the Lessee, the Guarantor, the Developer, various
other Affiliates of the Lessee and the Lessor (the
"Affiliated Party Subordination Agreement");
N. an Amended and Restated Agreement Regarding Related Lease
Transactions dated as of November 1, 1996, by and among the
Lessee, the Lessor and any Related Party that is a party to
any Related Lease, as amended by First Amendment to Amended
and Restated Agreement Regarding Related Lease Transactions
of even date (the "Agreement Regarding Related Lease
Transactions");
O. the Assignment Agreement; and
P. all other documents, instruments, or agreements now or
hereafter evidencing or securing the obligations under this
Agreement and/or the Facility Lease.
Items (A) through (P) above, as the same from time to time may be hereinafter
amended, modified or supplemented, are referred to herein as the "Lease
Documents".
4.2 LEASE OBLIGATIONS.
The Lessee agrees to pay and perform all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than the Lessor's
obligations) under this Agreement and all of the other Lease Documents
(collectively, the "Lease Obligations").
4.3 COLLATERAL SECURITY.
The Lease Obligations shall be secured by the following:
A. a perfected first priority security interest in all Permits
and Contracts pursuant to the Permits Assignments;
B. a perfected first priority security interest in Tangible
Personal Property, Receivables and certain other Collateral
pursuant to the Security Agreement;
C. the Guaranties;
D. the Environmental Indemnity Agreement;
E. a perfected first priority security interest in all of the
outstanding capital stock of the Lessee pursuant to the
Pledge Agreement;
F. a perfected first priority interest in the Cash Collateral
pursuant to the Deposit Pledge Agreement;
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G. all other security interests in such other property for which
provision is made in the Lease Documents or at law or in
equity; and
H. certain other Related Party Agreements.
All of the property in which security interests are granted (I) as described in
items (A) through (H) above and (II) pursuant to any other Lease Document is
collectively referred to herein as the "Collateral".
5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lessor to advance the Project Funds pursuant to
the terms and conditions of this Agreement, the Lessee represents and warrants
to the Lessor that:
5.1 ARCHITECT'S CONTRACT AND CONSTRUCTION CONTRACT.
The Architect's Contract has been validly executed by and is binding
upon the parties thereto and is in full force and effect in accordance with the
terms thereof. All of the parties to the Architect's Contract have faithfully
performed all of their respective obligations thereunder to the extent accrued
as of the date hereof, and none of the parties to the Architect's Contract has
asserted any claim of default thereunder;
5.2 PROJECT PLANS.
The two (2) copies of the Project Plans delivered to the Lessor by the
Lessee (A) are true and correct and satisfactory to the Lessee and (B) have
been filed with and approved by all appropriate Governmental Authorities. All
necessary Permits relating to the Project Plans to be issued or granted by any
applicable Governmental Authority having or claiming jurisdiction over the
Leased Property have been obtained and all such Permits are in full force and
effect, are not subject to any unexpired appeal periods or any appeals or
challenges which have not been fully resolved in favor of the Lessee, and do
not contain any conditions or terms relating to the Leased Property which have
not been fully satisfied or which will not be fully satisfied by the completion
of the construction of the Project (in accordance with the Project Plans and
the terms and provisions of this Agreement). Furthermore, the Project Plans
have been approved in writing by the Lessor, any construction heretofore
performed on the Project has been performed in accordance with the Project
Plans and all future construction on the Project shall be performed in
accordance with the Project Plans and the terms and conditions of this
Agreement. There are no structural defects in the Project of which the Lessee
has been advised or of which the Lessee has notice or knowledge. The Lessee has
not received any notice claiming that, and the Lessee has no knowledge that,
the Project Plans violate any Legal Requirement;
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5.3 PRIOR CONSTRUCTION WORK.
No Person has performed any construction work or furnished any
services in connection with any construction carried on or to be carried on at
the Leased Property who or which remains unpaid at the time of execution of
this Agreement, except as indicated in the requisition submitted simultaneously
herewith or otherwise expressly approved by the Lessor;
5.4 SUITABILITY OF PROJECT PLANS.
The Project Plans provide for the construction and renovation of all
buildings and related improvements necessary, both legally and practically, for
the proper and efficient construction of the Project in accordance with the
terms of this Agreement and, after the completion of the construction thereof,
for the operation of the Project for its Primary Intended Use;
5.5 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE
AGREEMENTS.
Upon the completion of construction of the Project, which shall be
constructed in accordance with the Project Plans and the terms and provisions
of this Agreement, the Project shall be in compliance with (A) all Legal
Requirements; (B) all Permits and Contracts and (C) all applicable by-laws,
codes, rules, regulations and restrictions of the Board of Fire Underwriters or
other insurance underwriters or similar bodies.
5.6 PERMITS AND CONTRACTS.
All Permits and Contracts required by or entered into with any
Governmental Authority or quasi-governmental authority or agency for, or in
connection with, the construction of the Project that can be obtained in the
ordinary course as of the date hereof have been obtained or executed, as the
case may be. All such Permits and Contracts are in full force and effect, are
not subject to any unexpired appeal periods or any appeals or challenges which
have not been conclusively resolved in favor of any member of the Leasing
Group, and do not contain any conditions or terms which have not been fully
satisfied or which will not be fully satisfied by the completion of the
construction of the Project (if constructed in accordance with the Project
Plans and the terms and provisions of this Agreement). There is no action
pending, or, to the best knowledge and belief of the Lessee, recommended by the
applicable Governmental Authority having jurisdiction thereof, either to
revoke, repeal, cancel, modify, withdraw or suspend any such Permit or Contract
relating to the construction of the Project, or any other action of any other
type which would have a material adverse effect on the Project. All other
Permits and Contracts required for the completion of the construction of the
Project and the commencement of the operation of the Facility are described on
EXHIBIT F and the Lessee knows of no impediment to the future issuance or
execution of such Permits and Contracts and has no reason to believe that such
Permits and Contracts will not be obtained as and when needed.
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5.7 FIRST ADVANCE.
As of the date of the first advance of Project Funds to the Lessee
pursuant to this Agreement, the amount of the money expended by the Lessee on
account of the construction of the Project in accordance with the Project Plans
and the items listed on Project Budget will not be less than the amount of such
first advance.
6. COVENANTS
6.1 COLLECTION AND ENFORCEMENT COSTS.
Upon demand, the Lessee shall reimburse the Lessor for all costs and
expenses, including, without limitation, attorneys' fees and expenses and court
costs, paid or reasonably incurred by the Lessor in connection with the
collection of any sum due hereunder, or in connection with the enforcement of
any of the Lessor's rights or any member of the Leasing Group's obligations
under this Agreement or any of the other Lease Documents. Any amount due and
payable to the Lessor pursuant to the provisions of this Section shall be a
demand obligation and, to the extent permitted by law, shall be added to the
Lease Obligations and shall be secured by the Liens created by the Lease
Documents as fully and effectively and with the same priority as every other
obligation of the Lessee secured thereby and, if not paid within ten (10) days
after demand, shall thereafter, to the extent permitted by applicable law, bear
interest at the Overdue Rate until the date of payment. The obligation of the
Lessee to pay all costs, charges and sums due hereunder or under any of the
other Lease Documents shall continue in full force and effect and in no way
shall be impaired, until the actual payment thereof to the Lessor. In the event
of (A) a sale, conveyance, transfer or other disposition of the Leased
Property, (B) any further agreement given to secure the payment of the
obligations set forth herein or (C) any agreement or stipulation extending the
time or modifying the terms of payment set forth herein; the Lessee shall
nevertheless remain obligated to pay the indebtedness evidenced by this
Agreement, as extended or modified by any such agreement or stipulation, unless
the Lessee is released and discharged from such obligation by a written
agreement executed by the Lessor.
6.2 THE LESSEE'S AGREEMENTS TO PERFORM CERTAIN
OBLIGATIONS.
The Lessee agrees faithfully to perform, pay and observe all
agreements, covenants, indebtedness, obligations and liabilities of the Lessee
to the Lessor, whether such agreements, covenants, indebtedness, obligations
and liabilities are direct or indirect, absolute or contingent, due or to
become due, existing or hereafter arising, including, without limitation, all
of the Lessee's obligations under all of the Lease Documents. The payment of
all obligations and the performance of all covenants of and agreements by the
Lessee under the Lease Documents shall be absolute and unconditional,
irrespective of any defense or any rights or set-off, recoupment or
counterclaim the Lessee might otherwise have against the Lessor, and the Lessee
shall pay absolutely net during the Term all payments to be made as prescribed
in the all of the Lease Documents, free of any deductions and without
abatement, diminution or set-off.
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6.3 CONTINUING EFFECT OF REPRESENTATION AND WARRANTIES.
All representations and warranties contained in this Agreement shall
constitute continuing representations and warranties which shall remain true,
correct and complete throughout the Term.
6.4 CONSTRUCTION COVENANTS.
6.4.1 COMMENCEMENT OF CONSTRUCTION.
If construction of the Project has not already begun, the
Lessee shall commence construction of the Project within thirty (30)
day from the date hereof. The Lessee shall diligently and continuously
cause the Project to be constructed and completed and made ready for
occupancy and use in accordance with the Project Plans all in a manner
satisfactory to the Lessor on or before the Completion Date.
Notwithstanding anything to the contrary contained herein, the Lessee
shall be and shall remain unconditionally liable to the Lessor for (A)
the complete construction of the Project in accordance with the
Project Plans on or before the Completion Date and whether or not
proceeds of the Project Funds remaining to be disbursed hereunder, if
any, are sufficient to cover all costs of construction and (B) the
complete performance of all other obligations, covenants, agreements
and liabilities of the Lessee hereunder.
6.4.2 QUALITY OF MATERIALS AND WORKMANSHIP.
The materials used in the Project shall be of the quality
called for by the Project Plans, and the workmanship shall be in
conformity with the Construction Contract and this Agreement, and both
the quality of such materials and such workmanship shall be
satisfactory to the Lessor. The Lessee shall not make any changes in,
and shall not permit the Developer, the General Contractor or the
Architect to make any changes in, the quality of such materials, the
Project Plans or the Project Budget, whether by change order or
otherwise, without the prior written consent of the Lessor, in each
instance (which consent may be withheld in the Lessor's sole and
absolute discretion); provided, however, that such consent shall not
be required for any individual change (necessitated by job conditions)
which has been approved by the Architect, which does not materially
affect the structure or exterior of the Project, and the cost of which
does not exceed TWENTY-FIVE THOUSAND DOLLARS ($25,000) or which
changes, in the aggregate, do not exceed TWO HUNDRED THOUSAND DOLLARS
($200,000) in cost. Notwithstanding the foregoing, prior to making any
change in Project Plans, copies of all change orders shall be
submitted by the Lessee to the Lessor and the Lessee shall also
deliver to the Lessor evidence satisfactory to the Lessor, in its
reasonable discretion, that all necessary Permits and/or Contracts
required by any Governmental Authority in connection therewith have
been obtained or entered into, as the case may be.
6.4.3 PROJECT BUDGET.
Upon the request of the Lessor, the Lessee shall furnish the
Lessor with revisions for the Project Budget to reflect (A) any
changes approved by the Lessor to the Project
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Budget, (B) the total cost of the construction of the Project
completed through any specific date and (C) the remaining cost to
complete the construction of the Project in accordance with the
Project Plans and the terms and provisions of this Agreement.
6.4.4 ARCHITECT CERTIFICATES.
The Lessee agrees to cause the Architect to furnish such
statements as to progress and certificates of completion as the Lessor
may reasonably require from time to time during such period as this
Agreement may be in effect, all without expense to the Lessor. The
Lessee agrees to cause the Architect to make the Project Plans
available to the Lessor without expense to the Lessor, and to agree
that, in the event that the Lessor shall take over the Project by
reason of an occurrence of a Lease Default, the Lessor shall be
entitled to use said Project Plans without any additional compensation
to the Architect above what is required (and was not previously paid)
under the Architect's Contract.
6.4.5 SUBCONTRACTORS.
Prior to the initial advance of Project Funds contemplated by
this Agreement, the Lessee agrees to provide the Lessor with a list of
the major subcontractors working on the Project, including an
identification by trade and the amount of each subcontract. The Lessor
reserves the right of reasonable approval of all subcontractors
(collectively, the "Major Subcontractors") under any subcontract the
aggregate amount due under which is equal to or greater than ONE
HUNDRED THOUSAND DOLLARS ($100,000). The Lessee further agrees that
the Lessee shall not permit any Major Subcontractors working on the
Project to change without the Lessor's prior written consent, in each
instance, which consent shall not be unreasonably withheld.
6.4.6 THE LESSOR'S CONSULTANT.
The Lessee agrees to pay the costs and expenses reasonably
incurred by the Lessor to retain the Consultants to perform various
services to the Lessor in connection with the construction of the
Project and the advances of Project Funds contemplated hereunder,
including, without limitation, the following:
A. to review and analyze the Project Plans and advise
the Lessor whether the same are satisfactory for the
intended purposes thereof;
B. to make periodic inspections of the Leased Property
for the purpose of assuring that construction
performed in connection with the Project prior to
the date of such inspection has been completed in
accordance with the Project Plans and this
Agreement;
C. to review the Lessee's then current requisition to
determine whether it is consistent with the
obligations of the Lessee under this Agreement, and
to advise the Lessor of the anticipated costs of,
and the time for, the
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completion of the Project in accordance with the
Project Plans, and the adequacy of reserves and
contingencies related thereto;
D. to review and analyze any proposed changes to the
Project Plans and advise the Lessor regarding the
same;
E. to review and analyze the Project Budget and advise
the Lessor as to the sufficiency thereof; and
F. to review and analyze the Architect's Contract,
Construction Contract and all subcontracts entered
into by the Lessee, the Developer or the General
Contractor in connection with the construction of
the Project and advise the Lessor regarding the
same.
Except as otherwise expressly provided herein, the Lessee
agrees promptly to make such changes or corrections, or to cause the
Developer to make such changes or corrections, in the construction of
the Project as may be required by the Lessor, based on the
recommendation of any of the Consultants, unless the Lessee
demonstrates to the Lessor's satisfaction that such corrective work is
inconsistent with the Project Plans.
6.4.07 TITLE TO MATERIALS AND SECURITY INTEREST GRANTED TO LESSOR.
Except as otherwise expressly provided herein, the Lessee
shall not suffer the use in connection with any construction relating
to the Project of any materials, fixtures or equipment intended to
become part of the Project which are purchased upon lease or
conditional bill of sale or to which the Lessee does not have absolute
and unencumbered title. The Lessee covenants to cause to be paid
punctually all sums becoming due for labor, materials, fixtures or
equipment used or purchased in connection with any such construction
and, in recognition of the fact that it is intended that the Project
Funds be used to pay for the cost of the construction of the Project
on behalf of the Lessor, the Lessee agrees that title to all
materials, fixtures and equipment that are incorporated into the
Improvements shall automatically pass to the Lessor upon such
incorporation without the need for the execution or delivery of any
further instrument of conveyance.
Notwithstanding the foregoing, in order to more fully secure
the Lessor with reference to all advances of Project Funds made
hereunder, the Lessee hereby conveys to the Lessor a security interest
in all of the Lessee's right, title and interest in materials on the
Leased Property which are not at any relevant time incorporated into
the Project
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and materials, wherever located, intended for incorporation into the
Project. The Lessee agrees:
A. that the Lessor shall have all the rights, with
reference to such security, as a secured party is
entitled to hold with reference to any security
interest under the UCC;
B. that such security interest shall cover cash and
non-cash proceeds of such materials;
C. that such materials will not be held for sale to
others or disposed of by the Lessee without the
prior written consent of the Lessor and, if at any
time located on the Leased Property shall be
suitably stored, secured and insured and
furthermore, shall not be removed from the Leased
Property; and
D. that such security interest shall be prior to the
rights of any other Person other than the Permitted
Prior Security Interests.
The undertakings of the Lessee in this Section shall also be
applicable to any personal property owned by the Lessee and used (or
to be used) in connection with the Project, whether or not the
purchase thereof was financed by advances of Project Funds made by the
Lessor.
The Lessee agrees to execute such instruments as the Lessor
may from time to time request to perfect the security interest of the
Lessor in any and all rights under this Agreement and the other Lease
Documents, and any and all property of the Lessee which, under
applicable provisions of this Agreement and/or any of the other Lease
Documents, may or shall stand as security for advances of Project
Funds under this Agreement and for the complete payment and
performance of the Lease Obligations.
6.4.08 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE AGREEMENTS.
The Lessee, the Project Plans and the Leased Property and all
uses thereof (including, without limitation, the construction of the
Project) shall comply with (A) all Legal Requirements, (B) all Permits
and Contracts, (C) all applicable by-laws, codes, rules, regulations
and restrictions of the Board of Fire Underwriters or other insurance
underwriters or similar body and (D) the Lease Documents, except to
the extent that any of the matters referred to in clauses (a) or (c)
are being duly contested in accordance with the terms of the Lease.
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6.4.9 LIENS.
The Leased Property shall at all times be free from any
attachment, encumbrance, lis pendens, mechanic's or materialmen's lien
or notice arising from the furnishing of materials or labor and, with
the exception of the Permitted Encumbrances, all other Liens of any
kind, except to the extent that any such Liens are being duly
contested in accordance with the terms of the Facility Lease or the
terms hereof. The Lessee shall not permit the recording of any notice
of contract or mechanic's or materialmen's lien relating to
construction of the Project or otherwise affecting the Leased
Property. Notwithstanding the foregoing provisions of this Section
6.3.09, the existence of an attachment or lis pendens for a period not
in excess of thirty (30) days shall not be deemed to be a default
hereunder provided that (A) there shall be no cessation of
construction of the Project, (B) a Lease Default has not occurred and
(C) the Lessee shall proceed promptly to cause such attachment or lis
pendens to be removed, but the Lessor shall not be obliged to make any
further advance under this Agreement while such attachment or lis
pendens remains outstanding, unless a bond, satisfactory to the
Lessor, has been posted as security for such attachment or lis
pendens.
6.4.10 BOOKS AND RECORDS.
The Lessee shall cause to be kept and maintained, and shall
permit the Lessor and its representatives to inspect at all reasonable
times, accurate books of accounts in which complete entries will be
made in accordance with GAAP reflecting all financial transactions of
the Lessee (showing, without limitation, all materials ordered and
received and all disbursements, accounts payable and accounts
receivable in connection with the construction of the Project and the
operation of the Leased Property). Such books and records must
accurately reflect that all funds advanced hereunder for construction
of the Project have been used solely for the payment of obligations
and expenses properly incurred in connection with said construction in
accordance with the terms of the Project Budget.
6.4.11 INSPECTION OF CONSTRUCTION.
The Lessor and its representatives including, without
limitation, the Consultants, shall, at all times as long as this
Agreement remains in effect, have the right to enter the Leased
Property, upon reasonable notice to the Lessee and at reasonable times
(except in the event of an emergency) for the purpose of inspecting
the Project and the progress of the work and materials thereon, and if
any such inspection reveals that the Lessee is not in compliance
herewith (in its sole and absolute discretion), then the Lessor shall
not be obligated to make any further advances under this Agreement to
the Lessee.
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6.4.12 NOTICE OF DELAY.
The Lessee shall give to the Lessor prompt written notice of
any fire, explosion, accident, flood, storm, earthquake or other
casualty or strike, lock out, act of God or interruption of the
construction of the Project which is reasonably anticipated to
interfere with the ability of the Lessee to complete the Project by
the Completion Date.
6.4.13 BONDS.
Performance, payment and lien bonds, in form and substance
and guaranteed by sureties satisfactory to the Lessor (in its sole and
absolute discretion), shall be furnished to the Lessor in connection
with the Construction Contract in an amount at least equivalent to the
contract sum due under the Construction Contract, naming the Lessor as
a dual obligee, shall be furnished to the Lessor prior to the
commencement of any work pursuant to the Construction Contract.
6.4.14 USE OF PROJECT FUNDS.
The Lessee shall utilize all advances by the Lessor pursuant
to the terms of this Agreement only for those items for which
requisitions are permitted under this Agreement or for reimbursement
of expenditures already made for items for which requisitions are so
permitted. The Lessee agrees to hold all advances by the Lessor
hereunder as a trust fund for the purpose of payment of the costs and
expenses permitted under this Agreement.
6.4.15 OCCUPANCY OF THE PROJECT.
The Lessee shall not permit any occupancy of the Project
(other than such occupancy as is required in connection with the
construction thereto) prior to (A) the substantial completion of that
portion of the Project being occupied and (B) the issuance by the
appropriate Governmental Authorities of a Certificate of Occupancy (or
its equivalent) permitting the occupancy of the Project for its
Primary Intended Use. The Project shall not be deemed to have been
completed unless and until constructed in accordance with this
Agreement and a Certificate of Occupancy (or its equivalent)
permitting the occupancy of the Project for its Primary Intended Use
has been issued by the applicable Governmental Authorities.
6.4.16 SELLER'S IMPROVEMENTS.
The Lessee shall cause the Seller's Improvements to be
constructed and completed in accordance with the terms of the Option
Puchase Agreement and the Municipal Improvements Agreement.
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6.5 CONSTRUCTION CONTRACT.
Upon the full execution of the Construction Contract, it
shall be binding upon the parties thereto in accordance with the terms
thereof and shall thereafter remain in full force and effect. All of
the parties to the Construction Contract shall faithfully perform all
of their obligations thereunder.
7. ADVANCES OF PROJECT FUNDS
7.1 CONDITIONS PRECEDENT TO FIRST ADVANCE OF PROJECT
FUNDS.
Prior to the first advance of Project Funds contemplated by this
Agreement, and as a condition of the Lessee's right to receive any of the
proceeds of the Project Funds, there shall have been furnished to the Lessor:
A. An owner's title insurance policy in form and substance
satisfactory to the Lessor, in its sole and absolute
discretion, issued by a title insurance company or companies
satisfactory to the Lessor (the "Title Company") with such
endorsements, reinsurance and/or co-insurance as the Lessor
may require, insuring the Lessor's fee title to the Leased
Property free from all Liens and without exception for (I)
filed or unfiled mechanics' liens, (II) survey matters, (III)
rights of parties in possession, (IV) environmental liens and
(V) any other matters of any kind or nature whatsoever other
than the Permitted Encumbrances (the "Title Policy");
B. Such evidence as the Lessor may require that the use
contemplated for the Project, and all of the improvements and
construction contemplated by the Project Plans, comply with
all applicable Legal Requirements, to the extent in force and
applicable;
C. Insurance policies and/or Certificates of Insurance required
pursuant to the terms and provisions of the Facility Lease;
D. Such evidence as the Lessor may require to determine that the
total cost of completion of the Project in all respects,
including all related direct and indirect costs as previously
approved by the Lessor, will not exceed the total amount set
forth in the Project Budget;
E. Such evidence as the Lessor may require that the Lessee's
representations and warranties contained herein and in all of
the other Lease Documents are true and correct in every
material respect;
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F. Such evidence as the Lessor may require as to the
satisfaction of such of the terms and conditions of this
Agreement and of the other Lease Documents as may by their
nature be satisfied prior to the making of such advance;
G. Such evidence as the Lessor may require that all outstanding
Impositions pertaining to the Leased Property have been paid
in full;
H. A current instrument survey, satisfactory in form and content
to the Lessor, prepared in accordance with the requirements
set forth in EXHIBIT G (the "Survey") and a certificate
substantially in the form of EXHIBIT H (the "Surveyor's
Certificate"), prepared and signed by a surveyor licensed to
do business in the state where the Leased Property is located
with his or her seal affixed thereto;
I. True and correct copies of the executed Architect's Contract,
all major subcontracts in effect with respect to the Project,
the form of Construction Contract to be executed by the
Developer and the General Contractor, as well as all
receipted bills paid by the Lessee or the Developer to the
General Contractor and the Architect for goods and/or
services rendered with respect to the Project prior to the
date hereof;
J. True and correct copies of (I) the Project Budget and (II)
the Project Plans, each of which shall be in form and content
satisfactory to the Lessor (in its sole and absolute
discretion);
K. A certificate from an engineer and/or architect, registered
as such in the state where the Leased Property is located,
substantially in the form attached hereto as EXHIBIT I,
certifying as to the (I) compliance of the Leased Property
with all applicable Legal Requirements, (II) the availability
and adequacy of access/egress to and from the Leased Property
and (III) the availability and adequacy of sewer, drainage,
water, electric and other utility services to the lot line of
the Leased Property; together with such other assurances
concerning the design of the Project as the Lessor may
require;
L. Opinions, in forms satisfactory to the Lessor (in its sole
and absolute discretion), from the Lessee's counsel and the
Guarantor's counsel, regarding (I) the due execution,
authority and enforceability of the Lease Documents; (II) the
compliance of the Leased Property and the Project, in all
material respects, with those provisions of applicable zoning
and other land-use Legal Requirements relating to the use of
the Leased Property and the Project for the Primary Intended
Use; (III) the valid issuance of the Certificate of Need and
all other Permits required for the construction of the
Project, the continuing effectiveness of said Certificate of
Need and other Permits and the Lessee's and Project's
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<PAGE> 20
compliance therewith and (IV) such other matters as the
Lessor may reasonably request (collectively, the
"Opinions")];
M. Payment of the Leasehold Improvement Fee (subject, however,
to the provisions of Section 3 hereof);
N. True and correct copies of all Permits and Contracts relating
to the construction and operation of the Project (including,
without limitation, an unconditional building permit or a
building permit that is subject only to such conditions as
will be fully satisfied by the completion of the construction
of the Project in accordance with the Project Plans and this
Agreement);
O. Such evidence as the Lessor may require that there has been
no material adverse change in the financial condition and
strength of the Lessee, the Guarantor and the Developer, and
that the Leased Property shall have sustained no impairment,
reduction, loss or damage which has not been fully restored
and repaired, and that no Condemnation proceedings or other
governmental action is or shall be pending against or with
respect thereto;
P. Such evidence as the Lessor may require that the General
Contractor and the Architect maintain adequate insurance, as
determined in the Lessor's reasonable discretion;
Q. [Intentionally Deleted];
R. [Intentionally Deleted]; and
S. A fully executed and authorized Architect's Assignment, in
form and substance satisfactory to the Lessor.
7.2 THE LESSOR'S RIGHT TO ADVANCE THE PROJECT FUNDS.
Without at any time waiving any of the Lessor's rights hereunder, the
Lessor shall have the right to make the first advance of a portion of the
Project Funds hereunder without the satisfaction of each and every condition
precedent to the Lessor's obligation to make such advance, and the Lessee
agrees to accept such advance as the Lessor may elect to make. The making of
any advance hereunder shall not constitute an approval or acceptance by the
Lessor of any work on the Project theretofore completed.
7.3 SUBMISSION OF REQUESTS FOR ADVANCES OF THE PROJECT
FUNDS.
Advances under this Agreement shall be made not more than once each
month and at least ten (10) Business Days before the date upon which an advance
is requested, the Lessee
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shall give notice to the Lessor, specifying the total advance which will be
desired, accompanied by:
A. Itemized requisitions for advances or, at the Lessee's
option, for reimbursements to the Lessee for prepaid items,
signed by the Lessee, the Architect and the General
Contractor on A.I.A. Forms G702, G702A or G703 or such other
form(s) as the Lessor may reasonably require (together with
copies of invoices or receipted bills relating to items
covered by such requisitions when so requested by the
Lessor). All such requisitions shall include an
indemnification of the Lessor by the Developer, the General
Contractor and the Lessee, jointly and severally, to the
extent such indemnification is available from the General
Contractor upon the Lessee's best efforts to obtain such
indemnification, against any and all claims of any
subcontractors, laborers and suppliers;
B. A certificate executed by the Lessee substantially in the
form attached hereto as EXHIBIT J;
C. A certificate executed by the General Contractor
substantially in the form attached hereto as EXHIBIT K;
D. A certificate executed by the Architect substantially in the
form attached hereto as EXHIBIT L.
E. At the Lessor's request, certificates executed by the
Consultants in such form as the Lessor may reasonably
require;
F. An endorsement of the Title Policy issued by the Title
Company, satisfactory in form and substance to the Lessor,
redating the Title Policy to the date that the then current
advance will be made, increasing the coverage afforded by the
Title Policy so that the same shall constitute insurance in
an amount at least equal to the sum of the amount of the
insurance then existing under the Title Policy plus the
amount of the then current advance of Project Funds to be
disbursed to the Lessee under this Agreement and subject to
no additional exceptions other than the Permitted
Encumbrances;
G. If and when reasonably requested by the Lessor, satisfactory
assurance that the construction of the Project has been
performed in accordance with the requirements of the
Construction Contract, the Project Plans, this Agreement and
all of the other Lease Documents and has been inspected and
found satisfactory by the parties hereto;
H. If and when reasonably requested by the Lessor, an updated
Surveyor's Certificate substantially in the form attached
hereto as EXHIBIT H and/or
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<PAGE> 22
updated Engineer's/Architect's Certificate substantially in
the form attached hereto as EXHIBIT I;
I. If and when reasonably requested by the Lessor, updated
Opinions from the Lessee's counsel and the Guarantor's
counsel (in form and substance satisfactory to the Lessor in
its sole and absolute discretion);
J. If and when requested by the Lessor, satisfactory evidence
that the Project Funds remaining unadvanced under this
Agreement are sufficient for the payment of all related
direct and indirect costs for the completion of the Project
in accordance with the terms and provisions hereof. If the
evidence furnished shall not be reasonably satisfactory to
the Lessor, in its sole and absolute discretion, it shall be
a condition to the making of any further advance hereunder
that the Lessee will provide the Lessor with such financial
guaranties (whether in the form of a bond, cash deposit,
letter of credit or otherwise) as are acceptable to the
Lessor, in its sole and absolute discretion, to assure the
completion of the construction of the Project in accordance
with the Project Plans and the terms and conditions of this
Agreement. In the event that the Lessor requires a cash
deposit from the Lessee, the Lessee shall deposit with the
Lessor such funds, to be held in an interest bearing account
with the interest accruing thereon to the benefit of the
Lessee, which, together with such unadvanced Project Funds,
shall be sufficient to pay all of the aforesaid costs. All
funds so deposited with the Lessor, along with the proceeds
thereof, shall be disbursed prior to any further advance
hereunder;
K. A certification of work completed by any major contractor
working on the Project, together with a statement of the
payment due therefor;
L. Partial lien waivers from the General Contractor, all other
contractors and all subcontractors and suppliers for all work
theretofore performed;
M. If and when reasonably requested, the Lessee shall deliver to
the Lessor an updated Survey of the Leased Property,
acceptable to the Lessor (in its reasonable discretion); and
N. Such evidence as the Lessor may require that there has been
no material adverse change in the financial condition and
strength of the Lessee, the Developer and the Guarantor, and
that the Leased Property shall have sustained no impairment,
reduction, loss or damage which has not been fully restored
and repaired and that no condemnation is or shall be pending
against or with respect thereto.
The Lessee hereby designates David Barber with authority to approve
requisitions and to execute certificates to be delivered pursuant to Section
7.3B on behalf of the Lessee.
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<PAGE> 23
7.4 ADVANCES BY WIRE TRANSFER.
All advances hereunder shall be made by wire transfer of funds into a
bank account maintained by either the Lessee or an authorized agent of the
Lessee.
7.5 CONDITIONS PRECEDENT TO ALL ADVANCES.
A. Advances hereunder shall be made solely for the payment of
the costs and expenses incurred by the Lessee directly in
connection with the construction of the Project, consistent
with the Project Budget, which are required to be paid out-
of-pocket to all other Persons and no advances of Project
Funds may be used to refund any part of expenditures from the
Lessee's own resources on the Project, except to the extent
that any Project Funds are used to reimburse the Lessee for
out-of-pocket expenses incurred by it in accordance with the
terms of the Project Budget. No funds advanced by the Lessor
shall be utilized for any purpose other than as specified
herein and none of the Project Funds shall be paid over to
any officer, partner, stockholder or employee of any member
of the Leasing Group or to any of the Persons collectively
constituting any member of the Leasing Group or those holding
a beneficial interest any member of the Leasing Group, or any
employee thereof, except to the extent that Project Funds are
used to pay compensation to an employee for and with respect
to activity of such employee in construction of the Project.
B. The amount of each requisition shall represent (I) the cost of
the work completed on the Project as of the date of such
requisition which has not been covered by prior requisitions,
(II) the cost of all equipment, fixtures and furnishings
included within the Project Budget, but not incorporated into
any contract approved by the Lessor, which have been delivered
to the Leased Property for incorporation into the Project and
have not been covered by prior requisitions; provided, that,
in the Lessor's judgment, such materials are suitably stored,
secured and insured and that the Lessee can furnish the Lessor
with evidence satisfactory to the Lessor of the Lessee's
unencumbered title thereto and (III) approved soft costs,
which have not been covered by prior requisitions.
C. All requisitions shall be subject to a ten percent (10%)
retainage for the completion of the Project. It is understood
that such retainage is intended to provide a contingency fund
to assure that the construction of the Project shall be fully
completed in accordance with the Project Plans and the terms
and provisions of this Agreement. All amounts so withheld
shall be disbursed after (I) construction of the Project has
been fully completed in accordance with the Project Plans and
the terms and provisions of this Agreement, (II) all of the
items set forth in Section 7.6 hereof have been delivered to
the Lessor and (III) the expiration of the period during
which liens may be perfected with respect to any work
performed or labor or materials supplied in connection with
the construction
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<PAGE> 24
of the Project or the receipt of such evidence as may be
required to assure the Lessor that no claim may thereafter
arise with respect to any work performed or labor or
materials supplied in connection with the construction of the
Project.
D. At the time of each advance, no event which constitutes, or
which, with notice or lapse of time, or both, could
constitute, a Lease Default shall have occurred and be
continuing.
E. Without at any time waiving any of the Lessor's rights under
this Agreement, the Lessor shall always have the right to
make an advance hereunder without satisfaction of each and
every condition upon the Lessor's obligation to make an
advance under this Agreement, and the Lessee agrees to accept
any advance which the Lessor may elect to make under this
Agreement. Notwithstanding the foregoing, the Lessor shall
have the right, notwithstanding a waiver relative to the
first advance or any subsequent advance hereunder, to refuse
to make any and all subsequent advances under this Agreement
until each and every condition set forth in this Section has
been satisfied. The making of any advance hereunder shall not
constitute an approval or acceptance by the Lessor of any
work on the Project theretofore completed.
F. If, while this Agreement is in effect, a claim is made that
the Project does not comply with any Legal Requirement or an
action is instituted before any Governmental Authority with
jurisdiction over the Leased Property or the Lessee in which
a claim is made as to whether the Project does so comply, the
Lessor shall have the right to defer any advance of Project
Funds which the Lessor would otherwise be obligated to make
until such time as any such claim is finally disposed of
favorably to the position of the Lessee, without any
obligation on the part of the Lessor to make a determination
of, or judgment on, the merits of any such claim. For the
purposes of the foregoing sentence, the term "claim" shall
mean an assertion by any Governmental Authority or Person as
to which, in each case, the Lessor has made a good faith
determination that the assertion may properly be made by the
party asserting the same, that the assertion, on its face, is
not without foundation and that the interests of the Lessor
require that the assertion be treated as presenting a bona
fide risk of liability or adverse effect on the Project.
If any such proceeding is not favorably resolved within
thirty (30) days after the commencement thereof, the Lessor
shall also have the right, at its option, to treat the
commencement of such action as a Lease Default, for which the
Lessor shall have all rights herein specified for a Lease
Default. As aforesaid, the Lessor shall have no obligation to
make a determination with reference to the merits of any such
claim. No waiver of the foregoing right shall be implied
from any forbearance by the Lessor in making such election or
any continuation by the Lessor in making advances under this
Agreement.
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<PAGE> 25
In all events, the Lessee agrees to notify the Lessor
forthwith upon learning of the assertion of any such claim or
the commencement of any such proceedings.
G. It is contemplated that all advances of the Project Funds
will be made by the Lessor to the Lessee pursuant to this
Agreement.
H. No inspections or any approvals of the Project during or
after construction shall constitute a warranty or
representation by the Lessor or any of the Consultants as to
the technical sufficiency, adequacy or safety of any
structure or any of its component parts, including, without
limitation, any fixtures, equipment or furnishings, or as to
the subsoil conditions or any other physical condition or
feature pertaining to the Leased Property. All acts,
including any failure to act, relating to the Leased Property
by any agent, representative or designee of the Lessor
(including, without limitation, the Consultants) are
performed solely for the benefit of the Lessor to assure the
payment and performance of the Obligations and are not for
the benefit of the Lessee or the benefit of any other Person.
I. Notwithstanding anything to the contrary hereunder or under
any of the other Lease Documents, the Lessor shall have no
obligation to make any advance hereunder, other than the
first advance on the date hereof, unless and until the Lessee
delivers to the Lessor (I) a fully executed Construction
Contract, (II) true and correct copies of all payment,
performance and completion bonds required pursuant to Section
6.4.13 hereof and (III) a fully executed Construction
Assignment in form and substance satisfactory to the Lessor.
7.6 COMPLETION OF THE PROJECT.
Upon the completion of the construction of the Project in accordance
with the Project Plans and the terms and provisions of this Agreement, the
Lessee shall provide the Lessor with (A) true, correct and complete copies of
(I) a final unconditional Certificate of Occupancy (or its equivalent) issued
by the appropriate governmental authorities, permitting the occupancy and use
of the Project for its Primary Intended Use and (II) all Permits issued by the
appropriate Governmental Authorities which are necessary in order to operate
the Project as a fully-licensed personal care home consisting of 56 units with
62 beds, (B) a certification from the Architect or the Consultants stating that
the Project was completed in accordance with the Project Plans, (C) an updated
Survey of the Leased Property, acceptable to the Lessor (in its sole and
absolute discretion), (D) updated Opinions and (E) such other items relating to
the operation and/or construction of the Project as may be reasonably requested
by the Lessor.
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8. THE LESSOR'S RIGHT TO MAKE PAYMENTS AND TAKE OTHER ACTION
The Lessor may, after ten (10) Business Days' prior notice to the
Lessee of its intention so to do (except in an emergency when such shorter
notice shall be given as is reasonable under the circumstances), pay any sums
due or claimed to be due for labor or materials furnished in connection with
the ownership, construction, development, maintenance, management, repair, use
or operation of the Leased Property, and any other sums which in the reasonable
opinion of the Lessor, or its attorneys, it is expedient to pay, and may take
such other and further action which in the reasonable opinion of the Lessor is
necessary in order to secure (A) the completion of the Project in accordance
with the Project Plans and the terms and conditions of this Agreement, (B) the
protection and priority of the security interests granted to the Lessor
pursuant to the Lease Documents and (C) the performance of all obligations
under the Lease Documents. The Lessor, in its sole and absolute discretion, may
charge any such payments against any advance that may otherwise be due
hereunder to the Lessee or may otherwise collect such amounts from the Lessee,
and the Lessee agrees to repay to the Lessor all such amounts, notwithstanding
that the aggregate indebtedness of the Lessee to the Lessor hereunder may
exceed the aggregate amount the Lessor has agreed to advance hereunder as the
Project Funds. Any amount which is not so charged against advances due
hereunder and all costs and expenses reasonably incurred by the Lessor in
connection therewith (including, without limitation, attorneys' fees and
expenses and court costs) shall be a demand obligation of the Lessee and, to
the extent permitted by applicable law, shall be added to the Lease Obligations
and secured by the Liens created by the Lease Documents, as fully and
effectively and with the same priority as every other obligation of the Lessee
thereunder and, if not paid within ten (10) days after demand, shall
thereafter, to the extent permitted under applicable law, bear interest at the
Overdue Rate until the date of payment.
If the Lessee fails to observe or cause to be observed any of the
provisions of this Section and such failure continues beyond any applicable
notice or cure period provided for under this Agreement, the Lessor or a
lawfully appointed receiver of the Leased Property, at their respective
options, from time to time may perform, or cause to be performed, any and all
repairs and such other work as they deem necessary to bring the Leased Property
into compliance with the provisions of this Agreement may enter upon the Leased
Property for any of the foregoing purposes, and the Lessee hereby waives any
claim against the Lessor or such receiver arising out of such entry or out of
any other act carried out pursuant to this Section. All amounts so expended or
incurred by the Lessor and by such receiver and all costs and expenses
reasonably incurred in connection therewith (including, without limitation,
attorneys' fees and expenses and court costs), shall be a demand obligation of
the Lessee to the Lessor or such receiver, and, to the extent permitted by law,
shall be added to the Obligations and shall be secured by the Liens created by
the Lease Documents as fully and effectively and with the same priority as
every other obligation of the Lessee secured thereunder and, if not paid within
ten (10) days after demand, shall thereafter, to the extent permitted by
applicable law, bear interest at the Overdue Rate until the date of payment.
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9. INSURANCE; CASUALTY; TAKING
9.1 GENERAL INSURANCE REQUIREMENTS.
The Lessee, at its sole cost and expense, shall keep the Leased
Property and the business operations conducted thereon insured as required
under the Facility Lease.
9.2 FIRE OR OTHER CASUALTY OR CONDEMNATION.
In the event of any damage or destruction to the Leased Property by
reason of fire or other hazard or casualty (a "Casualty") or a taking by power
of eminent domain or conveyance in lieu thereof of all or any portion of the
Leased Property (a "Condemnation"), the Lessee shall give immediate written
notice thereof to the Lessor and comply with the provisions of the Facility
Lease governing Casualties and Condemnations.
10. EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default" hereunder
and shall entitle the Lessor to exercise its remedies hereunder and under any
of the other Lease Documents:
A. any failure of the Lessee to pay any amount due hereunder or
under any of the other Lease Documents within ten (10) days
following the date when such payment was due;
B. any failure in the observance or performance of any other
covenant, term, condition or warranty provided in this
Agreement or any of the other Lease Documents, other than the
payment of any monetary obligation and other than as
specified in subsections (C) through (F) below (referred to
herein as a "Failure to Perform"), continuing for thirty (30)
days after the giving of notice by the Lessor to the Lessee
specifying the nature of the Failure to Perform; except as to
matters not susceptible to cure within thirty (30) days,
provided that with respect to such matters, (I) the Lessee
commences the cure thereof within thirty (30) days after the
giving of such notice by the Lessor to the Lessee, (II) the
Lessee continuously prosecutes such cure to completion, (III)
such cure is completed within ninety (90) days after the
giving of such notice by the Lessor to the Lessee and (IV)
such Failure to Perform does not impair the Lessor's rights
with respect to the Leased Property or otherwise impair the
Collateral or the Lessor's security interest therein;
C. the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and
grace periods, if any, under any of the other Lease
Documents;
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<PAGE> 28
D. if any representation, warranty or statement contained herein
proves to be untrue in any material respect as of the date
when made or at any time during the Term if such
representation or warranty, other than those contained in
Sections 5.2, 5.5 and in the third sentence of Section 5.6,
is a continuing representation or warranty pursuant to
Section 6.3;
E. Without limiting any of the terms of the other Lease
Documents, if any representation, warranty or statement
contained in Section 5.2, 5.5 or in the third sentence of
Section 5.6 proves to be untrue in any material respect at
any time during the Term after the date when made, beyond the
notice and grace periods set forth in Section 10(B).
F. except as a result of any Casualty or a partial or complete
Condemnation, if a suspension of any work in connection with
the construction of the Project occurs for a period in excess
of ten (10) Business Days, irrespective of the cause thereof,
provided that the Lessee shall not be deemed to be in default
under this Subsection if such suspension is for circumstances
not reasonably within its control, but only if the Lessor, in
its sole and absolute discretion, shall determine that such
suspension shall not create any risk that the construction of
the Project will not be completed (in accordance with the
Project Plans and the terms and conditions of this Agreement)
on or before the Completion Date; and
G. if construction of the Project shall not be completed in
accordance with the Project Plans and this Agreement
(including, without limitation, satisfaction of the
conditions set forth in Section 7.6) on or before the
Completion Date.
11. REMEDIES IN EVENT OF DEFAULT
Upon the occurrence of an Event of Default, at the option of the
Lessor, which may be exercised at any time after an Event of Default shall have
occurred, the Lessor shall have all rights and remedies available to it, at law
or in equity, including, without limitation, all of the rights and remedies
under the Facility Lease and the other Lease Documents. Subject to the
requirements of applicable law, all materials at that time on or near the
Leased Property which are the property of the Lessee and which are to be used
in connection with the completion of the Project shall be subject to the Liens
created by the Lease Documents.
In addition to, and without limitation of, the foregoing, the Lessor
is authorized to charge all money expended for completion of the Project
against sums hereunder which have not already been advanced (even if the
aggregate amount of such sums expended and all amounts previously advanced
hereunder exceed the amount of the Project Funds which the Lessor has agreed to
advance hereunder); and the Lessee agrees to pay to the Lessor Rent under the
Facility Lease (calculated, in part, thereunder based upon all sums advanced
hereunder, including, without limitation, all sums expended in good faith by
the Lessor in connection with the completion of the Project), and, in addition
thereto, the Lessee agrees to pay to the Lessor (as Rent under the
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Facility Lease), for services in connection with said completion of the
Project, such additional sums as shall compensate the Lessor for the time and
effort the Lessor and its employees shall have expended in connection
therewith. The Lessor is authorized, but not obligated in any event, to do all
such things in connection with the construction of the Project as the Lessor,
in its sole and absolute discretion, may deem advisable, including, without
limitation, the right to make any payments with respect to any obligation of
the Lessee to the Lessor or to any other Person in connection with the
completion of construction of the Project and to make additions and changes in
the Project Plans to employ contractors, subcontractors and agents and to take
any and all such action, either in the Lessor's own name or in the name of the
Lessee, and the Lessee hereby grants the Lessor an irrevocable power of
attorney to act in its name in connection with the foregoing. This power of
attorney, being coupled with an interest, shall be irrevocable until all of the
Obligations are fully paid and performed and shall not be affected by any
disability or incapacity which the Lessee may suffer and shall survive the
same. The power of attorney conferred on the Lessor by the provisions of this
Section 11 is provided solely to protect the interests of the Lessor and shall
not impose any duty on the Lessor to exercise any such power and neither the
Lessor nor such attorney-in-fact shall be liable for any act, omission, error
in judgment or mistake of law, except as the same may result from its gross
negligence or wilful misconduct. In the event that the Lessor takes possession
of the Leased Property and assumes control of the Project as aforesaid, it
shall not be obligated to continue the construction of the Project for any
period of time longer than the Lessor shall see fit (in its sole and absolute
discretion), and the Lessor may thereafter, at any time, abandon its efforts
and refuse to make further payments for the account of the Lessee, whether or
not the Project has been completed.
In addition, at the Lessor's option and without demand, notice or
protest, the occurrence of any Event of Default shall also constitute a default
under any one or more of the Related Party Agreements.
12. GENERAL
The provisions set forth in Articles 22 and 23 and Sections 2.2, 16.8
through 16.10, 24.2 through 24.6, and 24.8 through 24.12 of the Facility Lease
are hereby incorporated herein by reference, mutatis, mutandis, and shall be
applicable to this Agreement as if set forth in full herein.
In the event of any conflict between the provisions hereof and the
provisions of the Lease, the provisions of the Facility Lease shall control.
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<PAGE> 30
EXECUTED as a sealed instrument as of the day and year first above
mentioned.
WITNESS: LESSOR:
MEDITRUST ACQUISITION CORPORATION II,
a Delaware corporation
- ---------------------------- By:
Name: Name:
Title:
WITNESS: LESSEE:
-------------------------------
- ---------------------------- By:
Name: Name:
Title:
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<PAGE> 31
EXHIBIT E
DEFINITIONS
AFFILIATE: As defined in the Facility Lease.
AFFILIATED PARTY SUBORDINATION AGREEMENT: As defined in Section 4.1.
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS: As defined in Section 4.1.
ARCHITECT: As defined in Section 1.6.
ARCHITECT'S ASSIGNMENT: As defined in Section 4.1.
ARCHITECT'S CONTRACT: As defined in Section 1.6.
ASSIGNMENT AGREEMENT: As defined in the Facility Lease.
BALANCED CARE GUARANTY: As defined in Section 4.1.
BUSINESS DAY: As defined in the Facility Lease.
CASH COLLATERAL: As defined in the Deposit Pledge Agreement.
CASUALTY: As defined in Section 9.2.
COLLATERAL: As defined in Section 4.3.
COMPLETION DATE: As defined in Section 1.8.
CONDEMNATION: As defined in Section 9.2.
CONSTRUCTION ASSIGNMENT: As defined in Section 4.1.
CONSTRUCTION CONTRACT: As defined in Section 1.7.
CONSULTANTs: Collectively, the architects, engineers, inspectors, surveyors and
other consultants that are engaged, from time to time, by the Lessor to perform
services for the Lessor in connection with the construction of the Project
contemplated under this Agreement.
CONTRACTS: As defined in the Facility Lease.
DEPOSIT PLEDGE AGREEMENT: As defined in Section 4.1.
DEVELOPER: As defined in Section 1.4.
<PAGE> 32
DEVELOPER GUARANTY: As defined in Section 4.1.
DEVELOPER PERMITS ASSIGNMENT: As defined in Section 4.1.
DOLLARS: Lawful money of the United States of America.
ENVIRONMENTAL INDEMNITY AGREEMENT: As defined in Section 4.1.
EVENT OF DEFAULT: As defined in Section 10.
EXISTING IMPROVEMENTS: As defined in Section 1.2.
FACILITY LEASE: As defined in Section 1.3.
FAILURE TO PERFORM: As defined in Section 10.
FINANCING STATEMENTS: Uniform Commercial Code financing statements evidencing
the security interests granted to the Lessor in connection with the Lease
Documents.
GENERAL CONTRACTOR: As defined in Section 1.7.
GOVERNMENTAL AUTHORITIES: As defined in the Facility Lease.
GUARANTOR: Balanced Care Corporation, a Delaware corporation, and its
successors and assigns.
GUARANTIED OBLIGATIONS: As defined in the Guaranties.
GUARANTIES: Collectively, the Balanced Care Guaranty and the Developer
Guaranty.
IMPOSITIONS: As defined in the Facility Lease.
IMPROVEMENTS: As defined in Section 1.4.
INSURANCE REQUIREMENTS: As defined in the Facility Lease.
LAND: As defined in Section 1.2.
LEASE DEFAULT: The occurrence of a default or breach of condition continuing
beyond the expiration of any applicable notice and/or grace period, if any,
under the terms of any of the Lease Documents.
LEASE DOCUMENTS: As defined in Section 4.1.
LEASE OBLIGATIONS: As defined in Section 4.2 and, including, without
limitation, the Guarantied Obligations.
<PAGE> 33
LEASED PROPERTY: As defined in the Facility Lease.
LEASEHOLD IMPROVEMENT FEE: THIRTY-EIGHT THOUSAND TWO HUNDRED SIXTY-
NINE AND TEN/100 DOLLARS ($38,269.10).
LEASING GROUP: As defined in the Facility Lease.
LEGAL REQUIREMENTS: As defined in the Facility Lease.
LESSEE: As defined in the preamble of this Agreement and its successors and
assigns.
LESSEE PERMITS ASSIGNMENT: As defined in Section 4.1.
LESSOR: As defined in the preamble of this Agreement and its successors and
assigns.
LESSOR'S ADDRESS: 197 First Avenue, Needham Heights, MA 02194 or such other
address as the Lessor shall designate in writing.
LIEN: With respect to any real or personal property, any mortgage, easement,
restriction, lien, pledge, collateral assignment, hypothecation, charge,
security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not choate, vested or perfected.
MAJOR SUBCONTRACTORS: As defined in Section 6.4.05.
MUNICIPAL IMPROVEMENTS AGREEMENT: That certain Municipal Improvements Agreement
dated as of February 4, 1997 by and between the Seller and the Township.
OBLIGATIONS: Collectively, the Lease Obligations and the Related Party
Obligations.
OPINIONS: As defined in Section 7.1.
OVERDUE RATE: As defined in the Facility Lease.
PERMITS: As defined in the Facility Lease.
PERMITS ASSIGNMENTS: Collectively, the Lessee Permits Assignment and the
Developer Permits Assignment.
PERMITTED ENCUMBRANCES: As defined in the Facility Lease.
PERMITTED PRIOR SECURITY INTERESTS: As defined in the Facility Lease.
PERSON: As defined in the Facility Lease.
PLEDGE AGREEMENT: As defined in Section 4.1.
<PAGE> 34
PRIMARY INTENDED USE: The use of the Project as a personal care home with
______________ licensed units and such ancillary uses as are permitted by
applicable law and may be necessary in connection therewith or incidental
thereto.
PROJECT: As defined in Section 1.4.
PROJECT BUDGET: As defined in Section 1.7.
PROJECT FUNDS: As defined in Section 1.5.
PROJECT PLANS: As defined in Section 1.6.
PURCHASE OPTION AGREEMENT: As defined in the Facility Lease.
RECEIVABLES: As defined in the Security Agreement.
RELATED PARTY AGREEMENT: As defined in the Facility Lease.
RELATED PARTY OBLIGATIONS: As defined in the Facility Lease.
RENT: As defined in the Facility Lease.
SECURITY AGREEMENT: As defined in Section 4.1
SELLER: As defined in the Facility Lease.
SELLER'S IMPROVEMENTS: As defined in the Option Purchase Agreement.
SUBSIDIARY: As defined in the Facility Lease.
SURVEY: As defined in Section 17.1.
SURVEYOR'S CERTIFICATE: As defined in Section 17.1.
TANGIBLE PERSONAL PROPERTY: As defined in the Facility Lease.
TERM: As defined in the Facility Lease.
TITLE COMPANY: As defined in Section 7.1.
TITLE POLICY: As defined in Section 7.1.
TOWNSHIP: The Township of ___________________.
UCC: Uniform Commercial Code as adopted in the Commonwealth of Pennsylvania.
<PAGE> 35
SCHEDULE TO EXHIBIT 10.11 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
LEASEHOLD IMPROVEMENT AGREEMENT
<TABLE>
<CAPTION>
PROJECT PARTIES DATE OF LESSOR'S SUBSTANTIAL
------- ------- ------- -------- -----------
AGREEMENT INVESTMENT COMPLETION
--------- ---------- ----------
DATE
----
<S> <C> <C> <C> <C>
Reading, PA Meditrust Acquisition 2/27/97 $4,217,940.00 8/27/98
Corporation II (Lessor) and
BCC at Reading, Inc. (Lessee)
State College, PA Meditrust Acquisition 8/2/96 $3,637,006.00 2/2/98
Corporation II (Lessor) and
BCC at State College, Inc.
(Lessee)
Allegheny, PA Meditrust Acquisition 8/2/96 $3,637,018.00 2/2/98
Corporation II (Lessor) and
BCC at Altoona, Inc. (Lessee)
Blytheville, AR Meditrust Acquisition 11/1/96 $3,516,500.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Blytheville,
Inc. (Lessee)
Maumelle, AR Meditrust Acquisition 11/1/96 $3,796,500.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Maumelle,
Inc. (Lessee)
Mountain Home, AR Meditrust Acquisition 11/1/96 $3,656,700.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Mountain
Home, Inc. (Lessee)
Pocahontas, AR Meditrust Acquisition 11/1/96 $3,455,500.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Pocahontas,
Inc. (Lessee)
Sherwood, AR Meditrust Acquisition 11/1/96 $3,987,000.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Sherwood,
Inc. (Lessee)
</TABLE>
<PAGE> 1
EXHIBIT 10.12
FORM OF
F A C I L I T Y L E A S E A G R E E M E N T
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS.................................................1
1.1 Leased Property.................................................................................1
1.2 Term............................................................................................2
1.3 Extended Terms..................................................................................2
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION...........................................................3
2.1 Definitions.....................................................................................3
2.2 Rules of Construction..........................................................................20
ARTICLE 3 RENT...........................................................................................20
3.1 Base Rent for Land, Leased Improvements, Related
Rights and Fixtures............................................................................20
3.2 [Intentionally Deleted]........................................................................22
3.3 [Intentionally Deleted]........................................................................22
3.4 Additional Charges.............................................................................22
3.5 [Intentionally Deleted]........................................................................22
3.6 Net Lease......................................................................................22
3.7 No Lessee Termination or Offset................................................................23
3.7.1 No Termination........................................................................23
3.7.2 Waiver................................................................................23
3.7.3 Independent Covenants.................................................................23
3.8 Abatement of Rent Limited......................................................................23
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS..............................................24
4.1 Payment of Impositions.........................................................................24
4.1.1 Lessee To Pay.........................................................................24
4.1.2 Installment Elections.................................................................24
4.1.3 Returns and Reports...................................................................24
4.1.4 Refunds...............................................................................25
4.1.5 Protest...............................................................................25
4.2 Notice of Impositions..........................................................................25
4.3 Adjustment of Impositions......................................................................25
4.4 Utility Charges................................................................................25
4.5 Insurance Premiums.............................................................................26
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
4.6 Deposits.......................................................................................26
4.6.1 Lessor's Option.......................................................................26
4.6.2 Use of Deposits.......................................................................26
4.6.3 Deficits..............................................................................27
4.6.4 Other Properties......................................................................27
4.6.5 Transfers.............................................................................28
4.6.6 Security..............................................................................28
4.6.7 Return................................................................................28
4.6.8 Receipts..............................................................................28
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL
PROPERTY; INSTALLATION, REMOVAL AND REPLACEMENT
OF PERSONAL PROPERTY;..........................................................................28
5.1 Ownership of the Leased Property...............................................................28
5.2 Personal Property; Removal and Replacement of
Personal Property..............................................................................29
5.2.1 Lessee To Equip Facility..............................................................29
5.2.2 Sufficient Personal Property..........................................................29
5.2.3 Removal and Replacement; Lessor's Option to
Purchase..............................................................................29
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS.................................................................30
6.1 Security for Lessee's Obligations; Permitted
Prior Security Interests.......................................................................30
6.1.1 Security..............................................................................30
6.1.2 Purchase-Money Security Interests, Receivables
and Equipment Leases..................................................................30
6.2 Guaranties.....................................................................................31
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY; MANAGEMENT
AGREEMENTS.....................................................................................31
7.1 Condition of the Leased Property...............................................................31
7.2 Use of the Leased Property; Compliance;
Management.....................................................................................32
7.2.1 Obligation to Operate.................................................................32
7.2.2 Permitted Uses........................................................................32
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
7.2.3 Compliance with Insurance Requirements................................................32
7.2.4 No Waste..............................................................................33
7.2.5 No Impairment.........................................................................33
7.2.6 No Liens..............................................................................33
7.3 Compliance with Legal Requirements.............................................................33
7.4 Management Agreements..........................................................................33
ARTICLE 8 REPAIRS; RESTRICTIONS..........................................................................34
8.1 Maintenance and Repair.........................................................................34
8.1.1 Lessee's Responsibility...............................................................34
8.1.2 No Lessor Obligation..................................................................35
8.1.3 Lessee May Not Obligate Lessor........................................................35
8.2 Encroachments; Title Restrictions..............................................................36
ARTICLE 9 MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS..............................................................................37
9.1 Lessor's Approval..............................................................................37
9.2 General Provisions as to Capital Additions and
Certain Material Structural Work.............................................................37
9.2.1 No Liens..............................................................................37
9.2.2 Lessee's Proposal Regarding Capital Additions
and Material Structural Work........................................................37
9.2.3 Lessor's Options Regarding Capital Additions
and Material Structural Work........................................................37
9.2.4 Lessor May Elect to Finance Capital Additions
or Material Structural Work.........................................................38
9.3 Capital Additions Financed by Lessor...........................................................38
9.3.1 Lessee's Financing Request............................................................38
9.3.2 Lessor's General Requirements.........................................................38
9.3.3 Payment of Costs......................................................................40
9.4 General Limitations............................................................................40
9.5 Non-Capital Additions..........................................................................41
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE 10 WARRANTIES AND REPRESENTATIONS.......................................................................41
10.1 Representations and Warranties.................................................................41
10.1.1 Existence; Power; Qualification.......................................................41
10.1.2 Valid and Binding.....................................................................42
10.1.3 Single Purpose........................................................................42
10.1.4 No Violation..........................................................................42
10.1.5 Consents and Approvals................................................................42
10.1.6 No Liens or Insolvency Proceedings....................................................42
10.1.7 No Burdensome Agreements..............................................................43
10.1.8 Commercial Acts.......................................................................43
10.1.9 Adequate Capital, Not Insolvent.......................................................43
10.1.10 Not Delinquent........................................................................43
10.1.11 No Affiliate Debt.....................................................................43
10.1.12 Taxes Current.........................................................................44
10.1.13 Financials Complete and Accurate......................................................44
10.1.14 Pending Actions, Notices and Reports..................................................44
10.1.15 Compliance with Legal and Other Requirements..........................................45
10.1.16 No Action By Governmental Authority...................................................46
10.1.17 Property Matters......................................................................46
10.1.18 Third Party Payor Agreements..........................................................47
10.1.19 Rate Limitations......................................................................47
10.1.20 Free Care.............................................................................47
10.1.21 No Proposed Changes...................................................................48
10.1.22 ERISA.................................................................................48
10.1.23 No Broker.............................................................................48
10.1.24 No Improper Payments..................................................................48
10.1.25 Nothing Omitted.......................................................................49
10.1.26 No Margin Security....................................................................49
10.1.27 No Default............................................................................49
10.1.28 Principal Place of Business...........................................................49
10.1.29 Labor Matters.........................................................................49
10.1.30 Intellectual Property.................................................................50
10.1.31 Management Agreements.................................................................50
10.1.32 Option Purchase Documents.............................................................50
10.2 Continuing Effect of Representations and Warranties............................................50
ARTICLE 11 FINANCIAL AND OTHER COVENANTS........................................................................50
11.1 Status Certificates............................................................................50
11.2 Financial Statements; Reports; Notice and Information..........................................51
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
11.2.1 Obligation to Furnish.................................................................51
11.2.2 Responsible Officer...................................................................55
11.2.3 No Material Omission..................................................................55
11.2.4 Confidentiality.......................................................................55
11.3 Financial Covenants............................................................................56
11.3.1 Rent Coverage Ratio of Lessee.........................................................56
11.3.2 Current Ratio - Guarantor.............................................................56
11.3.3 Tangible Net Worth - Guarantor........................................................56
11.3.4 No Indebtedness.......................................................................56
11.3.5 No Guaranties.........................................................................57
11.4 Affirmative Covenants..........................................................................57
11.4.1 Maintenance of Existence..............................................................57
11.4.2 Materials.............................................................................57
11.4.3 Compliance with Legal Requirements and
Applicable Agreements.................................................................57
11.4.4 Books and Records.....................................................................58
11.4.5 Participation in Third Party Payor Programs...........................................58
11.4.6 Conduct of its Business...............................................................58
11.4.7 Address...............................................................................58
11.4.8 Subordination of Affiliate Transactions...............................................58
11.4.9 Inspection............................................................................59
11.4.10 Additional Property...................................................................59
11.4.11 Annual Facility Upgrade Expenditures..................................................59
11.5 Additional Negative Covenants..................................................................59
11.5.1 Restrictions Relating to Lessee.......................................................59
11.5.2 No Liens..............................................................................60
11.5.3 Limits on Affiliate Transactions......................................................60
11.5.4 Non-Competition.......................................................................61
11.5.5 No Default............................................................................62
11.5.6 Restrictions Relating to the Guarantor and the Developer..............................62
11.5.7 [Intentionally Deleted]...............................................................62
11.5.8 ERISA.................................................................................62
11.5.9 Forgiveness of Indebtedness...........................................................63
11.5.10 Value of Assets.......................................................................63
11.5.11 Changes in Fiscal Year and Accounting Procedures......................................63
11.5.12 Option Purchase Documents.............................................................63
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C>
ARTICLE 12 INSURANCE AND INDEMNITY..............................................................................63
12.1 General Insurance Requirements.................................................................63
12.1.1 Types and Amounts of Insurance........................................................63
12.1.2 Insurance Company Requirements........................................................65
12.1.3 Policy Requirements...................................................................65
12.1.4 Notices; Certificates and Policies....................................................66
12.1.5 Lessor's Right to Place Insurance.....................................................66
12.1.6 Payment of Proceeds...................................................................66
12.1.7 Irrevocable Power of Attorney.........................................................67
12.1.8 Blanket Policies......................................................................67
12.1.9 No Separate Insurance.................................................................67
12.1.10 Assignment of Unearned Premiums.......................................................68
12.2 Indemnity......................................................................................68
12.2.1 Indemnification.......................................................................68
12.2.2 Indemnified Parties...................................................................69
12.2.3 Limitation on Lessor Liability........................................................69
12.2.4 Risk of Loss..........................................................................69
ARTICLE 13 FIRE AND CASUALTY....................................................................................70
13.1 Restoration Following Fire or Other Casualty...................................................70
13.1.1 Following Fire or Casualty............................................................70
13.1.2 Procedures............................................................................70
13.1.3 Disbursement of Insurance Proceeds....................................................71
13.2 Disposition of Insurance Proceeds..............................................................75
13.2.1 Proceeds To Be Released To Pay For Work...............................................75
13.2.2 Proceeds Not To Be Released...........................................................76
13.2.3 Lessee Responsible for Short-Fall.....................................................76
13.3 Tangible Personal Property.....................................................................77
13.4 Restoration of Certain Improvements and the
Tangible Personal Property...................................................................77
13.5 No Abatement of Rent...........................................................................77
13.6 Termination of Certain Rights..................................................................77
13.7 Waiver.........................................................................................77
13.8 Application of Rent Loss and/or Business Interruption Insurance................................77
13.9 Obligation To Account..........................................................................78
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C>
ARTICLE 14 CONDEMNATION.........................................................................................78
14.1 Parties' Rights and Obligations................................................................78
14.2 Total Taking...................................................................................78
14.3 Partial or Temporary Taking....................................................................78
14.4 Restoration....................................................................................79
14.5 Award Distribution.............................................................................79
14.6 Control of Proceedings.........................................................................79
ARTICLE 15 PERMITTED CONTESTS...................................................................................80
15.1 Lessee's Right to Contest......................................................................80
15.2 Lessor's Cooperation...........................................................................81
15.3 Lessee's Indemnity.............................................................................81
ARTICLE 16 DEFAULT..............................................................................................81
16.1 Events of Default..............................................................................81
16.2 Remedies.......................................................................................85
16.3 Damages........................................................................................89
16.4 Lessee Waivers.................................................................................90
16.5 Application of Funds...........................................................................90
16.6 [Intentionally Deleted]........................................................................90
16.7 Lessor's Right to Cure.........................................................................90
16.8 No Waiver by Lessor............................................................................90
16.9 Right of Forbearance...........................................................................91
16.10 Cumulative Remedies............................................................................91
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE;
HOLDING OVER...................................................................................92
17.1 Surrender......................................................................................92
17.2 Transfer of Permits and Contracts..............................................................92
17.3 No Acceptance of Surrender.....................................................................93
17.4 Holding Over...................................................................................93
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY......................................................................93
18.1 Purchase of the Leased Property................................................................93
18.2 Appraisal......................................................................................94
18.2.1 Designation of Appraisers.............................................................94
18.2.2 Appraisal Process.....................................................................94
18.2.3 Specific Enforcement and Costs........................................................95
</TABLE>
vii
<PAGE> 9
<TABLE>
<S> <C> <C>
18.3 [Intentionally Deleted]........................................................................95
18.4 Lessee's Option to Purchase....................................................................95
18.4.1 Conditions to Option..................................................................95
18.4.2 Exercise of Option....................................................................95
18.4.3 Conveyance............................................................................96
18.4.4 Calculation of Purchase Price.........................................................96
18.4.5 Payment of Purchase Price.............................................................96
18.4.6 Place and Time of Closing.............................................................96
18.4.7 Condition of Leased Property..........................................................96
18.4.8 Quality of Title......................................................................96
18.4.9 Lessor's Inability to Perform.........................................................96
18.4.10 Merger by Deed........................................................................97
18.4.11 Use of Purchase Price to Clear Title..................................................97
18.4.12 Lessee's Default......................................................................97
ARTICLE 19 SUBLETTING AND ASSIGNMENT............................................................................97
19.1 Subletting and Assignment......................................................................97
19.2 Permitted Subleases............................................................................98
19.3 Attornment.....................................................................................98
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR..........................................................98
20.1 No Merger of Title.............................................................................98
20.2 Transfers by Lessor............................................................................98
20.3 Lessor May Grant Liens.........................................................................98
20.4 Subordination and Non-Disturbance..............................................................99
ARTICLE 21 LESSOR OBLIGATIONS..................................................................................100
21.1 Quiet Enjoyment...............................................................................100
21.2 Memorandum of Lease...........................................................................100
21.3 Default by Lessor.............................................................................100
ARTICLE 22 NOTICES.............................................................................................100
ARTICLE 23 LIMITATION OF MEDITRUST LIABILITY...................................................................102
ARTICLE 24 MISCELLANEOUS PROVISIONS............................................................................103
24.1 Broker's Fee Indemnification..................................................................103
24.2 No Joint Venture or Partnership...............................................................103
24.3 Amendments, Waivers and Modifications.........................................................103
</TABLE>
viii
<PAGE> 10
<TABLE>
<S> <C> <C>
24.4 Captions and Headings.........................................................................104
24.5 Time is of the Essence........................................................................104
24.6 Counterparts..................................................................................104
24.7 Entire Agreement..............................................................................104
24.8 WAIVER OF JURY TRIAL..........................................................................104
24.9 Successors and Assigns........................................................................105
24.10 No Third Party Beneficiaries..................................................................105
24.11 Governing Law.................................................................................105
24.12 General.......................................................................................106
EXHIBIT A LEGAL DESCRIPTION OF THE LAND
EXHIBIT B PERMITTED ENCUMBRANCES
EXHIBIT C LIST OF SHAREHOLDERS
EXHIBIT D NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
EXHIBIT E [INTENTIONALLY DELETED]
EXHIBIT F RATE LIMITATIONS
EXHIBIT G FREE CARE REQUIREMENTS
EXHIBIT H INTENTIONALLY DELETED
EXHIBIT I RENT COVERAGE RATIO CALCULATION
EXHIBIT J [INTENTIONALLY DELETED]
EXHIBIT K RELATED PARTY OBLIGATIONS
</TABLE>
ix
<PAGE> 11
FORM OF FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of _______________
and is between __________________ ("Lessor"), and ("Lessee"), _________________,
having its principal office at 5021 Louise Drive, Suite 200, Mechanicsburg,
Pennsylvania 17055.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, Lessor leases to Lessee and Lessee rents and leases from
Lessor all of Lessor's rights and interests in and to the following real and
personal property (collectively, the "Leased Property"):
(A) the real property described in EXHIBIT A attached hereto
(the "Land");
(B) all buildings, structures, Fixtures (as hereinafter
defined) and other improvements of every kind including, but not
limited to, alleyways and connecting tunnels, sidewalks, utility
pipes, conduits and lines, and parking areas and roadways appurtenant
to such buildings and structures presently or hereafter situated upon
the Land (collectively, the "Leased Improvements");
(C) all easements, rights and appurtenances of every nature
and description now or hereafter relating to or benefitting any or all
of the Land and the Leased Improvements; and
(D) all equipment, machinery, building fixtures, and other
items of property (whether realty, personalty or mixed), including all
components thereof, now or hereafter located in, on or used in
connection with, and 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 and fire and theft protection equipment,
and built-in oxygen and vacuum systems, all of which, to the greatest
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 Tangible Personal Property (as
hereinafter defined) which are not permanently affixed to or
incorporated in the Leased Property (collectively, the "Fixtures").
1
<PAGE> 12
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by Lessor and
subject to: (I) the rights of parties in possession; (II) the existing state of
title including all covenants, conditions, Liens (as hereinafter defined) and
other matters of record (including, without limitation, the matters set forth
in EXHIBIT B); (III) all applicable laws and (IV) all matters, whether or not
of a similar nature, which would be disclosed by an inspection of the Leased
Property or by an accurate survey thereof.
1.2 TERM. The term of this Lease shall consist of: the "Initial Term",
which shall commence on ________________ (the "Commencement Date") and end on
the date (the "Expiration Date"), that constitutes the tenth (10th) anniversary
of the first "Conversion Date" to occur under the Related Leases (as
hereinafter defined); provided, however, that this Lease may be sooner
terminated as hereinafter provided. In addition, Lessee shall have the
option(s) to extend the Term (as hereinafter defined) as provided for in
Section 1.3.
1.3 EXTENDED TERMS. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, Lessee
is hereby granted the option to extend the Initial Term of this Lease for three
(3) additional periods (collectively, the "Extended Terms") as follows: three
(3) successive five (5) year periods for a maximum Term, if all such options
are exercised, which ends on the fifteenth (15th) anniversary of the Expiration
Date. Lessee's extension options shall be exercised by Lessee by giving written
notice to Lessor of each such extension at least one hundred eighty (180) days,
but not more than three hundred sixty (360) days, prior to the termination of
the Initial Term or the then current Extended Term, as the case may be. Lessee
shall have no right to rescind any such notice once given. Lessee may not
exercise its option for more than one Extended Term at a time. During each
effective Extended Term, all of the terms and conditions of this Lease shall
continue in full force and effect, except that the Base Rent (as hereinafter
defined) for each such Extended Term shall be adjusted as set forth in Section
3.1(b).
Notwithstanding anything to the contrary set forth herein, Lessee's
rights to exercise the options granted in this Section 1.3 are subject to the
further condition that concurrently with the exercise of any extension option
hereunder, Lessee shall have exercised its option to extend the terms of all of
the Related Leases in accordance with the provisions of the Agreement Regarding
Related Lease Transactions and the provisions of Section 1.3 of each of the
Related Leases.
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ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 DEFINITIONS. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (I) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (II) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or
the other applicable Lease Document.
ACCOUNTS: As defined in the UCC.
ACCREDITATION BODY: CARF, JCAHO, the Department of Public Welfare and
all other Persons having or claiming jurisdiction over the accreditation,
certification, evaluation or operation of the Facility.
ADDITIONAL BASE RENT ADJUSTMENT DATE: As defined in Section 3.1.
ADDITIONAL CHARGES: As defined in Article 3.
ADDITIONAL LAND: As defined in Section 9.3.
AFFILIATE: With respect to any Person (I) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (II) any other Person that owns, beneficially, directly or
indirectly, twenty-five percent (25%) or more of the outstanding capital stock,
shares or equity interests of such Person or (III) any officer, director,
employee, general partner or trustee of such Person, or any other Person
controlling, controlled by, or under common control with, such Person
(excluding trustees and Persons serving in a fiduciary or similar capacity who
are not otherwise an Affiliate of such Person). For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests.
AFFILIATED PARTY SUBORDINATION AGREEMENT: That certain Affiliated
Party Subordination Agreement of even date by and among Lessee, the Developer,
the Guarantor and Lessor.
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS: That certain Amended
and Restated Agreement Regarding Related Lease Transactions dated as of
November 1, 1996 by and among Lessor and any Related Party that is a party to
any Related Lease, as amended by
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the First Amendment to Amended and Restated Agreement Regarding Related Lease
Transactions of even date by and among Lessee, Lessor and any Related Party
that is a party to any Related Lease. Lessor and Lessee anticipate that the
Agreement Regarding Related Lease Transactions will be further amended from
time to time in connection with future transactions in order to include
Affiliates of Lessor and/or Affiliates of Lessee as parties thereto and to
expand or otherwise modify the definition of "Related Leases" set forth
therein.
AMOUNTS DUE: As defined in Section 16.2(e).
ANNUAL FACILITY UPGRADE EXPENDITURE: The aggregate amount spent on
Upgrade Renovations during any Lease Year.
APPURTENANT AGREEMENTS: Collectively, all instruments, documents and
other agreements that now or hereafter create any utility, access or other
rights or appurtenances benefiting or relating to the Leased Property.
ARCHITECT'S ASSIGNMENT: As defined in the Leasehold Improvement
Agreement.
ARCHITECT'S CONTRACT: As defined in the Leasehold Improvement
Agreement.
ASSIGNMENT AGREEMENT: That certain Assignment Agreement of even date
herewith by and between the Guarantor, Lessor and Seller relating to the Option
Purchase Agreement.
AWARD: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
BALANCED CARE GUARANTY: That certain Guaranty of even date executed
by Guarantor in favor of Lessor, relating to the Lease Obligations.
BASE RENT: The Pre-Conversion Base Rent from the Commencement Date
through the day preceding the Conversion Date and the Post-Conversion Base Rent
from the Conversion Date through the remainder of the Term.
BUSINESS DAY: Any day which is not a Saturday or Sunday or a public
holiday under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which Lessor's depository bank is
located.
CARF: The Commission on Accreditation of Rehabilitation Facilities.
CAPITAL ADDITIONS: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and
material expansions of any of the Leased Improvements which are constructed on
any portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of
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any of the Leased Improvements on the Leased Property in order to provide a
functionally new facility that is needed or used to provide services not
previously offered and any expansion, construction, renovation or conversion or
in order to (I) increase the unit capacity of a Facility, (II) change the
purpose for which such units are utilized and/or (III) change the utilization
of any material portion of any of the Leased Improvements.
CAPITAL ADDITION COST: The cost of any Capital Addition made by Lessee
whether paid for by Lessee or Lessor. Such cost shall include all costs and
expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, Lessor.
CASH COLLATERAL: As defined in the Deposit Pledge Agreement.
CASH FLOW: The Consolidated Net Income (or Consolidated Net Loss)
before federal and state income taxes for any period plus (I) the amount of the
provision for depreciation and amortization actually deducted on the books of
the applicable Person for the purposes of computing such Consolidated Net
Income (or Consolidated Net Loss) for the period involved, plus (II) Rent and
interest on all other Indebtedness which is fully subordinated to the Lease
Obligations, plus (III) any indebtedness which is fully subordinated to the
Lease Obligations pursuant to the Affiliated Party Subordination Agreement.
CASUALTY: As defined in Section 13.1.
CHAMPUS: The Civilian Health and Medical Program of the Uniform
Service, a program of medical benefits covering retirees and dependents of
members or former members of a uniformed service provided, financed and
supervised by the United States Department of Defense and established by 10 USC
Section 1071 et seq.
CHATTEL PAPER: As defined in the UCC.
CLOSING: As defined in Section 18.4.
CODE: The Internal Revenue Code of 1986, as amended.
COLLATERAL: All of the property in which security interests are
granted to Lessor and the other Meditrust Entities pursuant to the Lease
Documents and the Related Party Agreements to secure the Lease Obligations,
including, without limitation, the Cash Collateral and the Receivables.
COMMENCEMENT DATE: As defined in Section 1.2.
COMPLETION DATE: As defined in the Leasehold Improvement Agreement.
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CONDEMNATION: With respect to the Leased Property or any interest
therein or right accruing thereto or use thereof (I) the exercise of any
Governmental Authority, whether by legal proceedings or otherwise, by a
Condemnor or (II) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of Condemnation or Taking or while legal proceedings for
Condemnation or Taking are pending.
CONDEMNOR: Any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
CONSOLIDATED AND CONSOLIDATING: The consolidated and consolidating
accounts of the relevant Person and its Subsidiaries consolidated in accordance
with GAAP.
CONSOLIDATED FINANCIALS: For any fiscal year or other accounting
period for any Person and its consolidated Subsidiaries, statements of earnings
and retained earnings and of changes in financial position for such period and
for the period from the beginning of the respective fiscal year to the end of
such period and the related balance sheet as at the end of such period,
together with the notes thereto, 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, and disclosing all
liabilities of such Person and its consolidated Subsidiaries, including,
without limitation, contingent liabilities.
CONSTRUCTION ASSIGNMENT: As defined in the Leasehold Improvement
Agreement.
CONSTRUCTION CONTRACT: As defined in the Leasehold Improvement
Agreement.
CONSULTANTS: Collectively, the architects, engineers, inspectors,
surveyors and other consultants that are engaged from time to time by Lessor to
perform services for Lessor in connection with this Lease.
CONSUMER PRICE ADJUSTMENT FACTOR: A fraction, the numerator of which
is the Consumer Price Index in effect as of first day of the Lease Year for
which the Annual Facility Upgrade Expenditure increase is being calculated and
the denominator of which is the Consumer Price Index in effect as of the
Commencement Date.
CONSUMER PRICE INDEX: The Consumer Price Index for Urban Wage Earners
and Clerical Workers, All Items-U.S. City Average (1982-84=100), published by
the Bureau of Labor Statistics, U.S. Department of Labor. If the Bureau of
Labor Statistics should cease to publish such Price Index in its present form
and calculated on the present basis, then the most similar index published by
the same Bureau shall be used for the same purpose. If there is no such similar
index, a substitute index which is then generally recognized as being similar
to the Consumer Price Index shall be used, with such substitute index to be
reasonably selected by Lessor.
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CONTRACTS: All agreements (including, without limitation, Provider
Agreements), contracts, (including without limitation, construction contracts,
subcontracts, and architects' contracts,) contract rights, warranties and
representations, franchises, and records and books of account benefiting,
relating to or affecting the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession, or
operation thereof, or the operation of any programs or services in conjunction
with the Leased Property and all renewals, replacement and substitutions
therefor, now or hereafter issued by or entered into with any Governmental
Authority, Accreditation Body or Third Party Payor or maintained or used by any
member of the Leasing Group or entered into by any member of the Leasing Group
with any third Person.
CONVERSION DATE: The earlier to occur of (I) the Completion Date, (II)
the completion of the Project in accordance with the Project Plans and the
Leasehold Improvement Agreement and the issuance by the appropriate
Governmental Authorities of a Certificate of Occupancy (or its equivalent) or
(III) the date that the first resident is admitted to the Facility.
CURRENT ASSETS: All assets of any Person which would, in accordance
with GAAP, be classified as current assets of a Person conducting a business
the same as or similar to that of such Person, excluding however, any and all
advances to or Current Liabilities owed to such Person by its Subsidiaries.
CURRENT LIABILITIES: All liabilities of any Person which would, in
accordance with GAAP, be classified as current liabilities of a Person
conducting a business the same as or similar to that of such Person, including
without limitation, all rental and other payments under leases and fixed
payments of, and sinking fund payments with respect to, Indebtedness required
to be made within one (1) year from the date of determination.
DANVILLE FACILITY: That certain proposed forty-eight (48) unit
personal care home to be constructed in Danville, Pennsylvania.
DANVILLE TRANSACTION: That certain proposed transaction by and between
an Affiliate of Meditrust and an Affiliate of the Guarantor relating to the
Danville Facility.
DANVILLE TRANSACTION DOCUMENTS: the documents that will evidence,
secure and otherwise be given in connection with the Danville transaction.
DATE OF TAKING: The date the Condemnor has the right to possession of
the property being condemned.
DECLARATION: As defined in Article 23.
DEED: As defined in Section 18.4.
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DEPARTMENT OF PUBLIC WELFARE: Commonwealth of Pennsylvania, Department
of Public Welfare.
DEPOSIT PLEDGE AGREEMENT: The pledge and security agreement so
captioned and dated as of even date herewith between Lessee and Lessor.
DEVELOPER: BCC Development and Management Co., a Delaware corporation,
and its successors and assigns.
DEVELOPER GUARANTY: That certain Guaranty of even date executed by the
Developer in favor of Lessor, relating to the Lease Obligations.
DEVELOPER PERMITS ASSIGNMENT: That certain Collateral Assignment of
Permits, Licenses and Contracts of even date granted by the Developer to
Lessor.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section 20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT: The Environmental Indemnity
Agreement of even date herewith by and among Lessee, the Guarantor, the
Developer and Lessor.
ENVIRONMENTAL LAWS: As defined in the Environmental Indemnity
Agreement.
ERISA: The Employment Retirement Income Security Act of 1974, as
amended.
EVENT OF DEFAULT: As defined in Article 16.
EXPIRATION DATE: As defined in Section 1.2.
EXTENSION TERM ADJUSTMENT DATES: During any Extended Terms, the tenth
(10th), and fifteenth (15th) and twentieth (20th) anniversaries of the
Conversion Date.
EXTENDED TERMS: As defined in Section 1.3.
FACILITY: The fully licensed personal care home consisting of ___ units
with ____ beds to be known as __________________________ to be constructed on
the Land (together with related parking and other amenities).
FAILURE TO PERFORM: As defined Article 16.
FAIR MARKET ADDED VALUE: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by Lessee had been
constructed.
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FAIR MARKET VALUE OF THE CAPITAL ADDITION: The amount by which the
Fair Market Value of the Leased Property upon the completion of a particular
Capital Addition exceeds the Fair Market Value of the Leased Property just
prior to the construction of the particular Capital Addition.
FAIR MARKET VALUE OF THE LEASED PROPERTY: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and
all other portions of the Leased Property, and (A) assuming the same is
unencumbered by this Lease, (B) determined in accordance with the appraisal
procedures set forth in Section 18.2 or in such other manner as shall be
mutually acceptable to Lessor and Lessee and (C) not taking into account any
reduction in value resulting from any Lien to which the Leased Property is
subject and which Lien Lessee or Lessor is otherwise required to remove at or
prior to closing of the transaction. However, the positive or negative effect
on the value of the Leased Property attributable to the interest rate,
amortization schedule, maturity date, prepayment provisions and other terms and
conditions of any Lien on the Leased Property which is not so required or
agreed to be removed shall be taken into account in determining the Fair Market
Value of the Leased Property. The Fair Market Value shall be determined as the
overall value based on due consideration of the "income" approach, the
"comparable sales" approach, and the "replacement cost" approach.
FAIR MARKET VALUE OF THE MATERIAL STRUCTURAL WORK: The amount by which
the Fair Market Value of the Leased Property upon the completion of any
particular Material Structural Work exceeds the Fair Market Value of the Leased
Property just prior to the construction of the applicable Material Structural
Work.
FEE MORTGAGE: As defined in Section 20.3.
FEE MORTGAGEE: As defined in Section 20.3.
FINANCING PARTY: Any Person who is or may be participating with Lessor
in any way in connection with the financing of any Capital Addition.
FINANCING STATEMENTS: Uniform Commercial Code financing statements
evidencing the security interests granted to Lessor in connection with the
Lease Documents.
FISCAL QUARTER: Each of the three (3) month periods commencing on July
1st, October 1st, January 1st and April 1st.
FISCAL YEAR: The twelve (12) month period from July 1st to June 30th.
FIXTURES: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
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GENERAL INTANGIBLES: As defined in the UCC.
GOVERNMENTAL AUTHORITIES: Collectively, all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures, and
offices of any nature whatsoever of any government, quasi-government unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise and whether now or hereinafter in existence.
GUARANTOR: Balanced Care Corporation, a Delaware corporation, and its
successors and assigns.
GUARANTIES: Collectively, the Balanced Care Guaranty and the Developer
Guaranty.
HAZARDOUS SUBSTANCES: As defined in the Environmental Indemnity
Agreement.
IMPOSITIONS: Collectively, all taxes (including, without limitation,
all capital stock and franchise taxes of Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), ground
rents, water and sewer rents, water charges or other rents and charges,
excises, tax levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), transfer taxes and recordation
taxes imposed as a result of the conveyance of the Land to Lessor (and/or any
conveyance of the Leased Property to Lessee pursuant to the terms of this
Lease), this Lease or any extensions hereof, 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 either or both of the
Leased Property and the Rent (including all interest and penalties thereon due
to any failure in payment by Lessee), which at any time prior to, during or in
respect of the Term hereof and thereafter until the Leased Property is
surrendered to Lessor as required by the terms of this Lease, may be assessed
or imposed on or in respect of or be a Lien upon (A) Lessor or Lessor's
interest in the Leased Property, (B) the Leased Property or any rent therefrom
or any estate, right, title or interest therein, or (C) any occupancy,
operation, use or possession of, sales from, or activity conducted on, or in
connection with, the Leased Property or the leasing or use of the Leased
Property. Notwithstanding the foregoing, nothing contained in this Lease shall
be construed to require Lessee to pay (1) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or
any other Person, except Lessee or its successors, (2) any net revenue tax of
Lessor or any other Person, except Lessee and its successors, (3) any tax
imposed with respect to the sale, exchange or other disposition by Lessor of
the Leased Property or the proceeds thereof, or (4) except as expressly
provided elsewhere in this Lease, any principal or interest on any Encumbrance
on the Leased Property; provided, however, the provisos set forth in clauses
(1) and (2) of this sentence shall not be applicable to the extent that any
tax, assessment, tax levy or charge which Lessee is obligated to pay pursuant
to the first sentence of this definition and which is
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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 (1) or (2) is
levied, assessed or imposed expressly in lieu thereof. In computing the amount
of any franchise tax or capital stock tax which may be or become an Imposition,
the amount payable by Lessee shall be equitably apportioned based upon all
properties owned by Lessor that are located within the particular jurisdiction
subject to any such tax.
INDEBTEDNESS: The total of all obligations of a Person, whether
current or long-term, which in accordance with GAAP would be included as
liabilities upon such Person's balance sheet at the date as of which
Indebtedness is to be determined, and shall also include (I) all capital lease
obligations and (II) all guarantees, endorsements (other than for collection of
instruments in the ordinary course of business), or other arrangements whereby
responsibility is assumed for the obligations of others, whether by agreement
to purchase or otherwise acquire the obligations of others, including any
agreement contingent or otherwise to furnish funds through the purchase of
goods, supplies or services for the purpose of payment of the obligations of
others.
INDEMNIFIED PARTIES: As defined in Section 12.2.
INDEX: The rate of interest of actively traded marketable United
States Treasury Securities bearing a fixed rate of interest adjusted for a
constant maturity of ten (10) years as calculated by the Federal Reserve Board.
INITIAL TERM: As defined in Section 1.2.
INSTRUMENTS: As defined in the UCC.
INSURANCE REQUIREMENTS: All terms of any insurance policy required by
this Lease, all requirements of the issuer of any such policy with respect to
the Leased Property and the activities conducted thereon and the requirements
of any insurance board, association or organization or underwriters'
regulations pertaining to the Leased Property.
JCAHO: The Joint Commission on Accreditation of Healthcare
Organizations.
LAND: As defined in Article 1.
LEASE: As defined in the preamble of this Lease.
LEASE DEFAULT: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace periods under this Lease
and/or any of the other Lease Documents.
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LEASE DOCUMENTS: Collectively, this Lease, the Guaranties, the
Security Agreement, the Deposit Pledge Agreement, the Pledge Agreement, the
Leasehold Improvement Agreement, the Agreement Regarding Related Lease
Transactions, the Permits Assignments, the Financing Statements, the Affiliated
Party Subordination Agreement, the Environmental Indemnity Agreement, the
Warrant, the Construction Assignment, the Architect's Assignment, the
Assignment Agreement and any and all other instruments, documents, certificates
or agreements now or hereafter (I) executed or furnished by any member of the
Leasing Group in connection with the transactions evidenced by this Lease
and/or any of the foregoing documents and/or (II) evidencing or securing any of
Lessee's obligations relating to the Leased Property, including, without
limitation, Lessee's obligations hereunder and/or under the Leasehold
Improvement Agreement.
LEASEHOLD IMPROVEMENT AGREEMENT: That certain Leasehold Improvement
Agreement of even date herewith by and between Lessor and Lessee.
LEASE OBLIGATIONS: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than Lessor's
obligations) under this Lease and the other Lease Documents.
LEASE YEAR: Each twelve-month period during the Term commencing on the
Conversion Date and any anniversary of the Conversion Date.
LEASED IMPROVEMENTS: As defined in Article 1.
LEASED PROPERTY: As defined in Article 1.
LEASING GROUP: Collectively, Lessee, the Guarantor, the Developer, any
Sublessee and any Manager.
LEGAL REQUIREMENTS: Collectively, all statutes, ordinances, by-laws,
codes, rules, regulations, restrictions, orders, judgments, decrees and
injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision, and other land use and personal care licensing
statutes, ordinances, by-laws, codes, rules and regulations), whether now or
hereafter enacted, promulgated or issued by any Governmental Authority,
Accreditation Body or Third Party Payor affecting Lessor, any member of the
Leasing Group or the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession or
operation thereof or the operation of any programs or services in connection
with the Leased Property, including, without limitation, any of the foregoing
which may (I) require repairs, modifications or alterations in or to the Leased
Property, (II) in any way affect (adversely or otherwise) the use and enjoyment
of the Leased Property or (III) require the assessment, monitoring, clean-up,
containment, removal, remediation or other treatment of any Hazardous
Substances on, under or from the Leased Property. Without limiting the
foregoing, the term Legal Requirements includes all Environmental Laws and
shall also include all Permits and Contracts issued or entered into
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by any Governmental Authority, any Accreditation Body and/or any Third Party
Payor and all Permitted Encumbrances.
LESSEE: As defined in the preamble of this Lease and its successors
and assigns.
LESSEE PERMITS ASSIGNMENT: That certain Collateral Assignment of
Permits, Licenses and Contracts of even date granted by Lessee to Lessor.
LESSEE'S ELECTION NOTICE: As defined in Section 14.3.
LESSEE'S PURCHASE OPTION NOTICE: As defined in Section 18.4.
LESSOR: As defined in the preamble of this Lease and its successors
and assigns.
LIEN: With respect to any real or personal property, any mortgage,
easement, restriction, lien, pledge, collateral assignment, hypothecation,
charge, security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not choate, vested or perfected.
LIMITED PARTIES: As defined in Section 11.5; provided, however, in no
event shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate of any member of the Leasing Group.
MANAGED CARE PLANS: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement, whether written or oral, between
Lessee or any Sublessee and any other Person pursuant to which Lessee or such
Sublessee provides any payment, fee or other consideration to any other Person
to operate or manage the Facility.
MANAGER: Any Person who has entered into a Management Agreement with
Lessee or any Sublessee.
MATERIAL STRUCTURAL WORK: Any (I) structural alteration, (II)
structural repair or (III) structural renovation to the Leased Property that
would require (A) the design and/or involvement of a structural engineer and/or
architect and/or (B) the issuance of a Permit.
MAXIMUM RENT ADJUSTMENT. As defined in Section 3.1.
MEDICAID: The medical assistance program established by Title XIX of
the Social Security Act (42 USC ss.ss.1396 et seq.) and any statute succeeding
thereto.
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MEDICARE: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.ss.1395 et
seq.) and any statute succeeding thereto.
MEDITRUST: As defined in Article 23.
MEDITRUST ENTITIES: Collectively, Meditrust, Lessor and any other
Affiliate of Lessor which may now or hereafter be a party to any Related Party
Agreement.
MEDITRUST INVESTMENT: The sum of (I) the Original Meditrust Investment
plus (II) the aggregate amount advanced under the Leasehold Improvement
Agreement plus (III) the aggregate amount of all Subsequent Investments.
MONTHLY DEPOSIT DATE: As defined in Section 4.6.
NET INCOME (OR NET LOSS): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
OBLIGATIONS: Collectively, the Lease Obligations and the Related Party
Obligations.
OFFICER'S CERTIFICATE: A certificate of Lessee signed on behalf of
Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of Lessee, or another officer authorized to so sign
by the Board of Directors or By-Laws of Lessee, or any other Person whose power
and authority to act has been authorized by delegation in writing by any of the
Persons holding the foregoing offices.
OPTION PURCHASE AGREEMENT: That certain Real Estate Purchase Option
Agreement, dated as of June 26, 1996 between the Seller and the Guarantor, as
affected by the Assignment Agreement.
OPTION PURCHASE DOCUMENTS: Collectively, the Option Purchase Agreement
and all other documents and instruments now or hereafter executed and/or
delivered in connection therewith or pursuant thereto.
ORIGINAL MEDITRUST INVESTMENT: ______________________________ DOLLARS
___________________.
OVERDUE RATE: On any date, a rate of interest per annum equal to the
greater of: (I) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (II) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than
the maximum rate then permitted under applicable law to be charged by Lessor.
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PBGC: Pension Benefit Guaranty Corporation.
PERMITS: Collectively, all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, agreements, contracts, contract rights,
franchises, interim licenses, permits and other authorizations of every nature
whatsoever required by, or issued under, applicable Legal Requirements
benefiting, relating or affecting the Leased Property or the construction,
development, maintenance, management, use or operation thereof, or the
operation of any programs or services in conjunction with the Leased Property
and all renewals, replacements and substitutions therefor, now or hereafter
required or issued by any Governmental Authority, Accreditation Body or Third
Party Payor to any member of the Leasing Group, or maintained or used by any
member of the Leasing Group, or entered into by any member of the Leasing Group
with any third Person.
PERMITS ASSIGNMENTS: Collectively, the Lessee Permits Assignment and
the Developer Permits Assignment.
PERMITTED ENCUMBRANCES: As defined in Section 10.1.
PERMITTED PRIOR SECURITY INTERESTS: As defined in Section 6.1.
PERSON: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
PLANS AND SPECIFICATIONS: As defined in Section 13.1.
PLEDGE AGREEMENT: The Pledge Agreement of even date by and between the
Guarantor, Lessee and Lessor.
POST-CONVERSION BASE RENT: As defined in Section 3.1.
PRE-CONVERSION BASE RENT: As defined in Section 3.1.
PRE-CONVERSION RENT ADJUSTMENT RATE: Two Hundred (200) basis points
over the Prime Rate.
PRIMARY INTENDED USE: The use of the Facility as a personal care home
consisting of _____________ licensed units with _______________ beds or such
additional number of units and/or beds as may hereafter be permitted under this
Lease, and such ancillary uses as are permitted by law and may be necessary in
connection therewith or incidental thereto.
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PRIME RATE: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by Lessor.
PRINCIPAL PLACE OF BUSINESS: As defined in Section 10.1.
PROCEEDS: As defined in the UCC.
PROJECT: As defined under the Leasehold Improvement Agreement.
PROJECT FUNDS: As defined under the Leasehold Improvement Agreement.
PROJECT PLANS: As defined under the Leasehold Improvement Agreement.
PROVIDER AGREEMENTS: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of Lessee
or any Sublessee in connection with the operation of the Facility relating to
any right of payment or other claim arising out of or in connection with
Lessee's or such Sublessee's participation in any Third Party Payor Program.
PURCHASE OPTION: As defined in Section 18.4.
PURCHASE OPTION DATE: As defined in Section 18.4.
PURCHASE PRICE: As defined in Section 18.4.
PURCHASER: As defined in Section 11.5.
RECEIVABLES: Collectively, all (I) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (II) rights to payment for
goods sold or leased or services rendered by Lessee or any other party, whether
now in existence or arising from time to time hereafter and whether or not yet
earned by performance, including, without limitation, obligations evidenced by
an account, note, contract, security agreement, chattel paper, or other
evidence of indebtedness.
REFERENCE BANK: Fleet Bank of Connecticut, N.A.
RELATED LEASES: As defined under the Agreement Regarding Related Lease
Transactions.
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RELATED PARTIES: Collectively, each Person that may now or hereafter
be a party to any Related Party Agreement other than the Meditrust Entities.
RELATED PARTY AGREEMENT: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation.
RELATED PARTY DEFAULT: The occurrence of a default or breach of
condition continuing beyond the expiration of any applicable notice and grace
periods, if any, under the terms of any Related Party Agreement.
RELATED PARTY OBLIGATIONS: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, Lessor or any of the other Meditrust Entities by Lessee or any
other member of the Leasing Group or any of their respective Affiliates;
whether such indebtedness, covenants, liabilities, obligations, agreements
and/or undertakings are direct or indirect, absolute or contingent, liquidated
or unliquidated, due or to become due, joint, several or joint and several,
primary or secondary, now existing or hereafter arising, including, without
limitation, the obligations under the Related Leases and those obligations set
forth on EXHIBIT K but specifically excluding all of the indebtedness,
covenants, liabilities, agreements and obligations of the Guarantor and any of
its Affiliates to Meditrust and any of its Affiliates under the Danville
Transaction Documents, provided that nothing set forth herein shall obligate
any party to enter into any of the Danville Transaction Documents.
RENT: Collectively, the Base Rent, the Additional Charges and all
other sums payable under this Lease and the other Lease Documents.
RENT ADJUSTMENT DATE: The Conversion Date and each Extension Term
Adjustment Date during the Term of the Lease, including, without limitation,
any Extended Terms.
RENT ADJUSTMENT RATE: Three hundred seventy-five (375) basis points
over the Index.
RENT COVERAGE RATIO: The ratio of (I) Cash Flow for each applicable
period to (II) the total of all Base Rent payable during the initial Lease Year
or accrued for such period.
RENT INSURANCE PROCEEDS: As defined in Section 13.8.
RENT SHORTFALL: As defined in Section 3.1.
RENT SURPLUS: As defined in Section 3.1.
RESIDENCE AGREEMENTS: All contracts, agreements and consents executed
by or on behalf of any resident or other Person seeking services at the
Facility, including, without limitation, assignments of benefits and
guarantees.
RETAINAGE: As defined in Section 13.1.
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SECURITY AGREEMENT: The Security Agreement as of even date herewith
between Lessee and Lessor.
SELLER: ____________________
STATE: The state or commonwealth in which the Leased Property is
located.
STATED AMOUNT: As defined in the Deposit Pledge Agreement.
SUBLEASE: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements, room rentals, rentals of
other facilities of the Leased Property and all other occupancy agreements of
every kind and nature, whether oral or in writing, now in existence or
subsequently entered into by Lessee, encumbering or affecting the Leased
Property.
SUBLESSEE: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but specifically excluding any resident of
the Facility under any of the Residence Agreements.
SUBSEQUENT INVESTMENTS: The aggregate amount of all sums expended and
liabilities incurred by Lessor in connection with Capital Additions.
SUBSIDIARY OR SUBSIDIARIES: With respect to any Person, any
corporation or other entity of which such Person, directly, or indirectly,
through another entity or otherwise, owns, or has the right to control or
direct the voting of, fifty percent (50%) or more of the outstanding capital
stock or other ownership interest having general voting power (under ordinary
circumstances).
TAKING: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
TANGIBLE NET WORTH: An amount determined in accordance with GAAP equal
to the total assets of any Person, excluding the total intangible assets of
such Person, minus the total liabilities of such Person. Total intangible
assets shall be deemed to include, but shall not be limited to, the excess of
cost over book value of acquired businesses accounted for by the purchase
method, formulae, trademarks, trade names, patents, patent rights and deferred
expenses (including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
TANGIBLE PERSONAL PROPERTY: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and
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other personal property owned or leased (pursuant to equipment leases) by
Lessee and used in connection with the operation of the Leased Property.
TERM: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
THIRD PARTY PAYOR PROGRAMS: Collectively, all third party payor
programs in which Lessee or any Sublessee 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 plans and
employee assistance programs.
THIRD PARTY PAYORS: Collectively, Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which presently or in
the future maintains Third Party Payor Programs.
TIME OF CLOSING: As defined in Section 18.4.
UCC: The Uniform Commercial Code as in effect from time to time in
the Commonwealth of Massachusetts.
UNAVOIDABLE DELAYS: Delays due to strikes, lockouts, inability to
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto.
UNITED STATES TREASURY SECURITIES: The uninsured treasury securities
issued by the United States Federal Reserve Bank.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: As used anywhere in this
Lease, the term "Unsuitable For Its Primary Intended Use" shall mean that, by
reason of Casualty, or a partial or temporary Taking by Condemnation, in the
good faith judgment of Lessor, the Facility cannot be operated on a
commercially practicable basis for the Primary Intended Use, taking into
account, among other relevant factors, the number of usable units affected by
such Casualty or partial or temporary Taking.
UPGRADE RENOVATIONS: Collectively, repairs and refurbishing made to
the Leased Property, other than normal janitorial, cleaning and maintenance
activities.
WARRANT: Warrant of even date issued by the Guarantor to Lessor to
purchase ______________ shares of capital stock of the Guarantor.
WORK: As defined in Section 13.1.
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WORK CERTIFICATES: As defined in Section 13.1.
2.2 RULES OF CONSTRUCTION. The following rules of construction shall
apply to the Lease and each of the other Lease Documents: (A) references to
"herein", "hereof" and "hereunder" shall be deemed to refer to this Lease or
the other applicable Lease Document, and shall not be limited to the particular
text or section or subsection in which such words appear; (B) the use of any
gender shall include all genders and the singular number shall include the
plural and vice versa as the context may require; (C) references to Lessor's
attorneys shall be deemed to include, without limitation, special counsel and
local counsel for Lessor; (D) reference to attorneys' fees and expenses shall
be deemed to include all costs for administrative, paralegal and other support
staff; (E) references to Leased Property shall be deemed to include references
to all of the Leased Property and references to any portion thereof; (F)
references to the Lease Obligations shall be deemed to include references to
all of the Lease Obligations and references to any portion thereof; (G)
references to the Obligations shall be deemed to include references to all of
the Obligations and references to any portion thereof; (H) the term
"including", when following any general statement, will not be construed to
limit such statement to the specific items or matters as provided immediately
following the term "including" (whether or not non-limiting language such as
"without limitation" or "but not limited to" or words of similar import are
also used), but rather will be deemed to refer to all of the items or matters
that could reasonably fall within the broadest scope of the general statement;
(I) any requirement that financial statements be Consolidated in form shall
apply only to such financial statements as relate to a period during any
portion of which the relevant Person has one or more Subsidiaries; (J) all
accounting terms not specifically defined in the Lease Documents shall be
construed in accordance with GAAP; and (K) all exhibits annexed to any of the
Lease Documents as referenced therein shall be deemed incorporated in such
Lease Document by such annexation and/or reference.
ARTICLE 3
RENT
3.1 BASE RENT FOR LAND, LEASED IMPROVEMENTS, RELATED RIGHTS AND
FIXTURES. Lessee will pay to Lessor, in lawful money of the United States of
America, at Lessor's address set forth herein or at such other place or to such
other Person as Lessor from time to time may designate in writing, rent for the
Leased Property, as follows.
(A) PRE-CONVERSION BASE RENT: From and after the Commencement
Date and until the Conversion Date, Lessee shall pay, commencing on
September 1, 1996, and on the first day of each calendar month
thereafter, as well as on the Conversion Date, a base rent (the
"Pre-Conversion Base Rent") in arrears that is equal to the product of
(I) the Meditrust Investment from time to time outstanding multiplied
by (II) the Pre-Conversion Rent Adjustment Rate in effect from time to
time, calculated on a daily basis.
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(B) POST-CONVERSION BASE RENT: From and after the Conversion
Date, Lessee shall pay a base rent (the "Post-Conversion Base Rent")
per annum that is equal to the product of (I) the Meditrust Investment
multiplied by (II) the Rent Adjustment Rate in effect on the
Conversion Date, payable in advance in equal, consecutive monthly
installments due on the first day of each calendar month; provided,
however, that on each Rent Adjustment Date, the Base Rent shall be
adjusted to equal the greater of (A) the then current Post-Conversion
Base Rent (before any adjustment for such year pursuant to Section
3.1(c)) or (B) an amount equal to the Meditrust Investment multiplied
by the Rent Adjustment Rate then in effect on such subsequent Rent
Adjustment Date and further, provided, however, that on the Conversion
Date, Lessee shall pay to Lessor the proportionate share of the
Post-Conversion Base Rent due for the period from (and including) the
Conversion Date through the end of the calendar month during which the
Conversion Date occurred.
(C) ANNUAL POST-CONVERSION BASE RENT ADJUSTMENTS: Commencing
on the first anniversary of the Conversion Date and on each
anniversary of the Conversion Date thereafter during the Term (each
such date shall be referred to herein as an "Additional Base Rent
Adjustment Date"), the Post-Conversion Base Rent shall be increased so
as to equal the lesser of (I) the Maximum Rent Adjustment, or (II) an
amount determined by multiplying the Post-Conversation Base Rent then
in effect (as adjusted pursuant to this paragraph and Section 3.1(b))
times a fraction, the numerator of which shall be the Consumer Price
Index on the applicable Additional Base Rent Adjustment Date and the
denominator of which shall be the Consumer Price Index on the
preceding Additional Base Rent Adjustment Date (or on the Conversation
Date in the case of the First Additional Base Rent Adjustment Date).
If, for any Lease Year, the Post-Conversion Base Rent is
adjusted in accordance with clause (ii) above, then the difference
between the Post-Conversion Base Rent for such Lease Year, and the
Post-Conversion Base Rent for such Lease Year if adjusted in
accordance with clause (i) above shall be referred to herein as the
"Rent Shortfall." If, for any Lease Year, the Post-Conversion Base
Rent is adjusted in accordance with clause (i), then the difference
between the Post-Conversion Base Rent for such Lease Year and the
Post-Conversion Base Rent for such Lease Year if adjusted in
accordance with clause (ii), shall be referred to herein in as the
"Rent Surplus".
In the event there is a Rent Shortfall for any Lease Year,
the Lessee shall also pay to the Lessor, as part of the
Post-Conversion Base Rent due hereunder, an amount equal to such Rent
Shortfall, plus any Rent Shortfall in any previous Lease Years, up to
an amount equal to the aggregate Rent Surplus, if any, for the then
current Lease Year, less any prior payments on account of a Rent
Shortfall.
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As used herein, the Maximum Rent Adjustment shall be the
Post-Conversion Base Rent in any applicable year, which would result
solely by multiplying, in each year, on the Additional Base Rent
Adjustment Date, the prior year's Post-Conversion Base Rent (as
adjusted pursuant to this paragraph and Section 3.1(b)) by 1.02%.
Until the Consumer Price Index is established, Lessee shall
pay the Post-Conversion Base Rent calculated in accordance with clause
(i) above, and once the Consumer Price Index for the Additional Base
Rent Adjustment Date of such Lease Year is published, the new
Post-Conversion Base Rent (as adjusted) shall be effective
retroactively as of the Additional Rent Base Adjustment Date with the
remaining payments to be adjusted ratably.
(D) Except as otherwise expressly provided in Section 3.1(a)
and (b) above, the Base Rent (as it may be adjusted) shall be paid
monthly in advance in equal, consecutive monthly installments on the
first day of each calendar month.
3.2 [INTENTIONALLY DELETED].
3.3 [INTENTIONALLY DELETED].
3.4 ADDITIONAL CHARGES. Subject to the rights to contest as set forth
in Article 15, in addition to the Base Rent, (A) Lessee will also pay and
discharge as and when due and payable all Impositions, all amounts, liabilities
and obligations under the Appurtenant Agreements due from or payable by the
owner of the Leased Property, all amounts, liabilities and obligations under
the Permitted Encumbrances due from or payable by the owner of the Leased
Property and all other amounts, liabilities and obligations which Lessee
assumes or agrees to pay under this Lease, and (B) in the event of any failure
on the part of Lessee to pay any of those items referred to in clause (a)
above, Lessee will also promptly pay and discharge every fine, penalty,
interest and cost which may be added for non-payment or late payment of such
items (the items referred to in clauses (a) and (b) above being referred to
herein collectively as the "Additional Charges"), and Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided in this
Lease, by statute or otherwise, in the case of non-payment of the Additional
Charges, as well as the Base Rent. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to any other
Person to which such Additional Charges would otherwise be due.
3.5 [INTENTIONALLY DELETED].
3.6 NET LEASE. The Rent shall be paid absolutely net to Lessor, so
that this Lease shall yield to Lessor the full amount of the installments of
Base Rent, and the payments of Additional Charges throughout the Term.
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3.7 NO LESSEE TERMINATION OR OFFSET.
3.7.1 NO TERMINATION. Except as may be otherwise specifically
and expressly provided in this Lease, Lessee, to the extent not
prohibited by applicable law, shall remain bound by this Lease in
accordance with its terms and shall neither take any action without
the consent of Lessor to modify, surrender or terminate the same, nor
seek nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent, nor shall the
respective obligations of Lessor and Lessee be otherwise affected by
reason of (A) any Casualty or any Taking of the Leased Property, (B)
the lawful or unlawful prohibition of, or restriction upon, Lessee's
use of the Leased Property or the interference with such use by any
Person (other than Lessor, except to the extent permitted hereunder)
or by reason of eviction by paramount title; (C) any claim that Lessee
has or might have against Lessor, (D) any default or breach of any
warranty by Lessor or any of the other Meditrust Entities under this
Lease, any other Lease Document or any Related Party Agreement, (E)
any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting
Lessor or any assignee or transferee of Lessor or (F) any other cause
whether similar or dissimilar to any of the foregoing, other than a
discharge of Lessee from any of the Lease Obligations as a matter of
law. Notwithstanding the foregoing, any amounts collected by Lessor
under any title insurance policies insuring Lessor's interest in the
Leased Property (less any costs and expenses incurred by Lessor in
collecting the same) shall be credited against the Lease Obligations.
3.7.2 WAIVER. Lessee to the fullest extent not prohibited by
applicable law, hereby specifically 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 Lease or
quit or surrender the Leased Property or (B) entitle Lessee to any
abatement, reduction, suspension or deferment of the Rent or other
sums payable by Lessee hereunder, except as otherwise specifically and
expressly provided in this Lease.
3.7.3 INDEPENDENT COVENANTS. The obligations of Lessor and
Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Lessee hereunder
shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of
this Lease or (except in those instances where the obligation to pay
expressly survives the termination of this Lease) by termination of
this Lease other than by reason of an Event of Default.
3.8 ABATEMENT OF RENT LIMITED. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3, the Base
Rent shall be abated as follows: (A) in the case of such a partial Taking, the
Meditrust Investment shall be reduced for the
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purposes of calculating Base Rent pursuant to Section 3.1 by subtracting
therefrom, as applicable, the net amount of the Award received by Lessor, and
(B) in the case of such a temporary Taking, by reducing the Base Rent for the
period of such a temporary Taking, by the net amount of the Award received by
Lessor.
For the purposes of this Section 3.8, the "net amount of the Award
received by Lessor" shall mean the Award paid to Lessor on account of such
Taking, minus all costs and expenses incurred by Lessor in connection
therewith, and minus any amounts paid to or for the account of Lessee to
reimburse for the costs and expenses of reconstructing the Facility following
such Taking in order to create a viable and functional Facility under all of
the circumstances.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 PAYMENT OF IMPOSITIONS.
4.1.1 LESSEE TO PAY. Subject to the provisions of Article 15,
Lessee will pay or cause to be paid all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments
to be made directly to the taxing authority where feasible, and Lessee
will promptly furnish Lessor copies of official receipts or other
satisfactory proof evidencing payment not later than the last day on
which the same may be paid without penalty or interest. Subject to the
provisions of Article 15 and Section 4.1.2, Lessee's obligation to pay
such Impositions shall be deemed absolutely fixed upon the date such
Impositions become a lien upon the Leased Property or any part
thereof.
4.1.2 INSTALLMENT ELECTIONS. 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), Lessee 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, shall pay such installments during
the Term hereof (subject to Lessee's right to contest pursuant to the
provisions of Section 4.1.5 below) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be
added thereto.
4.1.3 RETURNS AND REPORTS. Lessor, at its expense, shall, to
the extent permitted by applicable law, prepare and file all tax
returns and reports as may be required by Governmental Authorities in
respect of Lessor's net income, gross receipts, franchise taxes and
taxes on its capital stock, and Lessee, at its expense, shall, to the
extent 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
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Governmental Authorities. Lessor and Lessee shall, upon request of the
other, provide such data as is maintained by the party to whom the
request is made with respect to the Leased Property as may be
necessary to prepare any required returns and reports. In the event
that any Governmental Authority classifies any property covered by
this Lease as personal property, Lessee shall file all personal
property tax returns in such jurisdictions where it may legally so
file. Lessor, to the extent it possesses the same, and Lessee, to the
extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing
returns for any portion of Leased Property so classified as personal
property. Where Lessor is legally required to file personal property
tax returns, if Lessee notifies Lessor of the obligation to do so in
each year at least thirty (30) days prior to the date any protest must
be filed, Lessee will be provided with copies of assessment notices so
as to enable Lessee to file a protest.
4.1.4 REFUNDS. If no Lease Default shall have occurred and be
continuing, any refund due from any taxing authority in respect of any
Imposition paid by Lessee shall be paid over to or retained by Lessee.
If a Lease Default shall have occurred and be continuing, at Lessor's
option, such funds shall be paid over to Lessor and/or retained by
Lessor and applied toward the Obligations in accordance with the Lease
Documents and/or the Related Party Agreements.
4.1.5 PROTEST. Upon giving notice to Lessor, at Lessee's
option and sole cost and expense, and subject to compliance with the
provisions of Article 15, Lessee may contest, protest, appeal, or
institute such other proceedings as Lessee may deem appropriate to
effect a reduction of any Imposition and Lessor, at Lessee's cost and
expense as aforesaid, shall fully cooperate in a reasonable manner
with Lessee in connection with such protest, appeal or other action.
4.2 NOTICE OF IMPOSITIONS. Lessor shall give prompt notice to Lessee
of all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, but Lessor's failure to give any such notice shall in no way
diminish Lessee's obligations hereunder to pay such Impositions.
4.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between Lessor and Lessee, whether or not such
Impositions are imposed before or after such expiration or termination, and
Lessee's obligation to pay its prorated share thereof shall survive such
expiration or termination.
4.4 UTILITY CHARGES. Lessee will pay or cause to be paid all charges
for electricity, power, gas, oil, water, telephone and other utilities used in
the Leased Property during the Term and thereafter until Lessee surrenders the
Leased Property in the manner required by this Lease.
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4.5 INSURANCE PREMIUMS. Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and Lessee shall furnish Lessor with evidence satisfactory
to Lessor that all such premiums have been so paid prior to the commencement of
the Term and thereafter at least thirty (30) days prior to the due date of each
premium which thereafter becomes due. Notwithstanding the foregoing, Lessee may
pay such insurance premiums to the insurer in monthly installments so long as
the applicable insurer is contractually obligated to give Lessor not less than
a sixty (60) days notice of non-payment and so long as no Lease Default has
occurred and is continuing. In the event of the failure of Lessee either to
comply with the insurance requirements in Article 12, or to pay the premiums
for such insurance, or to deliver such policies or certificates thereof to
Lessor at the times required hereunder, Lessor shall be entitled, but shall
have no obligation, to effect such insurance and pay the premiums therefor,
which premiums shall be a demand obligation of Lessee to Lessor.
4.6 DEPOSITS.
4.6.1 LESSOR'S OPTION. Upon a Lease Default, or an event
which, with the giving of notice or passage of time, and/or both,
would constitute a Lease Default, at the option of Lessor, which may
be exercised at any time thereafter, Lessee shall, upon written
request of Lessor, on the first day of the calendar month immediately
following such request, and on the first day of each calendar month
thereafter during the Term (each of which dates is referred to as a
"Monthly Deposit Date"), pay to and deposit with Lessor a sum equal to
one-twelfth (1/12th) of the Impositions to be levied, charged, filed,
assessed or imposed upon or against the Leased Property within one (1)
year after said Monthly Deposit Date and a sum equal to one-twelfth
(1/12th) of the premiums for the insurance policies required pursuant
to Article 12 which are payable within one (1) year after said Monthly
Deposit Date. If the amount of the Impositions to be levied, charged,
assessed or imposed or insurance premiums to be paid within the
ensuing one (1) year period shall not be fixed upon any Monthly
Deposit Date, such amount for the purpose of computing the deposit to
be made by Lessee hereunder shall be estimated by Lessor with an
appropriate adjustment to be promptly made between Lessor and Lessee
as soon as such amount becomes determinable. In addition, Lessor may,
at its option, from time to time require that any particular deposit
be greater than one-twelfth (1/12th) of the estimated amount payable
within one (1) year after said Monthly Deposit Date, if such
additional deposit is required in order to provide to Lessor a
sufficient fund from which to make payment of all Impositions on or
before the next due date of any installment thereof, or to make
payment of any required insurance premiums not later than the due date
thereof.
4.6.2 USE OF DEPOSITS. The sums deposited by Lessee under
this Section 4.6 shall be held by Lessor and shall be applied in
payment of the Impositions or
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insurance premiums, as the case may be, when due. Any such deposits
may be commingled with other assets of Lessor, and shall be deposited
by Lessor at such bank as Lessor may, from time to time select. Lessor
may, at its election from time to time exercised, invest all or part
of such deposits in one or more of the investment vehicles described
on EXHIBIT A to the Deposit Pledge Agreement. Lessor shall not be
liable to Lessee or any other Person (A) based on Lessor's (or such
bank's) choice of investment vehicles, (B) for any consequent loss of
principal or interest or (C) for any unavailability of funds based on
such choice of investment. Furthermore, Lessor shall bear no
responsibility for the financial condition of, nor any act or omission
by, Lessor's depository bank. The income from such investment or
interest on such deposit shall be paid to Lessee on a semi-annual
basis as long as no Lease Default has occurred and is then continuing,
and as long as no fact or circumstance exists which, with the giving
of notice and/or the passage of time, would constitute a Lease
Default. Lessee shall give not less than ten (10) days prior written
notice to Lessor in each instance when an Imposition or insurance
premium is due, specifying the Imposition or premium to be paid and
the amount thereof, the place of payment, and the last day on which
the same may be paid in order to comply with the requirements of this
Lease. If Lessor, in violation of its obligations under this Lease,
does not pay any Imposition or insurance premium when due, for which a
sufficient deposit exists, Lessee shall not be in default hereunder by
virtue of the failure of Lessor to pay such Imposition or such
insurance premium and Lessor shall pay any interest or fine assessed
by virtue of Lessor's failure to pay such Imposition or insurance
premium.
4.6.3 DEFICITS. If for any reason any deposit held by Lessor
under this Section 4.6 shall not be sufficient to pay an Imposition or
insurance premium within the time specified therefor in this Lease,
then, within ten (10) days after demand by Lessor, Lessee shall
deposit an additional amount with Lessor, increasing the deposit held
by Lessor so that Lessor holds sufficient funds to pay such Imposition
or premium in full (or in installments as otherwise provided for
herein), together with any penalty or interest due thereon. Lessor may
change its estimate of any Imposition or insurance premium for any
period on the basis of a change in an assessment or tax rate or on the
basis of a prior miscalculation or for any other good faith reason; in
which event, within ten (10) days after demand by Lessor, Lessee shall
deposit with Lessor the amount in excess of the sums previously
deposited with Lessor for the applicable period which would
theretofore have been payable under the revised estimate.
4.6.4 OTHER PROPERTIES. If any Imposition shall be levied,
charged, filed, assessed, or imposed upon or against the Leased
Property, and if such Imposition shall also be a levy, charge,
assessment, or imposition upon or for any other real or personal
property that does not constitute a part of the Leased Property, then
the computation of the amounts to be deposited under this Section 4.6
shall be based upon
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the entire amount of such Imposition and Lessee shall not have the
right to apportion any deposit with respect to such Imposition.
4.6.5 TRANSFERS. In connection with any assignment of
Lessor's interest under this Lease, the original Lessor named herein
and each successor in interest shall have the right to transfer all
amounts deposited pursuant to the provisions of this Section 4.6 and
still in its possession to such assignee (as the subsequent holder of
Lessor's interest in this Lease) and upon such transfer and delivery
of notice thereof to Lessee, the original Lessor named herein or the
applicable successor in interest transferring the deposits shall
thereupon be completely released from all liability with respect to
such deposits so transferred and Lessee shall look solely to said
assignee, as the subsequent holder of Lessor's interest under this
Lease, in reference thereto.
4.6.6 SECURITY. All amounts deposited with Lessor pursuant to
the provisions of this Section 4.6 shall be held by Lessor as
additional security for the payment and performance of the Obligations
and, upon the occurrence of any Lease Default, Lessor may, in its sole
and absolute discretion, apply said amounts towards payment or
performance of such Obligations.
4.6.7 RETURN. Upon the expiration or earlier termination of
this Lease, provided, that, all of the Lease Obligations have been
fully paid and performed, any sums then held by Lessor under this
Section 4.6 shall be refunded to Lessee; unless a Related Party
Default has occurred, in which event such sums may be applied towards
the Obligations in accordance with the Related Party Agreements.
4.6.8 RECEIPTS. Lessee shall deliver to Lessor copies of all
notices, demands, claims, bills and receipts in relation to the
Impositions and insurance premiums immediately upon receipt thereof by
Lessee.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY;
5.1 OWNERSHIP OF THE LEASED PROPERTY. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the exclusive possession and use of the Leased Property upon the terms and
conditions of this Lease.
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5.2 PERSONAL PROPERTY; REMOVAL AND REPLACEMENT OF PERSONAL PROPERTY.
5.2.1 LESSEE TO EQUIP FACILITY. Lessee, at its sole cost and
expense, shall install, affix or assemble or place on the Leased
Property, sufficient items of Tangible Personal Property to enable the
Leased Property to be operated from and after the Conversion Date in
accordance with the requirements of this Lease for the Primary
Intended Use, and such Tangible Personal Property and replacements
thereof, shall be at all times the property of Lessee.
5.2.2 SUFFICIENT PERSONAL PROPERTY. Lessee shall maintain,
during the entire Term, the Tangible Personal Property in good order
and repair and shall provide at its expense all necessary replacements
thereof, as may be necessary in order to operate the Leased Property,
from and after the Conversion Date, in compliance with all applicable
Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Primary
Intended Use. In addition, Lessee shall, from and after the Conversion
Date, (A) furnish all necessary replacements of obsolete items of the
Tangible Personal Property during the Term, unless Lessee provides
Lessor with an explanation (reasonably acceptable to Lessor) as to why
such Tangible Personal Property is no longer required in connection
with the operation of the Leased Property and (B) at least once a
year, and more frequently if requested by Lessor, deliver to Lessor, a
detailed inventory of all such Tangible Personal Property.
5.2.3 REMOVAL AND REPLACEMENT; LESSOR'S OPTION TO PURCHASE.
Lessee shall not remove from the Leased Property any one or more items
of Tangible Personal Property (whether now owned or hereafter
acquired), the fair market value of which exceeds THIRTY-FIVE THOUSAND
DOLLARS ($35,000), individually or ONE HUNDRED FIFTY THOUSAND DOLLARS
($150,000.00) collectively, except if such Tangible Personal Property
is simultaneously suitably replaced or Lessee provides Lessor with an
explanation (reasonably satisfactory to Lessor) as to why such
Tangible Personal Property is no longer required in connection with
the operation of the Leased Property. At its sole cost and expense,
Lessee shall restore the Leased Property to the condition required by
Article 8, including repair of all damage to the Leased Property
caused by the removal of the Tangible Personal Property, whether
effected by Lessee or Lessor. Upon the expiration or earlier
termination of this Lease, Lessor shall have the option, which may be
exercised prior to or within sixty (60) days following such expiration
or termination, of (A) acquiring the Tangible Personal Property
(pursuant to a bill of sale and assignments of any equipment leases,
all in such forms as are reasonably satisfactory to Lessor) upon
payment of its book value (Lessee's cost, minus depreciation), but not
in excess of its fair market value or (B) requiring Lessee to remove
the Tangible Personal Property. If Lessor exercises its option to
purchase the Tangible Personal Property, the price to be paid by
Lessor shall be (I) reduced by the amount of all payments due on any
equipment leases or any other Permitted Prior Security Interests
assumed by Lessor
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and (II) applied to the Lease Obligations before any payment to
Lessee. If Lessor requires the removal of the Tangible Personal
Property, then all of the Tangible Personal Property that is not
removed by Lessee within ten (10) days following such request shall be
considered abandoned by Lessee and may be appropriated, sold,
destroyed or otherwise disposed of by Lessor without first giving
notice thereof to Lessee, without any payment to Lessee and without
any obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 SECURITY FOR LESSEE'S OBLIGATIONS; PERMITTED PRIOR SECURITY
INTERESTS.
6.1.1 SECURITY. In order to secure the payment and
performance of all of the Obligations, Lessee agrees to provide or
cause there to be provided, among other things, the following
security:
(A) a first lien and exclusive security interest in
the Tangible Personal Property, Receivables and certain other
Collateral as more particularly provided for in the Security
Agreement;
(B) the Cash Collateral;
(C) a first lien and exclusive pledge of all of the
capital stock of Lessee all as more particularly set forth in
the Pledge Agreement. If any Person other than the Lessee
shall ever operate the Facility, a pledge of all capital
stock of, or partnership or other ownership interests, in
such Person shall also be provided pursuant to a pledge and
security agreement substantially similar to the Pledge
Agreement; and
(D) a first lien and exclusive pledge and assignment
of, and security interest in, all Permits and Contracts, as
more particularly provided for in the Permits Assignments.
Notwithstanding the foregoing, Lessor shall subordinate its security
interest in Receivables to a prior security interest to secure a
working capital line as provided in Section 6.1.2.
6.1.2 PURCHASE-MONEY SECURITY INTERESTS, RECEIVABLES AND
EQUIPMENT LEASES. Notwithstanding any other provision hereof regarding
the creation of Liens, but subject to Section 11.3.4, Lessee may (A)
grant priority purchase money security interests in items of Tangible
Personal Property, (B) lease Tangible Personal Property from equipment
lessors and (C) grant a prior security interest in Receivables to an
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institutional lender which is providing a working capital line of
credit for the exclusive use of the Facility, as long as in each
instance: (I) the secured party or equipment lessor enters into an
intercreditor agreement with, and satisfactory to, Lessor, pursuant to
which, without limiting the foregoing, (X) Lessor shall be afforded
the option of curing defaults and the option of succeeding to the
rights of Lessee and (Y) Lessor's security interest in Tangible
Personal Property and/or Receivables as applicable, shall be
subordinated to the security interest granted to such secured party,
(II) all of the terms, conditions and provisions of the financing,
security interest or lease are reasonably acceptable to Lessor, (III)
Lessee provides a true and complete copy, as executed, of each such
purchase money security agreement, financing document and equipment
lease and all amendments thereto and (IV) no such security interest,
financing agreement or lease is cross-defaulted or cross-
collateralized with any other obligation. Notwithstanding the
foregoing, Lessee may lease, or grant purchase money security
interests in, new items of Tangible Personal Property having an
aggregate cost during the Term in an amount not to exceed TWO HUNDRED
THOUSAND DOLLARS ($200,000) without complying with the foregoing
requirements, provided that Lessee shall provide Lessor with a true
and complete copy, as executed, of each purchase money security
agreement, related financing document and equipment lease, and all
amendments thereto. Security interests granted by Lessee in full
compliance with the provisions of this Section 6.1.2 are referred to
as "Permitted Prior Security Interests".
6.2 GUARANTIES. All of the Lease Obligations shall be unconditionally
and irrevocably guaranteed by the Guarantor and the Developer pursuant to the
Guaranties.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 CONDITION OF THE LEASED PROPERTY. Lessee acknowledges that Lessee
has caused the Leased Property to be sold to Lessor and has concurrently
entered into this Lease. Lessee acknowledges receipt and delivery of possession
of the Leased Property and that Lessee has examined and otherwise has acquired
knowledge of the condition of the Leased Property prior to the execution and
delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Lessee is leasing the Leased
Property "AS-IS" in its present condition. Lessee waives any claim or action
against Lessor in respect of the condition of the Leased Property. LESSOR MAKES
NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
PROPERTY, EITHER AS TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS
DESIGN OR CONDITION OR OTHERWISE, OR AS TO DEFECTS IN THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT; IT BEING AGREED THAT ALL
RISKS
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RELATING TO THE DESIGN, CONDITION AND/OR USE OF THE LEASED PROPERTY ARE TO BE
BORNE BY LESSEE. LESSEE HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF
THE LEASED PROPERTY, THE SUITABILITY OF THE LEASED PROPERTY FOR LESSEE'S
PURPOSES, AND THE COMPLIANCE OR NON-COMPLIANCE OF THE LEASED PROPERTY WITH ALL
APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL LAWS
AND ZONING OR LAND USE LAWS.
Upon the request of Lessor, accompanied by an explanation reasonably
establishing a justification for such request, at any time and from time to
time during the Term, Lessee shall engage one (1) or more independent
professional consultants, engineers and inspectors, qualified to do business in
the State and acceptable to Lessor to perform any environmental and/or
structural investigations and/or other inspections of the Leased Property and
the Facility as Lessor may reasonably request in order to detect (A) any
structural deficiencies in the Leased Improvements or the utilities servicing
the Leased Property or (B) the presence of any condition that (I) may be
harmful or present a health hazard to the residents and other occupants of the
Leased Property or (II) constitutes a breach or violation of any of the Lease
Documents. In the event that Lessor reasonably determines that the results of
such testing or inspections are unsatisfactory, within thirty (30) days of
notice from Lessor, Lessee shall commence such appropriate remedial actions as
may be reasonably requested by Lessor to correct such unsatisfactory conditions
and, thereafter, shall diligently and continuously prosecute such remedial
actions to completion within the time limits prescribed in this Lease or the
other Lease Documents.
7.2 USE OF THE LEASED PROPERTY; COMPLIANCE; MANAGEMENT.
7.2.1 OBLIGATION TO OPERATE. From and after the Conversion
Date, Lessee shall continuously operate the Leased Property in
accordance with the Primary Intended Use and maintain its
qualifications for licensure and accreditation as required by all
applicable Legal Requirements and Insurance Requirements.
7.2.2 PERMITTED USES. From and after the Conversion Date,
Lessee shall use the Leased Property, or permit the Leased Property to
be used, only for the Primary Intended Use and, prior to the
Conversion Date, the Leased Property may only be used for the
completion of the construction of the Project in accordance with the
terms of the Leasehold Improvement Agreement. Lessee shall not use the
Leased Property or permit the Leased Property to be used for any other
use without the prior written consent of Lessor, which consent may be
withheld in Lessor's sole and absolute discretion.
7.2.3 COMPLIANCE WITH INSURANCE REQUIREMENTS. No use shall be
made or permitted to be made of the Leased Property and no acts shall
be done which will cause the cancellation of any insurance policy
covering the Leased Property, nor shall Lessee, any Manager or any
other Person sell or otherwise provide to any residents,
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other occupants or invitees therein, or permit to be kept, used or
sold in or about the Leased Property, any article which may be
prohibited by any Legal Requirement or by any of the Insurance
Requirements. Furthermore, Lessee shall, at its sole cost and
expense, take whatever other actions that may be necessary to comply
with and to insure that the Leased Property complies with all
Insurance Requirements.
7.2.4 NO WASTE. Lessee shall not commit or suffer to be
committed any waste on, in or under the Leased Property, nor shall
Lessee cause or permit any nuisance thereon.
7.2.5 NO IMPAIRMENT. Lessee shall neither suffer nor permit
the Leased Property to be used in such a manner as (A) might
reasonably tend to impair Lessor's title thereto or (B) may reasonably
make possible a claim or claims of adverse usage or adverse possession
by the public or of implied dedication of the Leased Property.
7.2.6 NO LIENS. Except as permitted pursuant to Section
6.1.2, Lessee shall not permit or suffer any Lien to exist on the
Tangible Personal Property and shall in no event cause, permit or
suffer any Lien to exist with respect to the Leased Property other
than as set forth in Section 11.5.2.
7.3 COMPLIANCE WITH LEGAL REQUIREMENTS. Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that
Lessee, at its sole cost and expense, will promptly (A) comply with, and shall
cause every other member of the Leasing Group to comply with, all Legal
Requirements relating to the use, operation, maintenance, repair and
restoration of the Leased Property, whether or not compliance therewith shall
require structural change in any of the Leased Property or interfere with the
use and enjoyment of the Leased Property and (B) procure, maintain and comply
with (in all material respects), and shall cause every other member of the
Leasing Group to procure, maintain and comply with (in all material respects),
all Contracts and Permits necessary in order to operate the Leased Property for
the Primary Intended Use, and for compliance with all of the terms and
conditions of this Lease. Unless a Lease Default has occurred or any event has
occurred which, with the passage of time and/or the giving of notice would
constitute a Lease Default, Lessee may, upon prior written notice to Lessor,
contest any Legal Requirement to the extent permitted by, and in accordance
with, Article 15.
7.4 MANAGEMENT AGREEMENTS. From and after the Commencement Date,
Lessee shall not enter into any Management Agreement without the prior written
approval of Lessor, in each instance, which approval shall not be unreasonably
withheld. Lessee shall not, without the prior written approval of Lessor, in
each instance, which approval shall not be unreasonably withheld, agree to or
allow: (A) any change in the Manager or change in the ownership or control of
the Manager, (B) any change in the Management Agreement, (C) the termination of
any Management Agreement (other than in connection with the exercise by lessee
of any of its remedies under the Management Agreement as a result of any
default by the Manager thereunder), (D) any assignment by the Manager of its
interest under the
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Management Agreement or (E) any material amendment of the Management Agreement.
In addition, Lessee shall, at its sole cost and expense, promptly and fully
perform or cause to be performed every covenant, condition, promise and
obligation of the licensed operator of the Leased Property under any Management
Agreement.
Each Management Agreement shall provide that Lessor shall be provided
notice of any defaults thereunder and, at Lessor's option, an opportunity to
cure such default. Lessee shall furnish to Lessor, within three (3) days after
receipt thereof, or after the mailing or service thereof by Lessee, as the case
may be, a copy of each notice of default which Lessee shall give to, or receive
from any Person, based upon the occurrence, or alleged occurrence, of any
default in the performance of any covenant, condition, promise or obligation
under any Management Agreement.
Whenever and as often as Lessee shall fail to perform, promptly and
fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under
and pursuant to any Management Agreement, Lessor, or a lawfully appointed
receiver of the Leased Property, may, at their respective options (and without
any obligation to do so), after five (5) days' prior notice to Lessee (except
in the case of an emergency) enter upon the Leased Property and perform, or
cause to be performed, such work, labor, services, acts or things, and take
such other steps and do such other acts as they may deem advisable, to cure
such defaulted covenant, condition, promise or obligation, and any amount so
paid or advanced by Lessor or such receiver and all costs and expenses
reasonably incurred in connection therewith (including, without limitation,
attorneys' fees and expenses and court costs), shall be a demand obligation of
Lessee to Lessor or such receiver, and, Lessor shall have the same rights and
remedies for failure to pay such costs on demand as for Lessee's failure to pay
any other sums due hereunder.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 MAINTENANCE AND REPAIR.
8.1.1 LESSEE'S RESPONSIBILITY. Lessee, at its sole cost and
expense, shall keep the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto which are under Lessee's
control in good order and repair (whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of the Leased Property or such private roadways,
sidewalks and curbs or any other cause whatsoever) and, subject to
Articles 9, 13 and 14, Lessee shall promptly, with the exercise of all
reasonable efforts, undertake and diligently complete all necessary
and appropriate repairs, replacements, renovations, restorations,
alterations and modifications thereof of every kind and nature,
whether interior or exterior, structural or non-structural, ordinary
or extraordinary, foreseen
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or unforeseen or arising by reason of a condition (concealed or
otherwise) existing prior to the commencement of, or during, the Term
and thereafter until Lessee surrenders the Leased Property in the
manner required by this Lease. In addition, Lessee, at its sole cost
and expense, shall make all repairs, modifications, replacements,
renovations and alterations of the Leased Property (and such private
roadways, sidewalks and curbs) that are necessary to comply with all
applicable Legal Requirements and Insurance Requirements so that, from
and after the Conversion Date, the Leased Property can be legally
operated for the Primary Intended Use. All repairs, replacements,
renovations, alterations, and modifications required by the terms of
this Section 8.1 shall be (A) performed in a good and workmanlike
manner in compliance with all Legal Requirements, Insurance
Requirements and the requirements of Article 9 hereof, using new
materials well suited for their intended purpose and (B) consistent
with the operation of the Leased Property in a first class manner.
Lessee will not take or omit to take any action the taking or omission
of which might materially impair the value or the usefulness of the
Leased Property for the Primary Intended Use. To the extent that any
of the repairs, replacements, renovations, alterations or
modifications required by the terms of this Section 8.1 constitute
Material Structural Work, Lessee shall obtain Lessor's prior written
approval (which approval shall not be unreasonably withheld) of the
specific repairs, replacements, renovations, alterations and
modifications to be performed by or on behalf of Lessee in connection
with such Material Structural Work. Notwithstanding the foregoing, in
the event of a bona fide emergency during which Lessee is unable to
contact the appropriate representatives of Lessor, Lessee may commence
such Material Structural Work as may be necessary in order to address
such emergency without Lessor's prior approval, provided, however,
that Lessee shall immediately thereafter advise Lessor of such
emergency and the nature and scope of the Material Structural Work
commenced and shall obtain Lessor's approval of the remaining Material
Structural Work to be completed.
8.1.2 NO LESSOR OBLIGATION. Lessor shall not, under any
circumstances, be required to build or rebuild any improvements on the
Leased Property (or any private roadways, sidewalks or curbs
appurtenant thereto), or to make any repairs, replacements,
renovations, alterations, restorations, modifications, or renewals of
any nature or description to the Leased Property (or any private
roadways, sidewalks or curbs appurtenant thereto), whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen,
or to make any expenditure whatsoever with respect thereto in
connection with this Lease, or to maintain the Leased Property (or any
private roadways, sidewalks or curbs appurtenant thereto) in any way.
8.1.3 LESSEE MAY NOT OBLIGATE LESSOR. Nothing contained
herein nor any action or inaction by Lessor shall be construed as (A)
constituting the consent or request of Lessor, express or implied, to
any contractor, subcontractor, laborer, materialman or vendor to or
for the performance of any labor or services for any construction,
alteration, addition, repair or demolition of or to the Leased
Property or
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(B) giving Lessee any right, power or permission to contract for or
permit the performance of any labor or services or the furnishing of
any materials or other property in such fashion as would permit the
making of any claim against Lessor for the payment thereof or to make
any agreement that may create, or in any way be the basis for, any
right, title or interest in, or Lien or claim against, the estate of
Lessor in the Leased Property. Without limiting the generality of the
foregoing, the right title and interest of Lessor in and to the Leased
Property shall not be subject to liens or encumbrances for the
performance of any labor or services or the furnishing of any
materials or other property furnished to the Leased Property at or by
the request of Lessee or any other Person other than Lessor. Lessee
shall notify any contractor, subcontractor, laborer, materialman or
vendor providing any labor, services or materials to the Leased
Property of this provision.
8.2 ENCROACHMENTS; TITLE RESTRICTIONS. If any of the Leased
Improvements shall, at any time, encroach upon any property, street or
right-of-way adjacent to the Leased Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other Lien now or
hereafter affecting the Leased Property, or shall impair the rights of others
under any easement, right-of-way or other Lien to which the Leased Property is
now or hereafter subject, then promptly upon the request of Lessor, Lessee
shall, at its sole cost and expense, subject to Lessee's right to contest the
existence of any encroachment, violation or impairment as set forth in Article
15, (A) obtain valid and effective waivers or settlements of all claims,
liabilities and damages resulting from each such encroachment, violation or
impairment or (B) make such alterations to the Leased Improvements, and take
such other actions, as Lessee in the good faith exercise of its judgment deems
reasonably practicable, to remove such encroachment, or to end such violation
or impairment, including, if necessary, the alteration of any of the Leased
Improvements. Notwithstanding the foregoing, Lessee shall, in any event, take
all such actions as may be reasonably necessary in order to be able to continue
the operation of the Leased Improvements for the Primary Intended Use
substantially in the manner and to the extent that the Leased Improvements were
operated prior to the assertion of such encroachment, violation or impairment
as contemplated by this Lease, the Leasehold Improvement Agreement and the
other Lease Documents and nothing contained herein shall limit Lessee's
obligations to operate the Leased Property, from and after the Conversion Date,
in accordance with its Primary Intended Use. Any such alteration made pursuant
to the terms of this Section 8.2 shall be completed in conformity with the
applicable requirements of Section 8.1 and Article 9. Lessee's obligations
under this Section 8.2 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.
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ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 LESSOR'S APPROVAL. Without the prior written consent of Lessor,
which consent may be withheld by Lessor, in its sole and absolute discretion,
Lessee shall make no Capital Addition or Material Structural Work to the Leased
Property (including, without limitation, any change in the size or unit
capacity of the Facility), except as may be otherwise expressly required
pursuant to Article 8.
9.2 GENERAL PROVISIONS AS TO CAPITAL ADDITIONS AND CERTAIN MATERIAL
STRUCTURAL WORK. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in Lessor's written approval.
9.2.1 NO LIENS. Lessee shall not be permitted to create any
Lien on the Leased Property in connection with any Capital Addition or
Material Structural Work.
9.2.2 LESSEE'S PROPOSAL REGARDING CAPITAL ADDITIONS AND
MATERIAL STRUCTURAL WORK. If Lessee desires to undertake any Capital
Addition or Material Structural Work, Lessee shall submit to Lessor in
writing a proposal setting forth in reasonable detail any proposed
Capital Addition or Material Structural Work and shall provide to
Lessor copies of, or information regarding, the applicable plans and
specifications, Permits, Contracts and any other materials concerning
the proposed Capital Addition or Material Structural Work, as the case
may be, as Lessor may reasonably request. Without limiting the
generality of the foregoing, each such proposal pertaining to any
Capital Addition shall indicate the approximate projected cost of
constructing such Capital Addition, the use or uses to which it will
be put and a good faith estimate of the change, if any, in the gross
revenues that Lessee anticipates will result from the construction of
such Capital Addition.
9.2.3 LESSOR'S OPTIONS REGARDING CAPITAL ADDITIONS AND
MATERIAL STRUCTURAL WORK. Lessor shall have the options of: (A)
denying permission for the construction of the applicable Capital
Addition or Material Structural Work, (B) offering to finance the
construction of the Capital Addition or Material Structural Work
pursuant to Section 9.3, (C) allowing Lessee to pay for or separately
finance the construction of the Capital Addition or Material
Structural Work, subject to compliance with the terms and conditions
of Section 9.2.1, Section 9.4, Section 13.1, all Legal Requirements
and all other requirements of this Lease and to such other terms and
conditions as Lessor may in its discretion impose or (D) any
combination of the foregoing. Unless Lessor notifies Lessee in writing
of a contrary election within
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forty-five (45) days of Lessee's request, Lessor shall be deemed to
have denied the request for the Capital Addition or Material
Structural Work.
9.2.4 LESSOR MAY ELECT TO FINANCE CAPITAL ADDITIONS OR
MATERIAL STRUCTURAL WORK. If Lessor elects to offer financing for the
proposed Capital Addition or Material Structural Work, the provisions
of Section 9.3 shall apply.
9.3 CAPITAL ADDITIONS AND MATERIAL STRUCTURAL WORK FINANCED BY LESSOR.
9.3.1 LESSEE'S FINANCING REQUEST. Lessee may request that
Lessor provide or arrange financing for a Capital Addition or Material
Structural Work by providing to Lessor such information about the
Capital Addition or Material Structural Work as Lessor may reasonably
request, including, without limitation, all information referred to in
Section 9.2 above. Lessee understands, however, that Lessor shall be
under no obligation to agree to such request. Nevertheless, Lessor
shall use reasonable efforts to notify Lessee, within forty-five (45)
days of receipt of such information, as to whether Lessor will finance
the proposed Capital Addition or Material Structural Work and, if so,
the terms and conditions upon which it would do so, including the
terms of any amendment to this Lease (including, without limitation,
an increase in Base Rent based on Lessor's then existing terms and
prevailing conditions to compensate Lessor for the additional funds
advanced by it). Lessee may withdraw its request by notice to Lessor
at any time before such time as Lessee accepts Lessor's terms and
conditions. All advances of funds for any such financing shall be made
in accordance with Lessor's then standard construction loan
requirements and procedures, which may include, without limitation,
the requirements and procedures applicable to Work under Section 13.1.
9.3.2 LESSOR'S GENERAL REQUIREMENTS. If Lessor agrees to
finance the proposed Capital Addition or Material Structural Work and
Lessee accepts Lessor's proposal therefor, in addition to all other
items which Lessor or any applicable Financing Party may reasonably
require, Lessee shall provide to Lessor the following:
(A) prior to any advance of funds, (I) any
information, opinions, certificates, Permits or documents
reasonably requested by Lessor or any applicable Financing
Party which are necessary to confirm that Lessee will be able
to use the Capital Addition upon the completion thereof or
the applicable portion of the Facility upon the completion of
the Material Structural Work in accordance with the Primary
Intended Use and (II) evidence satisfactory to Lessor and any
applicable Financing Party that all Permits required for the
construction and use of the Capital Addition or the
applicable portion of the Facility have been obtained, are in
full force and effect and are not subject to appeal, except
only for those Permits which cannot in the normal course be
obtained prior to commencement or completion of the
construction; provided, that Lessor and any applicable
Financing Party are furnished with reasonable
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evidence that the same will be available in the normal course
of business without unusual condition;
(B) prior to any advance of funds, an Officer's
Certificate and, if requested, a certificate from Lessee's
architect, setting forth in reasonable detail the projected
(or actual, if available) Capital Addition Cost or the cost
of the Material Structural Work;
(C) bills of sale, instruments of transfer and other
documents required by Lessor so as to vest title to the
Capital Addition or the applicable Material Structural Work
in Lessor free and clear of all Liens, and amendments to this
Lease and any recorded notice or memorandum thereof, duly
executed and acknowledged, in form and substance reasonably
satisfactory to Lessor, providing for any changes required by
Lessor including, without limitation, changes in the Base
Rent and the legal description of the Land;
(D) upon payment therefor, a deed conveying to
Lessor title to any land acquired for the purpose of
constructing the Capital Addition or the applicable Material
Structural Work ("Additional Land") free and clear of any
Liens except those approved by Lessor;
(E) upon completion of the Capital Addition or the
Material Structural Work, a final as-built survey thereof
reasonably satisfactory to Lessor, if required by Lessor;
(F) during and following the advance of funds and
the completion of the Capital Addition or the Material
Structural Work, endorsements to any outstanding policy of
title insurance covering the Leased Property satisfactory in
form and substance to Lessor and any Financing Party (I)
updating the same without any additional exception except as
may be reasonably permitted by Lessor, (II) if applicable,
including the Additional Land in the premises covered by such
title insurance policy and (III) increasing the coverage
thereof by an amount equal to any amount paid by Lessor for
the Additional Land plus the Fair Market Value of the Capital
Addition or the Fair Market Value of the Material Structural
Work (except to the extent covered by the owner's policy of
title insurance referred to in subparagraph (g) below);
(G) simultaneous with the initial advance of funds,
if appropriate, (I) an owner's policy of title insurance
insuring fee simple title to any Additional Land conveyed to
Lessor pursuant to subparagraph (d) free and clear of all
Liens except those approved by Lessor and (II) a lender's
policy of title insurance reasonably satisfactory in form and
substance to any applicable Financing Party;
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(H) following the completion of the Capital Addition
or the Material Structural Work, if reasonably deemed
necessary by Lessor, an appraisal of the Leased Property by
an M.A.I. appraiser acceptable to Lessor, which states that
the Fair Market Value of the Leased Property upon completion
of the Capital Addition or the Material Structural Work
exceeds the Fair Market Value of the Leased Property prior to
the commencement of the construction of such Capital Addition
or Material Structural Work by an amount not less than one
hundred five percent (105%) of the Capital Addition Cost or
the cost of the Material Structural Work; and
(I) during or following the advancement of funds,
prints of architectural and engineering drawings relating to
the Capital Addition or the Material Structural Work and such
other materials, including, without limitation, endorsements
to the title insurance policies (insuring Lessor and any
applicable Financing Party with respect to the Leased
Property) contemplated by subsection (f) above, opinions of
counsel, appraisals, surveys, certified copies of duly
adopted resolutions of the board of directors of Lessee
authorizing the execution and delivery of the lease amendment
and any other documents and instruments as may be reasonably
required by Lessor and any applicable Financing Party.
9.3.3 PAYMENT OF COSTS. By virtue of making a request to
finance a Capital Addition or any Material Structural Work, whether or
not such financing is actually consummated, Lessee shall be deemed to
have agreed to pay, upon demand, all costs and expenses reasonably
incurred by Lessor and any Person participating with Lessor in any way
in the financing of the Capital Addition or Material Structural Work,
including, but not limited to (A) fees and expenses of their
respective attorneys, (B) all photocopying expenses, if any, (C) the
amount of any filing, registration and recording taxes and fees, (D)
documentary stamp taxes and intangible taxes and (E) title insurance
charges and appraisal fees.
9.4 GENERAL LIMITATIONS. Without in any way limiting Lessor's options
with respect to proposed Capital Additions or Material Structural Work: (A) no
Capital Addition or Material Structural Work shall be completed that could,
upon completion, significantly alter the character or purpose or detract from
the value or operating efficiency of the Leased Property, or significantly
impair the revenue-producing capability of the Leased Property, or adversely
affect the ability of Lessee to comply with the terms of this Lease, (B) no
Capital Addition or Material Structural Work shall be completed which would tie
in or connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease) including, without limitation, tie-ins of buildings
or other structures or utilities, unless Lessee shall have obtained the prior
written approval of Lessor, which approval may be withheld in Lessor's sole and
absolute discretion and (C) all proposed Capital Additions and Material
Structural Work shall be architecturally integrated and consistent with the
Leased Property.
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9.5 NON-CAPITAL ADDITIONS. Lessee shall have the obligation and right
to make repairs, replacements and alterations which are not Capital Additions
as required by the other Sections of this Lease, but in so doing, Lessee shall
always comply with and satisfy the conditions of Section 9.4, mutatis,
mutandis. Lessee shall have the right, from time to time, to make additions,
modifications or improvements to the Leased Property which do not constitute
Capital Additions or Material Structural Work as it may deem to be desirable or
necessary for its uses and purposes, subject to the same limits and conditions
imposed under Section 9.4. The cost of any such repair, replacement,
alteration, addition, modification or improvement shall be paid by Lessee and
the results thereof shall be included under the terms of this Lease and become
a part of the Leased Property, without payment therefor by Lessor at any time.
Notwithstanding the foregoing, all such additions, modifications and
improvements which affect the structure of any of the Leased Improvements, or
which involve the expenditure of more than TWENTY-FIVE THOUSAND DOLLARS
($25,000.00), shall be undertaken only upon compliance with the provisions of
Section 13.1, all Legal Requirements and all other applicable requirements of
this Lease; provided, however, that in the event of a bona fide emergency
during which Lessee is unable to contact the appropriate representatives of
Lessor, Lessee may commence such additions, modifications and improvements as
may be necessary in order to address such emergency without Lessor's prior
approval, as long as Lessee immediately thereafter advises Lessor of such
emergency and the nature and scope of the additions, modifications and
improvements performed and obtains Lessor's approval of the remaining work to
be completed.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 REPRESENTATIONS AND WARRANTIES. Lessee hereby represents and
warrants to, and covenants and agrees with, Lessor that:
10.1.1 EXISTENCE; POWER; QUALIFICATION.
Lessee is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Lessee has
all requisite corporate power to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted
and is duly qualified to transact business and is in good standing in
each jurisdiction where such qualification is necessary or desirable
in order to carry out its business as presently conducted and as
proposed to be conducted. As of the date of this Agreement, Lessee
does not have any Subsidiaries and Lessee is not a member of any
partnership or joint venture. Attached hereto as EXHIBIT C is a true
and correct list of all of the shareholders of Lessee and their
respective ownership interests in Lessee.
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10.1.2 VALID AND BINDING. Lessee is duly authorized to make
and enter into all of the Lease Documents to which Lessee is a party
and to carry out the transactions contemplated therein. All of the
Lease Documents to which Lessee is a party have been duly executed and
delivered by Lessee, and each is a legal, valid and binding obligation
of Lessee, enforceable in accordance with its terms.
10.1.3 SINGLE PURPOSE. Lessee is, and during the entire time
that this Lease remains in force and effect shall be, engaged in no
business, trade or activity other than the construction of the Project
in accordance with the terms of the Leasehold Improvement Agreement
and, from and after the Conversion Date, operation of the Leased
Property for the Primary Intended Use. The fiscal year of Lessee and
the Guarantor is the Fiscal Year.
10.1.4 NO VIOLATION. The execution, delivery and performance
of the Lease Documents and the consummation of the transactions
thereby contemplated shall not result in any breach of, or constitute
a default under, or result in the acceleration of, or constitute an
event which, with the giving of notice or the passage of time, or
both, could result in default or acceleration of any obligation of any
member of the Leasing Group under any of the Permits or Contracts or
any other contract, mortgage, lien, lease, agreement, instrument,
franchise, arbitration award, judgment, decree, bank loan or credit
agreement, trust indenture or other instrument to which any member of
the Leasing Group is a party or by which any member of the Leasing
Group or the Leased Property may be bound or affected and do not
violate or contravene any Legal Requirement.
10.1.5 CONSENTS AND APPROVALS. Except as already obtained or
filed, as the case may be, no consent or approval or other
authorization of, or exemption by, or declaration or filing with, any
Person and no waiver of any right by any Person is required to
authorize or permit, or is otherwise required as a condition of the
execution and delivery of any of the Lease Documents, the Construction
Contract or the Architect's Agreement by any member of the Leasing
Group and the performance of such member's obligations thereunder or
as a condition to the validity (assuming the due authorization,
execution and delivery by Lessor of the Lease Documents to which it is
a party) and the first priority of any Liens granted under the Lease
Documents, except the filing of the Financing Statements.
10.1.6 NO LIENS OR INSOLVENCY PROCEEDINGS. Each member of the
Leasing Group is financially solvent and there are no actions, suits,
investigations or proceedings including, without limitation,
outstanding federal or state tax liens, garnishments or insolvency or
bankruptcy proceedings, pending or, to the best of Lessee's knowledge
and belief, threatened:
(A) against or affecting any member of the Leasing
Group, which if adversely resolved to such member of the
Leasing Group, would materially
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adversely affect the ability of any of the foregoing to
perform their respective obligations under the Lease
Documents;
(B) against or affecting the Leased Property or the
ownership, construction, development, maintenance,
management, repair, use, occupancy, possession or operation
thereof; or
(C) which may involve or affect the validity,
priority or enforceability of any of the Lease Documents, at
law or in equity, or before or by any arbitrator or
Governmental Authority.
10.1.7 NO BURDENSOME AGREEMENTS. Neither Lessee, the
Developer nor the Guarantor is a party to any agreement the terms of
which now have, or, as far as can be reasonably foreseen, may have, a
material adverse affect on its respective financial condition or
business or on the operation of the Leased Property.
10.1.8 COMMERCIAL ACTS. Lessee's performance of and
compliance with the obligations and conditions set forth herein and in
the other Lease Documents will constitute commercial acts done and
performed for commercial purposes.
10.1.9 ADEQUATE CAPITAL, NOT INSOLVENT. After giving effect
to the consummation of the transactions contemplated by the Lease
Documents, each member of the Leasing Group:
(A) will be able to pay its debts as they become
due;
(B) will have sufficient funds and capital to carry
on its business as now conducted or as contemplated to be
conducted (in accordance with the terms of the Lease
Documents);
(C) will own property having a value both at fair
valuation and at present fair saleable value greater than the
amount required to pay its debts as they become due; and
(D) will not be rendered insolvent as determined by
applicable law.
10.1.10 NOT DELINQUENT. No member of the Leasing Group is
delinquent or claimed to be delinquent under any obligation for the
payment of borrowed money.
10.1.11 NO AFFILIATE DEBT. Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability
(whether direct or contingent) for borrowed money from the Guarantor
(or any of its Affiliates) or any Affiliate of Lessee that is not
fully subordinated to the Lease Obligations pursuant to the Affiliated
Party Subordination Agreement.
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10.1.12 TAXES CURRENT. Each member of the Leasing Group has
filed all federal, state and local tax returns which are required to
be filed as to which extensions are not currently in effect and have
paid all taxes, assessments, impositions, fees and other governmental
charges (including interest and penalties) which have become due
pursuant to such returns or pursuant to any assessment or notice of
tax claim or deficiency received by each such member of the Leasing
Group. No tax liability has been asserted by the Internal Revenue
Service against any member of the Leasing Group or any other federal,
state or local taxing authority for taxes, assessments, impositions,
fees or other governmental charges (including interest or penalties
thereon) in excess of those already paid.
10.1.13 FINANCIALS COMPLETE AND ACCURATE. The financial
statements of each member of the Leasing Group given to Lessor in
connection with the execution and delivery of the Lease Documents were
true, complete and accurate, in all material respects, and fairly
presented the financial condition of each such member of the Leasing
Group as of the date thereof and for the periods covered thereby,
having been prepared in accordance with GAAP and such financial
statements disclosed all liabilities, including, without limitation,
contingent liabilities, of each such member of the Leasing Group.
There has been no material adverse change since such date with respect
to the Tangible Net Worth of any member of the Leasing Group or with
respect to any other matters contained in such financial statements,
nor have any additional material liabilities, including, without
limitation, contingent liabilities, of any member of the Leasing Group
arisen or been incurred or asserted since such date. The projections
heretofore delivered to Lessor continue to be reasonable (with respect
to the material assumptions upon which such projections are based) and
Lessee reasonably anticipates the results projected therein will be
achieved, there having been (A) no material adverse change in the
business, assets or condition, financial or otherwise of any member of
the Leasing Group or the Leased Property and (B) no material depletion
of the cash or decrease in working capital of any member of the
Leasing Group.
10.1.14 PENDING ACTIONS, NOTICES AND REPORTS.
(A) There is no action or investigation pending or, to the
best knowledge and belief of Lessee, threatened, anticipated or
contemplated (nor, to the knowledge of Lessee, is there any reasonable
basis therefor) against or affecting the Leased Property or any member
of the Leasing Group (or any Affiliate thereof) before any
Governmental Authority, Accreditation Body or Third Party Payor which
could prevent or hinder the consummation of the transactions
contemplated hereby or call into question the validity of any of the
Lease Documents or any action taken or to be taken in connection with
the transactions contemplated thereunder or which in any single case
or in the aggregate might result in any material adverse change in the
business, prospects, condition, affairs or operations of any member of
the Leasing Group or the Leased Property (including, without
limitation, any action to revoke,
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withdraw or suspend any Permit necessary or desirable for the
operation of the Leased Property in accordance with its Primary
Intended Use and any action to transfer or relocate any such Permit to
a location other than the Leased Property) or any material impairment
of the right or ability of any member of the Leasing Group to carry on
its operations as presently conducted or proposed to be conducted or
which may materially adversely impact reimbursement to any member of
the Leasing Group for services rendered to beneficiaries of Third
Party Payor Programs.
(B) Neither the Facility nor any member of the Leasing Group
has received any notice of any claim, requirement or demand of any
Governmental Authority, Accreditation Body, Third Party Payor or any
insurance body having or claiming any licensing, certifying,
supervising, evaluating or accrediting authority over the Leased
Property to rework or redesign the Leased Property, its professional
staff or its professional services, procedures or practices in any
material respect or to provide additional furniture, fixtures,
equipment or inventory or to otherwise take action so as to make the
Leased Property conform to or comply with any Legal Requirement;
(C) [Intentionally deleted]; and
(D) Lessee has delivered or caused to be delivered to Lessor
true and correct copies of all licenses, inspection surveys and
accreditation reviews relating to the Leased Property, issued by any
Governmental Authority or Accreditation Body during the most recent
licensing period, together with all plans of correction relating
thereto.
10.1.15 COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS.
(A) Lessee and the Leased Property and the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession and operation thereof comply with all applicable
Legal Requirements and there is no claim of any violation thereof
known to Lessee. Without limiting the foregoing, Lessee has obtained
all Permits that are necessary or desirable to operate the Leased
Property in accordance with its Primary Intended Use and all such
Permits are in full force and effect.
(B) Except as previously delivered to Lessor pursuant to
Section 10.1.14(d) hereof, there are no outstanding notices of
deficiencies, notices of proposed action or orders of any kind
relating to the Leased Property issued by any Governmental Authority,
Accreditation Body or Third Party Payor requiring conformity to any of
the Legal Requirements.
(C) Lessee knows of no impediments to the Facility becoming
licensed on or before the Conversion Date as a personal care home by
the Department of Public Welfare.
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10.1.16 NO ACTION BY GOVERNMENTAL AUTHORITY. There is no
action pending or, to the best knowledge and belief of Lessee,
recommended, by any Governmental Authority or Accreditation Body to
revoke, repeal, cancel, modify, withdraw or suspend any Permit or
Contract or to take any other action of any other type which could
have a material adverse effect on the Leased Property.
10.1.17 PROPERTY MATTERS.
(A) The Leased Property is free and clear of agreements,
covenants and Liens, except those agreements, covenants and Liens to
which this Lease is expressly subject, whether presently existing, as
are listed on EXHIBIT B or were listed on the UCC lien search results
delivered to Lessor at or prior to the execution and delivery of this
Lease (and were not required to be terminated as a condition of the
execution and delivery of this Lease), or which may hereafter be
created in accordance with the terms hereof (collectively referred to
herein as the "Permitted Encumbrances"); and Lessee shall warrant and
defend Lessor's title to the Leased Property against any and all
claims and demands of every kind and nature whatsoever;
(B) There is no Condemnation or similar proceeding pending
with respect to or affecting the Leased Property, and Lessee is not
aware, to the best of Lessee's knowledge and belief, that any such
proceeding is contemplated;
(C) To the actual knowledge of Lessee, no part of the
Collateral or the Leased Property has been damaged by any fire or
other casualty;
(D) None of the Permitted Encumbrances has or is likely to
have a material adverse impact upon, nor interfere with or impede, in
any material respect, the operation of the Leased Property in
accordance with the Primary Intended Use;
(E) Upon the completion of construction of the Project, all
buildings, facilities and other improvements necessary, both legally
and practically, for the proper and efficient operation of the
Facility are located upon the Leased Property and all real property
and personal property currently utilized by Lessee is included within
the definition of the Leased Property or the Collateral;
(F) The Leased Property abuts on and has direct vehicular
access to a public road or access to a public road via permanent,
irrevocable, appurtenant easements;
(G) The Leased Property constitutes a separate parcel for
real estate tax purposes and no portion of any real property that does
not constitute a portion of the Leased Property is part of the same
tax parcel as any part of the Leased Property;
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(H) Prior to the completion of construction of the Project,
all utilities necessary for the use and operation of the Facility will
be available to the lot lines of the Leased Property:
(I) in sufficient supply and capacity;
(II) through validly created and existing easements of
record appurtenant to or encumbering the Leased Property
(which easements shall not impede or restrict the
construction of the Project or the operation of the
Facility); and
(III) without need for any Permits and/or Contracts to
be issued by or entered into with any Governmental Authority,
except as already obtained or executed, as the case may be,
or as otherwise shown to the satisfaction of Lessor to be
readily obtainable; and
10.1.18 THIRD PARTY PAYOR AGREEMENTS.
(A) [Intentionally Deleted].
(B) Attached hereto as EXHIBIT D is a list of national
accounts and local discount agreements, which constitute all of the
agreements between Lessee or the Facility, on the one hand, and Third
Party Payors on the other hand, pursuant to which Lessee or the
Facility agrees to provide services based on a discount factor from
the rates regularly charged for services rendered by Lessee or the
Facility.
(C) No member of the Leasing Group, nor the Facility has any
rate appeal currently pending before any Governmental Authority or any
administrator of any Third Party Payor Program or any other referral
source other than such appeals which, if determined adversely to any
member of the Leasing Group or the Facility would not have a
materially adverse effect, either singly or in the aggregate, on the
financial condition of any member of the Leasing Group or the
Facility.
10.1.19 RATE LIMITATIONS. Except as disclosed on EXHIBIT F,
the State currently imposes no restrictions or limitations on rates
which may be charged to private pay residents receiving services at
the Facility.
10.1.20 FREE CARE. Except as disclosed on EXHIBIT G, there
are no Contracts, Permits or Legal Requirements which require that,
upon completion of construction of the Project, a percentage of beds
or slots in any program at the Facility be reserved for Medicaid or
Medicare eligible patients or that the Facility provide a certain
amount of welfare, free or charity care or discounted or government
assisted resident care.
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10.1.21 NO PROPOSED CHANGES. Lessee has no actual knowledge
of any Legal Requirements which have been enacted, promulgated or
issued within the eighteen (18) months preceding the date of this
Lease or any proposed Legal Requirements currently pending in the
State which may materially adversely affect rates at the Facility (or
any program operated in conjunction with the Facility) or may result
in the likelihood of increased competition at the Facility or the
imposition of Medicaid, Medicare, charity, free care, welfare or other
discounted or government assisted residents at the Facility or require
that Lessee or the Facility obtain a certificate of need, Section 1122
approval or the equivalent, which Lessee or the Facility does not
currently possess.
10.1.22 ERISA. No employee pension benefit plan maintained by
any member of the Leasing Group has any accumulated funding deficiency
within the meaning of the ERISA, nor does any member of the Leasing
Group have any material liability to the PBGC established under ERISA
(or any successor thereto) in connection with any employee pension
benefit plan (or other class of benefit which the PBGC has elected to
insure), and there have been no "reportable events" (not waived) or
"prohibited transactions" with respect to any such plan, as those
terms are defined in Section 4043 of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as now or hereafter amended,
respectively.
10.1.23 NO BROKER. No member of the Leasing Group nor any of
their respective Affiliates has dealt with any broker or agent in
connection with the transactions contemplated by the Lease Documents.
10.1.24 NO IMPROPER PAYMENTS. No member of the Leasing Group
nor any of their respective Affiliates has:
(A) made any contributions, payments or gifts of its
funds or property to or for the private use of any government
official, employee, agent or other Person where either the
payment or the purpose of such contribution, payment or gifts
is illegal under the laws of the United States, any state
thereof or any other jurisdiction (foreign or domestic);
(B) established or maintained any unrecorded fund or
asset for any purpose or has made any false or artificial
entries on any of its books or records for any reason;
(C) made any payments to any Person with the
intention or understanding that any part of such payment was
to be used for any other purpose other than that described in
the documents supporting the payment; or
(D) made any contribution, or has reimbursed any
political gift or contribution made by any other Person, to
candidates for public office, whether
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federal, state or local, where such contribution would be in
violation of applicable law.
10.1.25 NOTHING OMITTED. Neither this Lease, nor any of the
other Lease Documents, nor any certificate, agreement, statement or
other document, including, without limitation, any financial
statements concerning the financial condition of any member of the
Leasing Group, furnished to or to be furnished to Lessor or its
attorneys in connection with the transactions contemplated by the
Lease Documents, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary
in order to prevent all statements contained herein and therein from
being misleading. There is no fact within the special knowledge of
Lessee which has not been disclosed herein or in writing to Lessor
that materially adversely affects, or in the future, insofar as Lessee
can reasonably foresee, may materially adversely affect the business,
properties, assets or condition, financial or otherwise, of any member
of the Leasing Group or the Leased Property.
10.1.26 NO MARGIN SECURITY. Lessee is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds
of the Meditrust Investment will be used to purchase or carry any
margin security or to extend credit to others for the purpose of
purchasing or carrying any margin security or in any other manner
which would involve a violation of any of the regulations of the Board
of Governors of the Federal Reserve System. Lessee is not an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
10.1.27 NO DEFAULT. No event or state of facts which
constitutes, or which, with notice or lapse of time, or both, could
constitute, a Lease Default has occurred and is continuing.
10.1.28 PRINCIPAL PLACE OF BUSINESS. The principal place of
business and chief executive office of Lessee is located at 5021
Louise Drive, Suite 200, Mechanicsburg, Pennsylvania 17055 (the
"Principal Place of Business").
10.1.29 LABOR MATTERS. There are no proceedings now pending,
nor, to the best of Lessee's knowledge, threatened with respect to the
operation of the Facility before the National Labor Relations Board,
State Commission on Human Rights and Opportunities, State Department
of Labor, U.S. Department of Labor or any other Governmental Authority
having jurisdiction of employee rights with respect to hiring, tenure
and conditions of employment, and no member of the Leasing Group has
experienced any material controversy with any Facility administrator
or other employee of similar stature or with any labor organization.
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10.1.30 INTELLECTUAL PROPERTY. Lessee is duly licensed or
authorized to use all (if any) copyrights, rights of reproduction,
trademarks, trade-names, trademark applications, service marks, patent
applications, patents and patent license rights, (all whether
registered or unregistered, U.S. or foreign), inventions, franchises,
discoveries, ideas, research, engineering, methods, practices,
processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how and trade secrets which are used
in or necessary for the operation of the Facility in accordance with
its Primary Intended Use, without conflict with or infringement of
any, and subject to no restriction, lien, encumbrance, right, title or
interest in others.
10.1.31 MANAGEMENT AGREEMENTS. There is no Management
Agreement in force and effect as of the date hereof.
10.1.32 OPTION PURCHASE DOCUMENTS. True and correct copies of
the Option Purchase Agreement and the other Option Purchase Documents
have been delivered to Lessor and the transactions contemplated by the
Option Purchase Documents have closed in accordance with the terms
thereof and in compliance with all applicable Legal Requirements.
10.2 CONTINUING EFFECT OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which
shall remain true, correct and complete throughout the Term. Notwithstanding
the provisions of the foregoing sentence but without derogation from any other
terms and provisions of this Lease, including, without limitation, those terms
and provisions containing covenants to be performed or conditions to be
satisfied on the part of Lessee, the representations and warranties contained
in Sections 10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c),
10.1.18(b), 10.1.18(c), 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.28, 10.1.29,
in the second sentence of Section 10.1.12, and in the second and third
sentences of Section 10.1.13 shall not constitute continuing representations
and warranties throughout the Term.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 STATUS CERTIFICATES. At any time, and from time to time, upon
request from Lessor, Lessee shall furnish to Lessor, within ten (10) Business
Days' after receipt of such request, an Officer's Certificate certifying that
this Lease is unmodified and in full force and effect (or that this Lease is in
full force and effect as modified and setting forth the modifications) and the
dates to which the Rent has been paid. Any Officer's Certificate furnished
pursuant to this Section shall be addressed to any prospective purchaser or
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mortgagee of the Leased Property as Lessor may request and may be relied upon
by Lessor and any such prospective purchaser or mortgagee of the Leased
Property.
11.2 FINANCIAL STATEMENTS; REPORTS; NOTICE AND INFORMATION.
11.2.1 OBLIGATION TO FURNISH. Lessee will furnish and shall
cause to be furnished to Lessor the following statements, information
and other materials:
(A) ANNUAL STATEMENTS. Within one hundred (100) days
after the end of each of their respective fiscal years, (I) a
copy of the Consolidated Financials for each of (X) the
Guarantor (including Lessee and the Developer) and (Y) any
Sublessee for the preceding fiscal year, certified and
audited by, and with the unqualified opinion of, independent
certified public accountants acceptable to Lessor and
certified as true and correct by Lessee, the Guarantor, the
Developer or the applicable Sublessee, as the case may be
(and, without limiting anything else contained herein, the
Consolidated Financials for Lessee and for each Sublessee
shall include a detailed balance sheet for Leased Property as
of the last day of such fiscal year and a statement of
earnings from the Leased Property for such fiscal year
showing, among other things, all rents and other income
therefrom and all expenses paid or incurred in connection
with the operation of the Leased Property); (II) separate
statements, certified as true and correct by Lessee, the
Guarantor, the Developer and each Sublessee, stating whether,
to the best of the signer's knowledge and belief after making
due inquiry, Lessee, the Guarantor, the Developer or such
Sublessee, as the case may be, is in default in the
performance or observance of any of the terms of this Lease
or any of the other Lease Documents and, if so, specifying
all such defaults, the nature thereof and the steps being
taken to immediately remedy the same; (III) a copy of all
letters from the independent certified accountants engaged to
perform the annual audits referred to above, directed to the
management of Lessee, the Guarantor, the Developer or the
applicable Sublessee, as the case may be, regarding the
existence of any reportable conditions or material
weaknesses, (IV) a statement certified as true and correct by
Lessee setting forth all Subleases (excluding Residence
Agreements) as of the last day of such fiscal year, the
respective areas demised thereunder, the names of the
Sublessees thereunder, the respective expiration dates of
such Subleases, the respective rentals provided for therein,
and such other information pertaining to the Subleases as may
be reasonably requested by Lessor and (V) evidence
satisfactory to Lessor that Lessee has fulfilled its
obligation to make the Annual Facility Upgrade Expenditure in
accordance with the provisions of Section 11.4.11.
(B) MONTHLY STATEMENTS OF LESSEE. Within thirty (30)
days after the end of each calendar month during the pendency
of this Lease, from and after the Conversion Date, an
unaudited, detailed month and year to date
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income and expense statement for the Leased Property which
shall include a comparison to corresponding budget figures,
occupancy statistics (including the actual number of
residents, the number of units available) and resident mix
breakdowns (for each resident day during such month
classifying residents by the type of care required and source
of payment).
(C) QUARTERLY STATEMENTS. (I) Within thirty (30)
days after the end of each of their respective fiscal
quarters, unaudited Consolidated Financials for each of (I)
Lessee and (II) each Sublessee certified as true and correct
by Lessee or the applicable Sublessee, as the case may be and
(II) within thirty (30) days after the end of each Fiscal
Quarter, an express written calculation showing the
compliance or non-compliance, as the case may be, with the
specific financial covenants set forth in Section 11.3 for
the applicable period, including, with respect to the
calculation of Lessee's Rent Coverage Ratio, a schedule
substantially in the form attached hereto as EXHIBIT I.
(D) QUARTERLY STATEMENTS OF THE GUARANTOR. Within
fifty (50) days after the end of each Fiscal Quarter,
unaudited Consolidated Financials for the Guarantor certified
as true and correct by the Guarantor.
(E) PERMITS AND CONTRACTS. Promptly after the
issuance or the execution thereof, as the case may be, true
and complete copies of (I) all Permits which constitute
operating licenses for the Facility issued by any
Governmental Authority having jurisdiction over personal care
matters and (II) Contracts (involving payments in the
aggregate in excess of $100,000 per annum), including,
without limitation, all Provider Agreements.
(F) CONTRACT NOTICES. Promptly after the receipt
thereof, true and complete copies of any notices, consents,
terminations or statements of any kind or nature relating to
any of the Contracts (involving payments in the aggregate in
excess of $100,000 per annum) other than those issued in the
ordinary course of business.
(G) PERMIT OR CONTRACT DEFAULTS. Promptly after the
receipt thereof, true and complete copies of all surveys,
follow-up surveys, licensing surveys, complaint surveys,
examinations, compliance certificates, inspection reports,
statements (other than those statements that are issued in
the ordinary course of business), terminations and notices of
any kind (other than those notices that are furnished in the
ordinary course of business) issued or provided to Lessee or
any Sublessee by any Governmental Authority, Accreditation
Body or any Third Party Payor, including, without limitation,
any notices pertaining to any delinquency in, or proposed
revision of, Lessee's or any Sublessee's obligations under
the terms and conditions of any Permits or Contracts now or
hereafter issued by or entered into with any Governmental
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Authority, Accreditation Body or Third Party Payor and the
response(s) thereto made by or on behalf of Lessee or any
Sublessee.
(H) OFFICIAL REPORTS. Upon completion or filing
thereof, complete copies of all applications (other than
those that are furnished in the ordinary course of business),
notices (other than those that are furnished in the ordinary
course of business), statements, annual reports, cost reports
and other reports or filings of any kind (other than those
that are furnished in the ordinary course of business)
provided by Lessee or any Sublessee to any Governmental
Authority, Accreditation Body or any Third Party Payor with
respect to the Leased Property.
(I) OTHER INFORMATION. With reasonable promptness,
such other information as Lessor may from time to time
reasonably request respecting (I) the financial condition and
affairs of each member of the Leasing Group and the Leased
Property and (II) the licensing and operation of the Leased
Property; including, without limitation, audited financial
statements, certificates and consents from accountants and
all other financial and licensing/operational information as
may be required or requested by any Governmental Authority.
(J) DEFAULT CONDITIONS. As soon as possible, and in
any event within five (5) days after the occurrence of any
Lease Default, or any event or circumstance which, with the
giving of notice or the passage of time, or both, could
constitute a Lease Default, a written statement of Lessee
setting forth the details of such Lease Default, event or
circumstance and the action which Lessee proposes to take
with respect thereto.
(K) OFFICIAL ACTIONS. Promptly after the
commencement thereof, notice of all actions, suits and
proceedings before any Governmental Authority or
Accreditation Body which could have a material adverse effect
on (I) any member of the Leasing Group to perform any of its
obligations under any of the Lease Documents or (II) the
Leased Property.
(L) AUDIT REPORTS. Promptly after receipt, a copy of
all audits or reports submitted to any member of the Leasing
Group by any independent public accountant in connection with
any annual, special or interim audits of the books of any
such member of the Leasing Group and, if requested by Lessor,
any letter of comments directed by such accountant to the
management of any such member of the Leasing Group.
(M) ADVERSE DEVELOPMENTS. Within five (5) days after
Lessee acquires knowledge thereof, written notice of:
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(I) the potential termination of any Permit
or Provider Agreement necessary for the
construction of the Project and/or
operation of the Leased Property;
(II) any loss, damage or destruction to or
of the Leased Property in excess of
TWENTY-FIVE THOUSAND DOLLARS ($25,000)
(regardless of whether the same is
covered by insurance);
(III) any material controversy involving
Lessee or any Sublessee and (X)
Facility administrator or Facility
employee of similar stature or (Y) any
labor organization;
(IV) any controversy that calls into
question the eligibility of Lessee or
the Facility for the participation in
any Medicaid, Medicare or other Third
Party Payor Program;
(V) any refusal of reimbursement by any
Third Party Payor which, singularly or
together with all other such refusals
by any Third Party Payors, could have a
material adverse effect on the
financial condition of Lessee or any
Sublessee; and
(VI) any fact within the special knowledge
of any member of the Leasing Group, or
any other development in the business
or affairs of any member of the Leasing
Group, which may be materially adverse
to the business, properties, assets or
condition, financial or otherwise, of
any member of the Leasing Group or the
Leased Property.
(N) LINE OF CREDIT DEFAULT. Within ten (10) days
after becoming aware of a claim by any Person that Lessee is
in default of any agreement in connection with the borrowing
of money which is not prohibited hereunder, notice of any
such claim or default.
(O) RESPONSES TO INSPECTION REPORTS. Within thirty
(30) days after receipt of an inspection report relating to
the Leased Property from Lessor, a written response
describing in detail prepared plans to address concerns
raised by the inspection report.
(P) PUBLIC INFORMATION. Upon the completion or
filing, mailing or other delivery thereof, complete copies of
all financial statements, reports, notices and proxy
statements, if any, sent by any member of the Leasing Group
(which is a publicly held corporation) to its shareholders
and of all
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reports, if any, filed by any member of the Leasing Group
(which is a publicly held corporation) with any securities
exchange or with the Securities Exchange Commission.
(Q) ANNUAL BUDGETS. At least thirty (30) days prior
to the end of each Fiscal Year, Lessee, any Sublessee and/or
any Manager shall submit to Lessor a preliminary annual
financial budget for the Facility for the next Fiscal Year, a
preliminary capital expenditures budget for the Facility for
the next Fiscal Year and a report detailing the capital
expenditures made in the then current Fiscal Year and on or
before the end of the first month of each Fiscal Year,
Lessee, any Sublessee and/or any Manager shall submit to
Lessor revised finalized versions of such budgets and report.
11.2.2 RESPONSIBLE OFFICER. Any certificate, instrument,
notice, or other document to be provided to Lessor hereunder by any
member of the Leasing Group shall be signed by an executive officer of
such member (in the event that any of the foregoing is not an
individual), having a position of Vice President or higher and with
respect to financial matters, any such certificate, instrument, notice
or other document shall be signed by the chief financial officer of
such member.
11.2.3 NO MATERIAL OMISSION. No certificate, instrument,
notice or other document, including without limitation, any financial
statements furnished or to be furnished to Lessor pursuant to the
terms hereof or of any of the other Lease Documents shall contain any
untrue statement of a material fact or shall omit to state any
material fact necessary in order to prevent all statements contained
therein from being misleading.
11.2.4 CONFIDENTIALITY. Lessor shall afford any information
received pursuant to the provisions of the Lease Documents the same
degree of confidentiality that Lessor affords similar information
proprietary to Lessor; provided, however, that Lessor does not in any
way warrant or represent that such information received from any
member of the Leasing Group shall remain confidential (and shall not
be liable in any way for any subsequent disclosure of such information
by any Person that Lessor has provided such information in accordance
with the terms hereof) and provided, further, that Lessor shall have
the unconditional right to (A) disclose any such information as Lessor
deems necessary or appropriate in connection with any sale, transfer,
conveyance, participation or assignment of the Leased Property or any
of the Lease Documents or any interest therein and (B) use such
information in any litigation or arbitration proceeding between Lessor
and any member of the Leasing Group. Without limiting the foregoing,
Lessor may also utilize any information furnished to it hereunder as
and to the extent (I) counsel to Lessor determines that such
utilization is necessary pursuant to 15 U.S.C. 77a-77aa or 15 U.S.C.
78a-78jj and the rules and regulations promulgated thereunder, (II)
Lessor is required or requested by any Governmental Authority to
disclose any such information and/or (III) Lessor is
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requested to disclose any such information by any of the Meditrust
Entities' lenders or potential lenders. Lessor shall not be liable in
any way for any subsequent disclosure of such information by any
Person to whom Lessor provided such information in accordance with the
terms hereof. Nevertheless, in connection with any such disclosure,
Lessor shall inform all recipients of any such information of the
confidential nature thereof. Lessor additionally shall observe any
prohibitions or limitations on the disclosure of any such information
under applicable confidentiality law or regulations, to the extent
that the same are applicable to such information, including, without
limitation, any duly enacted "Patients' Bill of Rights" or similar
legislation, including such limitations as may be necessary to
preserve the confidentiality of the facility-patient relationship and
the physician-patient privilege.
11.3 FINANCIAL COVENANTS. Lessee covenants and agrees that, throughout
the Term and as long as Lessee is in possession of the Leased Property:
11.3.1 RENT COVERAGE RATIO OF LESSEE. Commencing with the
first full Fiscal Quarter after the first day of the third Lease Year,
and for each Fiscal Quarter thereafter through the end of the Term,
Lessee shall maintain a Rent Coverage Ratio equal to or greater than
1.2 to 1.
11.3.2 CURRENT RATIO - GUARANTOR. The Guarantor shall
maintain, at all times, a ratio of Consolidated Current Assets to
Consolidated Current Liabilities equal to or greater than 1 to 1.
11.3.3 TANGIBLE NET WORTH - GUARANTOR. The Guarantor shall
maintain a Tangible Net Worth equal to or greater than (A) FIVE
HUNDRED THOUSAND DOLLARS ($500,000) from the date hereof through June
30, 1997, (B) SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000) from
July 1, 1997 through June 30, 1998 and (C) ONE MILLION DOLLARS
($1,000,000) from July 1, 1998 through the end of the Term.
11.3.4 NO INDEBTEDNESS. Lessee shall not create, incur,
assume or suffer to exist any liability for borrowed money except (I)
Indebtedness to Lessor under the Lease Documents and, (II) Impositions
allowed pursuant to the provisions of the Lease, (III) unsecured
normal trade debt incurred upon customary terms in the ordinary course
of business, (IV) Indebtedness created in connection with any
financing of any Capital Addition, provided, that each such financing
has been approved by Lessor in accordance with the terms of Article 9
hereof, (V) Indebtedness to any Affiliate, provided, that, such
Indebtedness is fully subordinated to this Lease pursuant to the
Affiliated Party Subordination Agreement, (VI) other Indebtedness of
Lessee in the aggregate amount not to exceed TWO HUNDRED THOUSAND
DOLLARS ($200,000) incurred, for the exclusive use of the Leased
Property, on account of purchase money indebtedness or finance lease
arrangements, each of which shall not exceed the fair market value of
the assets or property acquired or leased and
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shall not extend to any assets or property other than those purchased
or leased and purchase money security interests in equipment and
equipment leases which comply with the provisions of Section 6.1.2,
and (VII) liability arising under a working capital line of credit in
an amount reasonably satisfactory to Lessor.
11.3.5 NO GUARANTIES. Lessee shall not assume, guarantee,
endorse, contingently agree to purchase or otherwise become directly
or contingently liable (including, without limitation, liable by way
of agreement, contingent or otherwise, to purchase, to provide funds
for payment, to supply funds to or otherwise to invest in any debtor
or otherwise to assure any creditor against loss) in connection with
any Indebtedness of any other Person, except by the endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
11.4 AFFIRMATIVE COVENANTS. Lessee covenants and agrees that
throughout the Term and any periods thereafter that Lessee remains in
possession of the Leased Property:
11.4.1 MAINTENANCE OF EXISTENCE. If Lessee is a corporation,
trust or partnership, during the entire time that this Lease remains
in full force and effect, Lessee shall keep in effect its existence
and rights as a corporation, trust or partnership under the laws of
the state of its incorporation or formation and its right to own
property and transact business in the State.
11.4.2 MATERIALS. Except as provided in Section 6.1.2, Lessee
shall not suffer the use in connection with any renovations or other
construction relating to the Leased Property of any materials,
fixtures or equipment intended to become part of the Leased Property
which are purchased upon lease or conditional bill of sale or to which
Lessee does not have absolute and unencumbered title, and Lessee
covenants to cause to be paid punctually all sums becoming due for
labor, materials, fixtures or equipment used or purchased in
connection with any such renovations or construction, subject to
Lessee's right to contest to the extent provided for in Article 15.
11.4.3 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE
AGREEMENTS. Lessee and the Leased Property and all uses thereof shall
comply with (I) all Legal Requirements, (II) all Permits and
Contracts, (III) all Insurance Requirements, (IV) the Lease Documents,
(V) the Permitted Encumbrances and (VI) the Appurtenant Agreements.
Without limiting the foregoing (A) Lessee shall, on or before the
Conversion Date, obtain a license to operate the Facility as a
personal care home and shall thereafter throughout the Term maintain
such license in full force and effect and (B) prior to the issuance of
such license, Lessee shall obtain the Department of Public Welfare's
approval of all forms of Residence Agreements to be utilized by Lessee
in connection with the operation of the Facility.
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11.4.4 BOOKS AND RECORDS. Lessee shall cause to be kept and
maintained, and shall permit Lessor and its representatives to inspect
at all reasonable times, accurate books of accounts in which complete
entries will be made in accordance with GAAP reflecting all financial
transactions of Lessee (showing, without limitation, all materials
ordered and received and all disbursements, accounts payable and
accounts receivable in connection with the operation of the Leased
Property).
11.4.5 PARTICIPATION IN THIRD PARTY PAYOR PROGRAMS. From and
after the Conversion Date, Lessee and each Sublessee shall participate
in all Third Party Payor Programs (which would be participated in by a
prudent operator in the good faith exercise of commercially reasonable
business judgment), in accordance with all requirements thereof
(including, without limitation, all applicable Provider Agreements),
and shall remain eligible to participate in such Third Party Payor
Programs, all as shall be necessary for the prudent operation of the
Facility in the good faith exercise of commercially reasonable
business judgment.
11.4.6 CONDUCT OF ITS BUSINESS. Lessee will maintain, and
cause any Sublessee and any Manager to maintain, experienced and
competent professional management with respect to its business and,
from and after the Conversion Date, with respect to the Leased
Property. Lessee, any Sublessee and any Manager shall conduct, in the
ordinary course, the operation of the Facility, and Lessee and any
Sublessee shall not enter into any other business or venture during
the Term or such time as Lessee or any Sublessee is in possession of
the Leased Property.
11.4.7 ADDRESS. Lessee shall provide Lessor thirty (30) days'
prior written notice of any change of its Principal Place of Business
from its current Principal Place of Business. Lessee shall maintain
the Collateral, including without limitation, all books and records
relating to its business, solely at its Principal Place of Business
and at the Leased Property. Lessee shall not (A) remove the
Collateral, including, without limitation, any books or records
relating to Lessee's business from either the Leased Property or
Lessee's Principal Place of Business or (B) relocate its Principal
Place of Business until after receipt of a certificate from Lessor,
signed by an officer thereof, stating that Lessor has, to its
satisfaction, obtained all documentation that it deems necessary or
desirable to obtain, maintain, perfect and confirm the first priority
security interests granted in the Lease Documents.
11.4.8 SUBORDINATION OF AFFILIATE TRANSACTIONS. Without
limiting the provisions of any other Section of this Lease or the
Affiliated Party Subordination Agreement, any payments to be made by
Lessee to (A) any member of the Leasing Group (or any Affiliate of any
member of the Leasing Group) or (B) any Affiliate of Lessee, in
connection with any transaction between Lessee and such Person,
including, without limitation, the purchase, sale or exchange of any
property, the rendering of any service to or with any such Person
(including, without limitation, all allocations of any so-called
corporate or central office costs, expenses and charges of
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any kind or nature) or the making of any loan or other extension of
credit or the making of any equity investment, shall be subordinate to
the complete payment and performance of the Lease Obligations;
provided, however, that all such subordinated payments may be paid at
any time unless: (X) after giving effect to such payment, Lessee shall
be unable to comply with any of its obligations under any of the Lease
Documents or (Y) a Lease Default has occurred and is continuing and
has not been expressly waived in writing by Lessor or an event or
state of facts exists, which, with the giving of notice or the passage
of time, or both, would constitute a Lease Default.
11.4.9 INSPECTION. At reasonable times and upon reasonable
notice, Lessee shall permit Lessor and its authorized representatives
(including, without limitation, the Consultants) to inspect the Leased
Property as provided in Section 7.1 above.
11.4.10 ADDITIONAL PROPERTY. In the event that at any time
during the Term, Lessee holds the fee title to or a leasehold interest
in any real property and/or personal property which is used as an
integral part of the operation of the Leased Property (but is not
subject to this Lease), Lessee shall (I) provide Lessor with prior
notice of such acquisition and (II) shall take such actions and enter
into such agreements as Lessor shall reasonably request in order to
grant Lessor a first priority mortgage or other security interest in
such real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably acceptable to
Lessor.
11.4.11 ANNUAL FACILITY UPGRADE EXPENDITURES. Commencing with
the third Lease Year to occur in the Term, Lessee shall make an Annual
Facility Upgrade Expenditure in the Facility in an amount no less than
TWO HUNDRED FIFTY DOLLARS ($250) multiplied by the number of units in
the Facility, such amount to be increased as of the first day of the
fourth Lease Year, and as of the first day of each subsequent Lease
Year, by an amount equal to the product of (I) TWO HUNDRED FIFTY
DOLLARS ($250) multiplied by (II) the Consumer Price Adjustment
Factor.
11.5 ADDITIONAL NEGATIVE COVENANTS. Lessee covenants and agrees that,
throughout the Term and such time as Lessee remains in possession of the Leased
Property:
11.5.1 RESTRICTIONS RELATING TO LESSEE. Except as may
otherwise be expressly provided in Section 19.4 or in any of the other
Lease Documents, Lessee shall not, without the prior written consent
of Lessor, in each instance, which consent may be withheld in the sole
and absolute discretion of Lessor:
(A) convey, assign, hypothecate, transfer, dispose
of or encumber, or permit the conveyance, assignment,
transfer, hypothecation, disposal or encumbrance of all or
any part of any legal or beneficial interest in this Lease,
its other assets or the Leased Property; provided, however,
that this restriction
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shall not apply to (I) the Permitted Encumbrances that may be
created after the date hereof pursuant to the Lease
Documents; (II) Liens created in accordance with Section
6.1.2 against Tangible Personal Property securing
Indebtedness permitted under Section 11.3.4(vi) relating to
equipment leasing or financing for the exclusive use of the
Leased Property; (III) the sale, conveyance, assignment,
hypothecation, lease or other transfer of any material asset
or assets (whether now owned or hereafter acquired), the fair
market value of which equals or is less than THIRTY-FIVE
THOUSAND DOLLARS ($35,000), individually, or ONE HUNDRED
FIFTY THOUSAND DOLLARS ($150,000) collectively; (IV) without
limitation as to amount, the disposition in the ordinary
course of business of any obsolete, worn out or defective
fixtures, furnishings or equipment used in the operation of
the Leased Property provided that the same are replaced with
fixtures, furnishings or equipment of equal or greater
utility or value or Lessee provides Lessor with an
explanation (reasonably satisfactory to Lessor) as to why
such fixtures, furnishings or equipment is no longer required
in connection with the operation of the Leased Property; (V)
without limitation as to amount, any sale of inventory by
Lessee in the ordinary course of business; and (VI) subject
to the terms of the Pledge Agreement and the Affiliated Party
Subordination Agreement, distributions to the shareholders of
Lessee;
(B) permit the use of the Facility, from and after
the Conversion Date, for any purpose other than the Primary
Intended Use; or
(C) liquidate, dissolve or merge or consolidate with
any other Person.
11.5.2 NO LIENS. Lessee will not directly or indirectly
create or allow to remain and will promptly discharge at its expense
any Lien, title retention agreement or claim upon or against the
Leased Property (including Lessee's interest therein) or Lessee's
interest in this Lease or any of the other Lease Documents, or in
respect of the Rent, excluding (A) this Lease and any permitted
Subleases, (B) the Permitted Encumbrances, (C) Liens which are
consented to in writing by Lessor, (D) Liens for those taxes of Lessor
which Lessee is not required to pay hereunder, (E) Liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either not yet
due or being contested in strict compliance with the terms and
conditions of Article 15, (F) any Liens which are the responsibility
of Lessor pursuant to the provisions of Article 20, (G) Liens for
Impositions which are either not yet due and payable or which are in
the process of being contested in strict compliance with the terms and
conditions of Article 15 and (H) involuntary Liens caused by the
actions or omissions of Lessor.
11.5.3 LIMITS ON AFFILIATE TRANSACTIONS. Lessee shall not
enter into any transaction with any Affiliate, including, without
limitation, the purchase, sale or exchange of any property, the
rendering of any service to or with any Affiliate and
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the making of any loan or other extension of credit, except in the
ordinary course of, and pursuant to the reasonable requirements of,
Lessee's business and upon fair and reasonable terms no less favorable
to the Lessee than would be obtained in a comparable arms'-length
transaction with any Person that is not an Affiliate.
11.5.4 NON-COMPETITION. Lessee acknowledges that upon and
after any termination of this Lease, any competition by any member of
the Leasing Group with any subsequent owner or subsequent lessee of
the Leased Property (the "Purchaser") would cause irreparable harm to
Lessor and any such Purchaser. To induce Lessor to enter into this
Lease, Lessee agrees that, from and after the date hereof and
thereafter until the fifth (5th) anniversary of the termination
hereof, no member of the Leasing Group nor any Person holding or
controlling, directly or indirectly, any interest in any member of the
Leasing Group (collectively, the "Limited Parties") shall be involved
in any capacity in or lend any of their names to or engage in any
capacity in any personal care home and/or assisted living facility,
center, unit or program (or in any Person engaged in any such activity
or any related activity competitive therewith), whether such
competitive activity shall be as an officer, director, owner,
employee, agent, advisor, independent contractor, developer, lender,
sponsor, venture capitalist, administrator, manager, investor,
partner, joint venturer, consultant or other participant in any
capacity whatsoever with respect to a personal care home and/or
assisted living facility, center, unit or program located within a ten
(10) mile radius of the Leased Property.
Lessee hereby acknowledges and agrees that none of the time
span, scope or area covered by the foregoing restrictive covenants is
or are unreasonable and that it is the specific intent of Lessee that
each and all of the restrictive covenants set forth hereinabove shall
be valid and enforceable as specifically set forth herein. Lessee
further agrees that these restrictions are special, unique,
extraordinary and reasonably necessary for the protection of Lessor
and any Purchaser and that the violation of any such covenant by any
of the Limited Parties would cause irreparable damage to Lessor and
any Purchaser for which a legal remedy alone would not be sufficient
to fully protect such parties.
Therefore, in addition to and without limiting any other
remedies available at law or hereunder, in the event that any of the
Limited Parties breaches any of the restrictive covenants hereunder or
shall threaten breach of any of such covenants, then Lessor and any
Purchaser shall be entitled to obtain equitable remedies, including
specific performance and injunctive relief, to prevent or otherwise
restrain a breach of this Section 11.5.4 (without the necessity of
posting a bond) and to recover any and all costs and expenses
(including, without limitation, attorneys' fees and expenses and court
costs) reasonably incurred in enforcing the provisions of this Section
11.5.4. The existence of any claim or cause of action of any of the
Limited Parties or any member of the Leasing Group against Lessor or
any Purchaser, whether predicated on this Lease or otherwise, shall
not constitute a defense to the enforcement by Lessor or
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any Purchaser of the foregoing restrictive covenants and the Limited
Parties shall not defend on the basis that there is an adequate remedy
at law.
Without limiting any other provision of this Lease, the
parties hereto acknowledge that the foregoing restrictive covenants
are severable and separate. If at any time any of the foregoing
restrictive covenants shall be deemed invalid or unenforceable by a
court having jurisdiction over this Lease, by reason of being vague or
unreasonable as to duration, or geographic scope or scope of
activities restricted, or for any other reason, such covenants shall
be considered divisible as to such portion and such covenants shall be
immediately amended and reformed to include only such covenants as are
deemed reasonable and enforceable by the court having jurisdiction
over this Lease to the full duration, geographic scope and scope of
restrictive activities deemed reasonable and thus enforceable by said
court; and the parties agree that such covenants as so amended and
reformed, shall be valid and binding as through the invalid or
unenforceable portion has not been included therein.
The provisions of this Section 11.5.4 shall survive the
termination of the Lease and any satisfaction of the Lease Obligations
in connection therewith or subsequent thereto. The parties hereto
acknowledge and agree that any Purchaser may enforce the provisions of
this Section 11.5.4 as a third party beneficiary.
11.5.5 NO DEFAULT. Lessee shall not commit any default or
breach under any of the Lease Documents.
11.5.6 RESTRICTIONS RELATING TO THE GUARANTOR AND THE
DEVELOPER. Except as may otherwise be expressly provided herein or in
any of the other Lease Documents, neither the Guarantor nor the
Developer shall, without the prior written consent of Lessor, in each
instance, which consent may be withheld in the sole and absolute
discretion of Lessor, convey, assign, donate, sell, mortgage or pledge
any real or personal property or take any other action which would
have a materially adverse effect upon the Tangible Net Worth or
general financial condition of the Guarantor or the Developer, as the
case may be. Notwithstanding the foregoing, but subject to the
provisions of Section 11.3, the Guarantor may guaranty obligations of
any of its present or future Affiliates.
11.5.7 [INTENTIONALLY DELETED].
11.5.8 ERISA. Lessee shall not establish or permit any
Sublessee to establish any new pension or defined benefit plan or
modify any such existing plan for employees subject to ERISA, which
plan provides any benefits based on past service without the advance
consent of Lessor to the amount of the aggregate past service
liability thereby created.
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11.5.9 FORGIVENESS OF INDEBTEDNESS. Lessee will not waive, or
permit any sublessee or Manager which is an Affiliate to waive any
debt or claim, except in the ordinary course of its business.
11.5.10 VALUE OF ASSETS. Except as disclosed in the financial
statements provided to Lessor as of the date hereof, Lessee will not
write up (by creating an appraisal surplus or otherwise) the value of
any assets of Lessee above their cost to Lessee, less the depreciation
regularly allowable thereon.
11.5.11 CHANGES IN FISCAL YEAR AND ACCOUNTING PROCEDURES.
Lessee shall not, without the prior written consent of Lessor, in each
instance, which consent may be withheld in Lessor's reasonable
discretion (A) change its fiscal year or capital structure or (B)
change, alter, amend or in any manner modify, except in accordance
with GAAP, any of its current accounting procedures related to the
method of revenue recognition, billing procedures or determinations of
doubtful accounts or bad debt expenses nor will Lessee permit any of
its Subsidiaries to change its fiscal year or suffer or permit any
circumstance to exist in which any Subsidiary is not wholly-owned,
directly or indirectly, by Lessee.
11.5.12 OPTION PURCHASE DOCUMENTS. Lessee shall not
terminate, amend, abridge, modify or otherwise limit the Option
Purchase Agreement or any of the other Option Purchase Documents
without the prior written consent of Lessor, in each instance, which
consent may be withheld in Lessor's sole and absolute discretion.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease and
thereafter until Lessee surrenders the Leased Property in the manner required
by this Lease, Lessee shall at its sole cost and expense keep the Leased
Property and the Tangible Personal Property located thereon and the business
operations conducted on the Leased Property insured as set forth below.
12.1.1 TYPES AND AMOUNTS OF INSURANCE. Lessee's insurance
shall include the following:
(A) property loss and physical damage insurance on
an all-risk basis (with only such exceptions as Lessor may in
its reasonable discretion approve) covering the Leased
Property (exclusive of Land) for its full replacement cost,
which cost shall be reset once a year at Lessor's option,
with an agreed-amount endorsement and a deductible not in
excess of TEN THOUSAND DOLLARS ($10,000.00). Such insurance
shall include, without limitation, the following
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coverages: (I) increased cost of construction, (II) cost of
demolition, (III) the value of the undamaged portion of the
Facility and (IV) contingent liability from the operation of
building laws, less exclusions provided in the normal "All
Risk" insurance policy. During any period of construction,
such insurance shall be on a builder's-risk, completed value,
non-reporting form with permission to occupy;
(B) flood insurance (if the Leased Property or any
portion thereof is situated in an area which is considered a
flood risk area by the U.S. Department of Housing and Urban
Development or any other Governmental Authority that may in
the future have jurisdiction over flood risk analysis) in
limits acceptable to Lessor;
(C) boiler and machinery insurance (including
related electrical apparatus and components) under a standard
comprehensive form, providing coverage against loss or damage
caused by explosion of steam boilers, pressure vessels or
similar vessels, now or hereafter installed on the Leased
Property, in limits acceptable to Lessor;
(D) earthquake insurance (if deemed necessary by
Lessor) in limits and with deductibles acceptable to Lessor;
(E) environmental impairment liability insurance (if
available) in limits and with deductibles acceptable to
Lessor;
(F) business interruption and/or rent loss insurance
in an amount equal to the annual Base Rent due hereunder plus
the aggregate sum of the Impositions relating to the Leased
Property due and payable during one year;
(G) comprehensive general public liability insurance
including coverages commonly found in the Broad Form
Commercial Liability Endorsements with amounts not less than
FIVE MILLION DOLLARS ($5,000,000) per occurrence with respect
to bodily injury and death and THREE MILLION DOLLARS
($3,000,000) for property damage and with all limits based
solely upon occurrences at the Leased Property without any
other impairment;
(H) professional liability insurance in an amount
not less than TEN MILLION DOLLARS ($10,000,000) for each
medical incident;
(I) physical damage insurance on an all-risk basis
(with only such exceptions as Lessor in its reasonable
discretion shall approve) covering the Tangible Personal
Property for the full replacement cost thereof and with a
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deductible not in excess of one percent (1%) of the full
replacement cost thereof;
(J) Workers' Compensation and Employers' Liability
Insurance providing protection against all claims arising out
of injuries to all employees of Lessee or of any Sublessee
(employed on the Leased Property or any portion thereof) in
amounts equal for Workers' Compensation, to the statutory
benefits payable to employees in the State and for Employers'
Liability, to limits of not less than ONE HUNDRED THOUSAND
DOLLARS ($100,000) for injury by accident, ONE HUNDRED
THOUSAND DOLLARS ($100,000) per employee for disease and FIVE
HUNDRED THOUSAND DOLLARS ($500,000) disease policy limit;
(K) subsidence insurance (if deemed necessary by
Lessor) in limits acceptable to Lessor; and
(L) such other insurance as Lessor from time to time
may reasonably require and also, as may from time to time be
required by applicable Legal Requirements and/or by any Fee
Mortgagee.
12.1.2 INSURANCE COMPANY REQUIREMENTS. All such insurance
required by this Lease or the other Lease Documents shall be issued
and underwritten by insurance companies licensed to do insurance
business by, and in good standing under the laws of, the State and
which companies have and maintain a rating of A:X or better by A.M.
Best Co.
12.1.3 POLICY REQUIREMENTS. Every policy of insurance from
time to time required under this Lease or any of the other Lease
Documents (other than worker's compensation) shall name Lessor as
owner, loss payee, secured party (to the extent applicable) and
additional named insured as its interests may appear. If an insurance
policy covers properties other than the Leased Property, then Lessor
shall be so named with respect only to the Leased Property. Each such
policy, where applicable or appropriate, shall:
(A) include an agreed amount endorsement and loss
payee, additional named insured and secured party
endorsements, in forms acceptable to Lessor in its sole and
absolute discretion;
(B) include mortgagee, secured party, loss payable
and additional named insured endorsements reasonably
acceptable to each Fee Mortgagee;
(C) provide that the coverages may not be cancelled
or materially modified except upon thirty (30) days' prior
written notice to Lessor and any Fee Mortgagee;
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(D) be payable to Lessor and any Fee Mortgagee
notwithstanding any defense or claim that the insurer may
have to the payment of the same against any other Person
holding any other interest in the Leased Property;
(E) be endorsed with standard noncontributory
clauses in favor of and in form reasonably acceptable to
Lessor and any Fee Mortgagee;
(F) expressly waive any right of subrogation on the
part of the insurer against Lessor, any Fee Mortgagee or the
Leasing Group; and
(G) otherwise be in such forms as shall be
reasonably acceptable to Lessor.
12.1.4 NOTICES; CERTIFICATES AND POLICIES. Lessee shall
promptly provide to Lessor copies of any and all notices (including
notice of non-renewal but excluding invoices for premiums due but not
delinquent), claims and demands which Lessee receives from insurers of
the Leased Property. At least ten (10) days prior to the expiration of
any insurance policy required hereunder, Lessee shall deliver to
Lessor certificates and evidence of insurance relating to all renewals
and replacements thereof, together with evidence, satisfactory to
Lessor, of payment of the premiums thereon. Lessee shall deliver to
Lessor original counterparts or copies certified by the insurance
company to be true and complete copies, of all insurance policies
required hereunder not later than the earlier to occur of (A) thirty
(30) days after the effective date of each such policy and (B) ten
(10) days after receipt thereof by Lessee.
12.1.5 LESSOR'S RIGHT TO PLACE INSURANCE. If Lessee shall
fail to obtain any insurance policy required hereunder by Lessor, or
shall fail to deliver the certificate and evidence of insurance
relating to any such policy to Lessor, or if any insurance policy
required hereunder (or any part thereof) shall expire or be cancelled
or become void or voidable by reason of any breach of any condition
thereof, or if Lessor determines that such insurance coverage is
unsatisfactory by reason of the failure or impairment of the capital
of any insurance company which wrote any such policy, upon demand by
Lessor, Lessee shall promptly obtain new or additional insurance
coverage on the Leased Property, or for those risks required to be
insured by the provisions hereof, satisfactory to Lessor, and, at its
option, Lessor may obtain such insurance and pay the premium or
premiums therefor; in which event, any amount so paid or advanced by
Lessor and all costs and expenses incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court
costs), shall be a demand obligation of Lessee to Lessor, payable as
an Additional Charge.
12.1.6 PAYMENT OF PROCEEDS. All insurance policies required
hereunder (except for general public liability, professional liability
and workers' compensation and employers liability insurance) shall
provide that in the event of loss, injury or
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damage, subject to the rights of any Fee Mortgagee, all proceeds shall
be paid to Lessor alone (rather than jointly to Lessee and Lessor).
Lessor is hereby authorized to adjust and compromise any such loss
with the consent of Lessee or, following any Lease Default, whether or
not cured, without the consent of Lessee, and to collect and receive
such proceeds in the name of Lessor and Lessee, and Lessee appoints
Lessor (or any agent designated by Lessor) as Lessee's
attorney-in-fact with full power of substitution, to endorse Lessee's
name upon any check in payment thereof. Subject to the provisions of
Article 13, such insurance proceeds shall be applied first toward
reimbursement of all costs and expenses reasonably incurred by Lessor
in collecting said insurance proceeds, then toward payment of the
Lease Obligations or any portion thereof, then due and payable, in
such order as Lessor determines, and then in whole or in part toward
restoration, repair or reconstruction of the Leased Property for which
such insurance proceeds shall have been paid.
12.1.7 IRREVOCABLE POWER OF ATTORNEY. The power of attorney
conferred on Lessor pursuant to the provisions of this Section 12.1,
being coupled with an interest, shall be irrevocable for as long as
this Lease is in effect or any Lease Obligations are outstanding,
shall not be affected by any disability or incapacity which Lessee may
suffer and shall survive the same. Such power of attorney, is provided
solely to protect the interests of Lessor and shall not impose any
duty on Lessor to exercise any such power, and neither Lessor nor such
attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its
gross negligence or wilful misconduct.
12.1.8 BLANKET POLICIES. Notwithstanding anything to the
contrary contained herein, Lessee's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called
blanket policy or policies of insurance carried and maintained by
Lessee and its Affiliates; provided, however, that the coverage
afforded to Lessor shall not be reduced or diminished or otherwise be
different from that which would exist under a separate policy meeting
all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided, further that the
requirements of this Section 12.1 are otherwise satisfied.
12.1.9 NO SEPARATE INSURANCE. Lessee shall not, on Lessee's
own initiative or pursuant to the request or requirement of any other
Person, take out separate insurance concurrent in form or contributing
in the event of loss with the insurance required hereunder to be
furnished by Lessee, or increase the amounts of any then existing
insurance by securing an additional policy or additional policies,
unless (A) all parties having an insurable interest in the subject
matter of the insurance, including Lessor, are included therein as
additional insureds and (B) losses are payable under said insurance in
the same manner as losses are required to be payable under this Lease.
Lessee shall immediately notify Lessor of the taking out of
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any such separate insurance or of the increasing of any of the amounts
of the then existing insurance by securing an additional insurance
policy or policies.
12.1.10 ASSIGNMENT OF UNEARNED PREMIUMS. Lessee hereby
assigns to Lessor all rights of Lessee in and to any unearned premiums
on any insurance policy required hereunder to be furnished by Lessee
which may become payable or are refundable after the occurrence of an
Event of Default hereunder, which amounts may be utilized by Lessor
for any purposes allowed hereunder or credited against the Lease
Obligations. In the event that this Lease is terminated for any
reason (other than the purchase of the Leased Property by Lessee), the
insurance policies required to be maintained hereunder, including all
right, title and interest of Lessee thereunder, shall become the
absolute property of Lessor.
12.2 INDEMNITY.
12.2.1 INDEMNIFICATION. Except with respect to the gross
negligence or wilful misconduct of Lessor or any of the other
Indemnified Parties, as to which no indemnity is provided, Lessee
hereby agrees to defend with counsel acceptable to Lessor, indemnify
and hold harmless Lessor and each of the other Indemnified Parties
from and against all damages, losses, claims, liabilities,
obligations, penalties, causes of action, costs and expenses
(including, without limitation, attorneys' fees, court costs and other
expenses of litigation) suffered by, or claimed or asserted against,
Lessor or any of the other Indemnified Parties, directly or
indirectly, based on, arising out of or resulting from (A) the use and
occupancy of the Leased Property or any business conducted therein,
(B) any act, fault, omission to act or misconduct by (I) any member of
the Leasing Group, (II) any Affiliate of Lessee or (III) any employee,
agent, licensee, business invitee, guest, customer, contractor or
sublessee of any of the foregoing parties, relating to, directly or
indirectly, the Leased Property, (C) any accident, injury or damage
whatsoever caused to any Person, including, without limitation, any
claim of malpractice, or to the property of any Person in or about the
Leased Property or outside of the Leased Property where such accident,
injury or damage results or is claimed to have resulted from any act,
fault, omission to act or misconduct by any member of the Leasing
Group or any Affiliate of Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (D) any Lease
Default, (E) any claim brought or threatened against any of the
Indemnified Parties by any member of the Leasing Group or by any other
Person on account of (I) Lessor's relationship with any member of the
Leasing Group pertaining in any way to the Leased Property and/or the
transaction evidenced by the Lease Documents and/or (II) Lessor's
negotiation of, entering into and/or performing any of its obligations
and/or exercising any of its right and remedies under any of the Lease
Documents, (F) any attempt by any member of the Leasing Group or any
Affiliate of Lessee to transfer or relocate any of the Permits to any
location other than the Leased Property and/or (G) the enforcement of
this indemnity. Any amounts which become payable by Lessee under this
Section 12.2.1 shall be a demand obligation of Lessee to
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Lessor, payable as an Additional Charge. The indemnity provided for in
this Section 12.2.1 shall survive any termination of this Lease.
12.2.2 INDEMNIFIED PARTIES. As used in this Lease the term
"Indemnified Parties" shall mean the Meditrust Entities, any Fee
Mortgagee and their respective successors, assigns, employees,
servants, agents, attorneys, officers, directors, shareholders,
partners and owners.
12.2.3 LIMITATION ON LESSOR LIABILITY. Neither Lessor nor any
Affiliate of Lessor shall be liable to any member of the Leasing Group
or any Affiliate of any member of the Leasing Group, or to any other
Person whatsoever for any damage, injury, loss, compensation, or claim
(including, but not limited to, any claim for the interruption of or
loss to any business conducted on the Leased Property) based on,
arising out of or resulting from any cause whatsoever, including, but
not limited to, the following: (A) repairs to the Leased Property, (B)
interruption in use of the Leased Property; (C) any accident or damage
resulting from the use or operation of the Leased Property or any
business conducted thereon; (D) the termination of this Lease by
reason of Casualty or Condemnation, (E) any fire, theft or other
casualty or crime, (F) the actions, omissions or misconduct of any
other Person, (G) damage to any property, or (H) any damage from the
flow or leaking of water, rain or snow. All Tangible Personal Property
and the personal property of any other Person on the Leased Property
shall be at the sole risk of Lessee and Lessor shall not in any manner
be held responsible therefor. Notwithstanding the foregoing, Lessor
shall not be released from liability for any injury, loss, damage or
liability suffered directly by Lessee to the extent caused directly by
the gross negligence or willful misconduct of Lessor, its servants,
employees or agents acting within the scope of their authority on or
about the Leased Property or in regards to the Lease; provided,
however, that in no event shall Lessor, its servants, employees or
agents have any liability based on any loss with respect to or
interruption in the operation of any business at the Leased Property
or for any indirect or consequential damages.
12.2.4 RISK OF LOSS. During the Term of this Lease, the risk
of loss or of decrease in the enjoyment and beneficial use of the
Leased Property in consequence of any damage or destruction thereof by
fire, the elements, casualties, thefts, riots, wars or otherwise, or
in consequence of foreclosures, levies or executions of Liens (other
than those created by Lessor in accordance with the provisions of
Article 20) is assumed by Lessee and, in the absence of the gross
negligence or willful misconduct as set forth in Section 12.2.3,
Lessor shall in no event be answerable or accountable therefor (except
for the obligation to account for insurance proceeds and Awards to the
extent provided for in Articles 13 and 14) nor shall any of the events
mentioned in this Section entitle Lessee to any abatement of Rent
(except for an abatement, if any, as specifically provided for in
Section 3.8).
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ARTICLE 13
FIRE AND CASUALTY
13.1 RESTORATION FOLLOWING FIRE OR OTHER CASUALTY.
13.1.1 FOLLOWING FIRE OR CASUALTY. In the event of any damage
or destruction to the Leased Property by reason of fire or other
hazard or casualty (a "Casualty"), Lessee shall give immediate written
notice thereof to Lessor and, subject to the terms of this Article 13,
Lessee shall proceed with reasonable diligence, in full compliance
with all applicable Legal Requirements, to perform such repairs,
replacement and reconstruction work (referred to herein as the "Work")
to restore the Leased Property to the condition it was in immediately
prior to such damage or destruction and to a condition adequate to
operate the Facility for the Primary Intended Use and in compliance
with Legal Requirements. All Work shall be performed and completed in
accordance with all Legal Requirements and the other requirements of
this Lease within one hundred and eighty (180) days following the
occurrence of the damage or destruction plus a reasonable time to
compensate for Unavoidable Delays (including for the purposes of this
Section, delays in obtaining Permits and in adjusting insurance
losses), but in no event beyond three-hundred and sixty-five (365)
days following the occurrence of the Casualty.
13.1.2 PROCEDURES. In the event that any Casualty results in
non-structural damage to the Leased Property in excess of TWENTY-FIVE
THOUSAND DOLLARS ($25,000) or in any structural damage to the Leased
Property, regardless of the extent of such structural damage, prior to
commencing the Work, Lessee shall comply with the following
requirements:
(A) Lessee shall furnish to Lessor complete plans
and specifications for the Work (collectively, the "Plans and
Specifications"), for Lessor's approval, in each instance,
which approval shall not be unreasonably withheld. The Plans
and Specifications shall bear the signed approval thereof by
an architect, licensed to do business in the State,
reasonably satisfactory to Lessor and shall be accompanied by
a written estimate from the architect, bearing the
architect's seal, of the entire cost of completing the Work,
and to the extent feasible, the Plans and Specifications
shall provide for Work of such nature, quality and extent,
that, upon the completion thereof, the Leased Property shall
be at least equal in value and general utility to its value
and general utility prior to the Casualty and shall be
adequate to operate the Leased Property for the Primary
Intended Use;
(B) Lessee shall furnish to Lessor certified or
photostatic copies of all Permits and Contracts required by
all applicable Legal Requirements in connection with the
commencement and conduct of the Work;
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(C) Lessee shall furnish to Lessor a cash deposit or
a payment and performance bond sufficient to pay for
completion of and payment for the Work in an amount not less
than the architect's estimate of the entire cost of
completing the Work, less the amount of property insurance
proceeds, if any, then held by Lessor and which Lessor shall
be required to apply toward restoration of the Leased
Property as provided in Section 13.2;
(D) Lessee shall furnish to Lessor such insurance
with respect to the Work (in addition to the insurance
required under Section 12.1 hereof) in such amounts and in
such forms as is reasonably required by Lessee; and
(E) Lessee shall not commence any of the Work until
Lessee shall have complied with the requirements set forth in
clauses (a) through (d) immediately above, as applicable,
and, thereafter, Lessee shall perform the Work diligently, in
a good and workmanlike fashion and in good faith in
accordance with (I) the Plans and Specifications referred to
in clause (a) immediately above, (II) the Permits and
Contracts referred to in clause (b) immediately above and
(III) all applicable Legal Requirements and other
requirements of this Lease; provided, however, that in the
event of a bona fide emergency during which Lessee is unable
to contact the appropriate representatives of Lessor, Lessee
may commence such Work as may be necessary in order to
address such emergency without Lessor's prior approval, as
long as Lessee immediately thereafter advises Lessor of such
emergency and the nature and scope of the Work performed and
obtains Lessor's approval of the remaining Work to be
completed.
13.1.3 DISBURSEMENT OF INSURANCE PROCEEDS. If, as provided in
Section 13.2, Lessor is required to apply any property insurance
proceeds toward repair or restoration of the Leased Property, then as
long as the Work is being diligently performed by Lessee in accordance
with the terms and conditions of this Lease, Lessor shall disburse
such insurance proceeds from time to time during the course of the
Work in accordance with and subject to satisfaction of the following
provisions and conditions. Lessor shall not be required to make
disbursements more often than at thirty (30) day intervals. Lessee
shall submit a written request for each disbursement at least ten (10)
Business Days in advance and shall comply with the following
requirements in connection with each disbursement:
(A) Prior to the commencement of any Work, Lessee
shall have received Lessor's written approval of the Plans
and Specifications (which approval shall not be unreasonably
withheld) and the Work shall be supervised by an experienced
construction manager with the consultation of an architect or
engineer qualified and licensed to do business in the State.
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(B) Each request for payment shall be accompanied by
(X) a certificate of the architect or engineer, bearing the
architect's or engineer's seal, and (Y) a certificate of the
general contractor, qualified and licensed to do business in
the State, that is performing the Work (collectively, the
"Work Certificates"), each dated not more than ten (10) days
prior to the application for withdrawal of funds, and each
stating:
(I) that all of the Work performed as of the date
of the certificates has been completed in
compliance with the approved Plans and
Specifications, applicable Contracts and all
applicable Legal Requirements;
(II) that the sum then requested to be withdrawn
has been paid by Lessee or is justly due to
contractors, subcontractors, materialmen,
engineers, architects or other Persons, whose
names and addresses shall be stated therein,
who have rendered or furnished certain
services or materials for the Work, and the
certificate shall also include a brief
description of such services and materials
and the principal subdivisions or categories
thereof and the respective amounts so paid or
due to each of said Persons in respect
thereof and stating the progress of the Work
up to the date of said certificate;
(III) that the sum then requested to be withdrawn,
plus all sums previously withdrawn, does not
exceed the cost of the Work insofar as
actually accomplished up to the date of such
certificate;
(IV) that the remainder of the funds held by
Lessor will be sufficient to pay for the full
completion of the Work in accordance with the
Plans and Specifications;
(V) that no part of the cost of the services and
materials described in the applicable Work
Certificate has been or is being made the
basis of the withdrawal of any funds in any
previous or then pending application; and
(VI) that, except for the amounts, if any,
specified in the applicable Work Certificate
to be due for services and materials, there
is no outstanding indebtedness known, after
due inquiry, which is then due and payable
for work, labor, services or materials in
connection with the Work which, if unpaid,
might become the basis of a vendor's,
mechanic's, laborer's or materialman's
statutory or other similar Lien upon the
Leased Property.
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(C) Lessee shall deliver to Lessor satisfactory
evidence that the Leased Property and all materials and all
property described in the Work Certificates are free and
clear of Liens, except (I) Liens, if any, securing
indebtedness due to Persons (whose names and addresses and
the several amounts due them shall be stated therein)
specified in an applicable Work Certificate, which Liens
shall be discharged upon disbursement of the funds then being
requested, (II) any Fee Mortgage and (III) the Permitted
Encumbrances. Lessor shall accept as satisfactory evidence of
the foregoing lien waivers in customary form from the general
contractor and all subcontractors performing the Work,
together with an endorsement of its title insurance policy
(relating to the Leased Property) in form acceptable to
Lessor, dated as of the date of the making of the then
current disbursement, confirming the foregoing.
(D) If the Work involves alteration or restoration
of the exterior of any Leased Improvement that changes the
footprint of any Leased Improvement, Lessee shall deliver to
Lessor, upon the request of Lessor, an "as-built" survey of
the Leased Property dated as of a date within ten (10) days
prior to the making of the first and final advances (or
revised to a date within ten (10) days prior to each such
advance) showing no encroachments other than such
encroachments, if any, by the Leased Improvements upon or
over the Permitted Encumbrances as are in existence as of the
date hereof.
(E) Lessee shall deliver to Lessor (I) an opinion of
counsel (satisfactory to Lessor both as to counsel and as to
the form of opinion) prior to the first advance opining that
all necessary Permits for the repair, replacement and/or
restoration of the Leased Property have been obtained and
that the Leased Property, if repaired, replaced or rebuilt in
accordance, in all material respects, with the approved Plans
and Specifications and such Permits, shall comply with all
applicable Legal Requirements and (II) an architect's
certificate (satisfactory to Lessor both as to the architect
and as to the form of the certificate) prior to the final
advance, certifying that the Leased Property was repaired,
replaced or rebuilt in accordance, in all material respects,
with the approved Plans and Specifications and complies with
all applicable Legal Requirements, including, without
limitation, all Permits referenced in the foregoing clause
(i).
(F) There shall be no Lease Default or any state of
facts or circumstance existing which, with the giving of
notice and/or the passage of time, would constitute any Lease
Default.
Lessor, at its option, may waive any of the foregoing requirements in
whole or in part in any instance. Upon compliance by Lessee with the
foregoing requirements (except for such requirements, if any, as
Lessor may have expressly elected to waive), and to
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the extent of (X) the insurance proceeds, if any, which Lessor may be
required to apply to restoration of the Leased Property pursuant to
the provisions of this Lease and (Y) all other cash deposits made by
Lessee, Lessor shall make available for payment to the Persons named
in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%)
as to all hard costs of the Work (the "Retainage"). It is understood
that the Retainage is intended to provide a contingency fund to assure
Lessor that the Work shall be fully completed in accordance with the
Plans and Specifications and the requirements of Lessor. Upon the full
and final completion of all of the Work in accordance with the
provisions hereof, the Retainage shall be made available for payment
to those Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making
any further advance, in addition to the requirements set forth above,
Lessee shall promptly deliver to Lessor:
(I) written certificates of the architect or engineer,
bearing the architect's or engineer's seal, and the
general contractor, certifying that the Work has been
fully completed in a good and workmanlike manner in
material compliance with the Plans and Specifications
and all Legal Requirements;
(II) an endorsement of its title insurance policy (relating
to the Leased Property) in form reasonably acceptable
to Lessor insuring the Leased Property against all
mechanic's and materialman's liens accompanied by the
final lien waivers from the general contractor and all
subcontractors;
(III) a certificate by Lessee in form and substance
reasonably satisfactory to Lessor, listing all costs
and expenses in connection with the completion of the
Work and the amount paid by Lessee with respect to the
Work; and
(IV) a temporary certificate of occupancy (if obtainable)
and all other applicable Permits and Contracts (that
have not previously been delivered to Lessor) issued by
or entered into with any Governmental Authority with
respect to the Leased Property and the Primary Intended
Use and by the appropriate Board of Fire Underwriters
or other similar bodies acting in and for the locality
in which the Leased Property is situated; provided,
that within thirty (30) days after completion of the
Work, Lessee shall obtain and deliver to Lessor a
permanent certificate of occupancy for the Leased
Property.
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Upon completion of the Work and delivery of the documents
required pursuant to the provisions of this Section 13.1, Lessor shall
pay the Retainage to Lessee or to those Persons entitled thereto and
if there shall be insurance proceeds or cash deposits, other than the
Retainage, held by Lessor in excess of the amounts disbursed pursuant
to the foregoing provisions, then provided that no Lease Default has
occurred and is continuing, nor any state of facts or circumstances
which, with the giving of notice and/or the passage of time would
constitute a Lease Default, Lessor shall pay over such proceeds or
cash deposits to Lessee.
No inspections or any approvals of the Work during or after
construction shall constitute a warranty or representation by Lessor,
or any of its agents or Consultants, as to the technical sufficiency,
adequacy or safety of any structure or any of its component parts,
including, without limitation, any fixtures, equipment or furnishings,
or as to the subsoil conditions or any other physical condition or
feature pertaining to the Leased Property. All acts, including any
failure to act, relating to Lessor are performed solely for the
benefit of Lessor to assure the payment and performance of the Lease
Obligations and are not for the benefit of Lessee or the benefit of
any other Person.
13.2 DISPOSITION OF INSURANCE PROCEEDS.
13.2.1 PROCEEDS TO BE RELEASED TO PAY FOR WORK. In the event
of any Casualty, except as provided for in Section 13.2.2, Lessor
shall release proceeds of property insurance held by it to pay for the
Work in accordance with the provisions and procedures set forth in
this Article 13, only if:
(A) all of the terms, conditions and provisions of
Sections 13.1 and 13.2.1 are satisfied;
(B) there does not then exist any Lease Default or
any state of facts or circumstance which, with the giving of
notice and/or the passage of time, would constitute such a
Lease Default;
(C) Lessee demonstrates to Lessor's satisfaction
that Lessee has the financial ability to satisfy the Lease
Obligations during such repair or restoration; and
(D) no Sublease (excluding Residence Agreements)
material to the operation of the Facility immediately prior
to such damage or taking shall have been cancelled or
terminated, nor contain any still exercisable right to cancel
or terminate, due to such Casualty if and to the extent that
the income from such Sublease is necessary in order to avoid
the violation of any of the financial covenants set forth in
this Lease or otherwise to avoid the creation of an Event of
Default.
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13.2.2 PROCEEDS NOT TO BE RELEASED. If, as the result of any
Casualty, the Leased Property is damaged to the extent it is rendered
Unsuitable For Its Primary Intended Use and if either: (A) Lessee,
after exercise of diligent efforts, cannot within a reasonable time
(not in excess of ninety (90) days) obtain all necessary Permits in
order to be able to perform all required Work and to again operate the
Facility for its Primary Intended Use within three hundred and
sixty-five (365) days from the occurrence of the damage or destruction
in substantially the manner as immediately prior to such damage or
destruction or (B) such Casualty occurs during the last twenty-four
(24) months of the Term and would reasonably require more than nine
(9) months to obtain all Permits and complete the Work, then Lessee
may either (I) acquire the Leased Property from Lessor for a purchase
price equal to the greater of (X) the Meditrust Investment or (Y) the
Fair Market Value of the Leased Property minus the Fair Market Added
Value, with the Fair Market Value and the Fair Market Added Value to
be determined as of the day immediately prior to such Casualty and
prior to any other Casualty which has not been fully repaired,
restored or replaced, in which event, Lessee shall be entitled upon
payment of the full purchase price to receive all property insurance
proceeds (less any costs and expenses incurred by Lessor in collecting
the same), or (II) terminate this Lease, in which event (subject to
the provisions of the last sentence of this Section 13.2.2) Lessor
shall be entitled to receive and retain the insurance proceeds;
provided, however, that Lessee shall only have such right of
termination effective upon payment to Lessor of all Rent and other
sums due under this Lease and the other Lease Documents through the
date of termination plus an amount, which when added to the sum of (1)
the Fair Market Value of the Leased Property as affected by all
unrepaired or unrestored damage due to any Casualty (and giving due
regard for delays, costs and expenses incident to completing all
repair or restoration required to fully repair or restore the same)
plus (2) the amount of insurance proceeds actually received by Lessor
(net of costs and expenses incurred by Lessor in collecting the same)
equals (3) the greater of the Meditrust Investment or the Fair Market
Value of the Leased Property minus the Fair Market Added Value, with
the Fair Market Value and the Fair Market Added Value to be determined
as of the day immediately prior to such Casualty and prior to any
other Casualty which has not been fully repaired. Any acquisition of
the Leased Property pursuant to the terms of this Section 13.2.2 shall
be consummated in accordance with the provisions of Article 18,
mutatis, mutandis. If such termination becomes effective, Lessor shall
assign to Lessee any outstanding insurance claims.
13.2.3 LESSEE RESPONSIBLE FOR SHORT-FALL. If the cost of the
Work exceeds the amount of proceeds received by Lessor from the
property insurance required under Article 12 (net of costs and
expenses incurred by Lessor in collecting the same), Lessee shall be
obligated to contribute any excess amount needed to repair or restore
the Leased Property and pay for the Work. Such amount shall be paid by
Lessee to Lessor together with any other property insurance proceeds
for application to the cost of the Work.
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13.3 TANGIBLE PERSONAL PROPERTY. All insurance proceeds payable by
reason of any loss of or damage to any of the Tangible Personal Property shall
be paid to Lessor as secured party, subject to the rights of the holders of any
Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or
the passage of time could constitute a Lease Default, has occurred and is
continuing, Lessor shall pay such insurance proceeds to Lessee to reimburse
Lessee for the cost of repairing or replacing the damaged Tangible Personal
Property, subject to the terms and conditions set forth in the other provisions
of this Article 13, mutatis mutandis.
13.4 RESTORATION OF CERTAIN IMPROVEMENTS AND THE TANGIBLE PERSONAL
PROPERTY. If Lessee is required or elects to restore the Facility, Lessee shall
either (A) restore (I) all alterations and improvements to the Leased Property
made by Lessee and (II) the Tangible Personal Property or (B) replace such
alterations and improvements and the Tangible Personal Property with
improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 NO ABATEMENT OF RENT. In no event shall any Rent abate as a
result of any Casualty.
13.6 TERMINATION OF CERTAIN RIGHTS. Any termination of this Lease
pursuant to this Article 13 shall cause any right of Lessee to extend the Term
of this Lease, granted to Lessee herein and any right of Lessee to purchase the
Leased Property contained in this Lease to be terminated and to be without
further force or effect.
13.7 WAIVER. Lessee hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction to the Leased Property
due to any Casualty which Lessee is obligated to restore or may restore under
any of the provisions of this Lease.
13.8 APPLICATION OF RENT LOSS AND/OR BUSINESS INTERRUPTION INSURANCE.
All proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to Lessor and dealt with as follows:
(A) if the Work has been promptly and diligently commenced by
Lessee and is in the process of being completed in accordance with
this Lease and no fact or condition exists which constitutes, or which
with the giving of notice and/or the passage of time would constitute,
a Lease Default, Lessor shall each month pay to Lessee out of the Rent
Insurance Proceeds a sum equal to that amount, if any, of the Rent
Insurance Proceeds paid by the insurer which is allocable to the
rental loss and/or business interruption for the preceding month minus
an amount equal to the sum of the Rent due hereunder for such month
plus any Impositions relating to the Leased Property then due and
payable;
(B) if the Work has not been promptly and diligently
commenced by Lessee or is not in the process of being completed in
accordance with this Lease, the Rent
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Insurance Proceeds shall be applied to any Rent then due, and, to the
extent sufficient therefor, an amount equal to Base Rent, Impositions
and insurance premiums payable for the next twelve (12) months, as
reasonably projected by Lessor, shall be held by Lessor as security
for the Lease Obligations and applied to the payment of Rent as it
becomes due; and
(C) if such Rent Insurance Proceeds received by Lessor (net
of costs and expenses incurred by Lessor in collecting the same)
exceed the amounts required under clauses (a) and (b) above, the
excess shall be paid to Lessee, provided no fact or circumstance
exists which constitutes, or with notice, or passage of time, or both,
would constitute, a Lease Default.
Notwithstanding the foregoing, Lessor may at its option use or release the Rent
Insurance Proceeds to pay for the Work and, if a Lease Default exists, Lessor
may apply all such insurance proceeds towards the Lease Obligations or hold
such proceeds as security therefor.
13.9 OBLIGATION TO ACCOUNT. Upon Lessee's written request, which may
not be made not more than once in any three (3) month period, Lessor shall
provide Lessee with a written accounting of the application of all insurance
proceeds received by Lessor.
ARTICLE 14
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
14.2 TOTAL TAKING. If there is a permanent Taking of all or
substantially all of the Leased Property, this Lease shall terminate on the
Date of Taking.
14.3 PARTIAL OR TEMPORARY TAKING. If there is a Permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as
the Leased Property is not thereby rendered permanently Unsuitable For Its
Primary Intended Use or, from and after the Conversion Date, temporarily
Unsuitable For Its Primary Intended Use for a period not likely to, or which
does not, exceed three hundred and sixty-five (365) days. If, however, the
Leased Property is thereby so rendered permanently or temporarily Unsuitable
For Its Primary Intended Use: (A) Lessee shall have the right to restore the
Leased Property, at its own expense, (subject to the right under certain
circumstances as provided for in Section 14.5 to receive the net proceeds of an
Award for reimbursement) to the extent possible, to substantially the same
condition as existed immediately before the partial or temporary Taking or (B)
Lessee shall have the right to acquire the Leased Property from Lessor (I)
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upon payment of all Rent due through the date that the purchase price is paid,
for a purchase price equal to the greater of (X) the Meditrust Investment or
(Y) the Fair Market Value of the Leased Property minus the Fair Market Added
Value, with the Fair Market Value of the Leased Property and the Fair Market
Added Value to be determined as of the day immediately prior to such partial or
temporary Taking and (II) in accordance with the terms and conditions set forth
in Article 18; in which event, this Lease shall terminate upon payment of such
purchase price and the consummation of such acquisition. Notwithstanding the
foregoing, Lessor may overrule Lessee's election under clause (a) or (b) and
instead either (1) terminate this Lease as of the date when Lessee is required
to surrender possession of the portion of the Leased Property so taken or (2)
compel Lessee to keep the Lease in full force and effect and to restore the
Leased Property as provided in clause (a) above, but only if the Leased
Property may be operated for at least eighty percent (80%) of the licensed unit
capacity of the Facility if operated in accordance with its Primary Intended
Use. Lessee shall exercise its election under this Section 14.3 by giving
Lessor notice thereof ("Lessee's Election Notice") within sixty (60) days after
Lessee receives notice of the Taking. Lessor shall exercise its option to
overrule Lessee's election under this Section 14.3 by giving Lessee notice of
Lessor's exercise of its rights under Section 14.3 within thirty (30) days
after Lessor receives Lessee's Election Notice. If, as the result of any such
partial or temporary Taking, this Lease is not terminated as provided above,
Lessee shall be entitled to an abatement of Rent, but only to the extent, if
any, provided for in Section 3.7, effective as of the date upon which the
Leased Property is rendered Unsuitable For Its Primary Intended Use.
14.4 RESTORATION. If there is a partial or temporary Taking of the
Leased Property and this Lease remains in full force and effect pursuant to
Section 14.3, Lessee shall accomplish all necessary restoration and Lessor
shall release the net proceeds of such Award to reimburse Lessee for the actual
reasonable costs and expenses thereof, subject to all of the conditions and
provisions set forth in Article 13 as though the Taking was a Casualty and the
Award was insurance proceeds. If the cost of the restoration exceeds the amount
of the Award (net of costs and expenses incurred in obtaining the Award),
Lessee shall be obligated to contribute any excess amount needed to restore the
Facility or pay for such costs and expenses. To the extent that the cost of
restoration is less than the amount of the Award (net of cost and expenses
incurred in obtaining the Award), the remainder of the Award shall be retained
by Lessor and Rent shall be abated as set forth in Section 3.7.
14.5 AWARD DISTRIBUTION. In the event Lessee completes the purchase of
the Leased Property, as described in Section 14.3, the entire Award shall, upon
payment of the purchase price and all Rent and other sums due under this Lease
and the other Lease Documents, belong to Lessee and Lessor agrees to assign to
Lessee all of Lessor's rights thereto. In any other event, the entire Award
shall belong to and be paid to Lessor.
14.6 CONTROL OF PROCEEDINGS. Subject to the rights of any Fee
Mortgagee, unless and until Lessee completes the purchase of the Leased
Property as provided in Section 14.3, all proceedings involving any Taking and
the prosecution of claims arising out of any Taking
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against the Condemnor shall be conducted, prosecuted and settled by Lessor;
provided, however, that Lessor shall keep Lessee apprised of the progress of
all such proceedings and shall solicit Lessee's advice with respect thereto and
shall give due consideration to any such advice. In addition, Lessee shall
reimburse Lessor (as an Additional Charge) for all costs and expenses,
including reasonable attorneys' fees, appraisal fees, fees of expert witnesses
and costs of litigation or dispute resolution, in relation to any Taking,
whether or not this Lease is terminated; provided, however, if this Lease is
terminated as a result of a Taking, Lessee's obligation to so reimburse Lessor
shall be diminished by the amount of the Award, if any, received by Lessor
which is in excess of the Meditrust Investment.
ARTICLE 15
PERMITTED CONTESTS
15.1 LESSEE'S RIGHT TO CONTEST. To the extent of the express
references made to this Article 15 in other Sections of this Lease, Lessee, any
Sublessee or any Manager on their own or on Lessor's behalf (or in Lessor's
name), but at their sole cost and expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental
Authority related to the operation of the Leased Property for its Primary
Intended Use or any Lien or claim relating to the Leased Property not otherwise
permitted by this Agreement; provided, that (A) prior written notice of such
contest is given to Lessor, (B) in the case of an unpaid Imposition, Lien or
claim, the commencement and continuation of such proceedings shall suspend the
collection thereof from Lessor and/or compliance by any applicable member of
the Leasing Group with the contested Legal Requirement or other matter may be
legally delayed pending the prosecution of any such proceeding without the
occurrence or creation of any Lien, charge or liability of any kind against the
Leased Property, (C) neither the Leased Property nor any rent therefrom would
be in any immediate danger of being sold, forfeited, attached or lost as a
result of such proceeding, (D) in the case of a Legal Requirement, neither
Lessor nor any member of the Leasing Group would be in any immediate danger of
civil or criminal liability for failure to comply therewith pending the outcome
of such proceedings, (E) in the event that any such contest shall involve a sum
of money or potential loss in excess of TEN THOUSAND DOLLARS ($10,000), Lessee
shall deliver to Lessor an Officer's Certificate and opinion of counsel, if
Lessor deems the delivery of an opinion to be appropriate, certifying or
opining, as the case may be, as to the validity of the statements set forth to
the effect set forth in clauses (b), (c) and (d), to the extent applicable, (F)
Lessee shall give such cash security as may be demanded in good faith by Lessor
to insure ultimate payment of any fine, penalty, interest or cost and to
prevent any sale or forfeiture of the affected portion of the Leased Property
by reason of such non-payment or non-compliance, (G) if such contest is finally
resolved against Lessor or any member of the Leasing Group, Lessee shall
promptly pay, as Additional Charges due hereunder, the amount required to be
paid, together with all interest and penalties accrued thereon and/or comply
(and cause any Sublessee and any
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Manager to comply) with the applicable Legal Requirement, and (H) no state of
facts or circumstance exists which constitutes, or with the passage of time
and/or the giving of notice, could constitute a Lease Default; provided,
however, the provisions of this Article 15 shall not be construed to permit
Lessee to contest the payment of Rent or any other sums payable by Lessee to
Lessor under any of the Lease Documents.
15.2 LESSOR'S COOPERATION. Lessor, at Lessee's sole cost and expense,
shall execute and deliver to Lessee such authorizations and other documents as
may reasonably be required in any such contest, so long as the same does not
expose Lessor to any civil or criminal liability, and, if reasonably requested
by Lessee or if Lessor so desires, Lessor shall join as a party therein.
15.3 LESSEE'S INDEMNITY. Lessee, as more particularly provided for in
Section 12.2, shall indemnify, defend (with counsel acceptable to Lessor) and
save Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
16.1 EVENTS OF DEFAULT. Each of the following shall constitute an
"Event of Default" hereunder and shall entitle Lessor to exercise its remedies
hereunder and under any of the other Lease Documents:
(A) any failure of Lessee to pay any amount due hereunder or
under any of the other Lease Documents within ten (10) days following
the date when such payment was due;
(B) any failure in the observance or performance of any other
covenant, term, condition or warranty provided in this Lease or any of
the other Lease Documents, other than the payment of any monetary
obligation and other than as specified in subsections (c) through (x)
below (a "Failure to Perform"), continuing for thirty (30) days after
the giving of notice by Lessor to Lessee specifying the nature of the
Failure to Perform; except as to matters not susceptible to cure
within thirty (30) days, provided that with respect to such matters,
(I) Lessee commences the cure thereof within thirty (30) days after
the giving of such notice by Lessor to Lessee, (II) Lessee
continuously prosecutes such cure to completion, (III) such cure is
completed within ninety (90) days after the giving of such notice by
Lessor to Lessee and (IV) such Failure to Perform does not impair the
value of, or Lessor's rights with respect to, the Leased Property or
otherwise impair the Collateral or Lessor's security interest therein;
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(C) the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and grace
periods, if any, under any of the other Lease Documents;
(D) if any representation, warranty or statement contained
herein or in any of the other Lease Documents proves to be untrue in
any material respect as of the date when made or at any time during
the Term if such representation or warranty, other than the
representations and warranties contained in Section 10.16, is a
continuing representation or warranty pursuant to Section 10.2;
(E) if any representation or warranty contained in Section
10.1.16 proves to be untrue in any material respect at any time during
the Term and remains untrue for thirty (30) days after the date such
representation or warranty proved to be untrue; except as to matters
not susceptible to cure within such thirty (30) day period, provided
that with respect to such matters, (I) Lessee commences the cure
thereof within such thirty (30) day period, (II) Lessee continuously
prosecutes such cure to completion, (III) such cure is completed
within ninety (90) days after the date such representation or warranty
proved to be untrue and (IV) the failure of such representation or
warranty to remain true does not impair the value of, or Lessor's
rights with respect to, the Leased Property or otherwise impair the
Collateral or Lessor's security interest therein;
(F) if any member of the Leasing Group shall (I) voluntarily
be adjudicated a bankrupt or insolvent, (II) seek or consent to the
appointment of a receiver or trustee for itself or for the Leased
Property, (III) file a petition seeking relief under the bankruptcy or
other similar laws of the United States, any state or any
jurisdiction, (IV) make a general assignment for the benefit of
creditors, (V) make or offer a composition of its debts with its
creditors or (VI) be unable to pay its debts as such debts mature;
(G) if any court shall enter an order, judgment or decree
appointing, without the consent of any member of the Leasing Group, a
receiver or trustee for such member or for any of its property and
such order, judgment or decree shall remain in force, undischarged or
unstayed, sixty (60) days after it is entered;
(H) if a petition is filed against any member of the Leasing
Group which seeks relief under the bankruptcy or other similar laws of
the United States, any state or any other jurisdiction, and such
petition is not dismissed within sixty (60) days after it is filed;
(I) in the event that, without the prior written consent of
Lessor, in each instance, which consent may be withheld by Lessor in
its sole and absolute discretion:
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I. there shall be a change in the Person or Persons
presently in control of any member of the Leasing Group
(whether by operation of law or otherwise);
II. all or any portion of the interest of any partner or
member of any member of the Leasing Group shall be, on
any one or more occasions, directly or indirectly,
sold, assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise), if such
member of the Leasing Group shall be a partnership,
joint venture, syndicate or other group;
III. except in connection with the exercise by Lessor under
the Warrant of its right to become a shareholder of the
Guarantor, the shares of the issued and outstanding
capital stock of any member of the Leasing Group shall
be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise),
if such member of the Leasing Group shall be a
corporation; or
IV. all or any portion of the beneficial interest in any
member of the Leasing Group shall be, directly or
indirectly, sold or otherwise transferred (whether by
operation of law or otherwise), if such member of the
Leasing Group shall be a trust;
(J) the death, incapacity, liquidation, dissolution or
termination of existence of the any member of the Leasing Group or the
merger or consolidation of any member of the Leasing Group with any
other Person;
(K) except as otherwise permitted pursuant to Section 19.2
hereof, if, without the prior written consent of Lessor, in each
instance, which consent may be withheld by Lessor in its sole and
absolute discretion, Lessee's or any Sublessee's interest in the
Leased Property shall be, directly or indirectly, mortgaged,
encumbered (by any voluntary or involuntary Lien other than the
Permitted Encumbrances), subleased, sold, assigned, hypothecated or
otherwise transferred (whether by operation of law or otherwise);
(L) the occurrence of a default or breach of condition
continuing beyond the expiration of the applicable notice and grace
periods, if any, in connection with the payment or performance of any
other material obligation of Lessee or any Sublessee, whether or not
the applicable creditor or obligee elects to declare the obligations
of Lessee or the applicable Sublessee under the applicable agreement
due and payable or to exercise any other right or remedy available to
such creditor or obligee, if such creditor's or obligee's rights and
remedies may involve or result in (I) the taking of possession of the
Leased Property or (II) the assertion of any other right
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or remedy that, in Lessor's reasonable opinion, may impair Lessee's
ability punctually to perform all of its obligations under this Lease
and the other Lease Documents, may impair such Sublessee's ability
punctually to perform all of its obligations under its Sublease or may
materially impair Lessor's security for the Lease Obligations;
provided, however, that in any event, the election by the applicable
creditor or obligee to declare the obligations of Lessee under the
applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee shall be an Event of
Default hereunder only if such obligations, individually or in the
aggregate, are in excess of FIVE HUNDRED THOUSAND DOLLARS ($500,000);
(M) the occurrence of a Related Party Default;
(N) the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and grace
periods, if any, under any credit agreement, loan agreement or other
agreement establishing a major line of credit (or any documents
executed in connection with such lines of credit) on behalf of any
member of the Leasing Group whether or not the applicable creditor has
elected to declare the indebtedness due and payable under such line of
credit or to exercise any other right or remedy available to it. For
the purposes of this provision, a major line of credit shall mean and
include any line of credit established in an amount equal to or
greater than ONE MILLION DOLLARS ($1,000,000);
(O) except as a result of Casualty or a partial or complete
Condemnation, if Lessee or any Sublessee ceases operation of the
Facility, from and after the Conversion Date, for a period in excess
of thirty (30) days;
(P) if one or more judgments against Lessee or any Sublessee
or attachments against Lessee's interest or any Sublessee's interest
in the Leased Property, which in the aggregate exceed ONE HUNDRED
THOUSAND DOLLARS ($100,000) or which may materially and adversely
interfere with the operation of the Facility, remain unpaid, unstayed
on appeal, undischarged, unbonded or undismissed for a period of
thirty (30) days;
(Q) if, from and after the Conversion Date, any malpractice
award or judgment exceeding any applicable professional liability
insurance coverage by more than FIVE HUNDRED THOUSAND DOLLARS
($500,000) shall be rendered against any member of the Leasing Group
and either (I) enforcement proceedings shall have been commenced by
any creditor upon such award or judgment or (II) such award or
judgment shall continue unsatisfied and in effect for a period of ten
(10) consecutive days without an insurance company satisfactory to
Lessor (in its sole and absolute discretion) having agreed to fund
such award or judgment in a manner satisfactory to Lessor (in its sole
and absolute discretion) and in either case such award or judgment
shall, in the reasonable opinion of Lessor, have a material adverse
affect on the ability of any member of the Leasing Group to operate
the Facility;
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(R) if, from and after the Conversion Date, any Provider
Agreement material to the operation or financial condition of any
member of the Leasing Group shall be terminated prior to the
expiration of the term thereof or, without the prior written consent
of Lessor, in each instance, which consent may be withheld in Lessor's
reasonable discretion, shall not be renewed or extended upon the
expiration of the stated term thereof;
(S) if, after Lessee or any Sublessee has obtained approval
for participation in the Medicare and/or Medicaid programs with regard
to the operation of the Facility, a final unappealable determination
is made by the applicable Governmental Authority that Lessee or any
Sublessee shall have failed to comply with applicable Medicare and/or
Medicaid regulations in the operation of the Facility, as a result of
which failure Lessee or such Sublessee is declared ineligible to
continue its participation in the Medicare and/or Medicaid programs;
(T) if any member of the Leasing Group receives notice of a
final unappealable determination by applicable Governmental
Authorities of the revocation of any Permit required for the lawful
construction or operation of the Facility in accordance with the
Primary Intended Use or the loss of any Permit under any other
circumstances under which any member of the Leasing Group is required
to cease (I) the construction of the Project in excess of ten (10)
days or (II) after the Conversion Date, the operation of the Facility
in accordance with the Primary Intended Use; and
(U) any failure to maintain the insurance required pursuant
to Section 12 of this Lease in force and effect at all times until the
Lease Obligations are fully paid and performed;
(V) the appointment of a temporary manager (or operator) for
the Leased Property by any Governmental Authority;
(W) the entry of an order by a court with jurisdiction over
the Leased Property to close the Facility, to transfer one or more
residents from the Facility as a result of a finding or determination
of abuse or neglect or to take any action to eliminate an emergency
situation then existing at the Facility; or
(X) any failure to deliver the Cash Collateral to Lessor when
required under Section 1 of the Deposit Pledge Agreement or to
replenish the Cash Collateral, if required, under Section 7 of the
Agreement Regarding Related Lease Transactions.
16.2 REMEDIES.
(A) If any Lease Default shall have occurred, Lessor may at its option
terminate this Lease by giving Lessee not less than ten (10) days' notice of
such termination, or exercise any one or more of its rights and remedies under
this Lease or any of the other
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Lease Documents, or as available at law or in equity and upon the expiration of
the time fixed in such notice, the Term shall terminate (but only if Lessor
shall have specifically elected by a written notice to so terminate the Lease)
and all rights of Lessee under this Lease shall cease. Notwithstanding the
foregoing, in the event of Lessee's failure to pay Rent, if such Rent remains
unpaid beyond ten (10) days from the due date thereof, Lessor shall not be
obligated to give ten (10) days notice of such termination or exercise of any
of its other rights and remedies under this Lease, or the other Lease
Documents, or otherwise available at law or in equity, and Lessor shall be at
liberty to pursue any one or more of such rights or remedies without further
notice. No taking of possession of the Leased Property by or on behalf of
Lessor, and no other act done by or on behalf of Lessor, shall constitute an
acceptance of surrender of the Leased Property by Lessee or reduce Lessee's
obligations under this Lease or the other Lease Documents, unless otherwise
expressly agreed to in a written document signed by an authorized officer or
agent of Lessor.
(B) To the extent permitted under applicable law, Lessee shall pay as
Additional Charges all costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of Lessor as a
result of any Lease Default.
(C) If any Lease Default shall have occurred, whether or not this
Lease has been terminated pursuant to Paragraph (a) of this Section, Lessee
shall, to the extent permitted under applicable law, if required by Lessor so
to do, upon not less than ten (10) days' prior notice from Lessor, immediately
surrender to Lessor the Leased Property pursuant to the provisions of Paragraph
(a) of this Section and quit the same, and Lessor may enter upon and repossess
the Leased Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Lessee and all other Persons and any and all of the
Tangible Personal Property from the Leased Property, subject to the rights of
any residents or patients of the Facility and any Sublessees who are not
Affiliates of any member of the Leasing Group and to any requirements of
applicable law, or Lessor may claim ownership of the Tangible Personal Property
as set forth in Section 5.2.3 hereof or Lessor may exercise its rights as
secured party under the Security Agreement. Lessor shall use reasonable, good
faith efforts to relet the Leased Property or otherwise mitigate damages
suffered by Lessor as a result of Lessee's breach of this Lease.
(D) In addition to all of the rights and remedies of Lessor set forth
in this Lease and the other Lease Documents, if Lessee shall fail to pay any
rental or other charge due hereunder (whether denominated as Base Rent,
Additional Charges or otherwise) within ten (10) days after same shall have
become due and payable, then and in such event Lessee shall also pay to Lessor
(I) a late payment service charge (in order to partially defray Lessor's
administrative and other overhead expenses) equal to two hundred-fifty ($250)
dollars and (II) to the extent permitted by applicable law, interest on such
unpaid sum at the Overdue Rate; it being understood, however, that nothing
herein shall be deemed to extend the due date for payment of any sums required
to be paid by Lessee hereunder or to relieve Lessee of its obligation to pay
such sums at the time or times required by this Lease.
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(E) LESSOR SHALL HAVE THE FOLLOWING RIGHTS TO CONFESS JUDGMENT AGAINST
LESSEE AND ALL PERSONS CLAIMING THROUGH LESSEE, FOR POSSESSION OF THE LEASED
PROPERTY AND/OR FOR MONIES OWED TO LESSOR:
(I) IF ANY LEASE DEFAULT SHALL HAVE OCCURRED, LESSEE HEREBY
EMPOWERS ANY PROTHONOTARY, CLERK OF COURT OR ATTORNEY OF ANY
COURT OF RECORD TO APPEAR FOR LESSEE IN ANY AND ALL SUITS,
ACTIONS OR ACTIONS IN ASSUMPSIT WHICH MAY BE BROUGHT FOR RENT
OR ANY CHARGES HEREBY RESERVED AS RENT, OR DAMAGES BY REASON
THEREOF, OR ANY ADDITIONAL CHARGES, INCLUDING, WITHOUT
LIMITATION, ANY LATE FEES OR INTEREST ACCRUED OR ACCRUING
THEREON (COLLECTIVELY, THE "AMOUNTS DUE"), OR ANY PORTION
THEREOF. IN SUCH SUITS OR ACTIONS, LESSEE EMPOWERS SUCH
PROTHONOTARY, CLERK OF COURT OR ATTORNEY TO CONFESS JUDGMENT
AGAINST LESSEE FOR ALL OR ANY PART OF THE RENT SPECIFIED IN
THIS LEASE AND THEN UNPAID AND ALL OTHER AMOUNTS DUE UNDER
THIS LEASE. SUCH AUTHORITY SHALL NOT BE EXHAUSTED BY ONE
EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS AFORESAID
FROM TIME TO TIME AS OFTEN AS ANY RENT OR ANY OTHER AMOUNT
DUE SHALL FALL DUE OR BE IN ARREARS, INCLUDING WITHOUT
LIMITATION, FOR THE SAME AMOUNTS DUE AS PREVIOUSLY CONFESSED
IF AND TO THE EXTENT THAT A PREVIOUS CONFESSION OF JUDGMENT
SHALL BE STRICKEN OR OTHERWISE INVALIDATED WITHOUT A FINAL
DECISION ON THE MERITS OF THE CLAIM. SUCH POWERS MAY BE
EXERCISED AS WELL AFTER THE EXPIRATION OF THE INITIAL TERM,
DURING ANY EXTENSION TERM, AND/OR AFTER THE TERMINATION OF
THIS LEASE.
(II) WHEN THIS LEASE SHALL BE TERMINATED BY REASON OF A LEASE
DEFAULT OR ANY OTHER REASON WHATSOEVER, EITHER DURING THE
INITIAL TERM OR ANY EXTENSION TERM, AND ALSO WHEN THE TERM
HEREBY CREATED OR ANY EXTENSION THEREOF SHALL HAVE EXPIRED,
IT SHALL BE LAWFUL FOR ANY ATTORNEY TO APPEAR FOR LESSEE IN
ANY AND ALL SUITS OR ACTIONS WHICH MAY BE BROUGHT FOR
POSSESSION AND/OR EJECTMENT; AND AS ATTORNEY FOR LESSEE TO
CONFESS JUDGMENT IN EJECTMENT AGAINST LESSEE AND ALL PERSONS
CLAIMING UNDER LESSEE FOR THE RECOVERY BY LESSOR OF
POSSESSION OF THE LEASED PROPERTY, FOR WHICH THIS LEASE SHALL
BE LESSOR'S
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SUFFICIENT WARRANT. UPON SUCH CONFESSION OF JUDGMENT FOR
POSSESSION, IF LESSOR SO DESIRES, A WRIT OF EXECUTION OR OF
POSSESSION MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR WRIT OR
PROCEEDINGS WHATSOEVER. IF FOR ANY REASON AFTER SUCH ACTION
SHALL HAVE BEEN COMMENCED, THE SAME SHALL BE DETERMINED AND
THE POSSESSION OF THE LEASED PROPERTY SHALL REMAIN IN OR BE
RESTORED TO LESSEE, THEN LESSOR SHALL HAVE THE RIGHT UPON ANY
SUBSEQUENT OR CONTINUING LEASE DEFAULT, OR AFTER EXPIRATION
OF THIS LEASE, OR UPON THE TERMINATION OF THIS LEASE AS
HEREINBEFORE SET FORTH, TO BRING ONE OR MORE FURTHER ACTIONS
AS HEREINBEFORE SET FORTH TO RECOVER POSSESSION OF THE LEASED
PROPERTY.
(III) In any action of ejectment and/or for Rent in arrears or
other Amount Due, Lessor shall cause to be filed in such
action an affidavit made by Lessor or someone acting for
Lessor setting forth the facts necessary to authorize the
entry of judgment, of which facts such affidavit shall be
conclusive evidence. If a true copy of this Lease shall be
filed in such action (and the truth of the copy as asserted
in the affidavit of Lessor shall be sufficient evidence of
same), it shall not be necessary to file the original Lease
as a warrant of attorney, any rule of court, custom or
practice to the contrary notwithstanding.
(IV) Lessee expressly agrees, to the extent not prohibited by law,
that any judgment, order or decree entered against it by or
in any court or magistrate by virtue of the powers of
attorney contained in this Lease shall be final, and that
Lessee will not take an appeal, certiorari, writ of error,
exception or objection to the same, or file a motion or rule
to strike off or open or to stay execution of the same, and
releases to Lessor and to any and all attorneys who may
appear for Lessee all errors in such proceedings and all
liability therefor.
(V) The right to enter judgment against Lessee and to enforce all
of the other provisions of this Lease herein provided for, at
the option of any assignee of this Lease, may be exercised by
any assignee of Lessor's right, title and interest in this
Lease in Lessee's own name, notwithstanding the fact that any
or all assignments of such right, title and interest may not
be executed and/or witnessed in accordance with the Act of
Assembly of May 28,1715,1 Sm. L. 94, and all supplements and
amendments thereto that have been or may hereafter be passed.
Lessee hereby expressly waives the requirements of such Act
of Assembly and any and all laws regulating the manner and/or
form in which such assignments shall be executed and
witnessed.
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(VI) LESSEE ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY COUNSEL
IN CONNECTION WITH THE NEGOTIATION OF THIS LEASE, THAT IT HAS
READ AND DISCUSSED WITH SUCH COUNSEL THE PROVISIONS HEREIN
RELATING TO CONFESSION OF JUDGMENT, AND THAT IT UNDERSTANDS
THE NATURE AND CONSEQUENCES OF SUCH PROVISIONS.
16.3 DAMAGES. None of (A) the termination of this Lease pursuant to
Section 16.2, (B) the eviction of Lessee or the repossession of the Leased
Property, (C) the failure or inability of Lessor, notwithstanding reasonable
good faith efforts, to relet the Leased Property, (D) the reletting of the
Leased Property or (E) the failure of Lessor to collect or receive any rentals
due upon any such reletting, shall relieve Lessee of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In any such event, Lessee shall forthwith pay to
Lessor all Rent due and payable with respect to the Leased Property to and
including the date of such termination, repossession or eviction. Thereafter,
Lessee shall forthwith pay to Lessor, at Lessor's option, either:
(I) the sum of: (X) all Rent that is due and unpaid at the later
to occur of termination, repossession or eviction, together
with interest thereon at the Overdue Rate to the date of
payment, plus (Y) the worth (calculated in the manner stated
below) of the amount by which the unpaid Rent for the balance
of the Term after the later to occur of the termination,
repossession or eviction exceeds the fair market rental value
of the Leased Property for the balance of the Term, plus (Z)
any other amount necessary to compensate Lessor for all
damage proximately caused by Lessee's failure to perform the
Lease Obligations or which in the ordinary course would be
likely to result therefrom; or
(II) each payment of Rent as the same would have become due and
payable if Lessee's right of possession or other rights under
this Lease had not been terminated, or if Lessee had not been
evicted, or if the Leased Property had not been repossessed;
which Rent, to the extent permitted by law, shall bear
interest at the Overdue Rate from the date when due until the
date paid, and Lessor may enforce, by action or otherwise,
any other term or covenant of this Lease. There shall be
credited against Lessee's obligation under this Clause (ii)
amounts actually collected by Lessor from another tenant to
whom the Leased Property may have actually been leased or, if
Lessor is operating the Leased Property for its own account,
the actual Cash Flow of the Leased Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate
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of capitalization (highest present worth) reasonably applicable at the time of
such deter mination and allowed by applicable law.
16.4 LESSEE WAIVERS. If this Lease is terminated pursuant to Section
16.2, Lessee waives, to the extent not prohibited by applicable law, (A) any
right of redemption, re-entry or repossession, (B) any right to a trial by jury
in the event of summary proceedings to enforce the remedies set forth in this
Article 16, and (C) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
16.5 APPLICATION OF FUNDS. Any payments otherwise payable to Lessee
which are received by Lessor under any of the provisions of this Lease during
the existence or continuance of any Lease Default shall be applied to the Lease
Obligations in the order which Lessor may reasonably determine or as may be
required by the laws of the State.
16.6 [INTENTIONALLY DELETED].
16.7 LESSOR'S RIGHT TO CURE. If Lessee shall fail to make any payment,
or to perform any act required to be made or performed under this Lease and to
cure the same within the relevant time periods provided in Section 16.1,
Lessor, after five (5) Business Days' prior notice to Lessee (except in an
emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for
such purpose and take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case, to
the extent permitted by law) so incurred shall be paid by Lessee to Lessor on
demand as an Additional Charge. The obligations of Lessee and rights of Lessor
contained in this Article shall survive the expiration or earlier termination
of this Lease.
16.8 NO WAIVER BY LESSOR. Lessor shall not by any act, delay, omission
or otherwise (including, without limitation, the exercise of any right or
remedy hereunder) be deemed to have waived any of its right or remedies
hereunder or under any of the other Lease Documents unless such waiver is in
writing and signed by Lessor, and then, only to the extent specifically set
forth therein. No waiver at any time of any of the terms, conditions,
covenants, representations or warranties set forth in any of the Lease
Documents (including, without limitation, any of the time periods set forth
therein for the performance of the Lease Obligations) shall be construed as a
waiver of any other term, condition, covenant, representation or warranty of
any of the Lease Documents, nor shall such a waiver in any one instance or
circumstances be construed as a waiver of the same term, condition, covenant,
representation or warranty in any subsequent instance or circumstance. No such
failure, delay or waiver shall be construed as creating a requirement that
Lessor must thereafter, as a result of such failure, delay or waiver, give
notice to Lessee or the
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Guarantor, the Developer or any other Person that Lessor does not intend to, or
may not, give a further waiver or to refrain from insisting upon the strict
performance of the terms, conditions, covenants, representations and warranties
set forth in the Lease Documents before Lessor can exercise any of its rights
or remedies under any of the Lease Documents or before any Lease Default can
occur, or as establishing a course of dealing for interpreting the conduct of
and agreements between Lessor and Lessee, the Guarantor, the Developer or any
other Person.
The acceptance by Lessor of any payment that is less than payment in
full of all amounts then due under any of the Lease Documents at the time of
the making of such payment shall not: (A) constitute a waiver of the right to
exercise any of Lessor's remedies at that time or at any subsequent time, (B)
constitute an accord and satisfaction or (C) nullify any prior exercise of any
remedy, without the express written consent of Lessor. Any failure by Lessor to
take any action under this Lease or any of the other Lease Documents by reason
of a default hereunder or thereunder, any acceptance of a past due installment,
or any indulgence granted from time to time shall not be construed (I) as a
novation of this Lease or any of the other Lease Documents, (II) as a waiver of
any right of Lessor thereafter to insist upon strict compliance with the terms
of this Lease or any of the other Lease Documents or (III) to prevent the
exercise of any right of acceleration or any other right granted hereunder or
under applicable law; and to the maximum extent not prohibited by applicable
law, Lessor hereby expressly waives the benefit of any statute or rule of law
or equity now provided, or which may hereafter be provided, which would produce
a result contrary to or in conflict with the foregoing.
16.9 RIGHT OF FORBEARANCE. Whether or not for consideration paid or
payable to Lessor and, except as may be otherwise specifically agreed to by
Lessor in writing, no forbearance on the part of Lessor, no extension of the
time for the payment of the whole or any part of the Obligations, and no other
indulgence given by Lessor to Lessee or any other Person, shall operate to
release or in any manner affect the original liability of Lessee or such other
Persons, or to limit, prejudice or impair any right of Lessor, including,
without limitation, the right to realize upon any collateral, or any part
thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension, forbearance or indulgence being hereby
waived by Lessee and all those claiming by, through or under Lessee.
16.10 CUMULATIVE REMEDIES. The rights and remedies set forth under
this Lease are in addition to all other rights and remedies afforded to Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and remedies of
Lessor under each of the Lease Documents shall be separate and cumulative and
may be exercised concurrently or successively in Lessor's sole and absolute
discretion.
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ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 SURRENDER. Lessee shall, upon the expiration or prior termination
of the Term (unless Lessee has concurrently purchased the Leased Property in
accordance with the terms hereof), vacate and surrender the Leased Property to
Lessor in good repair and condition, in compliance with all Legal Requirements,
all Insurance Requirements, and in compliance with the provisions of Article 8,
except for: (A) ordinary wear and tear (subject to the obligation of Lessee to
maintain the Leased Property in good order and repair during the entire Term of
the Lease), (B) damage caused by the gross negligence or willful acts of
Lessor, and (C) any damage or destruction resulting from a Casualty or Taking
that Lessee is not required by the terms of this Lease to repair or restore.
17.2 TRANSFER OF PERMITS AND CONTRACTS. In connection with the
expiration or any earlier termination of this Lease (unless Lessee has
concurrently purchased the Leased Property in accordance with the terms
hereof), upon any request made from time to time by Lessor, Lessee shall (A)
promptly and diligently use its best efforts to (I) transfer and assign all
Permits and Contracts necessary or desirable for the operation of the Leased
Property in accordance with its Primary Intended Lease to Lessor or its
designee and/or (II) arrange for the transfer or assignment of such Permits and
Contracts to Lessor or its designee, all to the extent the same may be
transferred or assigned under applicable law and (B) cooperate in every respect
(and to the fullest extent possible) and assist Lessor or its designee in
obtaining such Permits and Contracts (whether by transfer, assignment or
otherwise). Such efforts and cooperation on the part of Lessee shall include,
without limitation, the execution, delivery and filing with appropriate
Governmental Authorities and Third Party Payors of any applications, petitions,
statements, notices, requests, assignments and other documents or instruments
requested by Lessor. Furthermore, Lessee shall not take any action or refrain
from taking any action which would defer, delay or jeopardize the process of
Lessor or its designee obtaining said Permits and Contracts (whether by
transfer, assignment or otherwise). Without limiting the foregoing, Lessee
shall not seek to transfer or relocate any of said Permits or Contracts to any
location other than the Leased Property. The provisions of this Section 17.2
shall survive the expiration or earlier termination of this Lease.
Lessee hereby appoints Lessor as its attorney-in-fact, with full power
of substitution to take such actions, in the event that Lessee fails to comply
with any request made by Lessor hereunder, as Lessor (in its sole absolute
discretion) may deem necessary or desirable to effectuate the intent of this
Section 17.2. The power of attorney conferred on Lessor by the provisions of
this Section 17.2, being coupled with an interest, shall be irrevocable until
the Obligations are fully paid and performed and shall not be affected by any
disability or incapacity which Lessee may suffer and shall survive the same.
Such power of attorney is provided solely to protect the interests of Lessor
and shall not impose any duty on Lessor to exercise any such power and neither
Lessor nor such attorney-in-fact shall be liable for any
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act, omission, error in judgment or mistake of law, except as the same may
result from its gross negligence or willful misconduct.
17.3 NO ACCEPTANCE OF SURRENDER. Except at the expiration of the Term
in the ordinary course, no surrender to Lessor of this Lease or of the Leased
Property or any interest therein shall be valid or effective unless agreed to
and accepted in writing by Lessor and no act by Lessor or any representative or
agent of Lessor, other than such a written acceptance by Lessor, shall
constitute an acceptance of any such surrender.
17.4 HOLDING OVER. If, for any reason, Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time Lessee shall pay as rental each month, one and one-half times
the aggregate of (I) one-twelfth of the aggregate Base Rent payable at the time
of such expiration or earlier termination of the Term; (II) all Additional
Charges accruing during the month and (III) all other sums, if any, payable by
Lessee pursuant to the provisions of this Lease with respect to the Leased
Property. During such period of tenancy, Lessee shall be obligated to perform
and observe all of the terms, covenants and conditions of this Lease, but shall
have no rights hereunder other than the right, to the extent given by law to
tenants at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or
earlier termination of this Lease.
ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 PURCHASE OF THE LEASED PROPERTY. In the event Lessee purchases
the Leased Property from Lessor pursuant to any of the terms of this Lease,
Lessor shall, upon receipt from Lessee of the applicable purchase price,
together with full payment of any unpaid Rent due and payable with respect to
any period ending on or before the date of the purchase, deliver to Lessee a
deed with covenants only against acts of Lessor conveying the entire interest
of Lessor in and to the Leased Property to Lessee subject to all Legal
Requirements, all of the matters described in clauses (a), (b), (e) and (g) of
Section 11.5.2, Impositions, any Liens created by Lessee, any Liens created in
accordance with the terms of this Lease or consented to by Lessee, the claims
of all Persons claiming by through or under Lessee, any other matters assented
to by Lessee and all matters for which Lessee has responsibility under any of
the Lease Documents, but otherwise not subject to any other Lien created by
Lessor from and after the Commencement Date (other than an Encumbrance
permitted under Article 20 which Lessee elects to assume). The applicable
purchase price shall be paid in cash to Lessor, or as Lessor may direct, in
federal or other immediately available funds except as otherwise mutually
agreed by Lessor and Lessee. All expenses of such conveyance, including,
without limitation, title examination costs, standard (and extended) coverage
title insurance premiums, attorneys' fees incurred by Lessor in connection with
such conveyance,
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recording and transfer taxes and recording fees and other similar charges shall
be paid by Lessee.
18.2 APPRAISAL.
18.2.1 DESIGNATION OF APPRAISERS. In the event that it
becomes necessary to determine the Fair Market Value of the Leased
Property for any purpose of this Lease, the party required or
permitted to give notice of such required determination shall include
in the notice the name of a Person selected to act as appraiser on its
behalf. Within ten (10) days after receipt of any such notice, Lessor
(or Lessee, as the case may be) shall by notice to Lessee (or Lessor,
as the case may be) appoint a second Person as appraiser on its
behalf.
18.2.2 APPRAISAL PROCESS. The appraisers thus appointed, each
of whom must be a member of the American Institute of Real Estate
Appraisers (or any successor organization thereto), shall, within
forty-five (45) days after the date of the notice appointing the first
appraiser, proceed to appraise the Leased Property to determine the
Fair Market Value of the Leased Property as of the relevant date
(giving effect to the impact, if any, of inflation from the date of
their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall
have been so appointed but only one such appraiser shall have made
such determination within fifty (50) days after the making of Lessee's
or Lessor's request, then the determination of such appraiser shall be
final and binding upon the parties. If two appraisers shall have been
appointed and shall have made their determinations within the
respective requisite periods set forth above and if the difference
between the amounts so determined shall not exceed ten per cent (10%)
of the lesser of such amounts, then the Fair Market Value of the
Leased Property shall be an amount equal to fifty percent (50%) of the
sum of the amounts so determined. If the difference between the
amounts so determined shall exceed ten percent (10%) of the lesser of
such amounts, then such two appraisers shall have twenty (20) days to
appoint a third appraiser, but if such appraisers fail to do so, then
either party may request the American Arbitration Association or any
successor organization thereto to appoint an appraiser within twenty
(20) days of such request, and both parties shall be bound by any
appointment so made within such twenty (20) day period. If no such
appraiser shall have been appointed within such twenty (20) days or
within ninety (90) days of the original request for a determination of
Fair Market Value of the Leased Property, whichever is earlier, either
Lessor or Lessee may apply to any court having jurisdiction to have
such appointment made by such court. Any appraiser appointed by the
original appraisers, by the American Arbitration Association or by
such court shall be instructed to determine the Fair Market Value of
the Leased Property within thirty (30) days after appointment of such
Appraiser. The determination of the appraiser which differs most in
terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and
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fifty percent (50%) of the sum of the remaining two determinations
shall be final and binding upon Lessor and Lessee as the Fair Market
Value of the Leased Property.
18.2.3 SPECIFIC ENFORCEMENT AND COSTS. This provision for
determination by appraisal shall be specifically enforceable to the
extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law. Lessor and Lessee
shall each pay the fees and expenses of the appraiser appointed by it
and each shall pay one-half of the fees and expenses of the third
appraiser and one-half of all other cost and expenses incurred in
connection with each appraisal.
18.3 [INTENTIONALLY DELETED].
18.4 LESSEE'S OPTION TO PURCHASE.
18.4.1 CONDITIONS TO OPTION. On the conditions (which
conditions Lessor may waive, at its sole option, by notice to Lessee
at any time) that (A) at the time of exercise of the Purchase Option
and on the applicable Purchase Option Date, there then exists no Lease
Default, nor any state of facts or circumstance which constitutes, or
with the passage of time and/or the giving of notice, would constitute
a Lease Default and (B) Lessee strictly complies with the provisions
of this Section 18.4, then Lessee shall have the option to purchase
the Leased Property, at the price and upon the terms hereinafter set
forth (the "Purchase Option").
18.4.2 EXERCISE OF OPTION. The Purchase Option shall permit
Lessee to purchase the Leased Property (A) on the last day of the
Initial Term or (B) on the last day of any Extended Term effectively
exercised by Lessee (each of such dates are referred to herein as a
"Purchase Option Date") and shall be exercised by notice given by
Lessee to Lessor (the "Lessee's Purchase Option Notice") at least one
hundred eighty (180) days (but not more than two hundred seventy (270)
days) prior to the relevant Purchase Option Date. Notwithstanding
anything to the contrary set forth in this Lease, Lessee's right to
purchase the Leased Property is subject to the further conditions that
(I) concurrently with the exercise of the option set forth under this
Section 18.4, the Lessee shall have exercised its right to purchase
the premises demised under each of the Related Leases in accordance
with the provisions of Section 18.4 of each of the Related Leases and
(II) the conveyance of the Leased Property pursuant to the provisions
of this Section 18.4 shall occur simultaneously with the conveyance of
the premises demised under each of the Related Leases pursuant to
Section 18.4 of each of the Related Leases and (III) all of the
conditions in the Agreement Regarding Related Lease Transactions
pertaining to the Purchase Option are satisfied. Once given, Lessee
shall have no right to rescind Lessee's Purchase Option Notice.
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18.4.3 CONVEYANCE. If the Purchase Option is exercised by
Lessee in accordance with the terms hereof, the Leased Property shall
be conveyed by a good and sufficient deed with covenants only against
acts of Lessor (the "Deed") running to Lessee or to such grantee as
Lessee may designate by notice to Lessor at least seven (7) days
before the Time of Closing.
18.4.4 CALCULATION OF PURCHASE PRICE. Subject to the terms of
the Agreement Regarding Related Lease Transactions, the price to be
paid by Lessee for the acquisition of the Leased Property pursuant to
this Purchase Option (the "Purchase Price") shall be equal to the
greater of (A) the Meditrust Investment or (B) an amount equal to the
then Fair Market Value of the Leased Property minus the Fair Market
Added Value.
18.4.5 PAYMENT OF PURCHASE PRICE. Subject to the terms of the
Agreement Regarding Related Lease Transactions, the Purchase Price
shall be paid by Lessee at the Time of Closing by certified,
cashier's, treasurer's or bank check(s) or wire transfer pursuant to
instructions received from Lessor.
18.4.6 PLACE AND TIME OF CLOSING. Subject to the terms of the
Agreement Regarding Related Lease Transactions, if the Purchase Option
is exercised, the closing shall occur and the Deed shall be delivered
(the "Closing") at the office of Lessor at 12:00 o'clock noon (local
time in Boston, Massachusetts) on the applicable Purchase Option Date
(such time, as the same may be extended by mutual written agreement of
Lessor and Lessee, being hereinafter referred to as the "Time of
Closing"). It is agreed that time is of the essence of the Purchase
Option.
18.4.7 CONDITION OF LEASED PROPERTY. The Leased Property is
to be purchased "AS IS" and "WHERE IS" as of the Time of Closing.
18.4.8 QUALITY OF TITLE. If Lessor shall be unable to give
title or to make conveyance, as stipulated in this Section 18.4, then,
at Lessor's option, Lessor shall use reasonable efforts to remove all
defects in title and the applicable Purchase Option Date and Time of
Closing shall be extended for period of thirty (30) days. Lessor shall
not be required to expend more than FIFTY THOUSAND DOLLARS ($50,000)
(inclusive of attorney's fees) in order to have used "reasonable
efforts."
18.4.9 LESSOR'S INABILITY TO PERFORM. If at the expiration of
the extended time Lessor shall have failed so to remove any such
defects in title, then all other obligations of all parties hereto
under Section 18.4 shall cease and Section 18.4 shall be void and
without recourse to the parties hereto. Notwithstanding the foregoing,
Lessee shall have the election, at either the original or extended
Purchase Option Date and Time of Closing, to accept such title as
Lessor can deliver to the Leased Property in its then condition and to
pay therefor the Purchase Price without reduction, in which case
Lessor shall convey such title; provided, that, in the event of such
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conveyance, if any portion of the Leased Property shall have been
taken by Condemnation prior to the applicable Purchase Option Date and
Time of Closing, Lessor shall pay over or assign to Lessee at the Time
of Closing, all Awards recovered on account of such Taking, less any
amounts reasonably expended by Lessor in obtaining such Awards, or, to
the extent such Awards have not been recovered as of the applicable
Purchase Option Date and Time of Closing, Lessor shall assign to
Lessee all its rights with respect to any claim therefor.
18.4.10 MERGER BY DEED. The acceptance of the Deed by Lessee
or the grantee designated by Lessee, as the case may be, shall be
deemed to be a full performance and discharge of every agreement and
obligation to be performed by Lessor contained or expressed in this
Lease.
18.4.11 USE OF PURCHASE PRICE TO CLEAR TITLE. To enable
Lessor to make conveyance as provided in this Section, Lessor may, at
the Time of Closing, use the Purchase Price or any portion thereof to
clear the title of any Lien, provided that all instruments so procured
are recorded contemporaneously with the Closing or reasonable
arrangements are made for a recording subsequent to the Time of
Closing in accordance with customary conveyancing practices.
18.4.12 LESSEE'S DEFAULT. If Lessee delivers Lessee's
Purchase Option Notice and fails to consummate the purchase of the
Leased Property in accordance with the terms hereof for any reason
other than Lessor's willful and unexcused refusal to deliver the Deed,
(A) Lessee shall thereafter have no further right to purchase the
Leased Property pursuant to this Section, although this Lease shall
otherwise continue in full force and effect and (B) Lessor shall have
the right to sue for specific performance of Lessee's obligations to
purchase the Leased Property provided such suit for specific
performance is commenced within one (1) year after the applicable
Purchase Option Date on which such sale was supposed to occur.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 SUBLETTING AND ASSIGNMENT. Except as specifically set forth in
Section 19.2 below, Lessee may not, without the prior written consent of
Lessor, which consent may be withheld in Lessor's sole and absolute discretion,
assign or pledge all or any portion of its interest in this Lease or any of the
other Lease Documents (whether by operation of law or otherwise) or sublet all
or any part of the Leased Property. For purposes of this Section 19.1, the term
"assign" shall be deemed to include, but not be limited to, any one or more
sales, pledges, hypothecations or other transfers (including, without
limitation, any transfer by operation of law) of any of the capital stock of or
partnership interest in Lessee or sales, pledges, hypothecations or other
transfers (including, without limitation, any
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transfer by operation of law) of the capital or the assets of Lessee. Any such
assignment, pledge, sale, hypothecation or other transfer made without Lessor's
consent shall be void and of no force and effect.
19.2 PERMITTED SUBLEASES. Notwithstanding the foregoing, Lessee shall
have the right to enter into Residence Agreements without the prior consent of
Lessor.
19.3 ATTORNMENT. Lessee shall insert in each Sublease approved by
Lessor provisions to the effect that (A) such Sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (B) in the event this Lease shall terminate before the
expiration of such Sublease, the Sublessee thereunder will, at Lessor's option,
attorn to Lessor and waive any right the Sublessee may have to terminate the
Sublease or to surrender possession thereunder, as a result of the termination
of this Lease and (C) in the event the Sublessee receives a written notice from
Lessor stating that Lessee is in default under this Lease, the Sublessee shall
thereafter be obligated to pay all rentals accruing under said Sublease
directly to Lessor or as Lessor may direct. All rentals received from the
Sublessee by Lessor shall be credited against the amounts owing by Lessee under
this Lease.
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 NO MERGER OF TITLE. There shall be no merger of this Lease or of
the leasehold estate created hereby with the fee estate in the Leased Property
by reason of the fact that the same Person may acquire, own or hold, directly
or indirectly (A) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate and (B) the fee estate in the
Leased Property.
20.2 TRANSFERS BY LESSOR. If the original Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 LESSOR MAY GRANT LIENS. Without the consent of Lessee, but
subject to the terms and conditions set forth below in this Section 20.3,
Lessor may, from time to time, directly or indirectly, create or otherwise
cause to exist any lien, encumbrance or title retention agreement upon the
Leased Property or any interest therein ("Encumbrance"),
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whether to secure any borrowing or other means of financing or refinancing,
provided that Lessee shall have no obligation to make payments under such
Encumbrances. Lessee shall subordinate this Lease to the lien of any such
Encumbrance, on the condition that the beneficiary or holder of such
Encumbrance executes a non-disturbance agreement in conformity with the
provisions of Section 20.4. To the extent that any such Encumbrance consists of
a mortgage or deed of trust on Lessor's interest in the Leased Property the
same shall be referred to herein as a "Fee Mortgage" and the holder thereof
shall be referred to herein as a "Fee Mortgagee".
20.4 SUBORDINATION AND NON-DISTURBANCE. Concurrently with the
execution and delivery of any Fee Mortgage entered into after the date hereof,
provided that the Lessee executes and delivers an agreement of the type
described in the following paragraph, Lessor shall obtain and deliver to Lessee
an agreement by the holder of such Fee Mortgage, pursuant to which, (A) the
applicable Fee Mortgagee consents to this Lease and (B) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (I) Lessee's rights under this Lease shall not be
disturbed nor shall this Lease be terminated or cancelled at any time, except
in the event that Lessor shall have the right to terminate this Lease under the
terms and provisions expressly set forth herein, (II) Lessee's option to
purchase the Leased Property shall remain in force and effect pursuant to the
terms hereof and (III) in the event that Lessee elects its option to purchase
the Leased Property and performs all of its obligations hereunder in connection
with any such election, the holder of the Fee Mortgage shall release its Fee
Mortgage upon payment by Lessee of the purchase price required hereunder,
provided, that (1) such purchase price is paid to the holder of the Fee
Mortgage, in the event that the Indebtedness secured by the applicable Fee
Mortgage is equal to or greater than the purchase price or (2) in the event
that the purchase price is greater than the Indebtedness secured by the Fee
Mortgage, a portion of the purchase price equal to the Indebtedness secured by
the Fee Mortgage is paid to the Fee Mortgagee and the remainder of the purchase
price is paid to Lessor.
At the request from time to time by any Fee Mortgagee, Lessee shall
(A) subordinate this Lease and all of Lessee's rights and estate hereunder to
the Fee Mortgage held by such Fee Mortgagee and (B) agree that Lessee will
attorn to and recognize such Fee Mortgagee or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such Fee Mortgage as
Lessor under this Lease for the balance of the Term then remaining. To effect
the intent and purpose of the immediately preceding sentence, Lessee agrees to
execute and deliver such instruments in recordable from as are reasonably
requested by Lessor or the applicable Fee Mortgagee; provided, however, that
such Fee Mortgagee simultaneously executes, delivers and records a written
agreement of the type described in the preceding paragraph.
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ARTICLE 21
LESSOR OBLIGATIONS
21.1 QUIET ENJOYMENT. As long as Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and
shall fully comply with all of the terms of this Lease and the other Lease
Documents and fully perform its obligations thereunder, Lessee shall peaceably
and quietly have, hold and enjoy the Leased Property throughout the Term, free
of any claim or other action by Lessor or anyone claiming by, through or under
Lessor, but subject to the Permitted Encumbrances and such Liens as may
hereafter be consented to by Lessee. No failure by Lessor to comply with the
foregoing covenant shall give Lessee any right to cancel or terminate this
Lease, or to fail to perform any other sum payable under this Lease, or to fail
to perform any other obligation of Lessee hereunder. Notwithstanding the
foregoing, Lessee shall have the right by separate and independent action to
pursue any claim it may have against Lessor as a result of a breach by Lessor
of the covenant of quiet enjoyment contained in this Article 21.
21.2 MEMORANDUM OF LEASE. Lessor and Lessee shall, promptly upon the
request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease and all options contained herein shall be made. Lessee shall pay all
recording costs and taxes associated therewith.
21.3 DEFAULT BY LESSOR. Lessor shall be in default of its obligations
under this Lease only if Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to be performed and such
failure shall continue for a period of thirty (30) days after notice thereof
from Lessee (or, from and after the Conversion Date, such shorter time as may
be necessary in order to protect the health or welfare of any residents of the
Facility or to insure the continuing compliance of the Facility with the
applicable Legal Requirements), unless such failure cannot with due diligence
be cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Lessor, within said thirty (30) day period,
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof. The time within which Lessor shall be obligated
to cure any such failure shall also be subject to extension of time due to the
occurrence of any Unavoidable Delay.
ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder or
under any of the other Lease Documents shall be in writing and shall be deemed
duly given if personally delivered, sent by certified mail, return receipt
requested, or sent by a nationally recognized commercial overnight delivery
service with provision for a receipt, postage or delivery
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charges prepaid, and shall be deemed given when so personally delivered or
postmarked or placed in the possession of such mail or delivery service and
addressed as follows:
If to Lessee:
With copies to:
If to the Guarantor
or the Developer:
With copies to:
If to Lessor:
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With copies to:
or such other address as Lessor, Lessee, the Guarantor or the Developer shall
hereinafter from time to time designate by a written notice to the others given
in such manner. Any notice given to Lessee, the Guarantor or the Developer by
Lessor at any time shall not imply that such notice or any further or similar
notice was or is required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
The Declaration of Trust establishing the sole shareholder of Lessor,
Meditrust, a Massachusetts business trust ("Meditrust"), dated August 6, 1985
(the "Declaration"), as amended, a copy of which is duly filed in the office of
the Secretary of State of the Commonwealth of Massachusetts, provides that the
name "Meditrust" 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 Meditrust or any of its Subsidiaries shall be
held to any personal liability, jointly, or severally, for any obligation of,
or claim against Meditrust or any of its Subsidiaries. All Persons dealing with
Meditrust or Lessor, in any way, shall look only to the assets of Meditrust or
Lessor, as applicable, for the payment of any sum or the performance of any
obligation. Furthermore, in no event shall Meditrust or Lessor ever be liable
to Lessee or any other Person for any indirect or consequential damages
incurred by Lessee or such other Person resulting from any cause whatsoever.
Notwithstanding the foregoing, Lessee hereby acknowledges and agrees that
Meditrust is not a party to this Lease and that Lessee shall look only to the
assets of Lessor for the payment of any sum or performance of any obligation
due by or from Lessor pursuant to the terms and provisions of the Lease
Documents.
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ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 BROKER'S FEE INDEMNIFICATION. Lessee shall and hereby agrees to
indemnify, defend (with counsel acceptable to Lessor) and hold Lessor harmless
from and against any and all claims for premiums or other charges, finder's
fees, taxes, brokerage fees or commissions and other similar compensation due
in connection with any of the transactions contemplated by the Lease Documents,
except such claims by any Person with whom Lessor has dealt without Lessee's
knowledge in connection with the transactions contemplated by the Lease
Documents. Notwithstanding the foregoing, Lessor shall have the option of
conducting its own defense against any such claims with counsel of Lessor's
choice, but at the expense of Lessee, as aforesaid. This indemnification shall
include all attorneys' fees and expenses and court costs reasonably incurred by
Lessor in connection with the defense against any such claims and the
enforcement of this indemnification agreement and shall survive the termination
of this Lease.
24.2 NO JOINT VENTURE OR PARTNERSHIP. Neither anything contained in
any of the Lease Documents, nor the acts of the parties hereto, shall create,
or be construed to create, a partnership or joint venture between Lessor and
Lessee. Lessee is not the agent or representative of Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, Lessor liable to any Person for goods delivered to Lessee,
services performed with respect to the Leased Property at the direction of
Lessee or for debts or claims accruing against Lessee.
24.3 AMENDMENTS, WAIVERS AND MODIFICATIONS. Except as otherwise
expressly provided for herein or in any other Lease Document, none of the
terms, covenants, conditions, warranties or representations contained in this
Lease or in any of the other Lease Documents may be renewed, replaced, amended,
modified, extended, substituted, revised, waived, consolidated or terminated
except by an agreement in writing signed by (A) all parties to this Lease or
the other applicable Lease Document, as the case may be, with regard to any
such renewal, replacement, amendment, modification, extension, substitution,
revision, consolidation or termination and (B) the Person against whom
enforcement is sought with regard to any waiver. The provisions of this Lease
and the other Lease Documents shall extend and be applicable to all renewals,
replacements, amendments, extensions, substitutions, revisions, consolidations
and modifications of any of the Lease Documents, the Management Agreements, the
Related Party Agreements, the Permits and/or the Contracts. References herein
and in the other Lease Documents to any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the Permits and/or the Contracts
shall be deemed to include any renewals, replacements, amendments, extensions,
substitutions, revisions, consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the
Lease Documents, whether express or implied, to any renewal, replacement,
amendment,
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extension, substitution, revisions, consolidation or modification of any of the
Lease Documents or any Management Agreement, Related Party Agreement, Permit
and/or the Contract is not intended to constitute an agreement or consent by
Lessor to any such renewal, replacement, amendment, substitution, revision,
consolidation or modification; but, rather as a reference only to those
instances where Lessor may give, agree or consent to any such renewal,
replacement, amendment, extension, substitution, revision, consolidation or
modification as the same may be required pursuant to the terms, covenants and
conditions of any of the Lease Documents.
24.4 CAPTIONS AND HEADINGS. The captions and headings set forth in
this Lease and each of the other Lease Documents are included for convenience
and reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 TIME IS OF THE ESSENCE. Time is of essence of each and every
term, condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 COUNTERPARTS. This Lease and the other Lease Documents may be
executed in one or more counterparts, each of which taken together shall
constitute an original and all of which shall constitute one in the same
instrument.
24.7 ENTIRE AGREEMENT. This Lease and the other Lease Documents set
forth the entire agreement of the parties with respect to the subject matter
and shall supersede in all respect those provisions of the letter of intent
dated ____________ (and all prior iterations thereof), from Meditrust to the
Guarantor, accepted by the Guarantor on ________________, relating to the
Project.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, LESSOR AND LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR HEREAFTER HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE LEASE OR ANY OF THE LEASE
DOCUMENTS. Without limiting the foregoing, Lessee waives the right to trial by
jury and any notices to quit as may be specified in the Lessor and Lessee Act
of Pennsylvania, Act of April 6, 1951 (68 P.S.C.A. Section 250.101 et seq.), as
the same may have been or may hereafter be amended, and agrees that the notices
provided in this Lease shall be sufficient in any case where a longer period
may be statutorily specified. Lessee hereby certifies that neither Lessor nor
any of Lessor's representatives, agents or counsel has represented expressly or
otherwise that Lessor would not, in the event of any such suit, action or
proceeding seek to enforce this waiver to the right of trial by jury and
acknowledges that Lessor has been induced by this waiver (among other things)
to enter into the transactions
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evidenced by this Lease and the other Lease Documents and further acknowledges
that Lessee (A) has read the provisions of this Lease, and in particular, the
paragraph containing this waiver, (B) has consulted legal counsel, (C)
understands the rights that it is granting in this Lease and the rights that it
waiving in this paragraph in particular and (D) makes the waivers set forth
herein knowingly, voluntarily and intentionally.
24.9 SUCCESSORS AND ASSIGNS. This Lease and the other Lease Documents
shall be binding and inure to the benefit of (A) upon Lessee and Lessee's legal
representatives and permitted successors and assigns and (B) Lessor and any
other Person who may now or hereafter hold the interest of Lessor under this
Lease and their respective successors and assigns. Notwithstanding the
foregoing, Lessee shall not assign any of its rights or obligations hereunder
or under any of the other Lease Documents without the prior written consent of
Lessor, in each instance, which consent may be withheld in Lessor's sole and
absolute discretion.
24.10 NO THIRD PARTY BENEFICIARIES. This Lease and the other Lease
Documents are solely for the benefit of Lessor, its successors, assigns and
participants (if any), the Meditrust Entities, the Indemnified Parties, Lessee,
the Guarantor, the other members of the Leasing Group and their respective
permitted successors and assigns, and, except as otherwise expressly set forth
in any of the Lease Documents, nothing contained therein shall confer upon any
Person other than such parties any right to insist upon or to enforce the
performance or observance of any of the obligations contained therein. All
conditions to the obligations of Lessor to advance or make available proceeds
of insurance or Awards, or to release any deposits held for Impositions or
insurance premiums are imposed solely and exclusively for the benefit of
Lessor, its successors and assigns. No other Person shall have standing to
require satisfaction of such conditions in accordance with their terms, and no
other Person shall, under any circumstances, be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lessor at any time, if, in Lessor's sole and absolute discretion, Lessor deems
it advisable or desirable to do so.
24.11 GOVERNING LAW. This Lease shall be construed and the rights and
obligations of Lessor and Lessee shall be determined in accordance with the
laws of the State.
Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the Leased
Property is situated as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for the purpose of any suit,
action or other proceeding arising out of or with respect to any of the Lease
Documents, the negotiation and/or consummation of the transactions evidenced by
the Lease Documents, the Lessor's relationship of any member of the Leasing
Group in connection with the transactions evidenced by the Lease Documents
and/or the performance of any obligation or the exercise of any remedy under
any of the Lease Documents and expressly waives any and all objections Lessee
may have as to venue in any of such courts.
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24.12 GENERAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease or any of the other
Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents or
any application thereof shall be invalid or unenforceable, the remainder of
this Lease or the other applicable Lease Document, as the case may be, and any
other application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that
if any provision of any of this Lease is capable of two (2) constructions, one
of which would render the provision void and the other of which would render
the provision valid, then such provision shall be construed in accordance with
the construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any
of the other Lease Documents are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring
of new or additional obligations, except as to all of the foregoing as
expressly provided for herein.
THE UNDERSIGNED LESSEE ACKNOWLEDGES THAT IT FULLY UNDERSTANDS THE
CONFESSION OF JUDGMENT CONTAINED IN SECTION 16.2(E) HEREOF AND THAT THE
LESSOR-LESSEE RELATIONSHIP CREATED HEREBY IS COMMERCIAL IN NATURE AND THAT THE
UNDERSIGNED WAIVES ANY RIGHT TO A HEARING WHICH WOULD OTHERWISE BE A CONDITION
TO LESSOR'S OBTAINING THE JUDGMENTS AUTHORIZED BY SECTION 16.2(E).
106
<PAGE> 117
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE:
- --------------------------
Name:
WITNESS: LESSOR:
- --------------------------
Name:
107
<PAGE> 118
SCHEDULE TO EXHIBIT 10.12 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
FACILITY LEASE AGREEMENT
<TABLE>
<CAPTION>
PROJECT PARTIES FACILITY AGREEMENT DATE INVESTMENT COMMENCEMENT DATE
------- ------- -------- -------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Reading, PA Meditrust Outlook Pointe at 2/27/97 $ 350,000.00 2/27/97
Acquisition Reading
Corporation II
(Lessor) and BCC
at Reading, Inc.
(Lessee)
State College, PA Meditrust Outlook Pointe at 11/1/96 $ 332,662.10 8/2/96
Acquisition State College
Corporation II
(Lessor) and BCC
at State
College, Inc.
(Lessee)
Allegheny, PA Meditrust Outlook Pointe at 8/2/96 $ 275,000.00 8/2/96
Acquisition Altoona
Corporation II
(Lessor) and BCC
at Altoona, Inc.
(Lessee)
Blytheville, AR Meditrust Outlook Pointe at 11/1/96 $3,516,500.00 11/4/94
Acquisition Blytheville
Corporation II
(Lessor) and
Balanced Care at
Blytheville,
Inc. (Lessee)
Maumelle, AR Meditrust Outlook Pointe at 11/1/96 $3,796,500.00 11/4/94
Acquisition Maumelle
Corporation II
(Lessor) and
Balanced Care at
Maumelle, Inc.
(Lessee)
Mountain Home, AR Meditrust Outlook Pointe at 11/1/96 $3,656,700.00 11/4/94
Acquisition Mountain Home
Corporation II
(Lessor) and
Balanced Care at
Mountain Home,
Inc.
(Lessee)
</TABLE>
<PAGE> 119
<TABLE>
<S> <C> <C> <C> <C> <C>
Pocahontas, AR Meditrust Outlook Pointe at 11/1/96 $3,455,500.00 11/4/94
Acquisition Pocahontas
Corporation II
(Lessor) and
Balanced Care at
Pocahontas, Inc.
(Lessee)
Sherwood, AR Meditrust Outlook Pointe at 11/1/96 $3,987,000.00 11/4/94
Acquisition Sherwood
Corporation II
(Lessor) and
Balanced Care at
Sherwood, Inc.
(Lessee)
Hermitage, MO National Care Hermitage 8/30/96 $5,348,485.00 8/30/96
Centers of
Hermitage, Inc.
(Lessor) and BCC
at Hermitage
Park Care
Center, Inc.
(Lessee)
Lebanon, MO National Care Lebanon Care 8/30/96 $5,173,125.00 8/30/96
Centers, Inc.
(Lessor) and
BCC at Lebanon
Care Center,
Inc. (Lessee)
Lebanon, MO National Care Lebanon Park 8/30/96 $8,768,008.00 8/30/96
Centers of
Lebanon, Inc.
(Lessor) and
BCC at Lebanon
Park Manor, Inc.
(Lessee)
Springfield, MO Springfield Mt. Vernon 8/30/96 $6,488,326.00 8/30/96
Retirement
Village, Inc.
(Lessor) and
BCC at Mt.
Vernon Park Care
Center, Inc.
(Lessee)
</TABLE>
<PAGE> 120
<TABLE>
<S> <C> <C> <C> <C> <C>
Nixa, MO National Care Nixa 8/30/96 $4,647,044.00 8/30/96
Centers of Nixa,
Inc. (Lessor)
and BCC at Nixa
Park Center,
Inc. (Lessee)
Springfield, MO National Care Springfield 8/30/96 $7,540,487.00 8/30/96
Centers of
Springfield,
Inc. (Lessor)
and BCC at
Springfield Care
Center, Inc.
(Lessee)
Springfield, MO Mt. Vernon Park West Park 8/30/96 $3,419,523.00 8/30/96
Care Center
West, Inc.
(Lessor) and BCC
at Mt. Vernon
Park Care Center
West, Inc.
(Lessee)
</TABLE>
<PAGE> 1
EXHIBIT 10.13
FORM OF SECURITY AGREEMENT
THIS AGREEMENT entered into as of ___________________________, by and
between _________________________________________, with its principal place of
business at ____________________________________________________________
(hereinafter referred to as the "Debtor"), and ____________________________
CORPORATION II, ___________________________________________________________
_______________________________________________ (hereinafter, the "Secured
Party").
W I T N E S S E T H
WHEREAS, the Secured Party has agreed to lease to the Debtor certain
real property located in __________________________________, and all of the
improvements now or hereafter located thereon, including, without limitation,
the personal care home to be known as _________________________, pursuant to
a Facility Lease Agreement of even date herewith by and between the Secured
Party and the Debtor (the "Lease"); and
WHEREAS, as a condition to the Secured Party entering into the Lease
and entering into or accepting the other Lease Documents (as defined in the
Lease), the Secured Party has required the execution and delivery of this
Agreement as additional security for the complete payment and performance of
the Obligations (as defined in the Lease);
NOW, THEREFORE, in consideration of the Secured Party agreeing to
purchase the Leased Property (as defined in the Lease) and to consummate the
transactions described in the Lease and the other Lease Documents, and in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Secured Party and the Debtor hereby agree as follows:
ARTICLE 1. GRANT OF SECURITY INTEREST
1.1 To secure the prompt, punctual and faithful performance of all and
each of the present and future Obligations, the Debtor hereby grants to the
Secured Party a continuing first priority security interest in and to, and
assigns to the Secured Party, all of the Debtor's right, title and interest in
the following properties, assets and rights, all wherever located and whether
now existing or hereafter acquired or arising (all of which, together with any
other property in which the Secured Party may in the future be granted a
security interest pursuant hereto, is referred to hereinafter as the
"Collateral"): (a) all Accounts and all Receivables; (b) all Inventory; (c) all
General Intangibles; (d) all Equipment; (e) all Fixtures; (f) all Goods; (g)
all Tangible Personal Property (as defined in the Lease); (h) all Chattel
Paper; (i) all books, records, ledgers, print-outs, papers, data, file
materials and information relating to the Leased Property, the Collateral, any
account debtors in respect thereof and/or to the operation of the Debtor's
business, and all rights of access to such books, records, ledgers, print-outs,
papers, file materials and information, and all property in which such books,
records, ledgers, print-outs, data, file materials and information are stored,
recorded, and
<PAGE> 2
maintained; (j) all Instruments, Documents of Title, Documents, policies and
certificates of insurance, Securities, deposits, deposit accounts, money, cash
or other property; (k) all federal, state, and local tax refunds and/or
abatements to which the Debtor is, or becomes entitled, no matter how or when
arising, including, but not limited to any loss carryback tax refunds; (l) all
trade secrets, computer programs, customer lists, patient lists, manuals,
assignments of patents and patents pending, developmental ideas and concepts,
and all papers, drawings, blueprints, sketches and documents relating to all of
the foregoing and/or relating to the operation of the Debtor's business and/or
the Collateral; and (m) all insurance proceeds, refunds and premium rebates,
whether any of such proceeds, refunds and premium rebates arise out of any of
the foregoing or otherwise; together with (i) all security pledged, assigned,
hypothecated or granted to or held by the Debtor to secure any of the
foregoing, (ii) General Intangibles arising out of the Debtor's rights in any
Goods, the sale of which gave rise thereto, (iii) any property received in
payment, settlement or compromise of any Account or Receivable, (iv) all
guarantees, endorsements and indemnifications on, or of, any of the foregoing,
(v) all rights, remedies and privileges pertaining to any of the foregoing,
(vi) all powers of attorney for the execution of any evidence of indebtedness
or security or other writing in connection therewith, (vii) all evidences of
the filing of financing statements and other statements and the registration of
other instruments in connection therewith and amendments thereto and (viii) all
of the Debtor's rights to use, in perpetuity, in connection with the operation
of the Leased Property, the name ___________________________ and/or any other
name and the good will of the Debtor with respect thereto.
1.2 The Debtor shall execute, upon request of the Secured Party, all
such instruments as may be required by the Secured Party with respect to the
perfection of the security interests granted herein. A carbon, photographic, or
other reproduction of this Agreement or of any financing statement or other
instrument executed pursuant to this Section 1.2 shall be sufficient for filing
to perfect the security interests granted herein, to the extent permitted under
applicable law.
ARTICLE 2. CERTAIN DEFINITIONS
All capitalized terms not defined herein shall have the same meanings
ascribed to such terms under the Lease.
As herein used, the following terms have the following meanings:
2.1 The term "Accounts" shall have the same meaning ascribed to such
term under the UCC.
2.2 The term "Chattel Paper" shall have the same meaning ascribed to
such term under the UCC.
2.3 The term "Collateral" shall have the same meaning ascribed to such
term in Section 1.1.
-2-
<PAGE> 3
2.4 The term "Debtor" shall have the same meaning ascribed to such term
in the preamble of this Agreement.
2.5 The term "Documents" shall have the same meaning ascribed to such
term under the UCC.
2.6 The term "Documents of Title" shall have the same meaning ascribed
to such term under the UCC.
2.7 The term "Equipment" shall have the same meaning ascribed to such
term under the UCC.
2.8 The term Event of Default shall have the same meaning ascribed to
such term in Article 5 of this Agreement.
2.9 The term "Fixtures" shall have the same meaning ascribed to such
term under the UCC.
2.10 The term "General Intangibles" shall have the same meaning
ascribed to such term under the UCC.
2.11 The term "Goods" shall have the same meaning ascribed to such term
under the UCC.
2.12 The term "Instruments" shall have the same meaning ascribed to
such term under the UCC.
2.13 The term "Inventory" shall have the same meaning ascribed to such
term under the UCC.
2.14 The term "Lease" shall have the same meaning ascribed to such term
in the preamble of this Agreement.
2.15 The term "Liable Person" shall have the same meaning ascribed to
such term in Section 7.3.
2.16 The term "Proceeds" shall have the meaning ascribed to such term
under the UCC.
2.17 The term "Receivables" shall mean collectively, all (I)
Instruments, Documents, Accounts, Proceeds, General Intangibles and Chattel
Paper and (II) rights to payment for goods sold or leased or services rendered
by Debtor or any other party, whether now in existence or arising from time to
time hereafter and whether or not yet earned by
-3-
<PAGE> 4
performance, including, without limitation, obligations evidenced by an
account, note, contract, security agreement, chattel paper, or other evidence
of indebtedness.
2.18 The term "Receivables Collateral" refers to the Debtor's Accounts,
Receivables, Chattel Paper, Instruments, Documents of Title, Documents,
Securities, Letters of Credit, the Secured Party's Acceptance, and any other
rights to payment now held or in which the Debtor has an interest, or hereafter
acquired, or in which the Debtor obtains an interest.
2.19 The term "Secured Party" shall have the meaning ascribed to such
term in the preamble of this Agreement.
2.20 The term "Secured Party's Rights and Remedies" shall have the
meaning ascribed to such term in Section 6.4.
2.21 The term "Securities" shall have the same meaning ascribed to such
term under the UCC.
2.22 The term "UCC" shall mean the Uniform Commercial Code as adopted
in the Commonwealth of Massachusetts.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Subject to Section 6.1.2 of the Lease, the Debtor is, and shall
hereafter remain, the owner of the Collateral free and clear of all Liens and
charges with the exceptions of (A) the security interests created herein and
(B) the security interests and other encumbrances, if any, listed in SCHEDULE
3.1 attached hereto and incorporated herein by reference as a material part
hereof.
3.2 The Collateral is and shall be kept and maintained solely at the
following locations (hereinafter collectively referred to as the "Premises"):
the Leased Property and/or the Debtor's Principal Place of Business.
3.3 The Debtor, from time to time, upon reasonable notice and during
normal business hours (except in the case of an emergency), shall accord the
Secured Party and the Secured Party's representatives with such access, to all
properties owned by or over which the Debtor has control, as the Secured Party
and its representatives may reasonably require and in connection with such
access, the Debtor shall permit the Secured Party and such representatives, to
examine, inspect, copy, access and make extracts from any and all of the
Collateral, including, but not limited to, any and all of the Debtor's books,
records, electronically stored data, recorded data (regardless of the medium of
recording), papers, file materials and information (including, without
limitation, all records relating to Accounts and Receivables, the Debtor's
efforts to collect the Accounts and Receivables and any dispute relating to any
Accounts and Receivables), and to verify the Collateral or any portion thereof
-4-
<PAGE> 5
(such verification, may include, without limitation, contact with account
debtors). The Debtor shall make available to the Secured Party, at no cost to
the Secured Party, any copying facilities available to the Debtor. The Debtor
shall provide the Secured Party with such information concerning the Debtor,
the Collateral, the operation of the Debtor's business, and the Debtor's
financial condition as the Secured Party may reasonably request from time to
time. Until the expiration or termination of this Agreement, the Debtor agrees
not to destroy any of the Collateral (including, without limitation, all books,
records, ledgers, print-outs, electronically stored data, recorded data,
papers, file materials and information relating to the Collateral), except in
the ordinary course of business to the extent permitted under the Lease. The
obligations of the Debtor hereunder are subject to, and the parties hereto
shall comply with, all applicable Legal Requirements pertaining to the
maintenance and confidentiality of patient records. The provisions contained in
this Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 The amount represented by the Debtor to the Secured Party from time
to time as owing by each account debtor or by all account debtors in respect of
the Accounts and Receivables will at such time in all material respects be the
correct amount actually owing by such account debtor or debtors thereunder.
3.5 Subject to the terms of the Lease, the Debtor (A) promptly shall
pay, as they become due and payable, all taxes, unemployment contributions and
all other charges of any kind or nature levied, assessed, or claimed against
the Debtor or the Collateral by any Person whose claim could result in a Lien
upon assets of the Debtor or by any Governmental Authority, (B) properly shall
exercise any trust responsibilities imposed upon the Debtor in connection with
amounts withheld from employees' pay and (C) timely shall make all
contributions and other payments as may be required pursuant to any employee
benefit plan now or hereafter established by the Debtor. At its option, the
Secured Party may, but shall not be obligated, to pay all taxes, unemployment
contributions, and any and all other charges levied, assessed, or claimed
against the Debtor or upon the Collateral by any Person or Governmental
Authority, and to make all contributions or other payments on account of the
Debtor's employee benefit plans as the Secured Party may, in its discretion,
deem necessary or desirable to protect, maintain, preserve, collect, or realize
upon any or all of the Collateral or the value thereof or any right or remedy
pertaining thereto.
3.6 The Debtor shall comply with all, and shall not use or permit the
use of any of the Collateral in violation of any, Legal Requirement.
3.7 Subject to the terms of the Lease, the Debtor shall not sell or
offer to sell, lease, or otherwise transfer or dispose of the Collateral or any
part thereof or any interest therein, except, with respect to Inventory, Goods,
Equipment, Fixtures and Tangible Personal Property, in the ordinary conduct of
the Debtor's business.
3.8 Without limiting any of the Debtor's obligations hereunder or under
any of the other Lease Documents, upon the occurrence of an Event of Default,
the Debtor shall
-5-
<PAGE> 6
promptly deliver to the Secured Party, in the same form as received by the
Debtor, all original items of the Receivables Collateral and all security or
collateral for, guarantees of, and Letters of Credit, trade and bankers'
acceptances, and similar letters and instruments in respect of, any of the
Receivables Collateral, each duly endorsed, assigned or otherwise made payable
to the Secured Party.
3.9 The Debtor shall have and maintain insurance at all times with
respect to the Collateral that is required pursuant to the terms of the Lease.
3.10 The Debtor shall do, make, execute and deliver all such additional
and further acts, things, deeds, assurances and instruments as the Secured
Party may reasonably request, to vest more completely in and assure to the
Secured Party its rights hereunder and in or to the Collateral including,
without limitation, compliance with the Federal Assignment of Claims Act.
3.11 The agreements, representations, covenants and warranties
contained herein are in addition to any others previously, presently or
hereafter made by the Debtor to or with the Secured Party in any other
instrument.
3.12 From and after the occurrence of an Event of Default and subject
to applicable law, the Secured Party may, in its sole and absolute discretion,
require the Debtor to establish a lock box with a bank or other financial
institution designated by the Secured Party. If such a lock box is established,
the Debtor shall thereafter require all of its account and contract debtors to
make payment directly to such lock box.
ARTICLE 4. COLLECTION OF ACCOUNTS RECEIVABLE, CONTRACT
RIGHTS AND OTHER RECEIVABLES COLLATERAL.
4.1 From and after the occurrence of an Event of Default and subject to
applicable law, (A) the Secured Party may notify any of the Debtor's account or
contract debtors, either in the name of the Secured Party or the Debtor, to
make payment directly to the Secured Party or such other address as may be
specified by the Secured Party, and may advise any Person of the Secured
Party's security interest in and to the Receivables Collateral, and may collect
directly from the obligors thereon, all amounts due on account of the
Receivables Collateral and (B) at the Secured Party's request, the Debtor will
provide written notifications to any or all of the Debtor's account or contract
debtors concerning the Secured Party's security interest in the Receivables
Collateral and will request that such account or contract debtors forward
payment thereof directly to the Secured Party.
4.2 From and after the date hereof, the Debtor shall hold any proceeds
and collections of any of the Collateral in trust for the Secured Party,
provided that, without limiting any provisions of the other Lease Documents,
until the occurrence of an Event of Default, the Debtor may use such proceeds
to pay bills in the ordinary course of business. From and after the occurrence
of an Event of Default (A) the Debtor shall not commingle
-6-
<PAGE> 7
such proceeds or collections with any other funds of the Debtor and (B) the
Debtor shall deliver all such proceeds to the Secured Party immediately upon
the receipt thereof by the Debtor in the identical form received but duly
endorsed or assigned on behalf of the Debtor to the Secured Party.
4.3 The Debtor hereby irrevocably constitutes and appoints the Secured
Party as the Debtor's true and lawful attorney, with full power of
substitution, such powers to be effective following the occurrence of an Event
of Default, to convert the Receivables Collateral into cash at the sole risk,
cost, and expense of the Debtor, but for the sole benefit of the Secured Party.
Subject to applicable law, the rights and powers granted the Secured Party by
the within appointment include but are not limited to the right and power to:
prosecute, defend, compromise, settle, or release any action relating to the
Collateral; receive, open, and dispose of all mail addressed to the Debtor and
to take therefrom any remittances on or proceeds of any Collateral; sign change
of address forms to change the address to which the Debtor's mail is to be sent
as the Secured Party shall designate; endorse the name of the Debtor in favor
of the Secured Party upon any and all checks or other items constituting
remittances or proceeds of Collateral; sign and endorse the name of the Debtor
on, and to receive as secured party, any of the Collateral, any invoices,
schedules of Collateral, freight or express receipts, or bills of lading,
storage receipts, warehouse receipts, or other documents of title of a same or
different nature relating to the Collateral; sign the name of the Debtor on any
notice to the obligors on the Receivables Collateral; take all such action as
may be necessary to obtain the payment on any Letter of Credit of which the
Debtor is a beneficiary; and sign and file or record on behalf of the Debtor
any financing or other statement in order to perfect or protect the Secured
Party's security interest. The Secured Party shall not be obligated to perform
any of such acts or to exercise any of such powers, but if the Secured Party
elects so to perform or exercise, the Secured Party shall not be accountable
for more than it actually receives as a result of such exercise of power, and
shall not be responsible to Debtor except for the Secured Party's actual
willful misconduct. All powers conferred upon the Secured Party by this
Agreement, being coupled with an interest, shall be irrevocable until
terminated by a written instrument executed by a duly authorized officer of the
Secured Party and shall not be affected by any disability or incapacity which
the Debtor may suffer and shall survive the same. The power of attorney
conferred on the Secured Party pursuant to the provisions of this Article 4 is
provided solely to protect the interests of the Secured Party and shall not
impose any duty on the Secured Party to exercise any such power, and neither
the Secured Party nor such attorney-in-fact shall be liable for any act,
omission, error in judgment or mistake of law, except as the same may result
from its gross negligence or willful misconduct.
ARTICLE 5. EVENTS OF DEFAULT
Upon the occurrence of a default beyond the applicable notice and/or
grace periods, if any, under this Agreement or any of the other Lease Documents
(each, hereinafter referred to as an "Event of Default" hereunder), at the
option of the Secured Party, the Lease Obligations shall become immediately due
and payable by the Debtor; in addition to which,
-7-
<PAGE> 8
the Secured Party may exercise its rights and remedies upon default, as set
forth under this Agreement. The occurrence of any such Event of Default shall
also constitute, without notice or demand, a default under all other Related
Party Agreements.
ARTICLE 6. RIGHTS AND REMEDIES UPON DEFAULT
6.1 Upon the occurrence of any Event of Default and at any time
thereafter, the Secured Party shall have all of the rights and remedies of a
secured party upon default under the UCC; in addition to which, the Secured
Party shall have all of the following rights and remedies: (A) to collect the
Receivables Collateral; (B) to take possession of the Collateral and to
maintain and to use the same at the Premises (or elsewhere) pending any
disposition thereof; (C) to sell, lease, or otherwise dispose of any or all of
the Collateral in its then condition or following such preparation or
processing as the Secured Party deems advisable having due regard to compliance
with any statute or regulation which might affect, limit, or apply to the
Secured Party's disposition of the Collateral; and/or (D) to apply the
Receivables Collateral, or the proceeds of the Collateral, towards (but not
necessarily in complete satisfaction of) the Lease Obligations in such order as
the Secured Party may determine (in its sole and absolute discretion). The
Secured Party may conduct any such sale or other disposition of the Collateral
at the Premises (or elsewhere). Unless the Collateral is perishable, threatens
to decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Secured Party shall give the Debtor such notice as
may be practicable under the circumstances), the Secured Party shall give the
Debtor at least the greater of the minimum notice required by law or seven (7)
days' prior written notice of the date, time and place of any proposed public
sale, and/or of the date after which any private sale or other disposition of
the Collateral may be made. The Secured Party may purchase the Collateral, or
any portion of it, at any public sale conducted pursuant to this Agreement.
6.2 In connection with the Secured Party's exercise of the Secured
Party's Rights and Remedies, in accordance with and to the maximum extent
permitted by applicable law, the Secured Party may enter upon, occupy, and use
any premises owned or occupied by the Debtor, and may exclude the Debtor from
such premises or portion thereof as may have been so entered upon, occupied, or
used by the Secured Party. The Secured Party shall not be required to remove
any of the Collateral from any such premises upon the Secured Party's taking
possession thereof, and may render any Collateral unusable to the Debtor. In no
event shall the Secured Party be liable to the Debtor for use or occupancy by
the Secured Party of any premises pursuant to this Agreement, nor for any
charge (such as wages for the Debtor's employees and utilities) incurred in
connection with the Secured Party's exercise of the Secured Party's Rights and
Remedies.
6.3 Upon the occurrence of any Event of Default, the Secured Party may
require the Debtor to assemble the Collateral and make it available to the
Secured Party at the Debtor's sole risk and expense at a place or places
designated by the Secured Party which are reasonably convenient to both the
Secured Party and the Debtor.
-8-
<PAGE> 9
6.4 The rights, remedies, powers, privileges, and discretions of the
Secured Party hereunder and under the other Lease Documents (herein, the
"Secured Party's Rights and Remedies") shall be cumulative and not exclusive of
any rights or remedies which it otherwise may have. No delay or omission by the
Secured Party in exercising or enforcing any of the Secured Party's Rights and
Remedies shall operate as, or constitute, a waiver thereof. No waiver by the
Secured Party of any Event of Default shall operate as a waiver of any other
default hereunder or under any of the other Lease Documents. No exercise of any
of the Secured Party's Rights and Remedies and no other agreement or
transaction of whatever nature entered into between the Secured Party and the
Debtor at any time, shall preclude any other exercise of the Secured Party's
Rights and Remedies. No waiver by the Secured Party of any of the Secured
Party's Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver. All of the
Secured Party's Rights and Remedies and all of the Secured Party's rights,
remedies, powers, privileges, and discretions under any Related Party Agreement
are cumulative and not alternative or exclusive and may be exercised by the
Secured Party at such time or times and in such order of preference as the
Secured Party in its sole discretion may determine.
ARTICLE 7. MISCELLANEOUS
7.1 The Secured Party shall have no duty as to the collection or
protection of the Collateral beyond the safe custody of such of the Collateral
as may come into the possession of the Secured Party and shall have no duty as
to the preservation of rights against prior parties or of any other rights
pertaining thereto. The Secured Party's Rights and Remedies may be exercised
without resort or regard to any other source of satisfaction of the Lease
Obligations.
7.2 The obligations of the Debtor under this Agreement shall continue
in full force and effect until all of the Lease Obligations have been fully
paid and performed.
7.3 The Secured Party shall be at liberty, without giving notice to or
obtaining the assent of the Debtor and without relieving the Debtor of any of
the Lease Obligations, to deal with each other Person who now is or after the
date hereof becomes liable in any manner for any of the Lease Obligations (a
"Liable Person"), in such manner as the Secured Party in its sole discretion
deems fit, and to this end the Debtor gives to the Secured Party full authority
in its sole discretion to do any or all of the following things: (A) extend
credit, make loans, and afford other financial accommodations to any Liable
Person, enter into leases of real and personal property and agreements and
contracts of any nature whatsoever, at such times, in such amounts, and on such
terms as the Secured Party may approve, (B) vary the terms and grant extensions
or renewals of any present or future indebtedness or obligation to the Secured
Party of any Liable Person, (C) grant time, waivers, and other indulgences in
respect thereto, (D) vary, exchange, release or discharge, wholly or partially,
or delay in or abstain from perfecting and enforcing any security or guaranty
or other means of obtaining payment of any of the Lease Obligations which the
Secured Party now has or
-9-
<PAGE> 10
acquires after the date hereof, (E) accept partial payments from any Liable
Person, (F) release or discharge, wholly or partially, any endorser or
guarantor and (G) compromise or make any settlement or other arrangement with
any Liable Party. The Debtor waives all suretyship defenses of every kind and
nature.
7.4 This Agreement shall be in addition to any guaranty or other
security for the Lease Obligations, and it shall not be prejudiced or rendered
unenforceable by the invalidity of any such guaranty or other security.
7.5 The Debtor waives: notice of acceptance hereof, notice of any
action taken or omitted by the Secured Party in reliance hereon, and any
requirement that the Secured Party be diligent or prompt in making demands
hereunder, giving notice of any default by a Liable Person or asserting any
other right of the Secured Party hereunder. The Debtor also irrevocably waives,
to the fullest extent permitted by law, all defenses which at any time may be
available in respect of the Debtor's obligations hereunder by virtue of any
homestead exemption, statute of limitations, valuation, stay, moratorium law or
other similar law now or hereafter in effect.
7.6 As long as the Lease Obligations remain unpaid or undischarged, the
Debtor will not, by paying any sum recoverable hereunder (whether or not
demanded by the Secured Party) or by any means or on any other ground, claim
any set-off or counterclaim against any Liable Person in respect of any
liability of the Debtor to such Liable Person or, in proceedings under the
bankruptcy or other similar laws of the United States, any state or any other
jurisdiction or any insolvency proceedings of any nature, prove in competition
with the Secured Party in respect of any payment hereunder or be entitled to
have the benefit of any counterclaim or proof of claim or dividend or payment
by or on behalf of any Liable Person or the benefit of any other security for
any Liability which, now or hereafter, the Secured Party may hold or in which
it may have any share.
7.7 The Debtor shall pay, on demand, all costs and expenses (including,
without limitation, attorneys' fees and expenses) now or hereafter reasonably
incurred by the Secured Party (A) in connection with (I) the preparation,
execution, and delivery of this Agreement and the other Lease Documents,
including, without limitation, attorneys' fees and expenses, and all costs and
(II) the protection or enforcement of any of the Secured Party's rights and
remedies against the Debtor, any of the Collateral, and any other Liable Person
(including, without limitation, the exercise of any of the Secured Party's
Rights and Remedies) and/or (B) on account of the Secured Party's relationship
with any member of the Leasing Group.
7.8 This Agreement shall be construed, and the rights and obligations
of the Debtor and the Secured Party shall be determined, in accordance with the
laws of the Commonwealth of Massachusetts, except (A) that the laws of the
state where the Collateral is located shall govern this Agreement to the extent
necessary to perfect and/or enforce the Liens created by this Agreement and to
the extent necessary to obtain the benefit of the rights
-10-
<PAGE> 11
and remedies set forth herein with respect to the Collateral and (B) for
procedural requirements which must be governed by the laws of the state in
which the Collateral is located. To the maximum extent permitted by applicable
law, the Debtor hereby submits to the jurisdiction of the courts of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of, or with respect to any of the
Lease Documents, the negotiation and/or consummation of the transactions
evidenced by the Lease Documents, the Lessor's relationship of any member of
the Leasing Group in connection with the transactions evidenced by the Lease
Documents and/or the performance of any obligation or the exercise of any
remedy under any of the Lease Documents and expressly waives any and all
objections the Debtor may have as to venue in any of such courts.
7.9 This Agreement shall remain in full force and effect until
specifically terminated in writing by a duly authorized officer of the Secured
Party. In the event that any of the Lease Obligations remain outstanding, such
termination by the Secured Party may be conditioned upon such further
indemnifications provided to the Secured Party by or on behalf of the Debtor as
the Secured Party may request. Until specifically terminated in writing as set
forth above, this Agreement shall itself constitute conclusive evidence of
validity, effectiveness and continuing force hereof and any Person may rely
hereon. Upon the satisfaction in full of all of the Lease Obligations, the
Secured Party, upon the written request of the Debtor, shall execute and
deliver to the Debtor, at the Debtor's expense, all instruments of assignment
or other instruments as may be necessary to establish full title of the Debtor
to the Collateral, subject to any prior sale or other disposition pursuant to
the terms and provisions of this Agreement.
7.10 It is intended that the security interests created by this
Agreement attached to all of the Debtor's assets now owned or hereafter
acquired which are capable of being subject to a security interest.
7.11 The Debtor acknowledges having received a copy of this Agreement.
-11-
<PAGE> 12
7.12 The provisions set forth in Article 22, Article 23 and Sections
2.2, 16.8 through 16.10, 24.2 through 24.10 and 24.12 of the Lease are hereby
incorporated by reference, mutatis, mutandis, and shall be applicable to this
Agreement as if set forth in full herein.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the Debtor and the Secured Party duly executed
this Agreement as a sealed instrument as of the day and year first above
written.
WITNESS: DEBTOR:
- --------------------------
Name:
WITNESS: SECURED PARTY:
- --------------------------
Name:
-13-
<PAGE> 14
SCHEDULE TO EXHIBIT 10.13 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
SECURITY AGREEMENT
<TABLE>
<CAPTION>
PROJECT PARTIES FACILITY DATE
------- ------- -------- ----
<S> <C> <C> <C>
Reading, PA Meditrust Acquisition Corporation II (Secured Outlook Pointe 2/27/97
Party) and BCC at Reading, Inc. (Debtor) at Reading
State College, PA Meditrust Acquisition Corporation II (Secured Outlook Pointe 8/2/96
Party) and BCC at State College, Inc. (Debtor) at State College
Allegheny, PA Meditrust Acquisition Corporation II (Secured Outlook Pointe 11/1/96
Party) and BCC at Altoona, Inc. (Debtor) at Altoona
Blytheville, AR Meditrust Acquisition Corporation II (Secured Outlook Pointe 11/1/96
Party) and Balanced Care at Blytheville, Inc. at Blytheville
(Debtor)
Maumelle, AR Meditrust Acquisition Corporation II (Secured Outlook Pointe 11/1/96
Party) and Balanced Care at Maumelle, Inc. at Maumelle
(Debtor)
Mountain Home, AR Meditrust Acquisition Corporation II (Secured Outlook Pointe 11/1/96
Party) and Balanced Care at Mountain Home, Inc. at Mountain Home
(Debtor)
Pocahontas, AR Meditrust Acquisition Corporation II (Secured Outlook Pointe 11/1/96
Party) and Balanced Care at Pocahontas, Inc. at Pocahontas
(Debtor)
Sherwood, AR Meditrust Acquisition Corporation II (Secured Outlook Pointe 11/1/96
Party) and Balanced Care at Sherwood, Inc. at Sherwood
(Debtor)
Hawthorn Properties Meditrust Mortgage Investments, Inc. (Secured Hawthorn 8/30/96
Party) and Hawthorn Health Properties, Inc. Properties
(Debtor)
Dixon, MO Meditrust Mortgage Investments, Inc. (Secured Dixon 8/30/96
Party) and Dixon Management, Inc. (Debtor)
Hermitage, MO National Care Centers of Hermitage, Inc. Hermitage 8/30/96
(Secured Party) and BCC at Hermitage Park Care
Center, Inc. (Debtor)
Lebanon, MO National Care Centers, Inc. (Secured Party) and Lebanon Care 8/30/96
BCC at Lebanon Care Center, Inc. (Debtor)
Lebanon, MO National Care Centers of Lebanon, Inc. (Secured Lebanon Park 8/30/96
Party) and BCC at Lebanon Park Manor, Inc.
(Debtor)
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
Springfield, MO Springfield Retirement Village, Inc. (Secured Mt. Vernon 8/30/96
Party) and BCC at Mt. Vernon Park Care Center,
Inc. (Debtor)
Nixa, MO National Care Centers of Nixa, Inc. (Secured Nixa 8/30/96
Party) and BCC at Nixa Park Center, Inc.
(Debtor)
Springfield, MO National Care Centers of Springfield, Inc. Springfield 8/30/96
(Secured Party) and BCC at Springfield Care
Center, Inc. (Debtor)
Springfield, MO Mt. Vernon Park Care Center West, Inc. (Secured West Park 8/30/96
Party) and BCC at Mt. Vernon Park Care Center
West, Inc. (Debtor)
</TABLE>
<PAGE> 1
EXHIBIT 10.14
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT is made as of May 2, 1996, by BCC
OF WISCONSIN, INC., a Delaware corporation, having its principal place of
business at 3507 Market Street, Suite 202, Camp Hill, Pennsylvania 17011
(hereinafter referred to as the "Mortgagor") to MEDITRUST MORTGAGE INVESTMENTS,
INC., a Delaware corporation, having its principal address at 197 First Avenue,
Needham Heights, Massachusetts 02194 (hereinafter referred to as the
"Mortgagee").
WITNESSETH:
THAT, to secure the payment, observance, fulfillment and performance of
the Obligations, as defined in that certain Loan Agreement of even date herewith
by and between the Mortgagor, Balanced Care Corporation, a Delaware corporation,
and the Mortgagee (the "Loan Agreement"), including, without limitation:
(i) the payment to the Mortgagee of the principal
indebtedness of FIVE MILLION FORTY-FIVE THOUSAND EIGHT HUNDRED
SIXTY-NINE DOLLARS ($5,045,869), together with interest thereon and
other charges, all as evidenced by that certain promissory note
(hereinafter referred to as the "Note") of even date and delivery
herewith, made by the Mortgagor to the order of the Mortgagee, in and
by which Note the Mortgagor promises to pay the said principal
indebtedness and interest at the rate and in the installments as
provided in the Note;
(ii) the performance, observance and fulfillment of all of the
terms, conditions, covenants and warranties set forth in this Mortgage;
(iii) the performance, observance and fulfillment of all of
the terms, conditions, covenants and warranties set forth in the other
Loan Documents; and
(iv) the payment, observance and performance of the Related
Party Obligations;
the Mortgagor does hereby mortgage, grant, bargain, sell, transfer and convey
unto the Mortgagee and to the Mortgagee's successors and assigns forever, with
MORTGAGE COVENANTS, all of the following described land, improvements and
property and all of the Mortgagor's estate, right, title and interest therein
(hereinafter collectively referred to as the "Mortgaged Property"):
The parcels of land described in EXHIBIT A attached hereto and
incorporated herein by reference (hereinafter collectively referred to as the
"Land");
<PAGE> 2
TOGETHER with all buildings, structures and other improvements now or
hereafter located on the Land or any part thereof (hereinafter referred to as
the "Improvements"), including, without limitation, the community based
residential facilities identified on EXHIBIT B attached hereto and incorporated
herein by reference (each such facility is hereinafter referred to as a
"Facility");
TOGETHER with all of the Mortgagor's right, title and interest in and
to the land lying in the bed of any street, way, road, highway or avenue in
front of or adjoining the Land;
TOGETHER with all easements now or hereafter located on or appurtenant
to the Land and/or Improvements on, under or above the same or any part thereof,
and all rights-of-way, licenses, and privileges, belonging or in any way
appertaining to the Land and/or Improvements (including, without limitation, the
easements, rights-of-way, licenses and privileges, if any, included in the
description of the Land set forth in EXHIBIT A and included in the Permitted
Encumbrances [as hereinafter defined in Section 2]);
TOGETHER with any and all awards heretofore made and hereafter to be
made by any governmental authority (municipal, state or federal) to the present
and all subsequent owners of the Mortgaged Property for the taking of all or any
portion of the Mortgaged Property by power of eminent domain, including, without
limitation, awards for damage to the remainder of the Mortgaged Property and any
awards for any change or changes of grade of streets affecting the Mortgaged
Property; which said proceeds, premiums and awards are hereby assigned to the
Mortgagee, and, subject to the terms and provisions of the Loan Agreement, the
Mortgagee, at its option, is hereby authorized, directed and empowered to (i)
adjust, compromise, collect and receive the proceeds of any insurance judgments
or settlements made in lieu thereof and such premiums and the proceeds of any
such awards from the authorities making the same and to give proper receipts and
acquittances therefor, and (ii) apply the same toward the repair, rebuilding or
restoration of the Mortgaged Property or toward payment of the Obligations,
notwithstanding the fact that such amount may not then be due; and the Mortgagor
hereby covenants and agrees to and with the Mortgagee, upon request by the
Mortgagee, to make, execute and deliver, at the Mortgagor's sole cost and
expense, any and all assignments and other instruments sufficient for the
purpose of assigning the aforesaid proceeds, premiums and awards to the
Mortgagee, free, clear and discharged of any and all encumbrances of any kind or
nature whatsoever (all of the foregoing Land, Improvements, rights, easements,
rights-of-way, licenses, privileges and awards, hereinafter collectively
referred to as the "Real Property");
TOGETHER with all articles, appliances, chattels, fixtures, furniture,
furnishings, machinery, Equipment, Goods, Inventory and every other article of
personal property, tangible or intangible, now or hereafter attached to or used
in connection with the Real Property, or placed on any part thereof, whether or
not attached thereto, appertaining or adapted to the use, management, operation
or improvement of the Real Property, regardless of whether hereafter removed
from the Real Property, all insofar as the same and any reversionary right
thereto may now or hereafter be owned or acquired by the Mortgagor (hereinafter
referred to as the "Personal Property"), including, without limitation: all
partitions and portable or sectional buildings;
- 2 -
<PAGE> 3
screens; awnings; shades; blinds; storm and other detachable windows and doors;
floor coverings; mantels, built-in cases, counters, closets, chests of drawers
and mirrors; resident room furnishings, equipment for the treatment of
residents, kitchen and dining room equipment and furnishings and inventories of
linen, dishware and cooking utensils; hall and lobby equipment; heating,
lighting, plumbing, ventilating, refrigerating, incinerating, elevator,
escalator, air conditioning and communication plants, apparatus and/or equipment
with appurtenant fixtures; garbage incinerators and receptacles; boilers;
stoves; tanks; motors; vacuum cleaning systems; call systems; door bell and
alarm systems; sprinkler systems, smoke detectors and other fire prevention and
extinguishing apparatus and materials; all equipment, manual, mechanical and
motorized, for the construction, maintenance, repair and cleaning of, and
removal of snow from, parking areas, walks, underground ways, truck ways,
driveways, common areas, roadways, highways and streets; and all other
machinery, pipes, poles, appliances, equipment, wiring, fittings, panels and
fixtures; and any proceeds therefrom, any replacements thereof or additions or
accessions thereto; and all building materials, equipment, supplies and other
property delivered to the Real Property for incorporation into the Improvements
thereon, all of which are declared to be a part of the Real Property and covered
by the lien hereof, but said lien shall not cover any fixture, machinery,
equipment or article of personal property which is (a) leased by the Mortgagor
as of the date hereof or under a lease hereafter entered into by the Mortgagor
that is permitted under the Loan Agreement or is otherwise approved in writing
by the Mortgagee or (b) owned by a Lessee (as hereinafter defined) and not
required for the operation or maintenance of the Real Property, provided said
fixture, machinery, equipment or article of personal property is not permanently
affixed to the Real Property and may be removed without material damage thereto
and is not a replacement of any item which shall have been subject to the lien
hereof;
TOGETHER with the right to use, in perpetuity, in connection with the
operation of the Mortgaged Property, the names Harmony Manor, Harmony Manor I,
Harmony Manor II, any other name with the words "Harmony Manor" therein and all
other names similar thereto and the goodwill of the Mortgagor with respect
thereto;
TOGETHER with all of the Mortgagor's right, title and interest in and
to any and all leases, subleases, license agreements, concession agreements,
tenancy at will agreements, room rentals and rentals of other facilities of the
Mortgaged Property and all other occupancy agreements of every kind and nature
(including, without limitation, Residence Agreements), whether oral or in
writing, now in existence or subsequently entered into by the Mortgagor,
encumbering or affecting the Mortgaged Property (including, but not limited to,
the leases listed on EXHIBIT C attached hereto and incorporated herein by
reference as a material part hereof), together with all extensions, renewals,
modifications and replacements thereof (hereinafter collectively referred as the
"Leases"), together with any and all guaranties (hereinafter collectively
referred to as the "Lease Guaranties") of the obligations of the lessees,
licensees, concessionaires and other occupants under the Leases (hereinafter
collectively referred to as the "Lessees") and all extensions, renewals,
modifications and replacements of the Lease Guaranties and all rents, revenues,
royalties, issues, profits, insurance proceeds, condemnation awards, license
fees, concession fees and all other income and security of every kind and nature
due by virtue of the Leases and the Lease Guaranties (hereinafter collectively
referred to as the "Rents");
- 3 -
<PAGE> 4
TOGETHER with, to the extent now or hereafter permitted by applicable
law, all of the Mortgagor's right, title and interest in and to all (i)
licenses, approvals, qualifications, rights, variances, permissive uses,
certificates of need, franchises, accreditations, certificates, certifications,
consents, permits and other authorizations (including, without limitation,
building permits, subdivision approvals and subdivision plans) (hereinafter
collectively referred to as the "Permits") and (ii) agreements (including,
without limitation, all Provider Agreements), contracts (including, without
limitation, construction contracts, subcontracts and architects' contracts),
contract rights, warranties and representations, franchises, and records and
books of account (hereinafter collectively referred to as the "Contracts")
benefiting, relating to or affecting the Mortgaged Property and the ownership,
construction, development, maintenance, management, repair, use, occupancy,
possession or operation thereof or the operation of any programs or services in
conjunction with any Facility and all renewals, replacements and substitutions
therefor, now or hereafter issued by or entered into with any Governmental
Authority, Accreditation Body or Third Party Payor or maintained or used by the
Mortgagor or entered into by the Mortgagor with any third Person;
TOGETHER with all of the Mortgagor's right, title and interest in, to
and under any and all (i) Instruments, Accounts (to the extent now or hereafter
permitted by applicable law), Proceeds and General Intangibles (as those
foregoing capitalized terms are defined in the UCC) and (ii) rights to payment
for goods sold or leased or services rendered by the Mortgagor or any other
party, whether now in existence or arising from time to time hereafter and
whether or not yet earned by performance, including, without limitation,
obligations evidenced by an account, note, contract, security agreement, chattel
paper, or other evidence of indebtedness (collectively referred to as
"Receivables"); together with (a) all security pledged, assigned, hypothecated
or granted to or held by the Mortgagor to secure the foregoing, (b) general
intangibles arising out of Mortgagor's rights in any goods, the sale of which
gave rise thereto, (c) all ledger sheets, files, records, computer records and
tapes relating to any of the foregoing, (d) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (e) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, and (f) all evidences of the filing of financing
statements and other statements and the registration of other instruments in
connection therewith and amendments thereto; all whether now existing or
hereafter acquired or arising and all proceeds and products thereof (including,
without limitation, any property received in payment, settlement or compromise
of any Account or Receivable);
TOGETHER with, to the extent permitted under applicable law, all of the
right, title and interest of the Mortgagor in and to all books, records,
ledgers, print-outs, papers, data, file materials and information relating to
the Mortgaged Property, the Collateral, any account debtors in respect thereof
and/or to the operation of the Mortgagor's business, and all rights of access to
such books, records, ledgers, print-outs, papers, file materials and
information, and all property in which such books, records, ledgers, print-outs,
data, file materials and information are stored, recorded, and maintained;
TOGETHER with, to the extent permitted under applicable law, all of the
right, title and interest of the Mortgagor in and to (i) all Instruments,
Documents of Title, Documents, policies
- 4 -
<PAGE> 5
and certificates of insurance, Securities, deposits, deposit accounts, money,
cash or other property (as those foregoing capitalized terms are defined in the
UCC); (ii) all federal, state, and local tax refunds and/or abatements to which
the Mortgagor is, or becomes entitled, no matter how or when arising, including,
but not limited to any loss carryback tax refunds; and (iii) all trade secrets,
computer programs, customer lists, resident lists, manuals, assignments of
patents and patents pending, developmental ideas and concepts, and all papers,
drawings, blueprints, sketches and documents relating to all of the foregoing
and/or relating to the operation of the Mortgagor's business and/or the
Collateral;
TOGETHER with any and all proceeds of and any unearned premiums on any
insurance policies covering the Mortgaged Property, including, without
limitation, the right, at the Mortgagee's option (but subject to the terms and
provisions of the Loan Agreement), to adjust, compromise, collect, receive and
apply the proceeds of any insurance judgments or settlements made in lieu
thereof for damage to the Mortgaged Property or toward payment of the
Obligations, notwithstanding the fact that such amount may not then be due;
TOGETHER with all of the Mortgagor's right, title and interest in and
to all and singular the tenements, hereditaments and appurtenances belonging to
or in any way pertaining to the Mortgaged Property; all of the estate, right,
title and claim whatsoever of the Mortgagor, either at law or in equity, in and
to the Mortgaged Property; and any and all other, further or additional title,
estate, interest or right which may at any time be acquired by the Mortgagor in
or to the Mortgaged Property; and if the Mortgagor shall at any time acquire any
further estate or interest in or to the Mortgaged Property, the lien of this
Mortgage shall attach, extend to, cover and be a lien upon such further estate
or interest, and the Mortgagor, upon request of the Mortgagee, shall execute
such instrument or instruments as shall reasonably be requested by the Mortgagee
to confirm such lien, and the Mortgagor hereby appoints the Mortgagee as the
Mortgagor's attorney-in-fact, with full power of substitution, to execute all
such instruments if the Mortgagor shall fail to do so within ten (10) days after
demand (which power of attorney, being coupled with an interest, shall be
irrevocable until all of the Obligations are fully paid and performed, and shall
not be affected by any disability or incapacity which the Mortgagor may suffer
and shall survive the same; the power of attorney conferred on the Mortgagee
pursuant to the foregoing provisions is provided solely to protect the interests
of the Mortgagee and shall not impose any duty on the Mortgagee to exercise any
such power, and neither the Mortgagee nor such attorney-in-fact shall be liable
for any act, omission, error in judgment or mistake of law, except as the same
may result from its gross negligence or wilful misconduct);
TO HAVE AND TO HOLD the Mortgaged Property, and each and every part
thereof, unto the Mortgagee and its successors and assigns forever, for the
purposes and uses herein set forth;
AND, the Mortgagor hereby further covenants, agrees and warrants as
follows:
1. DEFINITIONS. For all purposes of this Mortgage, except as otherwise
expressly provided or unless the context otherwise requires, capitalized terms
used herein and not otherwise defined in this Mortgage shall have the same
meanings ascribed to such terms in the Loan
- 5 -
<PAGE> 6
Agreement, and all accounting terms used herein and not otherwise defined herein
have the meanings assigned to them in accordance with GAAP.
2. COVENANTS OF TITLE. The Mortgagor hereby warrants and represents
that the Mortgagor has good, marketable and indefeasible title to the entire
Real Property in fee simple, has absolute unencumbered title to the Personal
Property, and has good right and full power to assign, grant, bargain, sell,
mortgage, transfer and convey the same. The Mortgagor further warrants and
represents that the Mortgaged Property is free and clear of agreements,
covenants, easements, restrictions, liens, Leases and other encumbrances, except
(i) those agreements, covenants, easements, restrictions, liens and encumbrances
to which this Mortgage is expressly subject, whether presently existing, as
listed on EXHIBIT D attached hereto and incorporated herein by reference, or
which may hereafter be created in accordance with the terms hereof or of the
Loan Agreement and (ii) any Lease listed on EXHIBIT C (the matters described in
the foregoing clauses (i) and (ii) are collectively referred to herein as the
"Permitted Encumbrances"); and the Mortgagor shall warrant and defend title to
the Mortgaged Property against any and all claims and demands of every kind and
nature whatsoever. The Mortgagee shall have the right, at its option and at such
time or times as the Mortgagee (in its sole and absolute discretion) shall deem
necessary or desirable to take whatever action the Mortgagee (in its sole and
absolute discretion) may deem necessary or desirable to defend or uphold the
lien or the rights of the Mortgagee hereunder or otherwise enforce any
obligation secured hereby, including, without limitation, the right to institute
appropriate legal proceedings for such purposes, and all costs and expenses
reasonably incurred by the Mortgagee in connection therewith (including, without
limitation, attorneys' fees and expenses and court costs) shall be a demand
obligation of the Mortgagor to the Mortgagee, and to the extent permitted by
applicable law, shall be added to the Obligations and shall be secured by the
lien of this Mortgage and the other Loan Documents as fully and effectively and
with the same priority as every other obligation of the Mortgagor secured
hereby, and if not paid within ten (10) days after demand, shall thereafter (to
the extent permitted by applicable law) bear interest at the Advances Rate until
the date of payment.
3. IMPOSITIONS. The Mortgagor shall pay, or cause to be paid, the
Impositions in accordance with the terms and provisions of the Loan Agreement.
4. TAX DEPOSITS. At the option of the Mortgagee, the Mortgagor shall
deposit with the Mortgagee from time to time the amount of the Impositions to be
levied, charged, filed, assessed or imposed upon or against the Mortgaged
Property in accordance with the terms and provisions of the Loan Agreement.
5. INSURANCE. At all times until the Obligations are fully paid and
performed, the Mortgagor shall keep the Mortgaged Property insured in accordance
with the terms and provisions of the Loan Agreement.
6. RESTORATION FOLLOWING FIRE AND OTHER CASUALTY OR CONDEMNATION. In
the event of any damage or destruction to the Mortgaged Property by reason of
fire or other hazard or casualty or Condemnation, the Mortgagor shall give
immediate written notice thereof to the Mortgagee. The Mortgaged Property shall
be restored by Mortgagee and insurance proceeds
- 6 -
<PAGE> 7
shall be applied to repayment of the Obligations or restoration of the Mortgaged
Property in accordance with the terms and provisions of the Loan Agreement.
7. REPAIR; USE; COMPLIANCE WITH LAW; ALTERATIONS; WASTE. At all times
until the Obligations are fully paid and performed, the Mortgaged Property shall
be maintained and operated in accordance with the terms and provisions of the
Loan Agreement.
8. INDEPENDENCE OF MORTGAGED PROPERTY. The Mortgagor shall not, by act
or omission, permit any building or other improvement on any premises not
subject to the lien of this Mortgage to rely on the Mortgaged Property or any
interest therein to fulfill any applicable Legal Requirement, and the Mortgagor
hereby assigns to the Mortgagee any and all rights to give consent for all or
any portion of the Mortgaged Property or any interest therein to be so used.
Similarly, no portion of the Mortgaged Property shall rely on any premises not
subject to the lien of this Mortgage (or any interest therein) in order to
operate any Facility in a reasonable and businesslike manner or to fulfill any
applicable Legal Requirement. The Mortgagor shall not, by act or omission,
impair the integrity, as a single zoning lot separate and apart from all other
premises, of any portion of the Real Property that now comprises such a single
zoning lot. The Mortgagor covenants that the Mortgagor shall not initiate, join
in or consent to any zoning changes affecting the Mortgaged Property nor
initiate, join in or consent to any private restrictive covenant or other public
or private restriction upon the use of the Mortgaged Property without the
Mortgagee's prior written consent, in each instance, which consent may be
withheld in the Mortgagee's sole and absolute discretion. Any act or omission by
the Mortgagor which would result in a violation of any of the provisions of this
Section 8 shall be void and shall be an Event of Default hereunder.
9. NO OTHER LIENS. Except as otherwise specifically provided herein or
in the Loan Agreement, the Mortgagor shall not create, consent to, agree to,
permit or suffer to exist any mortgage, security interest, attachment, lis
pendens, mechanic's or materialman's lien or other lien or encumbrance upon or
affecting the Mortgaged Property, whether superior or inferior to the lien of
this Mortgage (including, without limitation, the filing of a notice of federal
or state tax lien at any location at which by law such notice must be filed in
order to be effective against the Mortgaged Property, whether or not such lien
applies, by its terms, to the Mortgaged Property), except as granted in this
Mortgage and any other lien or security interest granted to the Mortgagee.
If this Mortgage, by its terms, is now, or at any time hereafter,
subject or subordinate to a prior mortgage, the Mortgagor shall not, without the
prior written consent of the Mortgagee, in each instance, which consent may be
withheld in the Mortgagee's sole and absolute discretion, agree at any time to
any waiver, revision, modification, amendment, indulgence, suspension or
extension of or any addition to any of the provisions, terms, conditions or
payments of such prior mortgage.
The Mortgagor shall promptly pay and discharge any and all amounts
which are now or hereafter become liens against the Mortgaged Property, except
for such liens, if any, otherwise specifically permitted pursuant to the
provisions of this Mortgage or the Loan Agreement, and in
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<PAGE> 8
default thereof, the Mortgagee, upon five (5) days' notice to the Mortgagor, may
pay and discharge the same, and any amount so paid or advanced by the Mortgagee
and all costs and expenses reasonably incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court costs),
shall be a demand obligation of the Mortgagor to the Mortgagee, and to the
extent permitted by applicable law, shall be added to the Obligations and shall
be secured by the liens of this Mortgage and of the other Loan Documents as
fully and effectively and with the same priority as every other obligation of
the Mortgagor secured hereby and, if not paid within ten (10) days after demand,
shall thereafter (to the extent permitted by applicable law) bear interest at
the Advances Rate until the date of payment.
The covenants of this Section 9 shall survive any foreclosure of the
Mortgaged Property with respect to any such liens in existence as of the date of
transfer of title.
10. ASSIGNMENT OF LEASES. As additional security for the payment and
performance of the Obligations, the Mortgagor hereby grants, transfers and
assigns to the Mortgagee all of its right, title and interest in and to any and
all Leases and Lease Guaranties. The Mortgagee shall not be deemed by virtue of
this assignment to have assumed any of the lessor's obligations, duties or
liabilities under or in connection with the Leases or Lease Guaranties, which
obligations the Mortgagor covenants and agrees to perform and observe as if this
assignment had not been made. In addition to the remedies hereinafter set forth
in this Mortgage, after the occurrence of an Event of Default hereunder, the
Mortgagee shall be entitled, either with or without taking possession of the
Mortgaged Property, to demand, sue for or otherwise collect and receive all of
the Rents, including those past due and unpaid, reserved to the lessor under the
terms of the Leases and upon receipt thereof, the Mortgagee shall apply said
amounts collected to the indebtedness secured hereby. The Mortgagor hereby
authorizes all Lessees and guarantors under the Lease Guaranties, upon receipt
of written notice from the Mortgagee that an Event of Default has occurred
hereunder, to pay over all Rent at any time owed under the Leases to the
Mortgagee in lieu of the Mortgagor. The Mortgagor shall and does hereby agree to
defend, with counsel acceptable to the Mortgagee, indemnify and hold the
Mortgagee harmless from any and all claims, demands, losses, damages,
liabilities, costs and expenses of every kind and nature, including, without
limitation, attorneys' fees and expenses and court costs, which the Mortgagee
shall sustain or reasonably incur arising out of or in connection with the
Leases or the enforcement of this indemnification. Any Lessee (and any guarantor
of such Lessee's obligations under the applicable Lease) shall be deemed by
virtue of said Lessee's occupancy of the Mortgaged Property, to have agreed to
the terms of this assignment and shall be entitled to rely conclusively on any
written notice from the Mortgagee of the existence of an Event of Default under
this Mortgage. Upon receipt of such written notice, each Lessee (or guarantor of
the obligations of such Lessees under the applicable Lease) shall pay over to
the Mortgagee, on the dates set forth under the applicable Lease (except as to
those amounts past due and unpaid, which amounts shall be payable immediately to
the Mortgagee upon receipt of such written notice), all Rent required to be made
to the lessor pursuant to such Lease.
The indemnification provisions of this Section 10 shall survive the
complete payment and performance of the Obligations and the foreclosure of this
Mortgage.
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<PAGE> 9
11. FUTURE ACTIONS WITH RESPECT TO THE LEASES. The Mortgagor shall
furnish to the Mortgagee a true and complete copy of each Lease hereafter made
by the Mortgagor within ten (10) days after execution and delivery of each such
Lease by the parties thereto. Upon the request of the Mortgagee, the Mortgagor
shall also furnish to the Mortgagee an original mortgagee attornment agreement
executed by each Lessee under any Lease and an original estoppel certificate,
all in form and substance reasonably satisfactory to the Mortgagee, addressed to
the Mortgagee, from each Lessee under any Lease.
The Mortgagor shall, from time to time, upon request of the Mortgagee,
confirm in writing the assignment to the Mortgagee of any or all of the Leases,
and such written confirmation shall be in such form as the Mortgagee shall
reasonably require and as shall be necessary to make the same recordable.
12. LEASES; FORECLOSURE. Any proceedings or other steps taken by the
Mortgagee to foreclose this Mortgage, or otherwise to protect the interests of
the Mortgagee hereunder, shall not operate to terminate the rights of any
present or future Lessee under any of the Leases, notwithstanding that said
rights may be subject and subordinate to the lien of this Mortgage, unless the
Mortgagee specifically elects otherwise in the case of any particular Lessee.
The failure to make any such Lessee a defendant in any such foreclosure
proceeding and to foreclose such Lessee's rights shall not be asserted by the
Mortgagor or any other defendant in such foreclosure proceeding as a defense to
any proceeding instituted by the Mortgagee to foreclose this Mortgage or
otherwise to protect the interests of the Mortgagee hereunder.
In addition, the Mortgagee shall have the right to subordinate this
Mortgage and its rights hereunder to any Lease which is subject and subordinate
to this Mortgage, except that the Mortgagee shall be entitled to expressly
exclude from such subordination the Mortgagee's rights to insurance proceeds and
Condemnation awards as set forth herein and in the Loan Agreement.
13. EVENT OF DEFAULT. Each of the following shall constitute an "Event
of Default" hereunder and shall entitle the Mortgagee to exercise its remedies
hereunder and under any of the other Loan Documents:
(i) any failure of the Mortgagor to pay any amount due under
any of the Loan Documents within ten (10) days following the date when such
payment was due;
(ii) any failure in the observance, fulfillment or
performance of any other covenant, term, condition or warranty under any of the
Loan Documents, other than the payment of any monetary obligation and other than
as specified in subsections (iii) through (vi) below (hereinafter referred to as
a "Failure to Perform"), continuing for thirty (30) days after the giving of
notice by the Mortgagee to the Mortgagor specifying the nature of the Failure to
Perform, except as to matters not susceptible to cure within thirty (30) days,
provided that with respect to such matters, (a) the Mortgagor commences the cure
thereof within thirty (30) days after the giving of such notice by the Mortgagee
to the Mortgagor, (b) the Mortgagor continuously prosecutes such cure to
completion, (c) such cure is completed within ninety (90) days after the giving
of such notice by the Mortgagee to the Mortgagor and (d) such Failure to Perform
does
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<PAGE> 10
not impair the Mortgagee's rights with respect to the Mortgaged Property or
otherwise impair the security evidenced hereby;
(iii) except as otherwise permitted pursuant to the Loan
Agreement or any other Loan Document, if, without the prior written consent of
the Mortgagee, in each instance, which consent may be withheld by the Mortgagee
in its sole and absolute discretion the Mortgaged Property shall be, directly or
indirectly, mortgaged (whether or not junior to this Mortgage), encumbered (by
any voluntary or involuntary lien other than the Permitted Encumbrances),
leased, subleased, sold, assigned, hypothecated or otherwise transferred;
(iv) the occurrence of any Loan Default;
(v) the occurrence of any Related Party Default; and
(vi) a default or breach of condition continuing beyond the
expiration of any notice or grace periods, if any, under any prior mortgage
which may be included in the definition of Permitted Encumbrances and to which
this Mortgage is now, or at any time hereafter, subject or subordinate.
14. REMEDIES UPON DEFAULT. Immediately upon the occurrence of any Event
of Default, the Mortgagee shall have the option, in addition to and not in lieu
of or substitution for the other rights and remedies provided in this Mortgage
and the other Loan Documents and as may then be provided by applicable law, and
is hereby authorized and empowered by the Mortgagor, to do any or all of the
following:
(i) declare the entire unpaid amount of the Loan
Obligations, including, without limitation, the outstanding principal balance of
the Note and all accrued and unpaid interest due under the Note, the Prepayment
Fee, all Late Payment Charges and any and all costs, charges and other amounts
(including, without limitation, Additional Interest) payable by the Mortgagor to
the Mortgagee pursuant to the Loan Documents, immediately due and payable and,
at the Mortgagee's option, (a) bring suit therefor, or (b) bring suit for any
delinquent payment of, or bring suit upon, the Loan Obligations or (c) take any
and all steps and institute any and all other proceedings that the Mortgagee
deems necessary or desirable to enforce the payment and performance of the Loan
Obligations and to protect the lien of this Mortgage;
(ii) commence foreclosure proceedings against the Mortgaged
Property through judicial proceedings, by advertisement or as otherwise provided
by applicable law, at the option of the Mortgagee, and to sell all or any
portion of the Mortgaged Property or to cause the same to be sold at public
sale, and to convey the same to a purchaser, as provided by the law, in a single
parcel or in several parcels at the option of the Mortgagee;
(iii) cause to be brought down to date an abstract or
abstracts of title and tax histories of the Mortgaged Property, procure title
insurance or title reports and, if necessary, procure new abstracts and tax
histories;
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<PAGE> 11
(iv) enter upon and take possession of and operate all or any
portion of the Mortgaged Property (with or without bringing any action or
proceeding in any court);
(v) have a receiver appointed to manage the Mortgaged
Property with all such powers as the court making such appointment shall confer;
(vi) demand and receive payment of all Rents, benefits,
income and profits from the Mortgaged Property, including those past due and
unpaid (whether or not the Mortgagee has taken possession of the Mortgaged
Property);
(vii) in the event of any sale of the Mortgaged Property by
foreclosure, through judicial proceedings, by advertisement or otherwise, retain
one percent (1%) of the proceeds of any such sale and then apply the remaining
proceeds of any such sale towards payment of the items immediately set forth
below in the following order:
(a) all expenses reasonably incurred for the
collection and enforcement of the Obligations and the foreclosure of this
Mortgage, including, without limitation, attorneys' fees and expenses, court
costs, publication and advertising expenses, auctioneers' fees, appraisal fees
and expenses for environmental site audit reports (hereinafter collectively
referred to as the "Collection and Foreclosure Costs"), or such Collection and
Foreclosure Costs as are then permitted by applicable law;
(b) all sums expended or incurred by the Mortgagee
directly or indirectly in connection with the enforcement of terms, conditions,
covenants and warranties contained in the Loan Documents and all other
agreements evidencing or securing the Obligations, together with interest
thereon as therein provided;
(c) all accrued and unpaid interest (including,
without limitation, Additional Interest) upon the Obligations;
(d) the Prepayment Fee;
(e) the unpaid principal amount of the Obligations
(in the inverse order of maturity); and
(f) the surplus, if any, unless prohibited by
applicable law or a court of competent jurisdiction decrees otherwise, to the
Mortgagor or any other Person lawfully entitled thereto; and
(viii) set off or apply, without notice to or demand on the
Mortgagor, all deposits or other sums at any time credited by or due from the
Mortgagee to the Mortgagor, and all cash, securities, instruments or other
property of the Mortgagor in the possession of the Mortgagee (whether for
safekeeping or otherwise), which shall at all times constitute security for the
obligations contained in the Loan Documents.
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<PAGE> 12
Failure to exercise any option to accelerate the Loan Obligations upon
the occurrence of an Event of Default hereunder or other circumstance permitting
the exercise of such option, shall not constitute a waiver of the default or of
the right to exercise such option at a later time, or a waiver of the right to
exercise such option upon the occurrence of any other Event of Default or
circumstance specified above.
The Mortgagor hereby agrees to the provisions of Section 846.103 Wis.
Stats., as the same may be amended or renumbered from time to time, permitting
the Mortgagee, upon waiving the right to judgement for deficiency, to commence
foreclosure proceedings against the Mortgaged Property three (3) months after a
foreclosure judgement is entered.
15. NO OBLIGATION TO MARSHALL ASSETS. Notice is hereby given that
neither the Mortgagor, nor any holder of any mortgage, lien or other encumbrance
affecting all or part of the Mortgaged Property which is inferior to the lien of
this Mortgage shall have any right to require the Mortgagee to marshall assets.
16. ADDITIONAL COLLATERAL. The Mortgagor hereby covenants and agrees
that all collateral now or hereafter granted as security for any of the
Obligations (now existing or hereafter arising) shall be deemed to be additional
collateral securing the complete payment, performance, observance and
fulfillment of all of the terms, covenants, conditions and warranties secured by
this Mortgage.
To the extent that the Mortgagor is not the primary obligor of any of
the terms, covenants, conditions or warranties included within the definition of
the Obligations, the Mortgagor also hereby guarantees to the Mortgagee (and the
other Meditrust Entities) the complete payment, performance, observance and
fulfillment of such terms, covenants, conditions and warranties included within
the definition of the Obligations; provided, however, that (except as provided
below) recourse against the Mortgagor for the performance of this guaranty shall
be limited to the Mortgagor's interest in the Mortgaged Property and all cash,
instruments and other property of the Mortgagor in the possession of the
Mortgagee (whether for safekeeping or otherwise). Notwithstanding the foregoing,
it is expressly understood and agreed that the provisions of this guaranty shall
in no way limit or otherwise affect: (i) any other provision of this Mortgage or
(ii) any other term, condition, covenant or warranty set forth under any
agreement made by the Mortgagor to, and for the benefit of, the Mortgagee,
whether such agreement is now existing or hereafter entered into, including,
without limitation, the Loan Documents, which the Mortgagee shall have full
recourse to the Mortgagor.
The Mortgagor hereby waives any right to require the Mortgagee or any
of the Meditrust Entities to: (a) proceed against any other primary obligor or
guarantor of any of the indebtedness, liabilities, covenants, obligations or
agreements included within the definition of the Obligations or (b) pursue any
other remedy in the Mortgagee's or any of the Meditrust Entities' power
whatsoever. The Mortgagor waives any defense arising by reason of any disability
or other defense of any such Person or by reason of the cessation from any cause
whatsoever of the liability of any such Person. The Mortgagor shall not assert,
and hereby waives, any right or claim whatsoever including without limitation,
any right of subrogation, arising against such Persons in
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<PAGE> 13
connection with the Mortgagor's performance of the obligations, covenants and
agreements as set forth in this Section 16 and the Mortgagee's enforcement of
any rights and remedies hereunder, until the complete payment and performance of
all of the Obligations.
Furthermore, the Mortgagor also hereby waives any right to enforce any
remedy which the Mortgagee or any of the Meditrust Entities now has or may
hereafter have against any such Person, and hereby waives any benefit of rights
to participate in any security now or hereafter held by the Mortgagee. The
Mortgagor hereby waives notice of acceptance hereof and reliance hereon, notice
of any action taken or omitted by the Mortgagee or any of the Meditrust Entities
in reliance hereon, suretyship defenses, presentment, demand, protest, notice of
nonpayment, notice of dishonor, protest of any dishonor, notice of protest and
giving notice of:
(1) any default by any such Person under any of the applicable
agreements between any such Person and the Mortgagee or any of the Meditrust
Entities or the assertion of any right of the Mortgagee or any of the Meditrust
Entities thereunder or hereunder;
(2) all other notices in connection with the delivery,
acceptance, performance, default or enforcement of the payment and performance
of such agreements; and
(3) notices of the existence, creation or incurring of new or
additional indebtedness, liabilities, covenants, obligations or agreements which
shall be included in the Obligations.
The Mortgagor shall take no action of any kind which might be the basis
for a claim that the Mortgagor has any defense hereunder other than the complete
payment and performance of the Obligations. The Mortgagor hereby agrees to hold
harmless and indemnify and shall indemnify the Mortgagee against any claim,
injury, loss, cost, damage, liability and expense, including, without
limitation, attorneys' fees and expenses and court costs, arising out of or in
connection with the assertion by any such Person of any defense to any of its
obligations to the Mortgagee or resulting from the attempted assertion by the
Mortgagor of any defense hereunder based upon such action or inaction of any
such Person. The aforesaid indemnification agreement shall also include all
costs and expenses reasonably incurred by the Mortgagee in connection with the
enforcement thereof. The Mortgagor hereby waives any right or claim of right to
cause a marshalling of the assets of any such Person. No delay on the part of
the Mortgagee in the exercise of any right, power or privilege under any
documentation with any such Person or hereunder shall operate as a waiver of any
such privilege, power or right.
The indemnity provisions of this Section 16 shall survive the complete
payment and performance of the Obligations and the foreclosure of this Mortgage.
17. SECURITY INTEREST. As to (i) any fixtures, Equipment and other
Personal Property included in the Mortgaged Property, (ii) all Instruments,
Accounts, Receivables and General Intangibles of the Mortgagor and (iii) the
Permits and Contracts, this Mortgage shall be deemed to constitute a security
agreement and the Mortgagor, as debtor, hereby grants to the Mortgagee, as
secured party, a security interest therein pursuant to the UCC. Notwithstanding
the foregoing,
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<PAGE> 14
to the extent that the Mortgagee is not now or hereafter permitted by applicable
law to take a security interest in any of the Permits and Contracts, the
Mortgagor hereby agrees, from time to time upon the request of the Mortgagee, to
execute any and all other documents deemed necessary and desirable by the
Mortgagee to give the Mortgagee such interest in such Permit or Contract as is
now or hereafter allowed under applicable law. The Mortgagor agrees, upon
request of the Mortgagee, to furnish an inventory of Personal Property owned by
the Mortgagor and subject to this Mortgage and, upon request by the Mortgagee,
to execute any supplements to this Mortgage, any separate security agreements
and any financing statements and continuation statements in order to include
specifically said inventory of Personal Property or otherwise to perfect the
security interest granted hereby and to pay all costs and expenses reasonably
incurred by the Mortgagee relating thereto including, without limitation,
attorneys' fees and expenses and court costs.
Upon the occurrence of any Event of Default hereunder, in addition to
the rights and remedies provided by this Mortgage, the Mortgagee shall also have
all rights and remedies then provided under the UCC or otherwise then provided
by applicable law, including, but not limited to, the option of proceeding as to
both the Real Property and the Personal Property in accordance with the
Mortgagee's rights and remedies in respect of the Real Property, in which event
the default provisions of the UCC shall not apply. In the event that the
Mortgagee, at its option, elects to proceed with the Personal Property
separately from the Real Property, then, in addition to the rights and remedies
herein provided, the Mortgagee shall also have all rights and remedies then
provided under the UCC or otherwise then provided by applicable law, including,
without limitation, the right to require the Mortgagor to assemble such Personal
Property and to make it available to the Mortgagee at a place to be designated
by the Mortgagee which is reasonably convenient to both parties, the right to
take possession of such Personal Property with or without demand and with or
without process of law and the right to sell and dispose of the same and
distribute the proceeds according to applicable law. The parties hereto agree
that any requirement of reasonable notice under the UCC shall be met if the
Mortgagee sends such notice to the Mortgagor at least five (5) days prior to the
date of sale, disposition or other event giving rise to the required notice, and
that the proceeds of any disposition of any such Personal Property may be
applied by the Mortgagee first to the expenses reasonably incurred in connection
therewith, including attorneys' fees and expenses and court costs, and then,
toward payment of the Obligations. With respect to the Personal Property that
has become so attached to the Real Property that an interest therein arises
under the real property law of the state in which the Real Property is located,
this Mortgage shall also constitute a financing statement and a fixture filing
under the UCC.
18. RIGHT OF ENTRY. At reasonable times and upon reasonable notice to
the Mortgagor (which limitations with respect to time and notice shall not apply
in emergency situations), the Mortgagee and the Mortgagee's representatives,
from time to time throughout the term of this Mortgage, may enter upon the
Mortgaged Property and inspect the same, or cause the Mortgaged Property to be
inspected by agents, employees or independent contractors of the Mortgagee, and
show the same to others, but the Mortgagee shall not be obligated to make any
such entry or inspection.
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<PAGE> 15
19. MORTGAGE EXTENSION. The lien hereof shall remain in full force and
effect during any postponement or extension of the time for the payment and
performance of the Obligations, or of any part thereof, and any number of
extensions or modifications hereof or any additional notes taken by the
Mortgagee shall not affect the lien hereof or the liability of the Mortgagor or
of any subsequent obligor to pay and perform the Obligations unless and until
such lien or liability shall be expressly released in writing by the Mortgagee.
20. ADMINISTRATIVE FEES. The Mortgagee shall have the right to charge
administrative fees during the term of the loan evidenced by the Note in such
amounts and at such times as the Mortgagee may reasonably determine in
connection with any servicing requests made by the Mortgagor requiring the
Mortgagee's evaluation, preparation and processing of any such requests and in
connection with the processing. The Mortgagee shall also be entitled to
reimbursement for all professional fees and expenses reasonably incurred in
connection with such requests including, without limitation, those of
architects, engineers and attorneys.
21. TRANSFER OF MORTGAGED PROPERTY. In the event that the Mortgagor
transfers the Mortgagor's interest in the Mortgaged Property to any party not
appearing in this instrument (without implying any right of the Mortgagor to do
so without the Mortgagee's prior written consent in each instance pursuant to
the provisions hereof), the Mortgagee may, at its option and without notice to
the Mortgagor, deal with such successor or successors in interest with reference
to all of the Loan Documents, including, without limitation, forbearance on the
part of the Mortgagee or extension of the time for payment or performance of the
Obligations, without in any way modifying or affecting the provisions of this
Mortgage or the liability of the Mortgagor or any other party under the this
Mortgage or any of the other Loan Documents.
22. GENERAL PROVISIONS AND RULES OF CONSTRUCTION. The provisions set
forth in Section 12 of the Loan Agreement are hereby incorporated herein by
reference, mutatis, mutandis and shall govern this Mortgage as if set forth in
full herein.
23. STATE PROVISIONS. This Mortgage is upon the STATUTORY CONDITION and
upon the further condition that all covenants and agreements on the part of the
Mortgagor herein undertaken shall be kept and fully and seasonably performed and
that no breach of any of the other conditions specified herein shall be
permitted. For any breach of the STATUTORY CONDITION, or for breach of any other
of the Mortgagor's covenants and undertakings hereunder or for any breach of any
other condition specified herein, the Mortgagee shall have the STATUTORY POWER
OF SALE.
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<PAGE> 16
IN WITNESS WHEREOF, the Mortgagor has duly executed this Mortgage under
seal on the day and year first above written.
WITNESS: MORTGAGOR:
BCC OF WISCONSIN, INC.,
a Delaware corporation
/s/ Robin L. Barber By: /s/ Brian L. Barth
- ------------------- ------------------
Name: Robin L. Barber Name: Brian L. Barth
Title: Vice President
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<PAGE> 1
EXHIBIT 10.15
FORM OF
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT is made as of ____________
by __________________________________(hereinafter referred to as the
"Grantor") to LISA M. HAINES, AS TRUSTEE, having an address at Polsinelli,
White, Vademan & Shalton, 700 West 47th Street, Suite 1000, Kansas City,
Missouri 64112 (hereinafter referred to as the "Trustee") for the benefit of
MEDITRUST MORTGAGE INVESTMENTS, INC., a Delaware corporation, having its
principal address at 197 First Avenue, Needham Heights, Massachusetts 02194
(hereinafter referred to as the "Beneficiary").
WITNESSETH:
THAT, to secure the payment, observance, fulfillment and performance
of the Obligations, as defined in that certain Loan Agreement of even date
herewith by and among (a) the Grantor, Hawthorn Health Properties, Inc.,
National Care Centers, Inc., National Care Centers of Lebanon, Inc.,
Springfield Retirement Village, Inc., National Care Centers of Nixa, Inc.,
National Care Centers of Springfield, Inc. and Mt. Vernon Park Care Center
West, Inc. (collectively the "Borrowers") and (b) the Beneficiary (the "Loan
Agreement"), including, without limitation:
(i) the payment to the Beneficiary of the principal
indebtedness of FORTY-ONE MILLION THREE HUNDRED EIGHTY-FIVE THOUSAND
DOLLARS ($41,385,000), together with interest thereon and other
charges, all as evidenced by that certain promissory note (hereinafter
referred to as the "Note") of even date and delivery herewith, made by
the Borrowers to the order of the Beneficiary, in and by which Note
the Borrowers jointly and severally promise to pay the said principal
indebtedness and interest at the rate and in the installments as
provided in the Note, with the entire principal balance then remaining
unpaid with accrued and unpaid interest thereon and any costs, charges
and other amounts due thereunder and other Loan Documents, being due
on August , 2006;
(ii) the performance, observance and fulfillment of all of
the terms, conditions, covenants and warranties set forth in this Deed
of Trust;
<PAGE> 2
(iii) the performance, observance and fulfillment of all of
the terms, conditions, covenants and warranties set forth in the other
Loan Documents; and
(iv) the payment, observance and performance of the Related
Party Obligations;
the Grantor does hereby mortgage, grant, bargain, sell, transfer and convey
unto the Trustee and to the Trustee's substitutes and successors and assigns
forever with power of sale, all of the following described land, improvements
and property and all of the Grantor's estate, right, title and interest therein
(hereinafter collectively referred to as the "Mortgaged Property"):
The land described in EXHIBIT A attached hereto and incorporated
herein by reference as if fully set forth herein, situate, lying and being in
_______________________________ (hereinafter referred to as the "Land");
TOGETHER with all buildings, structures and other improvements now or
hereafter located on the Land or any part thereof (hereinafter referred to as
the "Improvements"), including, without limitation, the skilled nursing
facility with ___ licensed beds commonly known as __________________________
(hereinafter referred to as the "Facility");
TOGETHER with all of the Grantor's right, title and interest in and to
the land lying in the bed of any street, way, road, highway or avenue in front
of or adjoining the Land;
TOGETHER with all easements now or hereafter located on or appurtenant
to the Land and/or Improvements on, under or above the same or any part
thereof, and all rights-of-way, licenses, and privileges, belonging or in any
way appertaining to the Land and/or Improvements (including, without
limitation, the easements, rights-of-way, licenses and privileges, if any,
included in the description of the Land set forth in EXHIBIT A and included in
the Permitted Encumbrances [as hereinafter defined in Section 2]);
TOGETHER with any and all awards heretofore made and hereafter to be
made by any governmental authority (municipal, state or federal) to the present
and all subsequent owners of the Mortgaged Property for the taking of all or
any portion of the Mortgaged Property by power of eminent domain, including,
without limitation, awards for damage to the remainder of the Mortgaged
Property and any awards for any change or changes of grade of streets affecting
the Mortgaged Property; which said proceeds, premiums and awards are hereby
assigned to the Beneficiary, and, subject to the terms and provisions of the
Loan Agreement, the Beneficiary, at its option, is hereby authorized, directed
and empowered to (i) adjust, compromise, collect and receive the proceeds of
any insurance judgments or settlements made in lieu thereof and such premiums
and the proceeds of any such awards from the authorities making the same and to
give proper receipts and acquittances therefor, and (ii) apply the same toward
the repair, rebuilding or restoration of the Mortgaged Property or toward
payment of the Obligations, notwithstanding the fact that such amount
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<PAGE> 3
may not then be due; and the Grantor hereby covenants and agrees to and with
the Beneficiary, upon request by the Beneficiary, to make, execute and deliver,
at the Grantor's sole cost and expense, any and all assignments and other
instruments sufficient for the purpose of assigning the aforesaid proceeds,
premiums and awards to the Beneficiary, free, clear and discharged of any and
all encumbrances of any kind or nature whatsoever (all of the foregoing Land,
Improvements, rights, easements, rights-of-way, licenses, privileges and
awards, hereinafter collectively referred to as the "Real Property");
TOGETHER with all articles, appliances, chattels, fixtures, furniture,
furnishings, machinery, Equipment, Goods, Inventory (as those foregoing
capitalized terms are defined in the UCC) and every other article of personal
property, tangible or intangible, now or hereafter attached to or used in
connection with the Real Property, or placed on any part thereof, whether or
not attached thereto, appertaining or adapted to the use, management, operation
or improvement of the Real Property, regardless of whether hereafter removed
from the Real Property, all insofar as the same and any reversionary right
thereto may now or hereafter be owned or acquired by the Grantor (hereinafter
referred to as the "Personal Property"), including, without limitation: all
partitions and portable or sectional buildings; screens; awnings; shades;
blinds; storm and other detachable windows and doors; floor coverings; mantels,
built-in cases, counters, closets, chests of drawers and mirrors; patient room
furnishings, equipment for the treatment of patients, kitchen and dining room
equipment and furnishings and inventories of linen, dishware and cooking
utensils; hall and lobby equipment; heating, lighting, plumbing, ventilating,
refrigerating, incinerating, elevator, escalator, air conditioning and
communication plants, apparatus and/or equipment with appurtenant fixtures;
garbage incinerators and receptacles; boilers; stoves; tanks; motors; vacuum
cleaning systems; call systems; door bell and alarm systems; sprinkler systems,
smoke detectors and other fire prevention and extinguishing apparatus and
materials; all equipment, manual, mechanical and motorized, for the
construction, maintenance, repair and cleaning of, and removal of snow from,
parking areas, walks, underground ways, truck ways, driveways, common areas,
roadways, highways and streets; and all other machinery, pipes, poles,
appliances, equipment, wiring, fittings, panels and fixtures; and any proceeds
therefrom, any replacements thereof or additions or accessions thereto; and all
building materials, equipment, supplies and other property delivered to the
Real Property for incorporation into the Improvements thereon, all of which are
declared to be a part of the Real Property and covered by the lien hereof, but
said lien shall not cover any fixture, machinery, equipment or article of
personal property which is (a) leased by the Grantor as of the date hereof or
under a lease hereafter entered into by the Grantor that is permitted under the
Loan Agreement or is otherwise approved in writing by the Beneficiary or (b)
owned by a Lessee (as hereinafter defined) and not required for the operation
or maintenance of the Real Property, provided said fixture, machinery,
equipment or article of personal property is not permanently affixed to the
Real Property and may be removed without material damage thereto and is not a
replacement of any item which shall have been subject to the lien hereof;
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<PAGE> 4
TOGETHER with the right to use, in perpetuity, in connection with the
operation of the Mortgaged Property, the name "Hermitage Park Regional Care
Center" and any other name similar thereto and the goodwill of the Grantor with
respect thereto;
TOGETHER with all of the Grantor's right, title and interest in and to
any and all leases, subleases, license agreements, concession agreements,
tenancy at will agreements, room rentals and rentals of other facilities of the
Mortgaged Property and all other occupancy agreements of every kind and nature
(but excluding Patient Admission Agreements), whether oral or in writing, now
in existence or subsequently entered into by the Grantor, encumbering or
affecting the Mortgaged Property (including, but not limited to, the leases
listed on EXHIBIT B attached hereto and incorporated herein by reference as a
material part hereof), together with all extensions, renewals, modifications
and replacements thereof (hereinafter collectively referred as the "Leases"),
together with any and all guaranties (hereinafter collectively referred to as
the "Lease Guaranties") of the obligations of the lessees, licensees,
concessionaires and other occupants under the Leases (hereinafter collectively
referred to as the "Lessees") and all extensions, renewals, modifications and
replacements of the Lease Guaranties and all rents, revenues, royalties,
issues, profits, insurance proceeds, condemnation awards, license fees,
concession fees and all other income and security of every kind and nature due
by virtue of the Leases and the Lease Guaranties (hereinafter collectively
referred to as the "Rents");
TOGETHER with, to the extent now or hereafter permitted by applicable
law, all of the Grantor's right, title and interest in and to all (i) licenses,
approvals, qualifications, rights, variances, permissive uses, certificates of
need, franchises, accreditations, certificates, certifications, consents,
permits and other authorizations (including, without limitation, building
permits, subdivision approvals and subdivision plans) (hereinafter collectively
referred to as the "Permits") and (ii) agreements (including, without
limitation, all Provider Agreements and Patient Admission Agreements ),
contracts (including, without limitation, construction contracts, subcontracts
and architects' contracts), contract rights, warranties and representations,
franchises, and records and books of account (hereinafter collectively referred
to as the "Contracts") benefiting, relating to or affecting the Mortgaged
Property and the ownership, construction, development, maintenance, management,
repair, use, occupancy, possession or operation thereof or the operation of any
programs or services in conjunction with the Facility and all renewals,
replacements and substitutions therefor, now or hereafter issued by or entered
into with any Governmental Authority, Accreditation Body or Third Party Payor
or maintained or used by the Grantor or entered into by the Grantor with any
third Person;
TOGETHER with all of the Grantor's right, title and interest in, to
and under any and all (i) Instruments, Accounts (to the extent now or hereafter
permitted by applicable law), Proceeds and General Intangibles (as those
foregoing capitalized terms are defined in the UCC) and (ii) rights to payment
for goods sold or leased or services rendered by the Grantor or any other
party, whether now in existence or arising from time to time hereafter and
whether or not yet earned by performance, including, without limitation,
obligations
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<PAGE> 5
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness (collectively referred to as "Receivables");
together with (a) all security pledged, assigned, hypothecated or granted to or
held by the Grantor to secure the foregoing, (b) general intangibles arising
out of Grantor's rights in any goods, the sale of which gave rise thereto, (c)
all ledger sheets, files, records, computer records and tapes relating to any
of the foregoing, (d) all guarantees, endorsements and indemnifications on, or
of, any of the foregoing, (e) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in connection therewith,
and (f) all evidences of the filing of financing statements and other
statements and the registration of other instruments in connection therewith
and amendments thereto; all whether now existing or hereafter acquired or
arising and all proceeds and products thereof (including, without limitation,
any property received in payment, settlement or compromise of any Account or
Receivable);
TOGETHER with, to the extent permitted under applicable law, all of
the right, title and interest of the Grantor in and to all books, records,
ledgers, print-outs, papers, data, file materials and information relating to
the Mortgaged Property, the Collateral, any account debtors in respect thereof
and/or to the operation of the Grantor's business, and all rights of access to
such books, records, ledgers, print-outs, papers, file materials and
information, and all property in which such books, records, ledgers,
print-outs, data, file materials and information are stored, recorded, and
maintained;
TOGETHER with, to the extent permitted under applicable law, all of
the right, title and interest of the Grantor in and to (i) all Instruments,
Documents of Title, Documents, policies and certificates of insurance,
Securities, deposits, deposit accounts, money, cash or other property (as those
foregoing capitalized terms are defined in the UCC); (ii) all federal, state,
and local tax refunds and/or abatements to which the Grantor is, or becomes
entitled, no matter how or when arising, including, but not limited to any loss
carryback tax refunds; and (iii) all trade secrets, computer programs, customer
lists, patient lists, manuals, assignments of patents and patents pending,
developmental ideas and concepts, and all papers, drawings, blueprints,
sketches and documents relating to all of the foregoing and/or relating to the
operation of the Grantor's business and/or the Collateral;
TOGETHER with any and all proceeds of and any unearned premiums on any
insurance policies covering the Mortgaged Property, including, without
limitation, the right, at the Beneficiary's option (but subject to the terms
and provisions of the Loan Agreement), to adjust, compromise, collect, receive
and apply the proceeds of any insurance judgments or settlements made in lieu
thereof for damage to the Mortgaged Property or toward payment of the
Obligations, notwithstanding the fact that such amount may not then be due;
TOGETHER with all of the Grantor's right, title and interest in and to
all and singular the tenements, hereditaments and appurtenances belonging to or
in any way pertaining to the Mortgaged Property; all of the estate, right,
title and claim whatsoever of the Grantor, either at law or in equity, in and
to the Mortgaged Property; and any and all other, further or additional title,
estate, interest or right which may at any time be acquired
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<PAGE> 6
by the Grantor in or to the Mortgaged Property; and if the Grantor shall at any
time acquire any further estate or interest in or to the Mortgaged Property,
the lien of this Deed of Trust shall attach, extend to, cover and be a lien
upon such further estate or interest, and the Grantor, upon request of the
Beneficiary, shall execute such instrument or instruments as shall reasonably
be requested by the Beneficiary to confirm such lien, and the Grantor hereby
appoints the Beneficiary as the Grantor's attorney-in-fact, with full power of
substitution, to execute all such instruments if the Grantor shall fail to do
so within ten (10) days after demand (which power of attorney, being coupled
with an interest, shall be irrevocable until all of the Obligations are fully
paid and performed, and shall not be affected by any disability or incapacity
which the Grantor may suffer and shall survive the same; the power of attorney
conferred on the Beneficiary pursuant to the foregoing provisions is provided
solely to protect the interests of the Beneficiary and shall not impose any
duty on the Beneficiary to exercise any such power, and neither the Beneficiary
nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or wilful misconduct);
TO HAVE AND TO HOLD the Mortgaged Property, and each and every part
thereof, unto the Trustee for the benefit of the Beneficiary and their
substitutes, successors and assigns forever, for the purposes and uses herein
set forth;
AND, the Grantor hereby further covenants, agrees and warrants as
follows:
1. DEFINITIONS. For all purposes of this Deed of Trust, except as
otherwise expressly provided or unless the context otherwise requires,
capitalized terms used herein and not otherwise defined in this Deed of Trust
shall have the same meanings ascribed to such terms in the Loan Agreement, and
all accounting terms used herein and not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
2. COVENANTS OF TITLE. The Grantor hereby warrants and represents that
the Grantor has good, marketable and indefeasible title to the entire Real
Property in fee simple, has absolute unencumbered title to the Personal
Property, and has good right and full power to assign, grant, bargain, sell,
mortgage, transfer and convey the same. The Grantor further warrants and
represents that the Mortgaged Property is free and clear of agreements,
covenants, easements, restrictions, liens, Leases and other encumbrances,
except (i) those agreements, covenants, easements, restrictions, liens and
encumbrances to which this Deed of Trust is expressly subject, whether
presently existing, as listed on EXHIBIT C attached hereto and incorporated
herein by reference, or which may hereafter be created in accordance with the
terms hereof or of the Loan Agreement and (ii) any Lease listed on EXHIBIT B
(the matters described in the foregoing clauses (i) and (ii) are collectively
referred to herein as the "Permitted Encumbrances"); and the Grantor shall
warrant and defend title to the Mortgaged Property against any and all claims
and demands of every kind and nature whatsoever. The Beneficiary shall have the
right, at its option and at such time or times as the Beneficiary (in its sole
and absolute discretion) shall deem necessary or desirable to take whatever
action the Beneficiary (in its sole and absolute discretion) may
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<PAGE> 7
deem necessary or desirable to defend or uphold the lien or the rights of the
Beneficiary hereunder or otherwise enforce any obligation secured hereby,
including, without limitation, the right to institute appropriate legal
proceedings for such purposes, and all costs and expenses reasonably incurred
by the Beneficiary in connection therewith (including, without limitation,
attorneys' fees and expenses and court costs) shall be a demand obligation of
the Grantor to the Beneficiary, and to the extent permitted by applicable law,
shall be added to the Obligations and shall be secured by the lien of this Deed
of Trust and the other Loan Documents as fully and effectively and with the
same priority as every other obligation of the Grantor secured hereby, and if
not paid within ten (10) days after demand, shall thereafter (to the extent
permitted by applicable law) bear interest at the Advances Rate until the date
of payment.
3. IMPOSITIONS. The Grantor shall pay, or cause to be paid, the
Impositions in accordance with the terms and provisions of the Loan Agreement.
4. TAX DEPOSITS. At the option of the Beneficiary, the Grantor shall
deposit with the Beneficiary from time to time the amount of the Impositions to
be levied, charged, filed, assessed or imposed upon or against the Mortgaged
Property in accordance with the terms and provisions of the Loan Agreement.
5. INSURANCE. At all times until the Obligations are fully paid and
performed, the Grantor shall keep the Mortgaged Property insured in accordance
with the terms and provisions of the Loan Agreement.
6. RESTORATION FOLLOWING FIRE AND OTHER CASUALTY OR CONDEMNATION. In
the event of any damage or destruction to the Mortgaged Property by reason of
fire or other hazard or casualty or Condemnation, the Grantor shall give
immediate written notice thereof to the Beneficiary. The Mortgaged Property
shall be restored by the Grantor and insurance proceeds shall be applied to
repayment of the Obligations or restoration of the Mortgaged Property in
accordance with the terms and provisions of the Loan Agreement.
7. REPAIR; USE; COMPLIANCE WITH LAW; ALTERATIONS; WASTE. At all times
until the Obligations are fully paid and performed, the Mortgaged Property
shall be maintained and operated in accordance with the terms and provisions of
the Loan Agreement.
8. INDEPENDENCE OF MORTGAGED PROPERTY. The Grantor shall not, by act
or omission, permit any building or other improvement on any premises not
subject to the lien of this Deed of Trust to rely on the Mortgaged Property or
any interest therein to fulfill any applicable Legal Requirement, and the
Grantor hereby assigns to the Beneficiary any and all rights to give consent
for all or any portion of the Mortgaged Property or any interest therein to be
so used. Similarly, no portion of the Mortgaged Property shall rely on any
premises not subject to the lien of this Deed of Trust (or any interest
therein) in order to operate the Facility in a reasonable and businesslike
manner or to fulfill any applicable Legal Requirement. The Grantor shall not,
by act or omission, impair the integrity, as a single
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<PAGE> 8
zoning lot separate and apart from all other premises, of any portion of the
Real Property that now comprises such a single zoning lot. The Grantor
covenants that the Grantor shall not initiate, join in or consent to any zoning
changes affecting the Mortgaged Property nor initiate, join in or consent to
any private restrictive covenant or other public or private restriction upon
the use of the Mortgaged Property without the Beneficiary's prior written
consent, in each instance, which consent may be withheld in the Beneficiary's
sole and absolute discretion. Any act or omission by the Grantor which would
result in a violation of any of the provisions of this Section 8 shall be void
and shall be an Event of Default hereunder.
9. NO OTHER LIENS. Except as otherwise specifically provided herein or
in the Loan Agreement, the Grantor shall not create, consent to, agree to,
permit or suffer to exist any mortgage, security interest, attachment, lis
pendens, mechanic's or materialman's lien or other lien or encumbrance upon or
affecting the Mortgaged Property, whether superior or inferior to the lien of
this Deed of Trust (including, without limitation, the filing of a notice of
federal or state tax lien at any location at which by law such notice must be
filed in order to be effective against the Mortgaged Property, whether or not
such lien applies, by its terms, to the Mortgaged Property), except as granted
in this Deed of Trust and any other lien or security interest granted to the
Beneficiary or the Trustee for the benefit of the Beneficiary.
If this Deed of Trust, by its terms, is now, or at any time hereafter,
subject or subordinate to a prior mortgage, the Grantor shall not, without the
prior written consent of the Beneficiary, in each instance, which consent may
be withheld in the Beneficiary's sole and absolute discretion, agree at any
time to any waiver, revision, modification, amendment, indulgence, suspension
or extension of or any addition to any of the provisions, terms, conditions or
payments of such prior mortgage.
The Grantor shall promptly pay and discharge any and all amounts which
are now or hereafter become liens against the Mortgaged Property, except for
such liens, if any, otherwise specifically permitted pursuant to the provisions
of this Deed of Trust or the Loan Agreement, and in default thereof, the
Beneficiary, upon five (5) days' notice to the Grantor, may pay and discharge
the same, and any amount so paid or advanced by the Beneficiary and all costs
and expenses reasonably incurred in connection therewith (including, without
limitation, attorneys' fees and expenses and court costs), shall be a demand
obligation of the Grantor to the Beneficiary, and to the extent permitted by
applicable law, shall be added to the Obligations and shall be secured by the
liens of this Deed of Trust and of the other Loan Documents as fully and
effectively and with the same priority as every other obligation of the Grantor
secured hereby and, if not paid within ten (10) days after demand, shall
thereafter (to the extent permitted by applicable law) bear interest at the
Advances Rate until the date of payment.
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<PAGE> 9
The covenants of this Section 9 shall survive any foreclosure of the
Mortgaged Property with respect to any such liens in existence as of the date
of transfer of title.
10. ASSIGNMENT OF LEASES. As additional security for the payment and
performance of the Obligations, and subject to the terms of that certain
Assignment of Leases and Rents of even date and recorded herewith by the
Grantor to the Beneficiary, the Grantor hereby grants, transfers and assigns to
the Beneficiary all of its right, title and interest in and to any and all
Leases and Lease Guaranties. The Beneficiary shall not be deemed by virtue of
this assignment to have assumed any of the lessor's obligations, duties or
liabilities under or in connection with the Leases or Lease Guaranties, which
obligations the Grantor covenants and agrees to perform and observe as if this
assignment had not been made. In addition to the remedies hereinafter set forth
in this Deed of Trust, after the occurrence of an Event of Default hereunder,
the Beneficiary shall be entitled, either with or without taking possession of
the Mortgaged Property, to demand, sue for or otherwise collect and receive all
of the Rents, including those past due and unpaid, reserved to the lessor under
the terms of the Leases and upon receipt thereof, the Beneficiary shall apply
said amounts collected to the indebtedness secured hereby. The Grantor hereby
authorizes all Lessees and guarantors under the Lease Guaranties, upon receipt
of written notice from the Beneficiary that an Event of Default has occurred
hereunder, to pay over all Rent at any time owed under the Leases to the
Beneficiary in lieu of the Grantor. The Grantor shall and does hereby agree to
defend, with counsel acceptable to the Beneficiary, indemnify and hold the
Beneficiary harmless from any and all claims, demands, losses, damages,
liabilities, costs and expenses of every kind and nature, including, without
limitation, attorneys' fees and expenses and court costs, which the Beneficiary
shall sustain or reasonably incur arising out of or in connection with the
Leases or the enforcement of this indemnification. Any Lessee (and any
guarantor of such Lessee's obligations under the applicable Lease) shall be
deemed by virtue of said Lessee's occupancy of the Mortgaged Property, to have
agreed to the terms of this assignment and shall be entitled to rely
conclusively on any written notice from the Beneficiary of the existence of an
Event of Default under this Deed of Trust. Upon receipt of such written notice,
each Lessee (or guarantor of the obligations of such Lessees under the
applicable Lease) shall pay over to the Beneficiary, on the dates set forth
under the applicable Lease (except as to those amounts past due and unpaid,
which amounts shall be payable immediately to the Beneficiary upon receipt of
such written notice), all Rent required to be made to the lessor pursuant to
such Lease.
The indemnification provisions of this Section 10 shall survive the
complete payment and performance of the Obligations and the foreclosure of this
Deed of Trust.
11. FUTURE ACTIONS WITH RESPECT TO THE LEASES. The Grantor shall
furnish to the Beneficiary a true and complete copy of each Lease hereafter
made by the Grantor within ten (10) days after execution and delivery of each
such Lease by the parties thereto. Upon the request of the Beneficiary, the
Grantor shall also furnish to the Beneficiary an original mortgagee attornment
agreement executed by each Lessee under any Lease and an original estoppel
certificate, all in form and substance reasonably satisfactory to the
Beneficiary, addressed to the Beneficiary, from each Lessee under any Lease.
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<PAGE> 10
The Grantor shall, from time to time, upon request of the Beneficiary,
confirm in writing the assignment to the Beneficiary of any or all of the
Leases, and such written confirmation shall be in such form as the Beneficiary
shall reasonably require and as shall be necessary to make the same recordable.
12. LEASES; FORECLOSURE. Any proceedings or other steps taken by the
Beneficiary to foreclose this Deed of Trust, or otherwise to protect the
interests of the Beneficiary hereunder, shall not operate to terminate the
rights of any present or future Lessee under any of the Leases, notwithstanding
that said rights may be subject and subordinate to the lien of this Deed of
Trust, unless the Beneficiary specifically elects otherwise in the case of any
particular Lessee. The failure to make any such Lessee a defendant in any such
foreclosure proceeding and to foreclose such Lessee's rights shall not be
asserted by the Grantor or any other defendant in such foreclosure proceeding
as a defense to any proceeding instituted by the Beneficiary to foreclose this
Deed of Trust or otherwise to protect the interests of the Beneficiary
hereunder.
In addition, the Beneficiary shall have the right to subordinate this
Deed of Trust and its rights hereunder to any Lease which is subject and
subordinate to this Deed of Trust, except that the Beneficiary shall be
entitled to expressly exclude from such subordination the Beneficiary's rights
to insurance proceeds and Condemnation awards as set forth herein and in the
Loan Agreement.
13. EVENT OF DEFAULT. Each of the following shall constitute an "Event
of Default" hereunder and shall entitle the Beneficiary to exercise its
remedies hereunder and under any of the other Loan Documents:
(i) any failure of any of the Borrowers to pay any amount due
under any of the Loan Documents within ten (10) days following the date when
such payment was due;
(ii) any failure in the observance, fulfillment or performance of
any other covenant, term, condition or warranty under any of the Loan
Documents, other than the payment of any monetary obligation and other than as
specified in subsections (iii) through (vi) below (hereinafter referred to as a
"Failure to Perform"), continuing for thirty (30) days after the giving of
notice by the Beneficiary to the Grantor specifying the nature of the Failure
to Perform, except as to matters not susceptible to cure within thirty (30)
days, provided that with respect to such matters, (a) the Grantor commences the
cure thereof within thirty (30) days after the giving of such notice by the
Beneficiary to the Grantor, (b) the Grantor continuously prosecutes such cure
to completion, (c) such cure is completed within ninety (90) days after the
giving of such notice by the Beneficiary to the Grantor and (d) such Failure to
Perform does not impair the Beneficiary's rights with respect to the Mortgaged
Property or otherwise impair the security evidenced hereby;
(iii) except as otherwise permitted pursuant to the Loan Agreement
or any other Loan Document, if, without the prior written consent of the
Beneficiary, in each
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<PAGE> 11
instance, which consent may be withheld by the Beneficiary in its sole and
absolute discretion the Mortgaged Property shall be, directly or indirectly,
mortgaged (whether or not junior to this Mortgage), encumbered (by any
voluntary or involuntary lien other than the Permitted Encumbrances), leased,
subleased, sold, assigned, hypothecated or otherwise transferred;
(iv) the occurrence of any Loan Default;
(v) the occurrence of any Related Party Default; and
(vi) a default or breach of condition continuing beyond the
expiration of any notice or grace periods, if any, under any prior mortgage
which may be included in the definition of Permitted Encumbrances and to which
this Deed of Trust is now, or at any time hereafter, subject or subordinate.
14. REMEDIES UPON DEFAULT. Immediately upon the occurrence of any
Event of Default, the Beneficiary shall have the option, in addition to and not
in lieu of or substitution for the other rights and remedies provided in this
Deed of Trust and the other Loan Documents and as may then be provided by
applicable law, and is hereby authorized and empowered by the Grantor, to do
any or all of the following:
(I) declare the entire unpaid amount of the Loan Obligations,
including, without limitation, the outstanding principal balance of the Note
and all accrued and unpaid interest due under the Note, the Prepayment Fee, all
Late Payment Charges and any and all costs, charges and other amounts
(including, without limitation, Additional Interest) payable by the Grantor to
the Beneficiary pursuant to the Loan Documents, immediately due and payable
and, at the Beneficiary's option, (a) bring suit therefor, or (b) bring suit
for any delinquent payment of, or bring suit upon, the Loan Obligations or (c)
take any and all steps and institute any and all other proceedings that the
Beneficiary deems necessary or desirable to enforce the payment and performance
of the Loan Obligations and to protect the lien of this Deed of Trust;
(ii) sell the Mortgaged Property and any and every part thereof,
either in mass or in parcels, at public venue to the highest bidder for cash at
the place customary for foreclosure sales in the county and state where the
Mortgaged Property is located, first giving notice of such sale (as prescribed
by statute) in a newspaper of common circulation published in said county, and
delivering a copy of said notice to Grantor and any person who has filed a
request for notice, by United States mail, postage prepaid, certified or
registered, return receipt requested, delivered to addressee only; and upon
such sale, execute and deliver a deed or deeds conveying all estate, right,
title and interest, claim and demand therein, and right of redemption thereof,
at one or more sales as an entity or in parcels. The Trustee may adjourn from
time to time any sale by it to be made under or by virtue of this Deed of Trust
by announcement at the time and place appointed for such sale or for such
adjourned sale or sales; and, except as otherwise provided by any applicable
provision of law, the Trustee,
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without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned. In case Trustee shall have proceeded
to enforce any right or remedy under this Deed of Trust by foreclosure, entry
or otherwise, and such proceeding shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to Beneficiary, then and in
every case Grantor, Beneficiary and Trustee shall be restored to their former
positions and the rights, powers and remedies of Beneficiary and Trustee herein
provided or arising, or existing otherwise than herein set forth shall continue
as if no such proceeding had been taken;
(iii) commence foreclosure proceedings against the Mortgaged
Property through judicial proceedings, as provided by applicable law, either
for partial or complete foreclosure;
(iv) cause to be brought down to date an abstract or abstracts of
title and tax histories of the Mortgaged Property, procure title insurance or
title reports and, if necessary, procure new abstracts and tax histories;
(v) enter upon and take possession of and operate all or any
portion of the Mortgaged Property (with or without bringing any action or
proceeding in any court);
(vi) have a receiver appointed to manage the Mortgaged Property
with all such powers as the court making such appointment shall confer;
(vii) demand and receive payment of all Rents, benefits, income
and profits from the Mortgaged Property, including those past due and unpaid
(whether or not the Beneficiary has taken possession of the Mortgaged
Property);
(viii) in the event of any sale of the Mortgaged Property by
foreclosure, through judicial proceedings, or otherwise, apply the proceeds of
any such sale towards payment of the items immediately set forth below in the
following order:
(a) all expenses reasonably incurred for the collection and
enforcement of the Obligations and the foreclosure of this Deed of Trust,
including, without limitation, attorneys' fees and expenses, Trustee's fees,
court costs, publication and advertising expenses, auctioneers' fees, appraisal
fees and expenses for environmental site audit reports (hereinafter
collectively referred to as the "Collection and Foreclosure Costs"), or such
Collection and Foreclosure Costs as are then permitted by applicable law;
(b) all sums expended or incurred by the Beneficiary
directly or indirectly in connection with the enforcement of terms, conditions,
covenants and warranties contained in the Loan Documents and all other
agreements evidencing or securing the Obligations, together with interest
thereon as therein provided;
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<PAGE> 13
(c) all accrued and unpaid interest (including, without
limitation, Additional Interest) upon the Obligations;
(d) the Prepayment Fee;
(e) the unpaid principal amount of the Obligations (in the
inverse order of maturity); and
(f) the surplus, if any, unless prohibited by applicable
law or a court of competent jurisdiction decrees otherwise, to the Grantor or
any other Person lawfully entitled thereto; and
(ix) set off or apply, without notice to or demand on the Grantor,
all deposits or other sums at any time credited by or due from the Beneficiary
to the Grantor, and all cash, securities, instruments or other property of the
Grantor in the possession of the Beneficiary (whether for safekeeping or
otherwise), which shall at all times constitute security for the obligations
contained in the Loan Documents.
Failure to exercise any option to accelerate the Loan Obligations upon
the occurrence of an Event of Default hereunder or other circumstance
permitting the exercise of such option, shall not constitute a waiver of the
default or of the right to exercise such option at a later time, or a waiver of
the right to exercise such option upon the occurrence of any other Event of
Default or circumstance specified above.
Upon the completion of any sale or sales made by the Trustee under or
by virtue of this Section, the Trustee, or an officer of any court empowered to
do so, shall execute and deliver to the accepted purchaser or purchasers a good
and sufficient instrument, or good and sufficient instruments conveying,
assigning and transferring all estate, right, title and interest in and to the
property and rights sold. The Trustee is hereby appointed the true and
irrevocable lawful attorney of Grantor, in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Mortgaged
Property and rights so sold and for that purpose the Trustee may execute all
necessary instruments of conveyance, assignment and transfer, and may
substitute one or more persons with like power, the Grantor hereby ratifying
and confirming all that its said attorney or such substitute or substitutes
shall lawfully do by virtue hereof. This power of attorney shall be deemed to
be a power coupled with an interest and not subject to revocation.
Nevertheless, the Grantor, if so requested by the Trustee, shall ratify and
confirm any such sale or sales by executing and delivering to the Trustee or to
such purchaser or purchasers all such instruments as may be advisable, in the
judgment of the Trustee, for that purpose, and as may be designated in such
request. Any such sale or sales made under or by virtue of this Section whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, shall operate
to divest all the estate, right, title, interest, claim and demand whatsoever,
whether at law or in equity, of the Grantor in and to the properties and rights
so sold, and shall be a perpetual bar both at law and in equity
-13-
<PAGE> 14
against the Grantor and against any and all persons claiming or who may claim
the same, or any part thereof from, through or under the Grantor.
Upon any sale made under or by virtue of this Section, whether made
under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, the Beneficiary
may bid for and acquire the Mortgaged Property or any part thereof and in lieu
of paying cash therefor may make settlement for the purchase price by crediting
upon the obligations of the Grantor secured by this Deed of Trust the net sales
price after deducting therefrom the expenses of the sale and the cost of the
action and any other sums which the Beneficiary is authorized to deduct under
this Deed of Trust. The Beneficiary, upon so acquiring the Mortgaged Property,
or any part thereof, shall be entitled to hold, lease, rent, operate, manage
and sell the same in any manner provided by applicable laws.
The Trustee hereby lets the Mortgaged Property to the Grantor until a
sale is held under the foregoing provisions therefor, or until a default or
defaults in any of the terms, covenants, and conditions of this Deed of Trust,
or the Loan Agreement upon the following terms and conditions, to-wit: The
Grantor and every and all persons claiming or possessing the Mortgaged
Property, or any part thereof, by, through, or under Grantor shall pay rent
therefor during said term at the rate of one cent per month, payable monthly
upon demand, and shall surrender immediate peaceable possession of the
Mortgaged Property (and any and every part thereof) sold under provisions of
this Deed of Trust to the purchaser thereof under such sale, without notice or
demand therefor, and shall and will at once, without notice, surrender up
possession of the Mortgaged Property and ever part thereof in the event
Beneficiary shall take charge and enter as hereinbefore provided.
15. NO OBLIGATION TO MARSHALL ASSETS. Notice is hereby given that
neither the Grantor, nor any holder of any mortgage, lien or other encumbrance
affecting all or part of the Mortgaged Property which is inferior to the lien
of this Deed of Trust shall have any right to require the Beneficiary to
marshall assets.
16. ADDITIONAL COLLATERAL. The Grantor hereby covenants and agrees
that all collateral now or hereafter granted as security for any of the
Obligations (now existing or hereafter arising) shall be deemed to be
additional collateral securing the complete payment, performance, observance
and fulfillment of all of the terms, covenants, conditions and warranties
secured by this Deed of Trust.
-14-
<PAGE> 15
To the extent that the Grantor is not the primary obligor of any of
the terms, covenants, conditions or warranties included within the definition
of the Obligations, the Grantor also hereby guarantees to the Beneficiary (and
the other Meditrust Entities) the complete payment, performance, observance and
fulfillment of such terms, covenants, conditions and warranties included within
the definition of the Obligations; provided, however, that (except as provided
below) recourse against the Grantor for the performance of this guaranty shall
be limited to the Grantor's interest in the Mortgaged Property and all cash,
instruments and other property of the Grantor in the possession of the
Beneficiary (whether for safekeeping or otherwise). Notwithstanding the
foregoing, it is expressly understood and agreed that the provisions of this
guaranty shall in no way limit or otherwise affect: (i) any other provision of
this Deed of Trust or (ii) any other term, condition, covenant or warranty set
forth under any agreement made by the Grantor to, and for the benefit of, the
Beneficiary, whether such agreement is now existing or hereafter entered into,
including, without limitation, the Loan Documents, which the Beneficiary shall
have full recourse to the Grantor.
The Grantor hereby waives any right to require the Beneficiary or any
of the Meditrust Entities to: (a) proceed against any other primary obligor or
guarantor of any of the indebtedness, liabilities, covenants, obligations or
agreements included within the definition of the Obligations or (b) pursue any
other remedy in the Beneficiary's or any of the Meditrust Entities' power
whatsoever. The Grantor waives any defense arising by reason of any disability
or other defense of any such Person or by reason of the cessation from any
cause whatsoever of the liability of any such Person. The Grantor shall not
assert, and hereby waives, any right or claim whatsoever including without
limitation, any right of subrogation, arising against such Persons in
connection with the Grantor's performance of the obligations, covenants and
agreements as set forth in this Section 16 and the Beneficiary's enforcement of
any rights and remedies hereunder, until the complete payment and performance
of all of the Obligations.
Furthermore, the Grantor also hereby waives any right to enforce any
remedy which the Beneficiary or any of the Meditrust Entities now has or may
hereafter have against any such Person, and hereby waives any benefit of rights
to participate in any security now or hereafter held by the Beneficiary. The
Grantor hereby waives notice of acceptance hereof and reliance hereon, notice
of any action taken or omitted by the Beneficiary or any of the Meditrust
Entities in reliance hereon, suretyship defenses, presentment, demand, protest,
notice of nonpayment, notice of dishonor, protest of any dishonor, notice of
protest and giving notice of:
(1) any default by any such Person under any of the
applicable agreements between any such Person and the Beneficiary or any of the
Meditrust Entities or the assertion of any right of the Beneficiary or any of
the Meditrust Entities thereunder or hereunder;
(2) all other notices in connection with the delivery,
acceptance, performance, default or enforcement of the payment and performance
of such agreements; and
(3) notices of the existence, creation or incurring of new or
additional indebtedness, liabilities, covenants, obligations or agreements
which shall be included in the Obligations.
-15-
<PAGE> 16
The Grantor shall take no action of any kind which might be the basis
for a claim that the Grantor has any defense hereunder other than the complete
payment and performance of the Obligations. The Grantor hereby agrees to hold
harmless and indemnify and shall indemnify the Beneficiary against any claim,
injury, loss, cost, damage, liability and expense, including, without
limitation, attorneys' fees and expenses and court costs, arising out of or in
connection with the assertion by any such Person of any defense to any of its
obligations to the Beneficiary or resulting from the attempted assertion by the
Grantor of any defense hereunder based upon such action or inaction of any such
Person. The aforesaid indemnification agreement shall also include all costs
and expenses reasonably incurred by the Beneficiary in connection with the
enforcement thereof. The Grantor hereby waives any right or claim of right to
cause a marshalling of the assets of any such Person. No delay on the part of
the Beneficiary in the exercise of any right, power or privilege under any
documentation with any such Person or hereunder shall operate as a waiver of
any such privilege, power or right.
The indemnity provisions of this Section 16 shall survive the complete
payment and performance of the Obligations and the foreclosure of this Deed of
Trust.
17. SECURITY INTEREST. As to (i) any fixtures, Equipment and other
Personal Property included in the Mortgaged Property, (ii) all Instruments,
Accounts, Receivables and General Intangibles of the Grantor and (iii) the
Permits and Contracts, this Deed of Trust shall be deemed to constitute a
security agreement and the Grantor, as debtor, hereby grants to the
Beneficiary, as secured party, a security interest therein pursuant to the UCC.
Notwithstanding the foregoing, to the extent that the Beneficiary is not now or
hereafter permitted by applicable law to take a security interest in any of the
Permits and Contracts, the Grantor hereby agrees, from time to time upon the
request of the Beneficiary, to execute any and all other documents deemed
necessary and desirable by the Beneficiary to give the Beneficiary such
interest in such Permit or Contract as is now or hereafter allowed under
applicable law. The Grantor agrees, upon request of the Beneficiary, to
furnish an inventory of Personal Property owned by the Grantor and subject to
this Deed of Trust and, upon request by the Beneficiary, to execute any
supplements to this Deed of Trust, any separate security agreements and any
financing statements and continuation statements in order to include
specifically said inventory of Personal Property or otherwise to perfect the
security interest granted hereby and to pay all costs and expenses reasonably
incurred by the Beneficiary relating thereto including, without limitation,
attorneys' fees and expenses and court costs.
Upon the occurrence of any Event of Default hereunder, in addition to
the rights and remedies provided by this Deed of Trust, the Beneficiary shall
also have all rights and remedies then provided under the UCC or otherwise then
provided by applicable law, including, but not limited to, the option of
proceeding as to both the Real Property and the Personal Property in accordance
with the Beneficiary's rights and remedies in respect of the Real Property, in
which event the default provisions of the UCC shall not apply. In the event
that the Beneficiary, at its option, elects to proceed with the Personal
Property
-16-
<PAGE> 17
separately from the Real Property, then, in addition to the rights and remedies
herein provided, the Beneficiary shall also have all rights and remedies then
provided under the UCC or otherwise then provided by applicable law, including,
without limitation, the right to require the Grantor to assemble such Personal
Property and to make it available to the Beneficiary at a place to be
designated by the Beneficiary which is reasonably convenient to both parties,
the right to take possession of such Personal Property with or without demand
and with or without process of law and the right to sell and dispose of the
same and distribute the proceeds according to applicable law. The parties
hereto agree that any requirement of reasonable notice under the UCC shall be
met if the Beneficiary sends such notice to the Grantor at least five (5) days
prior to the date of sale, disposition or other event giving rise to the
required notice, and that the proceeds of any disposition of any such Personal
Property may be applied by the Beneficiary first to the expenses reasonably
incurred in connection therewith, including attorneys' fees and expenses and
court costs, and then, toward payment of the Obligations. With respect to the
Personal Property that has become so attached to the Real Property that an
interest therein arises under the real property law of the state in which the
Real Property is located, this Deed of Trust shall also constitute a financing
statement and a fixture filing under the UCC.
18. RIGHT OF ENTRY. At reasonable times and upon reasonable notice to
the Grantor (which limitations with respect to time and notice shall not apply
in emergency situations), the Beneficiary and the Beneficiary's
representatives, from time to time throughout the term of this Deed of Trust,
may enter upon the Mortgaged Property and inspect the same, or cause the
Mortgaged Property to be inspected by agents, employees or independent
contractors of the Beneficiary, and show the same to others, but the
Beneficiary shall not be obligated to make any such entry or inspection.
19. DEED OF TRUST EXTENSION. The lien hereof shall remain in full
force and effect during any postponement or extension of the time for the
payment and performance of the Obligations, or of any part thereof, and any
number of extensions or modifications hereof or any additional notes taken by
the Beneficiary shall not affect the lien hereof or the liability of the
Grantor or of any subsequent obligor to pay and perform the Obligations unless
and until such lien or liability shall be expressly released in writing by the
Beneficiary.
20. ADMINISTRATIVE FEES. The Beneficiary shall have the right to
charge administrative fees during the term of the loan evidenced by the Note in
such amounts and at such times as the Beneficiary may reasonably determine in
connection with any servicing requests made by the Grantor requiring the
Beneficiary's evaluation, preparation and processing of any such requests and
in connection with the processing. The Beneficiary shall also be entitled to
reimbursement for all professional fees and expenses reasonably incurred in
connection with such requests including, without limitation, those of
architects, engineers and attorneys.
-17-
<PAGE> 18
21. TRANSFER OF MORTGAGED PROPERTY. In the event that the Grantor
transfers the Grantor's interest in the Mortgaged Property to any party not
appearing in this instrument (without implying any right of the Grantor to do
so without the Beneficiary's prior written consent in each instance pursuant to
the provisions hereof), the Beneficiary may, at its option and without notice
to the Grantor, deal with such successor or successors in interest with
reference to all of the Loan Documents, including, without limitation,
forbearance on the part of the Beneficiary or extension of the time for payment
or performance of the Obligations, without in any way modifying or affecting
the provisions of this Deed of Trust or the liability of the Grantor or any
other party under the this Deed of Trust or any of the other Loan Documents.
22. GENERAL PROVISIONS AND RULES OF CONSTRUCTION. The provisions set
forth in Section 12 of the Loan Agreement are hereby incorporated herein by
reference, mutatis, mutandis and shall govern this Deed of Trust as if set
forth in full herein.
23. PROVISIONS RELATING TO TRUSTEE. THE TRUSTEE SHALL NOT BE LIABLE
FOR ANY ERROR OF JUDGMENT OR ACT DONE BY THE TRUSTEE IN GOOD FAITH, OR BE
OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER, EXCEPT
FOR THE TRUSTEE'S GROSS NEGLIGENCE OR BAD FAITH. THE TRUSTEE SHALL NOT BE
PERSONALLY LIABLE IN CASE OF ENTRY BY HER, OR ANYONE ENTERING BY VIRTUE OF THE
POWERS HEREIN GRANTED HER, UPON THE MORTGAGED PROPERTY FOR DEBTS CONTRACTED OR
LIABILITY OR DAMAGES INCURRED IN THE MANAGEMENT OR OPERATION OF THE MORTGAGED
PROPERTY. THE TRUSTEE SHALL HAVE THE RIGHT TO RELY ON ANY INSTRUMENT, DOCUMENT
OR SIGNATURE AUTHORIZING OR SUPPORTING ANY ACTION TAKEN OR PROPOSED TO BE TAKEN
BY HER HEREUNDER, BELIEVED BY HER IN GOOD FAITH TO BE GENUINE. THE TRUSTEE
SHALL BE ENTITLED TO REIMBURSEMENT FOR REASONABLE EXPENSES INCURRED BY HER IN
THE PERFORMANCE OF HER DUTIES HEREUNDER (INCLUDING WITHOUT LIMITATION ANY
AMOUNTS PAYABLE TO ATTORNEYS, ACCOUNTANTS, ENGINEERS OR OTHERS SELECTED BY THE
TRUSTEE TO AID THE TRUSTEE IN THE PERFORMANCE OF HER DUTIES HEREUNDER) AND TO
REASONABLE COMPENSATION FOR SUCH OF HER SERVICES HEREUNDER AS SHALL BE RENDERED
(NOT BASED ON SOME PERCENTAGE OF THE AMOUNT BID AT A FORECLOSURE SALE OR THE
AMOUNT OF THE NOTE BALANCE). GRANTOR WILL, FROM TIME TO TIME, PAY THE
COMPENSATION DUE TO THE TRUSTEE HEREUNDER AND REIMBURSE THE TRUSTEE FOR, AND
SAVE HER HARMLESS AGAINST, ANY AND ALL LIABILITY AND EXPENSES WHICH MAY BE
INCURRED BY HER IN THE PERFORMANCE OF HER DUTIES, UNLESS SUCH PERFORMANCE WAS
GROSSLY NEGLIGENT OR UNDERTAKEN IN BAD FAITH.
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<PAGE> 19
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated in any manner from any other moneys
(except to the extent required by law), and the Trustee shall be under no
liability for interest on any moneys received by her hereunder.
The Trustee may resign by the giving of notice of such resignation in
writing to the Beneficiary. If the Trustee shall die, resign or become
disqualified from acting in the execution of this trust or shall fail or refuse
to execute the same when requested by the Beneficiary so to do, or if, for any
reason, with or without cause, the Beneficiary shall prefer to appoint a
substitute trustee to act instead of the aforenamed Trustee, the Beneficiary
shall have full power to appoint a substitute trustee and, if preferred,
several substitute trustees in succession who shall succeed to all the estate,
rights, powers and duties of the aforenamed Trustee. Such appointment may be
executed by any authorized officer or agent of the Beneficiary and such
appointment shall be conclusively presumed to be executed with authority and
shall be valid and sufficient without proof of any action by the Board of
Directors or any superior officer of the Beneficiary. Said appointment shall be
effective upon recording of a Substitution of Trustee in the recorder of deeds
office for the county where the Mortgaged Property is located.
24. NOTICES. Any notice, request, demand, statement or consent made
hereunder (each of which shall hereinafter be referred to as a "Notice") shall
be in writing and shall be deemed duly given if personally delivered, sent by
certified mail, return receipt requested, or sent by a nationally recognized
commercial overnight delivery service with provisions for a receipt, postage or
delivery charges prepaid, and shall be deemed given when postmarked or placed
in the possession of such mail or delivery service. Any notice to be provided
to the Grantor or the Beneficiary shall addressed as set forth in Section 12.13
of the Loan Agreement and any Notice to be provided to the Trustee shall be
addressed to the Trustee at the address set forth in the first paragraph of
this Deed of Trust or at such other place as the Grantor, the Trustee or the
Beneficiary may from time to time hereafter designate to the others in writing.
IN WITNESS WHEREOF, the Grantor has duly executed this Deed of Trust
under seal on the day and year first above written.
WITNESS: GRANTOR:
- ------- -------
______________________________
By:
- ------------------------ --------------------------
-19-
<PAGE> 20
SCHEDULE TO EXHIBIT 10.15 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
DEED OF TRUST AND SECURITY
<TABLE>
<CAPTION>
PARTIES DATE
------- ----
<S> <C>
BCC at Hermitage Park Care Center, Inc. to Lisa M. Haines, as 8/30/96
Trustee for Meditrust Mortgage Investments, Inc.
BCC at Lebanon Care Center, Inc. to Lisa M. Haines, as Trustee 8/30/96
for Meditrust Mortgage Investments, Inc.
BCC at Lebanon Park Manor, Inc. to Lisa M. Haines, as Trustee 8/30/96
for Meditrust Mortgage Investments, Inc.
BCC at Mt. Vernon Park Care Center, Inc. to Lisa M. Haines, as 8/30/96
Trustee for Meditrust Mortgage Investments, Inc.
BCC at Nixa Park Center, Inc. to Lisa M. Haines, as Trustee for 8/30/96
Meditrust Mortgage Investments, Inc.
BCC at Springfield Care Center, Inc. to Lisa M. Haines, as 8/30/96
Trustee for Meditrust Mortgage Investments, Inc.
BCC at Mt. Vernon Park Care Center West, Inc. to Lisa M. Haines, 8/30/96
as Trustee for Meditrust Mortgage Investments, Inc.
BCC at Republic Park Center, Inc. to Lisa M. Haines, as Trustee 8/30/96
for Meditrust Mortgage Investments, Inc.
BCC at Nevada Park Center, Inc. to Lisa M. Haines, as Trustee 8/30/96
for Meditrust Mortgage Investments, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.16
FORM OF GUARANTY
TO:
1. GUARANTY OF PAYMENT AND PERFORMANCE OF OBLIGATIONS. For value
received and hereby acknowledged and as an inducement to (hereinafter referred
to as the "Lessor") to: (a) enter into that certain lease transaction with
____________, (hereinafter referred to as the "Lessee"), relating to the
personal care home to be known as "_________________________", located in
_____________________________ (hereinafter referred to as the "Facility"),
pursuant to the Facility Lease Agreement of even date herewith by and between
the Lessor and the Lessee (hereinafter referred to as the "Lease"), and (b)
enter into or accept the other Lease Documents (as defined in the Lease) and
make future loans, advances and extensions of credit to, for the account of or
on behalf of the Lessee, the undersigned, BALANCED CARE CORPORATION, a Delaware
corporation, having its principal place of business at 5021 Louise Drive, Suite
200, Mechanicsburg, Pennsylvania 17055 (the "Guarantor"), being the sole
shareholder of the Lessee and, as such, deriving a substantial benefit from the
consummation of the transaction evidenced by the Lease Documents, hereby
unconditionally guarantees to the Lessor the full payment and performance of the
Lease Obligations (as defined in the Lease).
This Guaranty is an absolute, unconditional and continuing guaranty of
the full and punctual payment and performance of the Lease Obligations and not
merely of their collectibility and is in no way conditioned upon any
requirement that the Lessor first collect or attempt to collect the Lease
Obligations or any portion thereof from the Lessee or from any endorser, surety
or other guarantor of any of the same or resort to any security or other means
of obtaining payment of any of the Lease Obligations that the Lessor now has or
may acquire after the date hereof, or upon any other contingency whatsoever.
Upon any Lease Default (as defined in the Lease), the Lease Obligations and all
liabilities and obligations of the Guarantor to the Lessor, hereunder or
otherwise, shall, at the option of the Lessor, become immediately due and
payable to the Lessor without further demand or notice of any nature, all of
which are expressly waived by the Guarantor. Payments by the Guarantor
hereunder may be required by the Lessor on any number of occasions. This
Guaranty shall continue in full force and effect until the complete payment and
performance of all of the Lease Obligations.
All payments hereunder received by the Lessor shall be applied by the
Lessor, without any marshalling of assets, towards the payment and/or
performance of the Lease Obligations and any other indebtedness of the
Guarantor hereunder in such order as the Lessor, in its sole and absolute
discretion, may determine.
<PAGE> 2
2. DEFINED TERMS. Capitalized terms used herein and not otherwise
specifically defined herein shall have the same meanings ascribed to such terms
in the Lease.
3. THE GUARANTOR'S FURTHER AGREEMENTS TO PAY. The Guarantor further
agrees, as the principal obligor and not as a guarantor, to pay to the Lessor
forthwith upon demand, in funds immediately available to the Lessor, all costs
and expenses, including without limitation, court costs and attorneys' fees and
expenses and court costs, reasonably incurred or expended by the Lessor in
connection with the collection or enforcement of the Lease Obligations and the
enforcement of all of the other obligations hereunder. Any amounts owed to the
Lessor under this Section 3 shall be a demand obligation and, if not paid
within ten (10) days after demand, shall thereafter, to the extent then
permitted by law, bear interest at the Overdue Rate until the date of payment.
The provisions of this Section 3 shall survive the expiration or earlier
termination of the Lease.
4. LIABILITY OF THE GUARANTOR. This Guaranty is unlimited and the
Guarantor shall be jointly and severally liable with every endorser, surety or
other guarantor of any or all of the Lease Obligations and the continuation of
this Guaranty shall not be affected by the termination, discontinuance, release
or modification of any agreement from (a) any such endorser, surety or
guarantor and/or (b) any other endorser, surety or guarantor of any of the
other Obligations. Nothing contained herein or otherwise shall require the
Lessor to make demand upon or join the Lessee or any such endorser, surety or
guarantor or other party in any suit brought upon this Guaranty; and the
Guarantor hereby waives any right to require marshalling or exhaustion of any
remedy against any collateral, other property, or any other Person primarily or
secondarily liable.
5. THE LESSOR'S FREEDOM TO DEAL WITH THE LESSEE AND OTHER PARTIES. The
Lessor shall be at liberty, without giving notice to or obtaining the assent of
the Guarantor and without relieving the Guarantor of any liability hereunder,
to deal with the Lessee and with each other Person who now is or after the date
hereof becomes liable in any manner for any of the Obligations in such manner
as the Lessor, in its sole and absolute discretion, deems fit. The Lessor and
the other Meditrust Entities have full authority (in their sole and absolute
discretion) to do any or all of the following things, none of which shall
discharge or affect the Guarantor's liability hereunder:
(a) extend credit, make loans and afford other financial
accommodations to the Lessee and/or any of the Related Parties at such times,
in such amounts and on such terms as the Lessor may approve;
(b) modify, amend, vary the terms and grant extensions or renewals of
any present or future indebtedness or of any of the Obligations or any
instrument relating to or securing the same, and, without limitation, this
Guaranty shall survive the expiration or earlier termination of the Lease;
(c) grant time, waivers and other indulgences in respect of any of the
Obligations;
-2-
<PAGE> 3
(d) vary, exchange, release or discharge, wholly or partially, or
delay or abstain from perfecting and enforcing any security or guaranty or
other means of obtaining payment of any of the Obligations which the Lessor or
any of the other Meditrust Entities now has or acquires after the date hereof;
(e) take or omit to take any of the actions referred to in any
instrument evidencing, securing or relating to any of the Obligations or any
actions under this Guaranty;
(f) fail, omit or delay to enforce, assert or exercise any right,
power or remedy conferred on the Lessor or any of the other Meditrust Entities
in this Guaranty or in any other instrument evidencing, securing or relating to
any of the Obligations or take or refrain from taking any other action;
(g) accept partial payments from the Lessee, any other member of the
Leasing Group, any of the Related Parties or any other Person;
(h) release or discharge, wholly or partially, the Lessee, any other
member of the Leasing Group, any of the Related Parties and/or any other Person
now or hereafter primarily or secondarily liable for the Obligations (or any
portion thereof) or accept additional collateral for the payment of any
Obligations;
(i) compromise or make any settlement or other arrangement with the
Lessee, any other member of the Leasing Group, any of the Related Parties or
any other Person referred to in clause (h) above; and
(j) consent to and participate in the proceeds of any assignment,
trust or mortgage for the benefit of creditors.
6. UNENFORCEABILITY OF OBLIGATIONS; INVALIDITY OF SECURITY OR OTHER
GUARANTIES. The obligations of the Guarantor hereunder shall not be affected by
any change in the beneficial ownership of the Lessee, any other member of the
Leasing Group or any of the Related Parties, by reason of any disability of the
Lessee, any other member of the Leasing Group, any Related Party or by any
other circumstance (other than the complete payment and performance of the
Lease Obligations) which might constitute a defense available to, or a
discharge of, the Lessee, any other member of the Leasing Group or any of the
Related Parties in respect of any of the Obligations. If for any reason now or
hereafter the Lessee, any other member of the Leasing Group or any of the
Related Parties has no legal existence or is under no legal obligation to
discharge any of the Obligations undertaken or purported to be undertaken by it
or on its behalf, or if any of the moneys included in the Obligations have
become irrecoverable from the Lessee, any other member of the Leasing Group or
any Related Party by operation of law or for any other reason, this Guaranty
shall nevertheless be binding on the Guarantor and the Guarantor shall remain
unconditionally liable for the complete payment and performance of the Lease
Obligations. This Guaranty shall be in addition to any other guaranty or other
security for the Obligations, and it shall
-3-
<PAGE> 4
not be prejudiced or rendered unenforceable by the invalidity of any such other
guaranty or security. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if, at any time, any payment of the Obligations
is rescinded or must otherwise be returned by the Lessor or any of the other
Meditrust Entities, upon the insolvency, bankruptcy or reorganization of the
Lessee, any other member of the Leasing Group or any of the Related Parties or
otherwise, all as though such payment had not been made. The Guarantor
covenants to cause the Lessee to maintain and preserve the enforceability of
any instruments now or hereafter executed in favor of the Lessor, and to take
no action of any kind which might be the basis for a claim that the Guarantor
has any defense hereunder other than the complete payment and performance of
the Lease Obligations.
It shall not be necessary for the Lessor to inquire into the power of
the Lessee or anyone acting or purporting to act on its behalf, and any Lease
Obligation made or created in reliance upon the professed exercise of such
powers shall be guarantied hereunder. The Guarantor represents that the Lessee
is the bona fide tenant of the Leased Property and that the Lessee has not been
formed or availed of to evade or circumvent the applicable usury laws of any
state or states concerned therewith, and the Guarantor hereby indemnifies the
Lessor and agrees to save it harmless against any damages or expenses suffered
by the Lessor should this representation or any other representation contained
herein prove untrue in any material respect. The aforesaid indemnification
agreement shall include, without limitation, attorneys' fees and expenses and
court costs reasonably incurred by the Lessor in connection with the
enforcement of said indemnification.
The indemnity provisions of this Section 6 shall survive the complete
payment and performance of the Obligations and the expiration or earlier
termination of the Lease.
7. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR. In order to induce
the Lessor to enter into or accept the Lease and the other Lease Documents, the
Guarantor hereby warrants and represents to, and covenants and agrees with, the
Lessor that:
7.1. FORMATION AND AUTHORITY OF THE GUARANTOR.
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. The Guarantor has all
requisite corporate power to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted and is duly qualified
to do business and is in good standing in each jurisdiction where such
qualification is necessary or desirable in order to carry out its business as
now conducted and as proposed to be conducted;
(b) The Guarantor is duly authorized to make and enter into this
Guaranty and all of the other Lease Documents to which the Guarantor is a party
and to carry out the transactions contemplated therein. This Guaranty and all
of the other Lease Documents to which the Guarantor is a party have each been
duly executed and delivered by the Guarantor,
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<PAGE> 5
and each is a legal, valid and binding obligation of the Guarantor, enforceable
in accordance with its terms;
7.2. THE LESSEE AS SUBSIDIARY.
The Lessee is a wholly-owned Subsidiary of the Guarantor.
7.3. NO VIOLATIONS.
The execution, delivery and performance of this Guaranty and the other
Lease Documents and the consummation of the transactions thereby contemplated
shall not result in any breach of, or constitute a default under, or result in
the acceleration of, or constitute an event which, with notice or passage of
time could result in default or acceleration of any obligation of the Guarantor
or any other contract, mortgage, lien, lease, agreement, instrument, franchise,
arbitration award, judgment, decree, bank loan or credit agreement, trust
indenture or other instrument to which the Guarantor is a party or by which the
Guarantor may be bound or affected and do not violate or contravene any Legal
Requirement;
7.4. NO CONSENT OR APPROVAL.
Except as already obtained or filed, as the case may be, no consent or
approval or other authorization of, or exemption by, or declaration or filing
with, any Person and no waiver of any right by any Person is required to
authorize or permit, or is otherwise required as a condition to the Guarantor's
execution and delivery of this Guaranty or any of the other Lease Documents to
which it is a party and the performance of its obligations thereunder, or as a
condition to the validity (assuming the due authorization, execution and
delivery by the Lessor of the Lease and the other Lease Documents to which it
is a party) or enforceability of any of the same and/or the first priority of
any Liens granted thereunder;
7.4. FINANCIAL CONDITION.
(a) The Guarantor is financially solvent and there are no actions,
suits, investigations or proceedings including, without limitation, outstanding
federal or state tax liens, garnishments or insolvency and bankruptcy
proceedings, pending or, to the best of the Guarantor's knowledge and belief,
threatened:
i. against or affecting the Guarantor which, if adversely resolved
against the Guarantor would materially adversely affect the ability of
the Guarantor to perform its obligations under this Guaranty or any of
the Lease Documents to which it is a party;
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<PAGE> 6
ii. against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession or operation thereof; or
iii. which may involve or affect the validity, priority or
enforceability of this Guaranty, the Lease or any of the other Lease
Documents, at law or in equity, or before or by any arbitrator or
Governmental Authority;
(b) After giving effect to the consummation of the transaction
contemplated by the Lease and the other Lease Documents, the Guarantor:
i. will be able to pay its debts as they become due;
ii. will have sufficient funds and capital to carry on its
business as now conducted or as contemplated to be conducted (in
accordance with the terms of the Lease Documents);
iii. will own property having a value both at fair valuation and
at present fair saleable value greater than the amount required to pay
its debts as they become due; and
iv. will not be rendered insolvent as determined by applicable
law;
(c) The Guarantor is not a party to any agreement, the terms of which
now have or, based upon current circumstances, as far as can be reasonably
foreseen, may have a material adverse effect on its financial condition or
business or on the operation of the Facility;
(d) The Guarantor is not delinquent or claimed to be delinquent under
any material obligation for the payment of borrowed money;
7.5. COMMERCIAL ACTS.
The Guarantor's performance of and compliance with the obligations and
conditions set forth herein and the other Lease Documents to which it is a
party will constitute commercial acts done and performed for commercial
purposes;
7.6. FILING OF TAX RETURNS.
The Guarantor has filed all federal, state and local tax returns which
are required to be filed as to which extensions are not currently in effect and
has paid all taxes, assessments, impositions, fees and other governmental
charges (including interest and penalties) which have become due pursuant to
such returns or pursuant to any assessment or notice of tax claim or deficiency
received by the Guarantor. No tax liability has been asserted by the
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<PAGE> 7
Internal Revenue Service against the Guarantor or any other federal, state or
local taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in excess of
those already paid; and
7.7. ACCURACY OF FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements of the Guarantor given to the Lessor in
connection with the consummation of the transaction contemplated by the Lease
Documents were true, complete and accurate and fairly presented the financial
condition of the Guarantor as of the date thereof and for the periods covered
thereby, having been prepared in accordance with GAAP and such financial
statements disclosed all material liabilities, including, without limitation,
contingent liabilities, of the Guarantor. There has been no material adverse
change since such date with respect to the Tangible Net Worth or liquidity of
the Guarantor or with respect to any other matters referred to or contained
therein and no additional material liabilities, including, without limitation,
contingent liabilities of the Guarantor have arisen or been incurred since such
date. The projections heretofore delivered to the Lessor continue to be
reasonable (with respect to the material assumptions upon which such
projections are based) and the Guarantor reasonably anticipates the results
projected therein will be achieved, there having been (a) no material adverse
change in the business, assets or condition, financial or otherwise of the
Guarantor or (b) no material depletion of the Guarantor's cash or decrease in
working capital.
8. CONTINUING REPRESENTATIONS AND WARRANTIES: All representations and
warranties contained in this Guaranty shall constitute continuing
representations and warranties which shall remain true, correct and complete as
long as this Guaranty is in force and effect. Notwithstanding the provisions of
the foregoing sentence but without derogation from any other terms and
provisions of this Guaranty, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied
on the part of the Guarantor, the representations and warranties contained in
Sections 7.4(a), 7.4(c), 7.4(d), in the second sentence of Section 7.6 and in
the second and third sentences of Section 7.7 hereof shall not constitute
continuing representations and warranties hereunder.
9. NO CONTEST WITH THE LESSOR. No set-off, counterclaim, reduction or
diminution of any obligation, or any claim or defense of any kind or nature
which the Guarantor has or may have against the Lessee, any other member of the
Leasing Group, any of the Related Parties or the Lessor shall be available
hereunder to the Guarantor. The Guarantor shall not assert and hereby waives
any right whatsoever that the Guarantor may have at law or in equity,
including, without limitation, any right of subrogation or to seek
contribution, indemnification or any other form of reimbursement from the
Lessee, any other endorser, surety or guarantor of any of the Obligations or
any other Person now or hereafter primarily or secondarily liable for any of
the Obligations. The Guarantor shall not, in any proceedings under the
Bankruptcy Code or insolvency proceedings of any nature, prove in competition
with the Lessor in respect of any payment hereunder or be entitled to have the
benefit of any counterclaim or proof of claim or dividend or payment by or on
behalf of the
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<PAGE> 8
Lessee, any other member of the Leasing Group or any of the Related Parties or
the benefit of any other security for any Obligation which, now or hereafter,
the Guarantor may hold in competition with the Lessor.
10. SET-OFF. In addition to any rights now or hereafter granted under
any agreement or applicable law and not by way of limitation of any such
rights, upon the occurrence of any Lease Default, including, without
limitation, any default by the Guarantor hereunder, the Lessor and the other
Meditrust Entities are hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to the
Guarantor or to any other Person, all of which are hereby expressly waived, to
set off and to appropriate and apply any and all deposits and any other
indebtedness at any time held by or owing to the Lessor (or any of the other
Meditrust Entities) to or for the credit or the account of the Guarantor
against and on account of the obligations and liabilities of the Guarantor to
the Lessor or any of the other Meditrust Entities under this Guaranty or
otherwise, irrespective of whether or not the Lessor or any of the other
Meditrust Entities shall have made any demand hereunder or under any Related
Party Agreement and although said obligations, liabilities or claims, or any of
them, may then be contingent or unmatured and without regard to the
availability or adequacy of other collateral. The Guarantor also grants to the
Lessor (and the other Meditrust Entities) a security interest in all of the
Guarantor's deposits, securities and other property at any time and from time
to time, in the possession of the Lessor (or any of the other Meditrust
Entities) and, upon the occurrence of any Lease Default, the Lessor and the
other Meditrust Entities may exercise all rights and remedies of a secured
party under the Massachusetts Uniform Commercial Code. The Lessor and the other
Meditrust Entities shall have no duty to take steps to preserve rights against
prior parties as to such securities or other property.
The Guarantor hereby agrees that all collateral now or hereafter
granted as security for any indebtedness of the Guarantor to the Lessor and/or
the other Meditrust Entities shall be deemed to be additional collateral
securing the Obligations.
11. WAIVERS. The Guarantor waives presentment for payment, demand,
protest, notice of nonpayment, notice of dishonor, protest of any dishonor,
suretyship defenses, notice of protest and protest of the Lease Documents and,
and all other notices in connection with (a) the delivery or the acceptance of
the Lease Documents and any reliance thereon and/or (b) the performance,
default (except notice of default as specifically elsewhere required under any
of the Lease Documents) or enforcement of any obligation under the Lease
Documents, and agrees that its liability shall be unconditional without regard
to the liability of any other party and shall not be in any manner affected by
any indulgence, extension of time, renewal, waiver or modification granted or
consented to by the Lessor; and the Guarantor consents to any and all
extensions of time, renewals, waivers or modifications that may be granted or
consented to by the Lessor with respect to the payment or performance of any
obligations under the Lease Documents and to the release of the Collateral (or
any part thereof), with or without substitution, and agrees that additional
makers, endorsers, guarantors or sureties may become parties to the Lease
Documents
-8-
<PAGE> 9
without notice to the Guarantor or affecting the liability of the Guarantor
hereunder or under any of the other Lease Documents to which the Guarantor is a
party.
12. INDEMNIFICATION. Except with respect to the gross negligence or
wilful misconduct of the Lessor or any of the other Indemnified Parties, as to
which no indemnity is provided, the Guarantor hereby agrees to defend with
counsel acceptable to the Lessor, indemnify and hold harmless the Lessor and
each of the other Indemnified Parties from and against all damages, losses,
claims, liabilities, obligations, penalties, causes of action, costs and
expenses (including, without limitation, attorneys' fees, court costs and other
expenses of litigation) suffered by, or claimed or asserted against, the Lessor
or any of the other Indemnified Parties, directly or indirectly, based on,
arising out of or resulting from (a) the use and occupancy of the Leased
Property or any business conducted therein, (b) any act, fault, omission to act
or misconduct by (i) any member of the Leasing Group, (ii) any Affiliate of the
Lessee or (iii) any employee, agent, licensee, business invitee, guest,
customer, contractor or sublessee of any of the foregoing parties, relating to,
directly or indirectly, the Leased Property, (c) any accident, injury or damage
whatsoever caused to any Person, including, without limitation, any claim of
malpractice, or to the property of any Person in or about the Leased Property
or outside of the Leased Property where such accident, injury or damage results
or is claimed to have resulted from any act, fault, omission to act or
misconduct by any member of the Leasing Group or any Affiliate of the Lessee or
any employee, agent, licensee, contractor or sublessee of any of the foregoing
parties, (d) any Lease Default, (e) any claim brought or threatened against any
of the Indemnified Parties by any member of the Leasing Group or by any other
Person on account of (i) the Lessor's relationship with any member of the
Leasing Group pertaining in any way to the Leased Property and/or the
transaction evidenced by the Lease Documents and/or (ii) the Lessor's
negotiation of, entering into and/or performing any of its obligations and/or
exercising any of its right and remedies under any of the Lease Documents, (f)
any attempt by any member of the Leasing Group or any Affiliate of the Lessee
to transfer or relocate any of the Permits to any location other than the
Leased Property and/or (g) the enforcement of this indemnity. Any amounts which
become payable by the Guarantor under this Section 12 shall be a demand
obligation of the Guarantor to the Lessor. The indemnity provided for in this
Section 12 shall survive any termination of this Guaranty.
13. NOTICES. Any notice, request, demand, statement or consent made
hereunder shall be in writing and shall be deemed duly given if personally
delivered, sent by certified mail, return receipt requested, or sent by a
nationally recognized commercial overnight delivery service with provisions for
a receipt, postage or delivery charges prepaid, and shall be deemed given when
postmarked or placed in the possession of such mail or delivery service and
addressed as follows:
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<PAGE> 10
IF TO THE GUARANTOR: Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, Pennsylvania 17055
Attn: President
WITH COPIES TO: Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, Pennsylvania 17055
Attn: General Counsel
Kirkpatrick & Lockhart
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: ________________________
IF TO THE LESSOR:
WITH COPIES TO: Attn: ________________________
or at such other place as any of the parties hereto may from time to time
hereafter designate to the others in writing. Any notice given to the Guarantor
by the Lessor at any time shall not imply that such notice or any further or
similar notice was or is required.
14. GOVERNING LAW. This Guaranty shall be construed, and the rights
and obligations of the Lessor and the Guarantor shall be determined, in
accordance with the laws of the Commonwealth of Massachusetts.
The Guarantor hereby consents to personal jurisdiction in the courts
of the Commonwealth of Massachusetts and the United States District Court for
the District of Massachusetts as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of or with respect to any of the
Lease Documents, the negotiation and/or consummation of the transactions
evidenced by the Lease Documents, the Lessor's relationship of any member of
the Leasing Group in connection with the transactions evidenced by the Lease
Documents and/or the performance of any obligation or the exercise of any
remedy under any of the Lease Documents and expressly waives any and all
objections the Guarantor may have as to venue in any of such courts.
-10-
<PAGE> 11
15. GENERAL PROVISIONS; RULES OF CONSTRUCTION. The provisions set
forth in Article 23 and Sections 2.2, 11.5.4, 16.8 through 16.10, 17.2, 24.2
through 24.10 and 24.12 of the Lease are hereby incorporated herein by
reference, mutatis, mutandis and shall be applicable to this Guaranty as if set
forth in full herein.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as an
instrument under seal as of the __________________________.
WITNESS: GUARANTOR:
- ------- ---------
____________________
Name:
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<PAGE> 12
SCHEDULE TO EXHIBIT 10.16 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
GUARANTY
<TABLE>
<CAPTION>
PROJECT PARTIES FACILITY DATE
------- ------- -------- ----
<S> <C> <C> <C>
Harmony Manor, WI Meditrust Mortgage Investments, Inc. and BCC of Harmony Manor facilities 5/2/96
Wisconsin, Inc.
Reading, PA Meditrust Acquisition Corporation II and BCC at Outlook Pointe at Reading 2/27/97
Reading, Inc.
State College, PA Meditrust Acquisition Corporation II and BCC at Outlook Pointe at State 8/2/96
State College, Inc. College
Allegheny, PA Meditrust Acquisition Corporation II and BCC at Outlook Pointe at Altoona 8/2/96
Altoona, Inc.
Blytheville, AR Meditrust Acquisition Corporation II and Outlook Pointe at Blytheville 11/1/96
Balanced Care at Blytheville, Inc.
Maumelle, AR Meditrust Acquisition Corporation II and Outlook Pointe at Maumelle 11/1/96
Balanced Care at Maumelle, Inc.
Mountain Home, AR Meditrust Acquisition Corporation II and Outlook Pointe at Mountain 11/1/96
Balanced Care at Mountain Home, Inc. Home
Pocahontas, AR Meditrust Acquisition Corporation II and Outlook Pointe at Pocahontas 11/1/96
Balanced Care at Pocahontas, Inc.
Sherwood, AR Meditrust Acquisition Corporation II and Outlook Pointe at Sherwood 11/1/96
Balanced Care at Sherwood, Inc.
Hawthorn Properties Balanced Care Corporation and National Care Hawthorn Property Facilities 8/30/96
(7 guaranties): Centers of Hermitage, Inc., National Care
Hermitage Centers, Inc., National Care Centers of Lebanon,
Lebanon Care Inc., Springfield Retirement Village, Inc.,
Lebanon Park National Care Centers of Nixa, Inc., National
Mt. Vernon Care Centers of Springfield, Inc. and Mt. Vernon
Nixa Park Care Center West, Inc.
Springfield
West Park
Hawthorn Properties Dixon Management, Inc. and National Care Centers Hawthorn Property Facilities 8/30/96
(7 guaranties) of Hermitage, Inc., National Care Centers, Inc.,
National Care Centers of Lebanon, Inc.,
Springfield Retirement Village, Inc., National
Care Centers of Nixa, Inc., National Care
Centers of Springfield, Inc. and Mt. Vernon Park
Care Center West, Inc.
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
Hawthorn Properties BCC at Nevada Park Care Center, Inc. and Hawthorn Property Facilities 8/30/96
(7 guaranties) National Care Centers of Hermitage, Inc.,
National Care Centers, Inc., National Care
Centers of Lebanon, Inc., Springfield Retirement
Village, Inc., National Care Centers of Nixa,
Inc., National Care Centers of Springfield, Inc.
and Mt. Vernon Park Care Center West, Inc.
Hawthorn Properties BCC at Republic Park Center, Inc. and National Hawthorn Property Facilities 8/30/96
(7 guaranties) Care Centers of Hermitage, Inc., National Care
Centers, Inc., National Care Centers of Lebanon,
Inc., Springfield Retirement Village, Inc.,
National Care Centers of Nixa, Inc., National
Care Centers of Springfield, Inc. and Mt. Vernon
Park Care Center West, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.17
FORM OF GUARANTY
TO: MEDITRUST MORTGAGE INVESTMENTS, INC.
1. GUARANTY OF PAYMENT AND PERFORMANCE OF OBLIGATIONS. For value
received and hereby acknowledged and as an inducement to MEDITRUST MORTGAGE
INVESTMENTS, INC., a Delaware corporation, having its principal office at 197
First Avenue, Needham Heights, Massachusetts 02194 (hereinafter referred to as
the "Lender") to: (a) enter into that certain loan transaction with BCC AT
NEVADA PARK CARE CENTER, INC., a Delaware corporation and BCC AT REPUBLIC PARK
CENTER, INC., a Delaware corporation, each having its principal place of
business at 5021 Louise Drive, Suite 200, Mechanicsburg, Pennsylvania 17055
(hereinafter collectively referred to as the "Borrowers"), which loan
transaction is evidenced by a Promissory Note of even date made by the Borrowers
to the order of the Lender, in the original principal amount of THREE MILLION
ONE HUNDRED FIFTEEN THOUSAND DOLLARS ($3,115,000) (the "Note") and is secured,
in part, by two (2) certain Deeds of Trust and Security Agreements (the "Deeds
of Trust"), of even date, executed by each of the Borrowers, respectively, in
favor of Lisa M. Haines as Trustee for the benefit of the Lender encumbering
certain real property located in Nevada and Republic, Missouri and all of the
improvements now or hereafter situated thereon (such real property and
improvements are hereinafter collectively referred to as the "Mortgaged
Property"), including, without limitation, the skilled nursing facilities
thereon, [the Note, the Deeds of Trust, this Guaranty, that certain Loan
Agreement of even date by and among the Borrowers, the undersigned, Dixon
Management, Inc., Long Term Pharmaceutical Care, Inc. and the Lender (the "Loan
Agreement") and all other documents and instruments now or hereafter evidencing
or securing repayment of, or otherwise pertaining to and executed and delivered
in connection with, the loan evidenced by the Note as each may be modified and
amended from time to time are hereinafter collectively referred to as the "Loan
Documents"] and (b) make present and future loans, advances and extensions of
credit to, for the account of or on behalf of the Borrowers; the undersigned,
_____________________________________________________________________________
_____________________________________________________________________________
(the "Guarantor"), being the sole shareholder of each of the Borrowers and, as
such, deriving a substantial benefit from the consummation of the loan
transaction evidenced by the Loan Documents, hereby unconditionally guarantees
to the Lender the full payment and performance of the Loan Obligations (as
defined in the Loan Agreement).
This Guaranty is an absolute, unconditional and continuing guaranty of
the full and punctual payment and performance of the Loan Obligations and not
merely of their collectibility, and is in no way conditioned upon any
requirement that the Lender first collect or attempt to
<PAGE> 2
collect the Loan Obligations or any portion thereof from the Borrowers or from
any endorser, surety or other guarantor of any of the same or resort to any
security or other means of obtaining the payment and/or performance of any of
the Loan Obligations that the Lender now has or may acquire after the date
hereof, or upon any other contingency whatsoever. Upon any Loan Default (as
defined in the Loan Agreement), the Loan Obligations and all liabilities and
obligations of the Guarantor to the Lender, hereunder or otherwise, shall, at
the option of the Lender, become immediately due and payable to the Lender
without further demand or notice of any nature, all of which are expressly
waived by the Guarantor. Payments by the Guarantor hereunder may be required by
the Lender on any number of occasions. This Guaranty shall continue in full
force and effect until the complete payment and performance of all of the Loan
Obligations.
All payments hereunder received by the Lender shall be applied by the
Lender, without any marshalling of assets, towards the payment and/or
performance of the Loan Obligations and any other indebtedness of the Guarantor
hereunder in such order as the Lender, in its sole and absolute discretion, may
determine.
2. DEFINED TERMS. Capitalized terms used herein and not otherwise
specifically defined herein shall have the same meanings ascribed to such terms
in the Loan Agreement.
3. THE GUARANTOR'S FURTHER AGREEMENTS TO PAY. The Guarantor further
agrees, as the principal obligor and not as a guarantor, to pay to the Lender
forthwith upon demand, in funds immediately available to the Lender, all costs
and expenses, including without limitation, court costs and attorneys' fees and
expenses and court costs, reasonably incurred or expended by the Lender in
connection with the collection or enforcement of the Obligations and the
enforcement of all of the other obligations hereunder. Any amounts owed to the
Lender under this Section 3 shall be a demand obligation and, if not paid within
ten (10) days after demand, shall thereafter, to the extent then permitted by
applicable law, bear interest at the Advances Rate until the date of payment.
The provisions of this Section 3 shall survive the foreclosure of either Deed of
Trust.
4. LIABILITY OF THE GUARANTOR. This Guaranty is unlimited and the
Guarantor shall be jointly and severally liable with every endorser, surety or
other guarantor of any or all of the Loan Obligations and the continuation of
this Guaranty shall not be affected by the termination, discontinuance, release
or modification of any agreement from (a) any such endorser, surety or guarantor
and/or (b) any other endorser, surety or guarantor of any of the other
Obligations. Nothing contained herein or otherwise shall require the Lender to
make demand upon or join the Borrowers or any such endorser, surety or guarantor
or other party in any suit brought upon this Guaranty; and the Guarantor hereby
waives any right to require marshalling or exhaustion of any remedy against any
collateral, other property, or any other Person primarily or secondarily liable.
5. THE LENDER FREEDOM TO DEAL WITH THE BORROWERS AND OTHER PARTIES. The
Lender shall be at liberty, without giving notice to or obtaining the assent of
the Guarantor and without relieving the Guarantor of any liability hereunder, to
deal with the Borrowers and with each other Person who now is or after the date
hereof becomes liable in any manner for any of the Obligations in such manner as
the Lender, in its sole and absolute discretion, deems fit. The Lender and the
other Meditrust Entities have full authority (in their sole and absolute
discretion)
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<PAGE> 3
to do any or all of the following things, none of which shall discharge or
affect the Guarantor's liability hereunder:
(a) extend credit, make loans and afford other financial accommodations
to either of the Borrowers and/or any of the Related Parties at such times, in
such amounts and on such terms as the Lender may approve;
(b) modify, amend, vary the terms and grant extensions or renewals of
any present or future indebtedness or of any of the Obligations or any
instrument relating to or securing the same, and without limitation, this
Guaranty shall survive the foreclosure of the Mortgage;
(c) grant time, waivers and other indulgences in respect of any of the
Obligations;
(d) vary, exchange, release or discharge, wholly or partially, or delay
or abstain from perfecting and enforcing any security or guaranty or other means
of obtaining payment of any of the Obligations which the Lender or any of the
other Meditrust Entities now has or acquires after the date hereof;
(e) take or omit to take any of the actions referred to in any
instrument evidencing, securing or relating to any of the Obligations or any
actions under this Guaranty;
(f) fail, omit or delay to enforce, assert or exercise any right, power
or remedy conferred on the Lender or any of the other Meditrust Entities in this
Guaranty or in any other instrument evidencing, securing or relating to any of
the Obligations or take or refrain from taking any other action;
(g) accept partial payments from either of the Borrowers, any other
member of the Borrowing Group, any of the Related Parties or any other Person;
(h) release or discharge, wholly or partially, either of the Borrowers,
any other member of the Borrowing Group, any of the Related Parties and/or any
other Person now or hereafter primarily or secondarily liable for the
Obligations (or any portion thereof) or accept additional collateral for the
payment of any Obligations;
(i) compromise or make any settlement or other arrangement with either
of the Borrowers, any other member of the Borrowing Group, any of the Related
Parties or any other Person referred to in clause (h) above; and
(j) consent to and participate in the proceeds of any assignment, trust
or mortgage for the benefit of creditors.
6. UNENFORCEABILITY OF OBLIGATIONS; INVALIDITY OF SECURITY OR OTHER
GUARANTIES. The obligations of the Guarantor hereunder shall not be affected by
any change in the beneficial ownership of either of the Borrowers, any other
member of the Borrowing Group or any of the Related Parties, by reason of any
disability of either of the Borrowers, any other member of the Borrowing Group
or any Related Party or by any other circumstance (other than the complete
- 3 -
<PAGE> 4
payment and performance of the Loan Obligations) which might constitute a
defense available to, or a discharge of, either of the Borrowers, any other
member of the Borrowing Group or any of the Related Parties in respect of any of
the Obligations. If for any reason now or hereafter either of the Borrowers, any
other member of the Borrowing Group or any of the Related Parties has no legal
existence or is under no legal obligation to discharge any of the Obligations
undertaken or purported to be undertaken by it or on its behalf, or if any of
the moneys included in the Obligations have become irrecoverable from either of
the Borrowers, any other member of the Borrowing Group or any Related Party by
operation of law or for any other reason, this Guaranty shall nevertheless be
binding on the Guarantor and the Guarantor shall remain unconditionally liable
for the complete payment and performance of the Loan Obligations. This Guaranty
shall be in addition to any other guaranty or other security for the
Obligations, and it shall not be prejudiced or rendered unenforceable by the
invalidity of any such other guaranty or security. This Guaranty shall continue
to be effective or be reinstated, as the case may be, if, at any time, any
payment of any of the Obligations is rescinded or must otherwise be returned by
the Lender or any of the other Meditrust Entities, upon the insolvency,
bankruptcy or reorganization of either of the Borrowers or any of the Related
Parties or otherwise, all as though such payment had not been made. The
Guarantor covenants to cause the Borrowers to maintain and preserve the
enforceability of any instruments now or hereafter executed in favor of the
Lender, and to take no action of any kind which might be the basis for a claim
that the Guarantor has any defense hereunder other than the complete payment and
performance of the Loan Obligations.
It shall not be necessary for the Lender to inquire into the power of
the Borrowers or anyone acting or purporting to act on their behalf, and any
Loan Obligation made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder. The Guarantor represents that the
Borrowers are the bona fide borrowers of the Loan and that the Borrowers have
not been formed or availed of to evade or circumvent the applicable usury laws
of any state or states concerned therewith, and the Guarantor hereby indemnifies
the Lender and agrees to save it harmless against any damages or expenses
suffered by the Lender should this representation or any other representation
contained herein prove untrue in any material respect. The aforesaid
indemnification agreement shall include, without limitation, attorneys' fees and
expenses and court costs reasonably incurred by the Lender in connection with
the enforcement of said indemnification.
The indemnity provisions of this Section 6 shall survive the complete
payment and performance of the Obligations and the foreclosure of the Mortgage.
7. NO CONTEST WITH THE LENDER. No set-off, counterclaim, reduction or
diminution of any obligation, or any claim or defense of any kind or nature
which the Guarantor has or may have against either of the Borrowers, any other
member of the Borrowing Group, any of the Related Parties or the Lender shall be
available hereunder to the Guarantor. The Guarantor shall not assert and hereby
waives any right whatsoever that the Guarantor may have at law or in equity,
including, without limitation, any right of subrogation or to seek contribution,
indemnification or any other form of reimbursement from the Borrowers, any other
endorser, surety or guarantor of any of the Obligations or any other Person now
or hereafter primarily or secondarily liable for any of the Obligations. The
Guarantor shall not, in any proceedings under
- 4 -
<PAGE> 5
the Bankruptcy Code or insolvency proceedings of any nature, prove in
competition with the Lender in respect of any payment hereunder or be entitled
to have the benefit of any counterclaim or proof of claim or dividend or payment
by or on behalf of either of the Borrowers, any other member of the Borrowing
Group or any of the Related Parties or the benefit of any other security for any
Obligation which, now or hereafter, the Guarantor may hold in competition with
the Lender.
8. SET-OFF. In addition to any rights now or hereafter granted under
any agreement or applicable law and not by way of limitation of any such rights,
upon the occurrence of any Loan Default, including, without limitation, any
default by the Guarantor hereunder, the Lender and the other Meditrust Entities
are hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to the Guarantor or to any other
Person, all of which are hereby expressly waived, to set off and to appropriate
and apply any and all deposits and any other indebtedness at any time held by or
owing to the Lender (or any of the other Meditrust Entities) to or for the
credit or the account of the Guarantor against and on account of the obligations
and liabilities of the Guarantor to the Lender or any of the other Meditrust
Entities under this Guaranty or otherwise, irrespective of whether or not the
Lender or any of the other Meditrust Entities shall have made any demand
hereunder or under any Related Party Agreement and although said obligations,
liabilities or claims, or any of them, may then be contingent or unmatured and
without regard to the availability or adequacy of other collateral. The
Guarantor also grants to the Lender (and the other Meditrust Entities) a
security interest in all of the Guarantor's deposits, securities and other
property at any time and from time to time, in the possession of the Lender (or
any of the other Meditrust Entities) and, upon the occurrence of any Loan
Default, the Lender and the other Meditrust Entities may exercise all rights and
remedies of a secured party under the Massachusetts Uniform Commercial Code. The
Lender and the other Meditrust Entities shall have no duty to take steps to
preserve rights against prior parties as to such securities or other property.
The Guarantor hereby agrees that all collateral now or hereafter
granted as security for any indebtedness of the Guarantor to the Lender and/or
the other Meditrust Entities shall be deemed to be additional collateral
securing the Obligations.
9. GENERAL PROVISIONS; RULES OF CONSTRUCTION. The provisions set forth
in Section 12 of the Loan Agreement are hereby incorporated herein by reference,
mutatis, mutandis and shall be applicable to this Guaranty as if set forth in
full herein.
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<PAGE> 6
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as an
instrument under seal as of the 30th day of August, 1996.
WITNESS: GUARANTOR:
_____________________________ By:_________________________________
Name: Name:
Title:
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<PAGE> 7
SCHEDULE TO EXHIBIT 10.17 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
GUARANTY
<TABLE>
<CAPTION>
GUARANTOR RECIPIENT GUARANTEEING OBLIGATIONS OF DATE
--------- --------- --------------------------- ----
<S> <C> <C> <C>
Balanced Care Meditrust Mortgage BCC at Nevada Park Care Center, Inc. and 8/30/96
Corporation Investments, Inc. BCC at Republic Park Center, Inc.
Dixon Management, Inc. Meditrust Mortgage BCC at Nevada Park Care Center, Inc. and 8/30/96
Investments, Inc. BCC at Republic Park Center, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.19
FORM OF LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of by and
among (the "Borrower"), BALANCED CARE CORPORATION,
a Delaware corporation (the "Guarantor") and MEDITRUST MORTGAGE INVESTMENTS,
INC., a Delaware corporation (the "Lender").
1. BACKGROUND
1.1 THE BORROWER.
The Borrower is a corporation which is a wholly-owned Subsidiary of
the Guarantor.
1.2 THE FACILITY AND THE LAND.
The Borrower is the owner of the community based residential
facilities identified on EXHIBIT K (collectively, the "Facilities" and singly a
"Facility") situated on those certain parcels of land in the locations set
forth on EXHIBIT K, and more particularly described on EXHIBIT A (collectively,
the "Land").
1.3 USE OF LOAN PROCEEDS.
In order to finance the acquisition of the Land and the Facilities and
expenses related thereto, the Borrower has applied to the Lender for a
DOLLAR ($ ) loan
(the "Loan").
1.4 GUARANTIES AND INDEMNITIES.
As an inducement to the Lender to make the Loan, the Guarantor agrees
to furnish certain guaranties as hereinafter described.
1.5 LOAN.
Subject to all of the terms, conditions and provisions of this
Agreement, and of the agreements and instruments referred to herein, the Lender
agrees to make the Loan and the Borrower agrees to accept and repay the Loan.
2. DEFINITIONS
In this Agreement, except as otherwise expressly provided in the text
of this Agreement or unless the context otherwise requires, all capitalized
terms shall have the meaning ascribed to them in EXHIBIT B.
<PAGE> 2
3. LOAN PROVISIONS.
3.1 AMOUNT OF LOAN.
The Loan shall be in the amount of __________________________________
________________________DOLLARS ($_________) (the "Loan Amount") or such
lesser amount as may be advanced under the Note and this Agreement.
3.2 PROMISSORY NOTE.
The Loan shall be evidenced by a promissory note of the Borrower dated
as of the Closing Date, made by the Borrower to the order of the Lender, in a
principal amount equal to the Loan (the "Note"). Interest on so much as is
outstanding from time to time under the Note shall accrue at the Interest Rate,
except as otherwise specifically provided herein or therein.
3.3 APPLICATION OF PAYMENTS.
All payments made pursuant to the Loan Documents that are received by
the Lender shall be applied by the Lender to any obligations of the Borrower
under the Loan Documents in such order as the Lender may determine in its sole
discretion.
3.4 METHOD OF PAYMENTS.
Except as may otherwise be specifically set forth herein or in any of
the other Loan Documents, all payments to be made to the Lender hereunder or
under any of the other Loan Documents, including, without limitation, all
payments of principal, interest (including, without limitation, Additional
Interest), Prepayment Fee, Late Payment Charges, all other charges, costs,
expenses and other amounts due hereunder or under any of the other Loan
Documents, shall be made to the Lender at the Lender's Address, in lawful money
of the United States of America, not later than 2:00 p.m. local time in Boston,
Massachusetts on the date that such payment is due. All payments received by
the Lender after such time shall be deemed to have been received by the Lender,
for the purposes of computing interest and Late Payment Charges, as of the next
Business Day. If any payment to be made to the Lender under any of the Loan
Documents falls due on a day which is not a Business Day, the due date therefor
shall be extended to the next succeeding Business Day.
3.5 LOAN FEES.
The Borrower shall pay the Permanent Loan Commitment Fee to the Lender
simultaneously with the execution of this Agreement; provided, however, that,
at the Lender's option, the Permanent Loan Commitment Fee shall be held in an
escrow account established with a Person designated by the Lender pursuant to
an escrow arrangement satisfactory to the Lender, with interest thereon
benefiting the Lender. If the Lender exercises its option to require that the
Permanent Loan Commitment Fee be held in such an escrow account (A) the
Permanent
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<PAGE> 3
Loan Commitment Fee shall be disbursed from said escrow account only upon the
joint instructions of the Borrower and the Lender (which instructions from the
Borrower shall be immediately given upon the request of the Lender) and in no
event shall the Permanent Loan Commitment Fee be disbursed therefrom, in whole
or in part, unless and until so requested by the Lender and (B) the Lender
shall bear the risk of loss of or misappropriation of the Permanent Loan
Commitment Fee by such escrow agent.
3.6 PREPAYMENT.
A prepayment fee (referred to herein as the "Prepayment Fee") shall be
paid to the Lender in the event that the Loan is prepaid (or shall become due
and payable) prior to the Maturity Date, whether such prepayment is voluntary
or involuntary, including, without limitation, any prepayment which results
from any default under any of the Loan Documents and an acceleration of the
indebtedness due thereunder. The Borrower shall have the right, at any time
during the Term, to prepay the entire outstanding principal balance of the
Loan, provided, that, the Borrower furnishes the Lender with at least ninety
(90) days' prior written notice of its intent to prepay (the "Prepayment
Notice"), and provided, further, that the Borrower pays to the Lender (upon the
specific date for prepayment which shall be identified in the Prepayment
Notice), together with the entire outstanding principal balance of the Loan,
all accrued and unpaid interest (including, without limitation, Additional
Interest) and any other costs, charges and sums due under this Agreement and
all of the other Loan Documents, a "Prepayment Fee" equal to (and defined
herein as) the greater of: (A) the then present value discounted at the Current
Rate (as hereinafter defined) of the difference between (I) the product of the
Interest Rate then in effect, multiplied by the then outstanding principal
balance of the Loan, multiplied by the remaining number of years (or fraction
thereof) of the Term and (II) the product of the annual rate of interest (as of
the date of prepayment) of actively traded marketable United States treasury
securities bearing a fixed rate of interest adjusted for a constant maturity
equal to the remaining number of years (rounded to the nearest whole year) of
the Term (the "Current Rate"), multiplied by the then-outstanding principal
balance of the Loan, multiplied by the remaining number of years (or fraction
thereof) of the Term; or (B) one percent (1%) of the then outstanding principal
balance of the Loan multiplied by the remaining number of years (or fraction
thereof) of the Term. The Prepayment Fee shall be paid without prejudice to the
rights of the Lender to collect any amounts due to the Lender. The Borrower
shall not be entitled to make any partial prepayments of principal at any time
during the Term without the prior written consent of the Lender, which consent
may be withheld in the Lender's sole and absolute discretion. Once given, the
Prepayment Notice shall be irrevocable and the failure to make prepayment of
the Loan in accordance with the Prepayment Notice shall be an Event of Default
hereunder.
3.7 LATE CHARGES; INTEREST FOLLOWING CERTAIN EVENTS.
In the event of any delinquency in the payment of any installment of
principal and interest (including, without limitation, Additional Interest) or
in the payment of any other monetary obligation under this Agreement or any of
the other Loan Documents continuing for ten (10)
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<PAGE> 4
days (hereinafter referred to as a "Late Payment"), the Borrower shall pay the
Lender a late payment charge of TWO HUNDRED FIFTY DOLLARS ($250) (referred to
herein as a "Late Payment Charge") for the month during which such delinquency
occurs and for each month (or partial month) thereafter that the Late Payment
remains unpaid, for the purpose of defraying the expenses incurred by the
Lender in handling and processing such Late Payments. In addition to any Late
Payment Charges which may become due hereunder, the Borrower shall pay interest
on any Late Payment, calculated at the Advances Rate, from the date upon which
the Late Payment was originally due until the date that the Lender actually
receives such Late Payment. It is understood that nothing contained in this
Section shall be deemed to relieve the Borrower of its obligations to make any
and all payments due and payable to the Lender pursuant to the provisions of
this Agreement or any of the other Loan Documents upon the dates set forth
therein, it being acknowledged that time is of the essence.
4. LOAN DOCUMENTS; COLLATERAL SECURITY
4.1 LOAN DOCUMENTS.
The Loan shall be made, evidenced, administered, secured and governed
by all of the terms, conditions and provisions of each of the following:
A. this Loan Agreement;
B. the Note;
C. a Mortgage and Security Agreement of even date granted by the
Borrower to the Lender (the "Mortgage") and related UCC
financing statements;
D. an Assignment of Leases and Rents of even date granted by the
Borrower to the Lender (the "Assignment of Leases");
E. a Collateral Assignment of Permits, Approvals, Licenses, and
Contracts of even date granted by the Borrower to the Lender
(the "Permits Assignment");
F. a Guaranty of even date executed by the Guarantor for the
benefit of the Lender (the "Guaranty");
G. an Environmental Indemnity Agreement of even date by and
among the Borrower, the Guarantor and the Lender (the
"Environmental Indemnity Agreement");
H. a Deposit Pledge Agreement of even date by and between the
Borrower and the Lender (the "Deposit Pledge Agreement");
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<PAGE> 5
I. a Pledge Agreement of even date by and among the Borrower,
the Lender and the Guarantor, pursuant to which the Guarantor
granted the Lender a security interest in all of the
outstanding capital stock of the Borrower (the "Pledge
Agreement") and related stock powers;
J. an Affiliated Party Subordination Agreement of even date by
and among the Borrower, the Guarantor and the Lender (the
"Affiliated Party Subordination Agreement");
K. Warrant of even date issued by the Guarantor to the Lender to
purchase ______ shares of capital stock of the Guarantor (the
"Warrant"); and
L. all other documents, instruments, or agreements now or
hereafter evidencing and/or securing the Loan.
Items (A) through (L) above, as the same from time to time may be hereinafter
amended, modified or supplemented, are referred to herein as the "Loan
Documents".
4.2 LOAN OBLIGATIONS.
The Borrower agrees to pay and perform (or cause to be paid and
performed) all indebtedness, covenants, liabilities, obligations, agreements
and undertakings (other than the Lender's obligations) under the Note, this
Agreement and all of the other Loan Documents (collectively, the "Loan
Obligations").
4.3 COLLATERAL SECURITY.
The Loan Obligations shall be secured by the following:
A. a perfected first priority security interest (subject only to
the Permitted Encumbrances) in the Mortgaged Property
pursuant to the Mortgage and the Financing Statements;
B. a perfected first priority security interest in the Leases
pursuant to the Assignment of Leases;
C. a perfected first priority security interest in all Permits
and Contracts pursuant to the Permits Assignment;
D. the Guaranty;
E. the Environmental Indemnity;
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<PAGE> 6
F. a perfected first priority security interest in all of the
outstanding capital stock of the Borrower pursuant to the
Pledge Agreement;
G. a perfected first priority interest in the Cash Collateral
pursuant to the Deposit Pledge Agreement;
H. all other security interests in such other property for which
provision is made in the Loan Documents or at law or in
equity; and
I. certain other Related Party Agreements.
All of the property in which security interests are granted (I) as described in
items (A) through (I) above and (II) pursuant to any other Loan Document is
collectively referred to herein as the "Collateral".
4.4 PERMITTED SECURITY INTERESTS.
Notwithstanding any other provisions hereof regarding the creation of
Liens, but subject to the provisions of Section 6.1, the Borrower may (A) grant
priority purchase money security interests in newly acquired items of tangible
personal property, (B) lease tangible personal property from equipment lessors,
and (C) grant a priority security interest in Receivables to an institutional
lender which is providing a working capital line of credit for the exclusive
use of the Facilities, as long as in each instance: (I) the secured party or
equipment lessor enters into an intercreditor agreement with, and satisfactory
to, the Lender, pursuant to which, without limiting the foregoing, (X) the
Lender shall be afforded the option of curing defaults and the option of
succeeding to the rights of the Borrower and (Y) the Lender's security interest
in tangible personal property and/or Receivables as applicable, shall be
subordinated to the security interest granted to such secured party, (II) all
the terms, conditions and provisions of the financing, security interest or
lease are reasonably acceptable to the Lender, (III) the Borrower provides a
true and complete copy, as executed, of each such purchase money security
agreement, financing document and equipment lease and all amendments thereto
and (IV) no such security interest, financing agreement or lease is
cross-defaulted or cross-collateralized with any other obligation.
Notwithstanding the foregoing, the Borrower may lease, or grant purchase money
security interests in, new items of tangible personal property having an
aggregate cost during the Term in an amount not to exceed TWO HUNDRED THOUSAND
DOLLARS ($200,000) without complying with the foregoing requirements, provided
that the Borrower shall provide the Lender with a true and complete copy, as
executed, of each purchase money security agreement, related financing document
and equipment lease, and all amendments thereto. Security interests granted by
the Borrower in full compliance with the provisions of this Section are
referred to as "Permitted Prior Security Interests".
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<PAGE> 7
5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
In order to induce the Lender to make the Loan, the Borrower
represents and warrants to the Lender that:
5.1.01 FORMATION AND AUTHORITY OF THE BORROWER.
A. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware . The Borrower has all requisite corporate power to
own and operate its properties and to carry on its business
as now conducted and as is proposed to be conducted and is
duly qualified to transact business and is in good standing
in each jurisdiction where such qualification is necessary in
order to carry out its business as presently conducted and as
proposed to be conducted. As of the date of this Agreement,
the Borrower does not have any Subsidiaries and the Borrower
is not a member of any partnership or joint venture. EXHIBIT
C attached hereto contains a true and correct list of all of
the shareholders of the Borrower and their respective
ownership interests in the Borrower;
B. The Borrower is duly authorized to make and enter into all of
the Loan Documents to which the Borrower is a party and to
carry out the transactions contemplated therein. All of the
Loan Documents to which the Borrower is a party have been
duly executed and delivered by the Borrower, and each is a
legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms;
5.1.02 BUSINESS OF THE BORROWER.
The Borrower is, and during the entire time that this
Agreement remains in force and effect the Borrower and each Lessee
shall be, engaged in no business, trade or activity other than the
operation of each Facility for its Primary Intended Use. The fiscal
year of the Borrower is June 30;
5.1.03 NO VIOLATIONS.
The execution, delivery and performance of the Loan Documents
and the consummation of the transactions thereby contemplated shall
not result in any breach of, or constitute a default under, or result
in the acceleration of, or constitute an event which, with notice
and/or passage of time could result in default or acceleration of, any
obligation of any member of the Borrowing Group under any of the
Permits or Contracts or any other contract, mortgage, lien, lease,
agreement, instrument, franchise, arbitration award, judgment, decree,
bank loan or credit agreement, trust indenture or other instrument to
which any member of the Borrowing Group is a party or by which any
member of the Borrowing Group or the Mortgaged Property may be bound
or affected and do not violate or contravene any Legal Requirement;
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<PAGE> 8
5.1.04 NO CONSENT OR APPROVAL.
Except as already obtained or filed, as the case may be, no
consent or approval or other authorization of, or exemption by, or
declaration or filing with, any Person and no waiver of any right by
any Person is required to authorize or permit, or is otherwise
required as a condition of the execution and delivery of any of the
Loan Documents by any member of the Borrowing Group and the
performance of such member obligations thereunder or as a condition to
the validity (assuming the due authorization, execution and delivery
by the Lender of the Loan Documents to which it is a party) and/or the
enforceability of any of the Loan Documents and/or the first priority
of any Liens granted under the Loan Documents except the recording of
the Mortgage and the Assignment of Leases and the filing of the
Financing Statements;
5.1.05 FINANCIAL CONDITION.
A. Each member of the Borrowing Group is financially
solvent and there are no actions, suits,
investigations or proceedings including, without
limitation, outstanding federal or state tax liens,
garnishments or insolvency and bankruptcy
proceedings, pending or, to the best of the
Borrower's knowledge and belief, threatened:
i. against or affecting any member of the
Borrowing Group, which, if adversely
resolved to such member of the Borrowing
Group, would materially adversely affect
the ability of any of the foregoing to
perform any of their respective
obligations under the Loan Documents;
ii. against or affecting the Mortgaged
Property or the ownership, construction,
development, maintenance, management,
repair, use, occupancy, possession or
operation thereof; or
iii. which may involve or affect the validity,
priority or enforceability of any of the
Loan Documents, at law or in equity, or
before or by any arbitrator or
Governmental Authority;
B. No member of the Borrowing Group is a party to any
agreement, the terms of which now have or, as far as
can be reasonably foreseen, may have a material
adverse effect on its respective financial condition
or business or on the operation of the Mortgaged
Property;
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<PAGE> 9
C. After giving effect to the consummation of the Loan,
each member of the Borrowing Group:
i. will be able to pay its debts as they
become due;
ii. will have sufficient funds and capital to
carry on its business as now conducted or
as contemplated to be conducted (in
accordance with the terms of the Loan
Documents);
iii. will own property having a value both at
fair valuation and at present fair
saleable value greater than the amount
required to pay its debts as they become
due; and
iv. will not be rendered insolvent as
determined by applicable law;
D. No member of the Borrowing Group is delinquent or
claimed to be delinquent under any material
obligation for the payment of borrowed money;
5.1.06 NO MONEY BORROWED FROM THE GUARANTOR OR AFFILIATES.
The Borrower has not created, incurred, guaranteed, endorsed,
assumed or suffered to exist any liability (whether direct or
contingent) for borrowed money from the Guarantor (or any of its
Affiliates) or any Affiliate of the Borrower that is not fully
subordinated to the Loan Obligations pursuant to the Affiliated Party
Subordination Agreement;
5.1.07 COMMERCIAL ACTS AND PURPOSES.
The Borrower's performance of, and compliance with, the
obligations and conditions set forth herein and in the other Loan
Documents to which it is a party will constitute commercial acts done
and performed for commercial purposes;
5.1.08 FILING OF TAX RETURNS.
Each member of the Borrowing Group has filed all federal,
state and local tax returns which are required to be filed as to which
extensions are not currently in effect and has paid all taxes,
assessments, impositions, fees and other governmental charges
(including interest and penalties) which have become due pursuant to
such returns or pursuant to any assessment or notice of tax claim or
deficiency received by each such member of the Borrowing Group. No tax
liability has been asserted against any member of the Borrowing Group
by the Internal Revenue Service or any other federal, state or local
taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in
excess of those already paid;
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<PAGE> 10
5.1.09 ACCURACY OF FINANCIAL STATEMENTS AND OTHER INFORMATION.
A. The financial statements of each member of the
Borrowing Group and of each Facility that were given
to the Lender in connection with the making of the
Loan were true, complete and accurate, in all
material respects, and fairly presented the
financial condition of each member of the Borrowing
Group as of the date thereof and for the periods
covered thereby, having been prepared in material
accordance with GAAP and such financial statements
disclosed all material liabilities (including,
without limitation, contingent liabilities) of each
such member of the Borrowing Group. There has been
no material adverse change since such date with
respect to the Tangible Net Worth or liquidity of
any member of the Borrowing Group or with respect to
any other matters referred to or contained therein
and no additional material liabilities (including,
without limitation, contingent liabilities) of any
member of the Borrowing Group have arisen or been
incurred since such date. The projections heretofore
delivered to the Lender continue to be reasonable
(with respect to the material assumptions upon which
such projections are based) and the Borrower
reasonably anticipates the results projected therein
will be achieved, there having been (I) no material
adverse change in the business, assets or condition,
financial or otherwise of any member of the
Borrowing Group or any Facility and (II) no material
depletion of their cash or decrease in their working
capital;
B. Neither this Agreement, nor any of the other Loan
Documents nor any certificate, agreement, statement
or other document, including, without limitation,
any financial statements concerning the financial
condition of any member of the Borrowing Group,
furnished to or to be furnished to the Lender or its
attorneys in connection with the Loan, contains or
will contain any untrue statement of a material fact
or omits or will omit to state a material fact
necessary in order to prevent all statements
contained herein and therein from being misleading
in any material respect. There is no fact within the
special knowledge of the Borrower which has not been
disclosed herein or in writing to the Lender that
materially adversely affects, or in the future,
insofar as the Borrower can reasonably foresee, may
materially adversely affect the business,
properties, assets or condition, financial or
otherwise, of any member of the Borrowing Group or
any Facility;
5.1.10 PENDING ACTIONS, NOTICES AND REPORTS.
A. There is no action or investigation pending or, to
the best knowledge and belief of the Borrower,
threatened, anticipated or contemplated (nor, to the
knowledge of the Borrower, is there any reasonable
basis therefor)
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<PAGE> 11
against or affecting the Mortgaged Property or any
member of the Borrowing Group (or any Affiliate
thereof) before any Governmental Authority,
Accreditation Body or Third Party Payor which could
prevent or hinder the consummation of the
transactions contemplated hereby or call into
question the validity of any of the Loan Documents
or any action taken or to be taken in connection
with the transactions contemplated thereunder or
which in any single case or in the aggregate might
result in any material adverse change in the
business, prospects, condition, affairs or
operations of any member of the Borrowing Group or
the Mortgaged Property (including, without
limitation, any action to revoke, withdraw or
suspend any Permit necessary or desirable for the
operation of the Mortgaged Property in accordance
with its Primary Intended Use and any action to
transfer or relocate any such Permit to a location
other than the Mortgaged Property) or any material
impairment of the right or ability of any member of
the Borrowing Group to carry on its operations as
presently conducted or proposed to be conducted or
which may materially adversely impact reimbursement
to any member of the Borrowing Group for services
rendered to beneficiaries of Third Party Payor
Programs;
B. None of the Facilities and no member of the
Borrowing Group has received any notice of any
claim, requirement or demand of any Governmental
Authority, Accreditation Body, Third Party Payor or
any insurance body having or claiming any licensing,
certifying, supervising, evaluating or accrediting
authority over any Facility to rework or redesign
any Facility, its professional staff or its
professional services, procedures or practices in
any material respect or to provide additional
furniture, fixtures, equipment or inventory or to
otherwise take any action so as to make such
Facility conform to or comply with any Legal
Requirement;
C. The most recent utilization reviews relating to each
Facility by all applicable Third Party Payors,
Accreditation Bodies and Governmental Authorities
and reviews or scrutiny by any managed care or
utilization review companies have not had a material
adverse impact on the utilization of units or
programs at any Facility. No claims or assertions
have been made in any utilization review that any of
the practices or procedures used at any Facility are
improper or inappropriate other than such claims or
assertions which singly and in the aggregate will
not have a material adverse impact on any Facility;
D. The Borrower has delivered or caused to be delivered
to the Lender true and correct copies of all
licenses, inspection surveys and accreditation
reviews relating to the Mortgaged Property, issued
by any Governmental Authority or Accreditation Body
during the most recent licensing period, together
with all plans of correction relating thereto;
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<PAGE> 12
5.1.11 COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS.
A. The Borrower and the Mortgaged Property and the
ownership, construction, development, maintenance,
management, repair, use, occupancy, possession and
operation thereof comply with all Legal Requirements
and there is no claim of any violation thereof known
to the Borrower. Without limiting the foregoing, the
Borrower has obtained all Permits that are necessary
or desirable to operate the Mortgaged Property in
accordance with its Primary Intended Use and all
such Permits are in full force and effect;
B. Except as previously disclosed to the Lender in
materials delivered to the Lender pursuant to
Section 5.1.10D, there are no outstanding notices of
deficiencies or work orders relating to the
Mortgaged Property issued by any Governmental
Authority, Accreditation Body or Third Party Payor
requiring conformity to any of the Legal
Requirements;
C. The Borrower has no actual knowledge of any Legal
Requirements which have been enacted, promulgated or
issued within the eighteen (18) months preceding the
date of this Agreement or any proposed Legal
Requirements currently pending in the state where
the Facilities are located, which may materially
adversely affect rates at any Facility (or any
program operated in conjunction with any Facility)
or may result in the likelihood of increased
competition at any Facility or the imposition of
Medicaid, Medicare, charity, free care, welfare or
other discounted or government assisted residents at
any Facility or require that the Borrower or any
Facility obtain a certificate of need, Section 1122
approval or the equivalent, which the Borrower or
such Facility does not currently possess;
D. The Facilities are licensed by the Wisconsin
Department of Health and Social Services and there
are no deficiencies in either the Mortgaged Property
or any services provided at any Facility that would
prevent the renewal of the licensure of any Facility
by the Wisconsin Department of Health and Social
Services after its next regularly scheduled
inspections;
5.1.12 PROPERTY MATTERS.
A. The Mortgaged Property is free and clear of all
Liens and Leases (other than Residence Agreements),
except (i) those Liens to which the Mortgage and the
Loan Documents are expressly subject, whether
presently existing, as are listed on EXHIBIT D, or
which may hereafter be created in accordance with
the terms hereof (collectively referred to herein as
the "Permitted Encumbrances") and (ii) the Liens
that were listed on the UCC
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<PAGE> 13
lien search results delivered to the Lender at or
prior to the execution and delivery of this Loan
Agreement (and that were not required to be
terminated as a condition of the execution and
delivery of this Loan Agreement); and the Borrower
shall warrant and defend title to the Mortgaged
Property against any and all claims and demands of
every kind and nature whatsoever.
B. There is no Condemnation or similar proceeding
pending with respect to or affecting the Mortgaged
Property and the Borrower is not aware, to the best
of the Borrower's knowledge and belief, that any
such proceeding is contemplated;
C. To the actual knowledge of the Borrower, no part of
the Collateral has been damaged by fire or other
casualty. Each Facility is in good operating
condition and repair, ordinary wear and tear
excepted, free from known defects in construction or
design;
D. None of the Permitted Encumbrances has or is likely
to have a material adverse impact upon, nor
interfere with or impede, in any material respect,
the operation of the Mortgaged Property in
accordance with its Primary Intended Use;
E. All buildings and other improvements necessary, both
legally and practically, for the proper and
efficient operation of the Facilities are located
upon the Mortgaged Property and all real property
and personal property currently utilized by the
Borrower in connection with the ownership and
operation of the Facilities is included within the
definition of the Mortgaged Property and is subject
to the Liens created by the Mortgage;
F. The Borrower has good, marketable and indefeasible
title to the entire Real Property in fee simple, has
absolute unencumbered title to the Personal
Property, and has good right and full power to
assign, grant, bargain, sell, mortgage, transfer and
convey the Mortgaged Property; and
G. Each lot comprising a portion of the Mortgaged
Property on which a Facility is located abuts on and
has direct vehicular access to a public road or has
access to a public road via permanent, irrevocable,
appurtenant easements;
H. Each lot comprising a portion of the Mortgaged
Property on which a Facility is located constitutes
a separate parcel for real estate tax purposes and
no portion of any real property that does not
constitute a portion of
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<PAGE> 14
the Mortgaged Property is part of the same tax
parcel as any part of the Mortgaged Property;
I. All utilities necessary for the use and operation of
each Facility are available to the lot lines of that
portion of the Mortgaged Property on which each such
Facility is located:
(i) in sufficient supply and capacity;
(ii) through validly created and existing
easements of record appurtenant to or
encumbering that portion of the Mortgaged
Property on which such Facility is located
(which easements shall not impede or
restrict the operation of any Facility);
and
(iii) without need for any Permits and Contracts
required to be issued by or entered into
with any Governmental Authority, except as
already obtained or executed, as the case
may be, or as otherwise shown, to the
satisfaction of the Lender, to be readily
obtainable.
J. The Borrower has made no structural alterations or
renovations to any Facility that altered the
foot-print of any Improvement, added an additional
story to any Improvement, decreased the amount of
parking available on the Mortgaged Property or
otherwise involved any alteration that would be
regulated by applicable zoning or other land use
requirements during the immediately preceding ten
years (10) years and has no knowledge of any such
structural alteration or renovation made to any
Facility or decrease in parking during such period.
5.1.13 THIRD PARTY PAYOR AGREEMENTS.
A. The Borrower or each of the Facilities is fully
qualified as a provider of services under and
participate in all Third Party Payor Programs and
referral programs as are necessary for the prudent
operation of the Facilities in the good faith
exercise of commercially reasonable business
judgment;
B. Attached hereto as EXHIBIT E is a list of national
accounts and local discount agreements, which
constitute all of the agreements between the
Borrower or any Facility, on the one hand, and Third
Party Payors on the other hand, pursuant to which
the Borrower or any Facility agrees to provide
services based on a discount factor from the rates
regularly charged for services rendered by the
Borrower or such Facility;
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<PAGE> 15
C. No member of the Borrowing Group, nor any Facility
has any rate appeal currently pending before any
Government Authority or any administrator of any
Third Party Payor Program or referral source other
than such appeals which, if determined adversely to
any member of the Borrowing Group or any Facility
would not have a materially adverse effect, either
singly or in the aggregate, on the financial
condition of any member of the Borrowing Group or
any Facility;
D. All cost reports and financial reports submitted to
any Third Party Payor with respect to any Facility
by any member of the Borrowing Group have been
materially accurate and complete and have not been
misleading in any material respect. As a result of
any audits by any Third Party Payor, there are no
related recoupment claims made or contests pending
or threatened other than such recoupment claims or
contests which, if determined adversely to any
member of the Borrowing Group or any Facility, would
not have a materially adverse effect, either singly
or in the aggregate, on the financial condition of
any member of the Borrowing Group or any Facility.
As of the date hereof, no cost reports for any
Facility remain open or unsettled other than those
listed on EXHIBIT F; ---------
5.1.14 RATE RESTRICTIONS AND LIMITATIONS.
The state where the Facilities are located currently imposes
no restrictions or limitations on rates which may be charged to
private pay residents receiving services at the Facilities, except as
set forth on EXHIBIT G;
5.1.15 FREE OR SUBSIDIZED PATIENT CARE.
Except as disclosed on EXHIBIT H attached hereto, there are
no Contracts, Permits or Legal Requirements which require that a
percentage of beds or slots in any program at any Facility be reserved
for Medicaid or Medicare eligible patients or that any Facility
provide a certain amount of welfare, free or charity care or
discounted or government assisted resident care;
5.1.16 ERISA.
No employee pension benefit plan maintained by any member of
the Borrowing Group has any accumulated funding deficiency within the
meaning of the ERISA, nor does any member of the Borrowing Group have
any material liability to the PBGC established under ERISA (or any
successor thereto) in connection with any employee pension benefit
plan (or other class of benefit which the PBGC has elected to insure),
and there have been no "reportable events" (not waived) or "prohibited
transactions" with respect to any such plan, as those terms are
defined in Section 4043 of ERISA and Section 4975 of the Internal
Revenue Code of 1986, as amended, respectively;
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<PAGE> 16
5.1.17 BROKERAGE.
No member of the Borrowing Group nor any of their respective
Affiliates has dealt with any broker or agent in connection with the
Loan;
5.1.18 GIFTS AND CONTRIBUTIONS.
No member of the Borrowing Group nor any of their respective
Affiliates has:
A. made any contributions, payments or gifts of its
funds or property to or for the private use of any
government official, employee, agent or other Person
where either the payment or the purpose of such
contribution, payment or gifts is illegal under the
laws of the United States, any state thereof or any
other jurisdiction (foreign or domestic);
B. established or maintained any unrecorded fund or
asset for any purpose or has made any false or
artificial entries on any of its books or records
for any reason;
C. made any payments to any Person with the intention
or understanding that any part of such payment was
to be used for any other purpose other than that
described in the documents supporting the payment;
or
D. made any contribution, or has reimbursed any
political gift or contribution made by any other
Person, to candidates for public office, whether
federal, state or local, where such contribution
would be in violation of applicable law;
5.1.19 REGULATION U.
The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of the Loan will be used
to purchase or carry any margin security or to extend credit to others
for the purpose of purchasing or carrying any margin security or in
any other manner which would involve a violation of any of the
regulations of the Board of Governors of the Federal Reserve System.
The Borrower is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
5.1.20 DEFAULT UNDER LOAN DOCUMENTS.
No event or state of facts which constitutes, or which, with
notice or lapse of time, or both, could constitute, a Loan Default has
occurred and is continuing;
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<PAGE> 17
5.1.21 PRINCIPAL PLACE OF BUSINESS.
The principal place of business and chief executive office of
the Borrower is located at __________________________________________
__________________ (referred to herein as the "Principal Place of
Business");
5.1.22 LABOR MATTERS.
There are no proceedings now pending, nor, to the best of the
Borrower's knowledge, threatened with respect to the operation of any
Facility before the National Labor Relations Board, State Commission
on Human Rights and Opportunities, State Department of Labor, U.S.
Department of Labor or any other Governmental Authority having
jurisdiction of employee rights with respect to hiring, tenure and
conditions of employment, and no member of the Borrowing Group has
experienced any material controversy with any Facility administrator
or other employee of similar stature or with any labor organization;
and
5.1.23 INTELLECTUAL PROPERTY.
The Borrower is duly licensed or authorized to use all (if
any) copyrights, rights of reproduction, trademarks, trade-names,
trademark applications, service marks, patent applications, patents
and patent license rights, (all whether registered or unregistered,
U.S. or foreign), inventions, franchises, discoveries, ideas,
research, engineering, methods, practices, processes, systems,
formulae, designs, drawings, products, projects, improvements,
developments, know-how and trade secrets which are used in or
necessary for the operation of each Facility in accordance with its
Primary Intended Use, without conflict with or infringement of any,
and subject to no restriction, lien, encumbrance, right, title or
interest in others.
5.1.24 MANAGEMENT AGREEMENTS.
There is no Management Agreement in force and effect as of
the date hereof.
5.2 REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
In order to induce the Lender to make the Loan, the Guarantor
represents and warrants to the Lender that:
5.2.01 FORMATION AND AUTHORITY OF THE GUARANTOR.
A. The Guarantor is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Delaware. The Guarantor has all
requisite corporate power to own and operate its
properties and to carry on its business as presently
conducted and as proposed to be
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<PAGE> 18
conducted and is duly qualified to do business and
is in good standing in each jurisdiction where such
qualification is necessary or desirable in order to
carry out its business as now conducted and as
proposed to be conducted; and
B. The Guarantor is duly authorized to make and enter
into all of the Loan Documents to which the
Guarantor is a party and to carry out the
transactions contemplated therein. All of the Loan
Documents to which the Guarantor is a party have
each been duly executed and delivered by the
Guarantor, and each is a legal, valid and binding
obligation of the Guarantor, enforceable in
accordance with its terms;
5.2.02 THE BORROWER AS SUBSIDIARY.
The Borrower is a wholly-owned subsidiary of the Guarantor;
5.2.03 NO VIOLATIONS.
The execution, delivery and performance of the Loan Documents
and the consummation of the transactions thereby contemplated shall
not result in any breach of, or constitute a default under, or result
in the acceleration of, or constitute an event which, with notice
and/or passage of time could result in default or acceleration of, any
obligation of the Guarantor or any other contract, mortgage, lien,
lease, agreement, instrument, franchise, arbitration award, judgment,
decree, bank loan or credit agreement, trust indenture or other
instrument to which the Guarantor is a party or by which the Guarantor
may be bound or affected and do not violate or contravene any Legal
Requirement;
5.2.04 NO CONSENT OR APPROVAL.
Except as already obtained or filed, as the case may be, no
consent or approval or other authorization of, or exemption by, or
declaration or filing with, any Person and no waiver of any right by
any Person is required to authorize or permit, or is otherwise
required as a condition of, the Guarantor's execution, delivery and
performance of its obligations under the Loan Documents to which it is
a party or as a condition to the validity (assuming the due
authorization, execution and delivery by the Lender of the Loan
Documents to which it is a party) and/or the enforceability of any of
such Loan Documents and/or the first priority of any Liens granted
thereunder;
5.2.05 FINANCIAL CONDITION.
A. The Guarantor is financially solvent and there are
no actions, suits, investigations or proceedings
including, without limitation, outstanding federal
or state tax liens, garnishments or insolvency and
bankruptcy
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<PAGE> 19
proceedings, pending or, to the best of the
Guarantor's knowledge and belief, threatened:
i. against or affecting the Guarantor which,
if adversely resolved against the
Guarantor would materially adversely
affect the ability of the Guarantor to
perform its obligations under the Loan
Documents to which it is a party;
ii. against or affecting the Mortgaged
Property or the ownership, construction,
development, maintenance, management,
repair, use, occupancy, possession or
operation thereof; or
iii. which may involve or affect the validity,
priority or enforceability of any of the
Loan Documents, at law or in equity, or
before or by any arbitrator or
Governmental Authority;
B. After giving effect to the consummation of the Loan,
the Guarantor:
i. will be able to pay its debts as they
become due;
ii. will have sufficient funds and capital to
carry on its business as now conducted or
as contemplated to be conducted (in
accordance with the terms of the Loan
Documents);
iii. will own property having a value both at
fair valuation and at present fair
saleable value greater than the amount
required to pay its debts as they become
due; and
iv. will not be rendered insolvent as
determined by applicable law;
C. The Guarantor is not a party to any agreement, the
terms of which now have or, as far as can be
reasonably foreseen, may have a material adverse
effect on its financial condition or business or on
the operation of any Facility;
D. The Guarantor is not delinquent or claimed to be
delinquent under any material obligation for the
payment of borrowed money;
5.2.06 COMMERCIAL ACTS.
The Guarantor's performance of and compliance with the
obligations and conditions set forth herein and the other Loan
Documents to which it is a party will constitute commercial acts done
and performed for commercial purposes;
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<PAGE> 20
5.2.07 FILING OF TAX RETURNS.
The Guarantor has filed all federal, state and local tax
returns which are required to be filed as to which extensions are not
currently in effect and has paid all taxes, assessments, impositions,
fees and other governmental charges (including interest and penalties)
which have become due pursuant to such returns or pursuant to any
assessment or notice of tax claim or deficiency received by the
Guarantor. No tax liability has been asserted by the Internal Revenue
Service against the Guarantor or any other federal, state or local
taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in
excess of those already paid;
5.2.08 ACCURACY OF FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements of the Guarantor given to the Lender
in connection with the making of the Loan were true, complete and
accurate and fairly presented the financial condition of the Guarantor
as of the date thereof and for the periods covered thereby, having
been prepared in accordance with GAAP and such financial statements
disclosed all liabilities (including, without limitation, contingent
liabilities) of the Guarantor. There has been no material adverse
change since such date with respect to the Tangible Net Worth or
liquidity of the Guarantor or with respect to any other matters
referred to or contained therein and no additional material
liabilities (including, without limitation, contingent liabilities) of
the Guarantor have arisen or been incurred since such date. The
projections heretofore delivered to the Lender continue to be
reasonable (with respect to the material assumptions upon which such
projections are based) and the Guarantor reasonably anticipates the
results projected therein will be achieved, there having been (A) no
material adverse change in the business, assets or condition,
financial or otherwise of the Guarantor or (B) no material depletion
of the Guarantor's cash or decrease in working capital;
6. COVENANTS
6.1 FINANCIAL COVENANTS.
As long as any of the Loan Documents may remain in effect:
6.1.01 THE BORROWER'S DEBT COVERAGE RATIO.
For each fiscal quarter, the Borrower shall maintain, with
respect to the Mortgaged Property, a Debt Coverage Ratio equal to or
greater than 1.25 to 1;
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<PAGE> 21
6.1.02 THE GUARANTOR'S ASSETS.
Throughout the Term, the Guarantor shall maintain a ratio of
Consolidated Current Assets to Consolidated Current Liabilities equal
to or greater than 1 to 1;
6.1.03 THE GUARANTOR'S NET WORTH.
The Guarantor shall maintain a Tangible Net Worth equal to or
greater than (A) FIVE HUNDRED THOUSAND DOLLARS ($500,000) from the
date hereof through June 30, 1997, (B) SEVEN HUNDRED FIFTY THOUSAND
DOLLARS ($750,000) from July 1, 1997 through June 30, 1998 and (C) ONE
MILLION DOLLARS ($1,000,000) from July 1, 1998 through the end of the
Term.
6.1.04 LIABILITY FOR BORROWED MONEY.
The Borrower shall not create, incur, assume or suffer to
exist any liability for borrowed money except (A) indebtedness to the
Lender under the Loan Documents, (B) Impositions allowed pursuant to
the provisions of this Agreement, (C) unsecured normal trade debt
incurred upon customary terms in the ordinary course of business, (D)
other Indebtedness of the Borrower in the aggregate principal amount
not to exceed FIVE HUNDRED THOUSAND DOLLARS ($500,000) incurred, for
the exclusive use of the Facilities, on account of purchase money
indebtedness or finance lease arrangements, each of which shall not
exceed the fair market value of the assets or property acquired or
leased and shall not extend to any assets or property other than those
purchased or leased and (E) liability arising under a working capital
line of credit in an amount reasonably satisfactory to the Lender;
6.1.05 ASSUMPTION OF LIABILITY.
The Borrower shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or
contingently liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise to invest in any debtor or
otherwise to assure any creditor against loss) in connection with any
Indebtedness of any other Person, except by the endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
6.2 COLLECTION AND ENFORCEMENT COSTS.
Upon demand, the Borrower shall reimburse the Lender for all costs and
expenses, including, without limitation, attorneys' fees and expenses and court
costs, reasonably paid or incurred by the Lender in connection with the
collection of any sum due hereunder, or in connection with the enforcement of
any of the Lender's rights or any member of the Borrowing Group's obligations
under this Agreement or any of the other Loan Documents. Any amount
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<PAGE> 22
due and payable to the Lender pursuant to the provisions of this Section shall
be a demand obligation and, to the extent permitted by law, shall be added to
the Loan Obligations and shall be secured by the Liens created by the Loan
Documents as fully and effectively and with the same priority as every other
obligation of the Borrower secured thereby and, if not paid within ten (10)
days after demand, shall thereafter, to the extent permitted by applicable law,
bear interest at the Advances Rate until the date of payment. The obligation of
the Borrower to pay the outstanding principal balance, interest (including,
without limitation, Additional Interest) and all other costs, charges and sums
due hereunder or under any of the other Loan Documents shall continue in full
force and effect and in no way shall be impaired, until the actual payment
thereof to the Lender. In the event of (A) a sale, conveyance, transfer or
other disposition of the Mortgaged Property, (B) any further agreement given to
secure the payment of the obligations set forth herein or (C) any agreement or
stipulation extending the time or modifying the terms of payment set forth
herein; the Borrower shall nevertheless remain obligated to pay the
indebtedness evidenced by this Agreement, as extended or modified by any such
agreement or stipulation, unless the Borrower is released and discharged from
such obligation by a written agreement executed by the Lender.
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Borrower shall furnish or shall cause to be furnished to the
Lender the following statements, information and other materials:
6.3.01 Within one hundred (100) days after the end of each of their
respective fiscal years:
A. a copy of the Consolidated Financials for each of
(i) the Guarantor (including the Borrower) and (ii)
any Lessee, for the preceding fiscal year, certified
and audited by, and with the unqualified opinion of,
independent certified public accountants acceptable
to the Lender and certified as true and correct by
the Borrower, the applicable Lessee and the
Guarantor, as the case may be (and, without limiting
anything else contained herein, the Consolidated
Financials for the Borrower and each Lessee shall
contain a detailed balance sheet for the Mortgaged
Property as of the last day of such fiscal year and
a statement of earnings from the Mortgaged Property
for such fiscal year showing, among other things,
all rents and other income therefrom and all
expenses paid or incurred in connection with the
operation of the Mortgaged Property);
B. statements certified as true and correct by the
Borrower, each Lessee and the Guarantor stating, to
the best of the signer's knowledge and belief after
making due inquiry, whether the Borrower, such
Lessee and the Guarantor, as the case may be, is in
default in the performance or observance of any of
the terms of any Lease or any of the Loan
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<PAGE> 23
Documents and, if so, specifying all such defaults,
the nature thereof and the steps being taken to
immediately remedy the same; and
C. a copy of all letters from the independent certified
accountants engaged to perform the annual audits
referred to above, directed to the management of the
Borrower, the Guarantor or the applicable Lessee, as
the case may be, regarding the existence of any
reportable conditions or material weaknesses;
D. evidence satisfactory to Lessor that the Borrower
has fulfilled its obligation to make the Annual
Facility Upgrade Expenditure in accordance with the
terms of Section 6.24.
6.3.02 Within one hundred (100) days after the end of each fiscal
year of the Borrower, a statement certified as true and
correct by the Borrower, setting forth all Leases of the
Mortgaged Property as of the last day of such fiscal year,
the respective areas demised thereunder, the names of the
Lessees thereunder, the respective expiration dates of the
Leases, the respective rentals provided for therein, and such
other information pertaining to the Leases as may be
reasonably requested by the Lender;
6.3.03 Within thirty (30) days after the end of each calendar month,
an unaudited, detailed month and year to date income and
expense statement for the Mortgaged Property which shall
include a comparison to corresponding budget figures,
occupancy statistics (including the actual number of
residents, the number of units available and total patient
days for such month) and resident mix breakdowns for each
patient day during such month (classifying residents by the
type of care required and source of payment).
6.3.04 Within twenty (20) days after the end of each of their
respective fiscal quarters, unaudited Consolidated Financials
for the Borrower and each Lessee certified as true and
correct by the Borrower or such Lessee, as the case may be;
6.3.05 Within thirty (30) days after the end of each of the
Borrower's fiscal quarters, a calculation showing compliance
or non-compliance, as the case may be, with the financial
covenants set forth in Section 6.1 hereof for the applicable
period;
6.3.06 Within fifty (50) days after the end of each of its fiscal
quarters, unaudited Consolidated Financials for the Guarantor
certified as true and correct by the Guarantor;
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<PAGE> 24
6.3.07 At least thirty (30) days prior to the end of the fiscal year
for the Facilities, the Borrower, any Lessee and any Manager
shall submit a proposed financial and capital expenditures
budget for the Facilities for the next fiscal year and a
report detailing the capital improvements completed in the
immediately prior fiscal year;
6.3.08 Upon the issuance or execution thereof, as the case may be,
true and complete copies of all (A) Permits which constitute
operating licenses for the Facilities issued by any
Governmental Authority having jurisdiction over assisted
living or community based residential matters and (B)
Contracts (involving payments in the aggregate in excess of
$100,000 per annum), including, without limitation, all
Provider Agreements;
6.3.09 Upon receipt thereof, true and complete copies of any
notices, consents, terminations or statements of any kind or
nature relating to any of the Contracts involving payments in
the aggregate in excess of $100,000 per annum (other than
those issued in the ordinary course of business);
6.3.10 Upon receipt thereof, true and complete copies of all
surveys, follow-up surveys, complaint surveys, examinations,
compliance certificates, inspection reports, statements
(other than those statements that are furnished in the
ordinary course of business), terminations and notices of any
kind (other than those notices that are furnished in the
ordinary course of business) issued or provided to the
Borrower or any Lessee by any Governmental Authority,
Accreditation Body or Third Party Payor, including, without
limitation, any notices pertaining to any delinquency in, or
proposed revision of, the Borrower's or such Lessee's
obligations under the terms and conditions of any Permits or
Contracts now or hereafter issued by or entered into with any
Governmental Authority, Accreditation Body or Third Party
Payor and the response(s) thereto made by or on behalf of the
Borrower or any Lessee;
6.3.11 Upon the completion or filing thereof, complete copies of all
Permit applications (other than those that are furnished in
the ordinary course of business), notices (other than those
that are furnished in the ordinary course of business),
statements (other than those that are furnished in the
ordinary course of business), annual reports, cost reports
and other reports or filings of any kind (other than those
that are furnished in the ordinary course of business)
provided by the Borrower or any Lessee to any Governmental
Authority, Accreditation Body or Third Party Payor with
respect to the Mortgaged Property;
6.3.12 Upon the completion or filing, mailing or other delivery
thereof, complete copies of all financial statements,
reports, notices and proxy statements,
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if any, sent by the Borrower to its shareholders and of all
reports, if any, filed by the Borrower with any securities
exchange or with the Securities Exchange Commission;
6.3.13 With reasonable promptness, such other information as the
Lender may reasonably request from time to time respecting
(I) the financial condition and affairs of each member of the
Borrowing Group and the Mortgaged Property and (II) the
licensing and the operation of the Mortgaged Property;
including, without limitation, audited financial statements,
certificates and consents from accountants and any other
financial and licensing or operational information as may be
required or requested by any Governmental Authority;
6.3.14 As soon as possible and in any event within five (5) days
after the occurrence of each Loan Default or each event or
state of facts which, with the giving of notice or lapse of
time or both, could constitute such a Loan Default, a written
statement of the Borrower setting forth details of such Loan
Default or event and the action which the Borrower proposes
to take with respect thereto;
6.3.15 Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any Governmental
Authority or Accreditation Body which may have a material
adverse effect on (I) the ability of any member of the
Borrowing Group to perform any of its obligations under any
of the Loan Documents or (II) the Mortgaged Property;
6.3.16 Promptly after receipt, a copy of all audits or reports
submitted to any member of the Borrowing Group independent
public accountants in connection with any annual, special or
interim audits of the books of any such member of the
Borrowing Group and, if requested by the Lender, any letter
of comments directed by such accountants to the management of
any such member of the Borrowing Group;
6.3.17 Within five (5) days after the Borrower acquires knowledge
thereof, written notice of:
A. the potential termination of any Permit or Provider
Agreement necessary for the operation or ownership
of the Mortgaged Property;
B. any loss, damage or destruction to or of the
Mortgaged Property in excess of TWENTY-FIVE THOUSAND
DOLLARS ($25,000) (regardless of whether the same is
covered by insurance);
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C. any material controversy involving the Borrower or
any Lessee and (I) any Facility Administrator or
Facility employee of similar stature or (II) any
labor organization;
D. any controversy that calls into question the
eligibility of the Borrower, any Lessee or any
Facility for participation in any Third Party
Program;
E. any refusal of reimbursement by any Third Party
Payor which, singly or together with all other such
refusals by any Third Party Payors, could have a
materially adverse effect on the financial condition
of the Borrower or any Lessee; and
F. any other development adversely affecting or which
may adversely affect the condition, financial or
otherwise, of any member of the Borrowing Group or
the Mortgaged Property;
6.3.18 Within ten (10) days after becoming aware of a claim by any
Person that the Borrower is in default of any agreement in
connection with the borrowing of money which may be allowed
hereunder, notice of any such claim or default; and
6.3.19 Within thirty (30) days after receipt of a Facility
inspection report from the Lender, a written response
describing in detail prepared plans to address concerns
raised by the inspection report.
Any certificate, instrument, notice or other document to be provided
to the Lender hereunder or under any of the other Loan Documents by any member
of the Borrowing Group shall be signed by an executive officer of such member
(in the event that any of the foregoing is not an individual) having a position
of Vice President or higher and with respect to financial matters, any such
certificate, instrument notice or other document shall be signed by the chief
financial officer or treasurer of such member.
No certificate, instrument, notice or other document including,
without limitation, any financial statements, furnished or to be furnished to
the Lender pursuant to the terms hereof or of any of the other Loan Documents
shall contain any untrue statement of a material fact or shall omit to state a
material fact necessary in order to prevent all statements contained therein
from being misleading.
The Lender shall afford any information received pursuant to the
provisions of the Loan Documents the same degree of confidentiality that the
Lender affords similar information proprietary to the Lender; provided,
however, that the Lender does not in any way warrant or represent that such
information received from any member of the Borrowing Group shall remain
confidential, and, provided, further, that the Lender shall have the
unconditional right to (A) disclose any such information as the Lender deems
necessary or appropriate in connection
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with any sale, transfer, conveyance, participation, assignment or foreclosure
of any of the Loan Documents and/or any interest therein and (B) use such
information in any litigation or arbitration proceeding between the Lender and
any member of the Borrowing Group. Without limiting the foregoing, the Lender
may also disclose any information furnished to it pursuant to any of the Loan
Documents as and to the extent (I) counsel to the Lender determines that such
disclosure is necessary pursuant to 15 U.S.C. 77a-77aa or 15 U.S.C. 78a-78jj
and the rules and regulations promulgated thereunder, (II) the Lender is
required or requested by any Governmental Authority to disclose any such
information and/or (III) the Lender is required or requested to disclose any
such information by any of its and/or any of the Meditrust Entities' lenders,
potential lenders and/or any other parties in connection with any capital
raising efforts or arrangements. The Lender shall not be liable in any way for
any subsequent disclosure of such information by any Person to whom the Lender
provided such information in accordance with the terms hereof. Nevertheless,
the Lender shall inform all recipients of any such information of the
confidential nature thereof. The Lender additionally shall observe any
prohibitions or limitations on the disclosure of any such information under
applicable confidentiality law or regulations to the extent that the same are
applicable to such information, including, without limitation, any duly enacted
"Patients' Bill of Rights" or similar legislation, including such limitations
as may be necessary to preserve the confidentiality of the facility-patient
relationship and the physician-patient privilege.
6.4 MAINTENANCE OF EXISTENCE.
During the entire time that this Agreement remains in full force and
effect, the Borrower shall keep in effect its existence and rights as a
corporation under the laws of the state of its incorporation and its right to
own property and transact business in the state in which the Mortgaged Property
is situated.
6.5 REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained in this Agreement shall
constitute continuing representations and warranties which shall remain true,
correct and complete throughout the Term. Notwithstanding the provisions of the
foregoing sentence but without derogation from any other terms and provisions
of this Agreement, including, without limitation, those terms and provisions
containing covenants to be performed or conditions to be satisfied on the part
of the Borrower, the representations and warranties contained in Sections
5.1.05(a), 5.1.05(b), 5.1.05(d), 5.1.10, 5.1.11, 5.1.12(b), 5.1.12(c),
5.1.13(b), 5.1.13(c), 5.1.14, 5.1.15, 5.1.16, 5.1.20, 5.1.22, 5.2.05(a),
5.2.05(c), 5.2.05(d), in the second sentence of Section 5.1.08, in the second
and third sentences of Section 5.1.09(a), in the second and third sentences of
Section 5.1.13(d), in the third sentence of Section 5.2.01 (but only in
connection with the exercise by the Lender under the Warrant of its right to
become a shareholder of the Guarantor), in the second sentence of Section
5.2.07 and in the second and third sentences of Section 5.2.08 hereof shall not
constitute continuing representations and warranties throughout the Term.
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6.6 CONDUCT OF THE BORROWER'S BUSINESS.
The Borrower will maintain, and cause any Lessee and Manager to
maintain, experienced and competent professional management with respect to its
business and with respect to the Mortgaged Property. The Borrower, any Lessee
and any Manager shall conduct, in the ordinary course, the operation of the
Facilities the Borrower and any Lessee shall not enter into any other business
or venture.
6.7 PRINCIPAL PLACE OF BUSINESS, LOCATION OF THE COLLATERAL.
The Borrower shall provide the Lender thirty (30) days' prior written
notice of any change of its Principal Place of Business from its current
Principal Place of Business. The Borrower shall maintain the Collateral,
including without limitation, all books and records relating to the Borrower's
business, at solely its Principal Place of Business and at the Mortgaged
Property. The Borrower shall not (A) remove the Collateral, including, without
limitation, any books or records relating to the Collateral and/or the
Borrower's business from either the Mortgaged Property or its Principal Place
of Business or (B) relocate its Principal Place of Business until after receipt
of a certificate from the Lender, signed by an officer thereof, stating that
the Lender has, to its satisfaction, obtained all documentation that it deems
necessary or desirable to obtain, maintain, perfect and confirm the first
priority security interests granted in the Loan Documents.
6.8 RESTRICTIONS.
6.8.01 RESTRICTIONS RELATING TO THE BORROWER.
Except as may otherwise be expressly provided herein or in the
Mortgage, the Borrower shall not, without the prior written consent of the
Lender, in each instance, which consent may be withheld in the sole and
absolute discretion of the Lender:
A. convey, assign, hypothecate, transfer, dispose of or
encumber, or permit the conveyance, assignment, transfer,
hypothecation, disposal or encumbrance of all or any part of
any legal or beneficial interest in the Mortgaged Property;
provided, however, that this restriction shall not apply to
(i) the Permitted Encumbrances that may be created after the
date hereof pursuant to the Loan Documents, (ii) Liens
against Personal Property securing Indebtedness permitted
under Section 4.4 and Section 6.1.04(d) relating to equipment
leasing or financing for the exclusive use of the Facility,
(iii) Leases to the Guarantor or any Affiliate of the
Guarantor which are subordinate to the Loan Documents and
which comply with the provisions of Section 6.9; (iv) the
sale, conveyance, assignment, hypothecation, lease or other
transfer of any material asset or assets (whether now owned
or hereafter acquired), the fair market value of which equals
or is less than THIRTY-FIVE THOUSAND DOLLARS ($35,000),
individually, or ONE HUNDRED FIFTY THOUSAND DOLLARS
($150,000) collectively; (v) without limitation as to amount,
the disposition in the ordinary course of business of any
obsolete, worn out or defective fixtures, furnishings or
equipment used in
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the operation of the Facilities provided that the same are
replaced with fixtures, furnishings or equipment of equal or
greater utility or value; (vi) without limitation as to
amount, any sale of inventory by the Borrower in the ordinary
course of business; and (vii) subject to the terms of the
Pledge Agreement and the Affiliated Party Subordination
Agreement, distributions and/or dividends to the Borrower's
shareholder(s);
B. permit the use of the Mortgaged Property or any Facility for
any purpose other than the Primary Intended Use; or
C. liquidate, dissolve or merge or consolidate with any other
Person.
The occurrence of any of the foregoing shall be deemed to be an Event
of Default.
6.8.02 RESTRICTIONS RELATING TO THE GUARANTOR.
Except as may otherwise be expressly provided herein or in any of the
other Loan Documents, the Guarantor shall not, without the prior written
consent of the Lender, in each instance, which consent may be withheld in the
sole and absolute discretion of the Lender, convey, assign, donate, sell,
mortgage or pledge any real or personal property or take any other action which
would have a materially adverse effect upon the Tangible Net Worth or general
financial condition of the Guarantor. Notwithstanding the foregoing, but
subject to the provisions of Section 6.1, the Guarantor may guaranty
obligations of any of its present or future Affiliates.
6.9 AFFILIATE TRANSACTIONS.
6.9.01 No member of the Borrowing Group shall enter into any
transaction with any Affiliate pertaining to the Mortgaged
Property, including, without limitation, the purchase, sale
or exchange of any property, the rendering of any service to
or with any Affiliate and the making of any loan or other
extension of credit, except in the ordinary course of, and
pursuant to the reasonable requirements of, such member's
business and upon fair and reasonable terms no less favorable
to such member than would be obtained in a comparable
arms'-length transaction with any Person that is not an
Affiliate.
6.9.02 Without limiting the provisions of any other Section of this
Agreement or the Affiliated Party Subordination Agreement,
any payments to be made by the Borrower or any Lessee to (A)
any member of the Borrowing Group (or any Affiliate of any
member of the Borrowing Group) or (B) any Affiliate of the
Borrower, in connection with any transaction between the
Borrower and such Person, including, without limitation, the
purchase, sale or exchange of any property, the rendering of
any service
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to or by any such Person (including, without limitation, all
allocations of any so-called corporate or central office
costs, expenses and charges of any kind or nature) or the
making of any loan or other extension of credit or the making
of any equity investment, shall be subordinate to the
complete payment and performance of all Loan Obligations;
provided, however, that all such subordinated payments may be
paid at any time unless: (I) after giving effect to such
payment, the Borrower or any Lessee shall be unable to comply
with any of its respective obligations under any of the Loan
Documents or (II) a Loan Default has occurred and is
continuing and has not been expressly waived in writing by
the Lender or an event or state of facts exists, which, with
notice or the passage of time, or both, would constitute a
Loan Default.
6.10 NON-COMPETITION.
6.10.01 The Borrower and the Guarantor acknowledge that any
competition by any member of the Borrowing Group with any
Purchaser upon the transfer of title to such Purchaser by
reason of the Lender's exercise of any rights and remedies
granted under any of the Loan Documents, including without
limitation, the exercise of the power of sale under the
Mortgage, any other foreclosure of the Mortgage or any other
proceedings brought to enforce the rights of the holder of
the Mortgage or by any other method, would cause irreparable
harm to the Lender and the Purchaser.
6.10.02 From and after the date hereof until the fifth anniversary of
the date of any such transfer of title to the Mortgaged
Property to any Purchaser, no member of the Borrowing Group
nor any Person holding or controlling, directly or
indirectly, any interest in any member of the Borrowing Group
(collectively, the "Limited Parties"), shall be involved in
any capacity in or lend any of their names to or engage in
any capacity in any assisted living, community based
residential facility, center, unit or program (or in any
Person engaged in any such activity or any related activity
competitive therewith), whether such competitive activity
shall be as an officer, director, owner, employee, agent,
advisor, independent contractor, developer, lender, sponsor,
venture capitalist, administrator, manager, investor,
partner, joint venturer, consultant or other participant in
any capacity whatsoever with respect to an assisted living,
community based residential facility, center, unit or program
located within a five (5) mile radius of the Mortgaged
Property.
6.10.03 The Borrower and the Guarantor hereby acknowledge and agree
that none of the time span, scope or area covered by the
foregoing restrictive covenants is or are unreasonable and
that it is the specific intent of the Borrower and the
Guarantor that each and all of the restrictive covenants
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set forth hereinabove shall be valid and enforceable as
specifically set forth herein. The Borrower and the Guarantor
further agree that these restrictions are special, unique,
extraordinary and reasonably necessary for the protection of
the Lender and any Purchaser and that the violation of any
such covenant by any of the Limited Parties would cause
irreparable damage to the Lender and any Purchaser for which
a legal remedy alone would not be sufficient to fully protect
such parties.
6.10.04 Therefore, in addition to and without limiting any other
remedies available at law or hereunder, in the event that any
of the Limited Parties breaches any of the restrictive
covenants hereunder or shall threaten breach of any of such
covenants, then the Lender and any Purchaser shall be
entitled to obtain equitable remedies, including specific
performance and injunctive relief, to prevent or otherwise
restrain a breach of this Section 6.10 (without the necessity
of posting a bond) and to recover any and all costs and
expenses (including, without limitation, attorneys' fees and
expenses and court costs) reasonably incurred in enforcing
the provisions of this Section 6.10. The existence of any
claim or cause of action of any of the Limited Parties or any
member of the Borrowing Group against the Lender or any
Purchaser, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the
Lender or any Purchaser of the foregoing restrictive
covenants and the Limited Parties shall not defend on the
basis that there is an adequate remedy at law.
6.10.05 Without limiting any other provision of this Agreement, the
parties hereto acknowledge that the foregoing restrictive
covenants are severable and separate. If at any time any of
the foregoing restrictive covenants shall be deemed invalid
or unenforceable by a court having jurisdiction over this
Agreement, by reason of being vague or unreasonable as to
duration, or geographic scope or scope of activities
restricted, or for any other reason, such covenants shall be
considered divisible as to such portion and such covenants
shall be immediately amended and reformed to include only
such covenants as are deemed reasonable and enforceable by
the court having jurisdiction over this Agreement to the full
duration, geographic scope and scope of restrictive
activities deemed reasonable and thus enforceable by said
court; and the parties agree that such covenants as so
amended and reformed, shall be valid and binding as though
the invalid or unenforceable portion has not been included
therein.
6.10.06 The provisions of this Section 6.10 shall survive the early
termination of the Term by reason of a transfer of title to
the Mortgaged Property as described in the first paragraph of
this Section 6.10 and any satisfaction of the Loan
Obligations in connection therewith or subsequent thereto.
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The parties hereto acknowledge and agree that any Purchaser
may enforce the provisions of this Section 6.10, as a third
party beneficiary.
6.11 ERISA.
The Borrower shall not establish or permit any Lessee to establish any
new pension or defined benefit plan or modify any such existing plan for
employees subject to ERISA, which plan provides any benefits based on past
service without the advance consent of the Lender to the amount of the
aggregate past service liability thereby created.
6.12 FORGIVENESS OF INDEBTEDNESS.
The Borrower will not waive, or permit any Manager or Lessee which is
an Affiliate to waive any debt or claim, except in the ordinary course of its
business.
6.13 VALUE OF ASSETS.
Except as disclosed in the financial statements provided to the Lender
as of the date hereof, the Borrower will not write up (by creating an appraisal
surplus or otherwise) the value of any of its assets above their cost to the
Borrower, less the depreciation regularly allowable thereon.
6.14 CHANGES IN FISCAL YEAR AND ACCOUNTING PROCEDURES.
The Borrower shall not, without the prior written consent of the
Lender, in each instance, which consent may be withheld in the Lender's
reasonable discretion (A) change its fiscal year or capital structure or (B)
change, alter, amend or in any manner modify, except in accordance with GAAP,
any of its current accounting procedures related to the method of revenue
recognition, billing procedures or determinations of doubtful accounts or bad
debt expenses nor will the Borrower permit any of its Subsidiaries to change
its fiscal year or suffer or permit any circumstance to exist in which any
Subsidiary is not wholly-owned, directly or indirectly, by the Borrower.
6.15 [INTENTIONALLY DELETED].
6.16 THE BORROWER'S AGREEMENTS TO PERFORM CERTAIN OBLIGATIONS.
The Borrower agrees faithfully to perform, pay and observe all
agreements, covenants, indebtedness, obligations and liabilities of the
Borrower to the Lender, whether such agreements, covenants, indebtedness,
obligations and liabilities are direct or indirect, absolute or contingent, due
or to become due, existing or hereafter arising, including, without limitation,
all of the Borrower's obligations under all of the Loan Documents. The payment
of all obligations and the performance of all covenants of and agreements by
the Borrower under the Loan Documents shall be absolute and unconditional,
irrespective of any defense or any rights or set-off,
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recoupment or counterclaim the Borrower might otherwise have against the
Lender, and the Borrower shall pay absolutely net during the Term all payments
to be made as prescribed in the all of the Loan Documents, free of any
deductions and without abatement, diminution or set-off.
6.17 PARTICIPATION IN THIRD PARTY PAYOR PROGRAMS.
The Borrower shall participate in all Third Party Payor Programs
(which would be participated in by a prudent operator in the good faith
exercise of commercially reasonable judgement), in accordance with all
requirements thereof (including, without limitation, all applicable Provider
Agreements), and shall remain eligible to participate in all other Third Party
Payor Programs as shall be necessary for the prudent operation of the
Facilities in the good faith exercise of commercially reasonable business
judgment.
6.18 NO DEFAULT.
The Borrower shall not commit any default or breach, or permit a
default or breach by any of the Borrowing Group, under any of the Loan
Documents to continue beyond applicable grace periods.
6.19 [INTENTIONALLY DELETED].
6.20 COVENANTS REGARDING MORTGAGED PROPERTY.
6.20.01 IMPOSITIONS.
A. Subject to the provisions of Section 9 hereof, the
Borrower shall pay, or cause to be paid, without
deduction (except such discount as may be permitted
by law), defalcation or abatement, before the last
day on which the same may be paid without penalty or
interest, all real estate taxes, ground rents, sewer
rents, water charges and all other municipal and
governmental assessments, fees (including, without
limitation, license, permit, inspection,
authorization and similar fees), taxes, rates,
charges, impositions, levies, liabilities,
obligations, special assessments and Liens of every
kind and nature (hereinafter collectively referred
to as the "Impositions") that now or hereafter may
be imposed, suffered, placed, assessed, levied or
filed at any time, upon (i) the Borrower, (ii) the
Borrower's interest in the Mortgaged Property, (iii)
the Mortgaged Property or any Rent therefrom or any
estate, right, title or interest therein, (iv) any
occupancy, leasing, operation, use or possession of,
sales from, or activity conducted on, or in
connection with, the Mortgaged Property and/or (v)
the Lender, but only to the extent that any
Imposition is imposed upon the Lender as a result of
the Loan transaction, or which by any Legal
Requirement may have priority over the indebtedness
secured either in lien or in distribution out of the
proceeds of any judicial
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sale of the Mortgaged Property (without regard to
any law heretofore or hereafter enacted imposing
payment in whole or in part upon the Lender).
Furthermore, if any such Imposition is of record,
the same shall be promptly satisfied and discharged
of record and evidence of such discharge of record
(satisfactory to the Lender) shall be forwarded to
the Lender on or before the date required hereunder
for payment of such Imposition. If any Imposition is
not paid within the time hereinabove specified, the
Lender shall have the right, but not the obligation,
to pay the same, together with any penalty and
interest thereon, and any amount so paid or advanced
by the Lender and all costs and expenses reasonably
incurred in connection therewith (including, without
limitation, attorneys' fees and expenses and court
costs), shall be a demand obligation of the Borrower
to the Lender, and to the extent permitted by
applicable law, shall be added to the Loan
Obligations and shall be secured by the Liens
created by the Loan Documents as fully and
effectively and with the same priority as every
other obligation of the Borrower secured thereby
and, if not paid within ten (10) days after demand,
shall thereafter, to the extent permitted by
applicable law, bear interest at the Advances Rate
until the date of payment.
B. The Borrower hereby assigns to the Lender all rights
of the Borrower now or hereafter arising in and to
the refund of any Imposition and any interest
thereon. If, at the time of receipt of any such
refund by the Lender, a Loan Default or a Related
Party Default has occurred, then the Lender may
apply said refund in reduction of the Obligations;
otherwise, the Lender shall promptly forward any
such refund to the Borrower upon demand.
6.20.02 TAX DEPOSITS.
A. Upon an Event of Default hereunder, or an event
which, with the giving of notice or passage of time,
and/or both, would constitute an Event of Default,
at the option of the Lender at any time thereafter,
the Borrower shall deposit with the Lender, on the
first day of the calendar month immediately
following the Closing Date and on the first day of
each calendar month thereafter (each of which dates
is hereinafter referred to as a "Monthly Tax Deposit
Date") until the payment in full of the Loan
Obligations, a sum equal to one-twelfth (1/12) of
the Impositions to be levied, charged, filed,
assessed or imposed upon or against the Mortgaged
Property within one (1) year after said Monthly Tax
Deposit Date. If the amount of the Impositions to be
levied, charged, assessed or imposed within the
ensuing one (1) year period shall not be fixed upon
any Monthly Tax Deposit Date, such amount for the
purpose of computing the tax deposit to be made by
the Borrower hereunder shall be estimated by
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the Lender, with an appropriate adjustment to be
promptly made between the Borrower and the Lender as
soon as the fixed amount of such Impositions is
determinable.
B. The sums deposited by the Borrower under this
Section 6.20.02 shall be held by the Lender and
shall be applied toward the payment of the
Impositions when due. Any such deposits may be
commingled with other assets of the Lender and shall
be invested by the Lender at such bank as the Lender
from time to time may select. The Lender may, at its
election from time to time exercised, invest all or
part such deposits in one or more of the investment
vehicles described on Exhibit A to the Deposit
Pledge Agreement. The Lender shall not be liable to
the Borrower or any other Person based on the
Lender's choice of investment vehicles, any
consequent loss of principal or interest or any
unavailability of funds based on such choice of
investment. Furthermore, the Lender shall bear no
responsibility for the financial condition of, or
any act or omission by, the Lender's depository
bank. The income from such investment or interest on
such deposit shall accrue for the benefit of the
Borrower. The Borrower shall give not less than ten
(10) days' prior written notice to the Lender in
each instance when an Imposition is due, specifying
the Imposition to be paid and the amount thereof,
the place of payment and the last day on which the
same may be paid in order to be within the time
limit specified above.
C. If for any reason the sums on deposit with the
Lender under this Section 6.20.02 shall not be
sufficient to pay an Imposition within the time
specified in this Section, then, within ten (10)
days after demand by the Lender, the Borrower shall
deposit sufficient sums so that the Lender may pay
such Imposition in full, together with any penalty
and interest thereon. The Lender may change its
estimate of any Imposition for any period on the
basis of a change in an assessment or tax rate or on
the basis of a prior miscalculation or for any other
reason; in which event, within ten (10) days after
demand by the Lender, the Borrower shall deposit
with the Lender the amount in excess of the sums
actually deposited which would theretofore have been
payable under the revised estimate.
D. If any Imposition shall be levied, charged, filed,
assessed or imposed upon or against the Mortgaged
Property and if such Imposition shall also be a
levy, charge, assessment or imposition upon or for
any other real or personal property not covered by
the Liens created by the Loan Documents, then the
computation of the amounts to be deposited under
this Section 6.20.02 shall be based upon the entire
amount of such Imposition and the Borrower shall not
have the right to apportion any deposit with respect
to such Imposition.
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E. Upon an assignment of the Mortgage by the Lender,
the Lender shall transfer all amounts deposited
pursuant to the provisions of this Section 6.20.02
and still in its possession to such assignee (as the
subsequent holder of the Mortgage) and the original
Lender named herein shall thereupon be completely
released from all liability with respect to such tax
deposits so transferred and the Borrower shall look
solely to said assignee (as the subsequent holder of
the Mortgage) in reference thereto.
F. All amounts deposited with the Lender pursuant to
the provisions of this Section 6.20.02 shall be held
by the Lender as additional security for the sums
secured by the Liens created by the Loan Documents
and, upon the occurrence of any Loan Default, the
Lender may, in its sole and absolute discretion,
apply said amounts toward payment of the Loan
Obligations. Upon the complete payment and
performance of the Loan Obligations, any sums then
held by the Lender under this Section 6.20.02 shall
be refunded to the Borrower; unless a Related Party
Default has occurred, in which event such sums may
be applied toward the Obligations.
G. The Borrower shall deliver to the Lender copies of
all notices, demands, claims, bills and receipts in
relation to the Impositions immediately upon the
receipt thereof by the Borrower.
6.20.03 CHANGE IN TAXES.
A. In the event any tax shall be due or become due and
payable to any Governmental Authority with respect
to the execution and delivery or recordation of any
of the Loan Documents or the interest of the Lender
in the Mortgaged Property, the Borrower shall pay
such tax at the time and in the manner required by
applicable law (without regard to whether any such
tax is imposed in whole or in part on the Lender)
and the Borrower shall and hereby agrees to hold
harmless, defend (with counsel acceptable to the
Lender) and indemnify the Lender against any
liability of any nature whatsoever as a result of
the imposition of any such tax. Notwithstanding the
foregoing, the Lender shall have the option of
conducting its own defense with counsel of its own
choice. Furthermore, the aforesaid indemnification
agreement shall include, without limitation,
attorneys' fees and expenses and court costs
reasonably incurred by the Lender in connection with
the imposition of any such taxes and the enforcement
of said indemnification agreement. The Borrower
shall not claim any credit on, or make any deduction
from, the Obligations by reason of the payment of
any such tax.
B. If any Legal Requirement becomes effective after the
date hereof changing (in any manner) any of the
present Legal Requirements as to the taxation
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of notes or debts secured by mortgages, for federal,
state, or local purposes, or the manner of
collection of any Impositions, so as to affect any
of the Loan Documents, then, upon demand, the
Borrower shall make such payments to the Lender and
take such other steps as may be necessary or
desirable in the Lender's reasonable discretion, to
place the Lender in the same financial position as
it was in prior to any such enactment; failing
which, at the option of the Lender and upon demand,
the Loan Obligations shall become due and payable
upon six (6) months' prior written notice to the
Borrower. In the event of any such acceleration of
the Loan Obligations, provided that a Loan Default
has not occurred, the Borrower shall not be required
to pay the Lender a Prepayment Fee.
C. The indemnity provisions of this Section 6.20.03
shall survive the complete payment and performance
of the Obligations and the foreclosure of the
Mortgage.
6.20.04 INSURANCE DEPOSITS.
A. Upon an Event of Default hereunder, or an event
which, with the giving of notice or passage of time,
and/or both, would constitute an Event of Default,
at the option of the Lender at any time thereafter,
the Borrower shall deposit with the Lender, on the
first day of the calendar month immediately
following the date hereof and on the first day of
each calendar month thereafter (each of which dates
is hereinafter referred to as a "Monthly Insurance
Deposit Date") until the complete payment and
performance of the Loan Obligations, a sum equal to
one-twelfth (1/12) of the premiums of the insurance
policies required hereunder which are payable within
one (1) year after said Monthly Insurance Deposit
Date. If the total amount of the insurance premiums
to be paid within the ensuing one (1) year period
are not fixed upon any Monthly Insurance Deposit
Date, such amount for the purpose of computing the
insurance deposit to be made by the Borrower
pursuant to this Section 6.20.04 shall be estimated
by the Lender, with an appropriate adjustment to be
promptly made between the Borrower and the Lender as
soon as the total amount of the insurance premiums
is determinable.
B. The sums deposited by the Borrower hereunder shall
be held by the Lender and shall be applied in
payment of the insurance premiums when due. Any such
deposits may be commingled with other assets of the
Lender and shall be invested by the Lender in a bank
account in the name of the Lender at such bank as
the Lender from time to time may select. The Lender
may, at its election from time to time exercised,
invest all or part such deposits in one or more of
the investment vehicles described on Exhibit A to
the Deposit Pledge Agreement. The Lender shall not
be
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liable to the Borrower or any other Person based on
the Lender's choice of investment vehicles, any
consequent loss of principal or interest or any
unavailability of funds based on such choice of
investment. Furthermore, the Lender shall bear no
responsibility for the financial condition of, as
well as any act or omission by, the Lender's
depository bank. The income from such investment or
interest on such deposit shall accrue for the
benefit of the Borrower. The Borrower shall give not
less than ten (10) days' prior written notice to the
Lender in each instance when an insurance policy
premium is due, specifying the premium to be paid
and the amount thereof, the place of payment and the
last day on which the same may be paid.
C. If for any reason the sums on deposit with the
Lender under this Section 6.20.04 shall not be
sufficient to pay any insurance policy premium,
then, within ten (10) days after demand by the
Lender, the Borrower shall deposit sufficient sums
so that the Lender may pay such insurance policy
premium in full, together with any penalty and
interest thereon. The Lender may change its estimate
of any insurance premiums for any period on the
basis of a change in any premium rates, a change in
the type or amount of coverage required hereunder, a
prior miscalculation or for any other reason; in
which event, within ten (10) days after demand by
the Lender, the Borrower shall deposit with the
Lender the amount in excess of the sums actually
deposited which would theretofore have been payable
under the revised estimate.
D. Upon an assignment of this Agreement by the Lender,
the Lender shall transfer all amounts deposited
pursuant to the provisions of this Section 6.20.04
and still in its possession to such assignee (as the
subsequent holder of the Loan Documents) and the
original Lender named herein shall thereupon be
completely released from all liability with respect
to such insurance deposits so transferred, and the
Borrower shall look solely to said assignee (as the
subsequent holder of the Loan Documents) in
reference thereto.
E. All amounts deposited with the Lender pursuant to
the provisions of this Section 6.20.04 shall be held
by the Lender as additional security for the Loan
Obligations and, upon the occurrence of any Loan
Default, the Lender may, in its sole and absolute
discretion, apply said amounts toward payment of the
Loan Obligations. Upon the complete payment and
performance of the Loan Obligations, any sums then
held by the Lender under this Section 6.20.04 shall
be refunded to the Borrower; unless a Related Party
Default has occurred, in which event such sums may
be applied toward the Obligations.
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6.20.05 REPAIR; USE; COMPLIANCE WITH LAW; ALTERATIONS; WASTE.
A. At all times until the Loan Obligations are fully
paid and performed and the Mortgage is discharged,
the Mortgaged Property shall be maintained in good
order, repair and condition (damage from any
Casualty expressly not excepted), and the Borrower
expressly agrees that it will neither permit nor
suffer any waste upon the Mortgaged Property, nor
cause or permit any nuisance thereon, nor do any act
whereby the Mortgaged Property may become less
valuable or the Liens created by the Loan Documents
may be impaired. Subject to the provisions of
Section 8 hereof, no additional Improvement may be
constructed on the Land, nor may any Improvement on
the Land be materially altered, removed or
demolished without the prior written consent of the
Lender in each instance, which consent may be
withheld in the Lender's reasonable discretion.
Without limiting any of the Lender's other rights of
entry pursuant to the terms of the Mortgage or any
of the other Loan Documents, the Borrower shall
permit the Lender to enter the Mortgaged Property at
any reasonable time and upon reasonable notice
(except in the case of an emergency) to determine
whether the Borrower and the Mortgaged Property are
in compliance with the provisions of this Section
6.20.05.
B. Subject to the provisions of Section 8 hereof, the
Borrower covenants that the Mortgaged Property shall
be continuously operated in accordance with its
Primary Intended Use (unless such operations are
temporarily interrupted as a result of any Casualty
or any permitted renovations or repairs to any
Facility) and for such other uses as may be
necessary in connection with or incidental to such
Primary Intended Use. The Borrower shall not allow
the Mortgaged Property to be used for any use other
than its Primary Intended Use and such other uses as
may be necessary in connection with or incidental to
such Primary Intended Use, without the prior written
consent of the Lender in each instance, which
consent may be withheld in the Lender's sole and
absolute discretion.
C. The Borrower further covenants that the operation of
the Mortgaged Property shall be conducted in a
manner consistent with the prevailing standards and
practices recognized in the assisted living industry
as those customarily utilized by first class
business operations. Subject to any applicable Legal
Requirements, the members of the Borrowing Group
shall use their best efforts to maximize the
Facility's gross revenues, and to that end, but
without limiting the foregoing, (I) a full staff of
employees shall be maintained at the Facilities and
(II) a maximum amount of space in the Facilities
shall be devoted to resident uses and only such part
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thereof shall be devoted for storage, office and
other ancillary purposes as shall be reasonably
necessary.
D. No use shall be made or permitted to be made of the
Mortgaged Property and no acts shall be done which
will cause the cancellation of any insurance policy
required pursuant to the terms this Agreement, nor
shall the Borrower, any Lessee, any Manager or any
other Person sell or otherwise provide to residents,
other occupants or invitees therein, or permit to be
kept, used or sold in or about the Mortgaged
Property any article which may be prohibited by any
Legal Requirement or by the standard form of fire
insurance policies, any other insurance policies
required to be carried hereunder or fire
underwriters' regulations.
E. The Borrower and any Lessee, at their sole cost and
expense, at all times throughout the term of the
Loan and for so long as the Loan Obligations remain
outstanding, shall (I) fully comply (and shall cause
every Lessee, Manager and other occupant of the
Mortgaged Property, as well as all of their
respective agents and invitees, to fully comply)
with all Legal Requirements and Insurance
Requirements whether or not compliance therewith
shall require any structural change of the Mortgaged
Property or interfere with the use and enjoyment of
the Mortgaged Property and (II) procure, maintain
and comply (and shall cause every Lessee, Manager
and other occupant of the Mortgaged Property, as
well as their respective agents and other invitees,
to procure, maintain and/or comply, as the case may
be) with all Permits, accreditations,
qualifications, Provider Agreements, Contracts and
other authorizations required for the continued use
of the Mortgaged Property for the Primary Intended
Use or other permitted uses then being made, and for
the proper construction, development, operation,
repair and maintenance of the Mortgaged Property.
F. At all times throughout the Term and for so long as
the Loan Obligations remain outstanding, all
utilities necessary for the use and operation of
each Facility shall be available to the lot lines of
that portion of the Mortgaged Property on which each
such Facility is located:
(i) in sufficient supply and capacity;
(ii) through validly created and existing
easements of record appurtenant to or
encumbering the that portion of the
Mortgaged Property on which such Facility
is located (which easements shall not
impede or restrict the operation of any
Facility); and
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(iii) without need for any Permits and Contracts
required to be issued by or entered into
with any Governmental Authority, except as
already obtained or executed, as the case
may be, or as otherwise shown, to the
satisfaction of the Lender, to be readily
obtainable.
G. The Borrower shall not initiate, join in or consent
to any zoning changes affecting the Mortgaged
Property nor initiate, join in or consent to any
private restrictive covenant or other public or
private restriction upon the use of the Mortgaged
Property without the Lender's prior written consent,
in each instance, which consent shall not
unreasonably be withheld.
H. Upon the request of the Lender accompanied by an
explanation reasonably establishing a justification
for such request, at any time and from time to time
while this Agreement remains in full force and
effect, the Borrower shall engage independent
professional consultants, engineers and inspectors
(qualified to do business in the state where the
Mortgaged Property is located and acceptable to the
Lender) to perform any environmental and structural
investigations and other inspections of the
Mortgaged Property as the Lender may reasonably
request in order to detect (A) any structural
deficiencies in the Improvements or the utilities
servicing the Mortgaged Property or (B) the presence
of any condition that may be harmful to the
environment or present a health hazard to the
residents and/or the other occupants of any
Facility. In the event that the Lender determines
that the results of such investigations and
inspections are unsatisfactory, within thirty (30)
days of notice from the Lender, the Borrower shall
undertake such appropriate remedial actions as may
be reasonably requested by the Lender to correct any
such unsatisfactory conditions, and shall thereafter
diligently and continuously prosecute such remedial
actions to completion.
6.21 MANAGEMENT AGREEMENTS
From and after the date hereof, neither the Borrower nor any Lessee
shall enter into any Management Agreement without the prior written consent of
the Lender, in each instance, which consent will not be unreasonably withheld.
There shall be no change in the ownership or control (directly or indirectly)
of any Manager under any Management Agreement without the prior written consent
of the Lender, in each instance, which consent shall not be unreasonably
withheld. The Borrower and any Lessee shall, at their sole cost and expense,
promptly and fully perform or cause to be performed every covenant, condition,
promise and obligation of the owner of the Mortgaged Property or such Lessee
under any Management Agreement. The Borrower shall deliver or cause to be
delivered to the Lender a true and correct copy of each Management Agreement
and any amendment of any Management Agreement within ten (10) days after the
execution thereof. Neither the Borrower nor any Lessee shall cancel (other
than in connection with the exercise by the Borrower or the Lessee of any of
its remedies under the
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Management Agreement as a result of any default by the Manager thereunder),
transfer or assign or amend, in any material respect, any Management Agreement
or consent to the cancellation (other than in connection with the exercise by
the Borrower or the Lessee of any of its remedies under the Management
Agreement as a result of any default by the Manager thereunder), transfer or
assignment or material amendment of any Management Agreement by any party
thereto, without the prior written consent of the Lender, in each instance,
which consent shall not be unreasonably withheld.
Each Management Agreement shall provide that the Lender shall be
provided notice of any defaults thereunder and, at the Lender's option, an
opportunity to cure such default. The Borrower or any Lessee shall furnish to
the Lender, within three (3) days after receipt thereof, or after the mailing
or service thereof by the Borrower or any Lessee, as the case may be, a copy of
each notice of default which the Borrower or any Lessee shall give to, or
receive from any Person, based upon the occurrence, or alleged occurrence, of
any default in the performance of any covenant, condition, promise or
obligation under any Management Agreement.
Whenever and as often as the Borrower or any Lessee shall fail to
perform, promptly and fully, at their sole cost and expense, any covenant,
condition, promise or obligation on the part of the owner of the Mortgaged
Property or a Lessee thereof under and pursuant to any Management Agreement,
the Lender, or a lawfully appointed receiver of the Mortgaged Property, may, at
their respective options (and without any obligation to do so), after five (5)
days' prior notice to the Borrower (except in the case of an emergency) enter
upon the Mortgaged Property and perform, or cause to be performed, such work,
labor, services, acts or things, and take such other steps and do such other
acts as they may deem advisable, to cure such defaulted covenant, condition,
promise or obligation, and any amount so paid or advanced by the Lender or such
receiver and all costs and expenses reasonably incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court costs),
shall be a demand obligation of the Borrower to the Lender or such receiver,
and, to the extent permitted by applicable law, shall be added to the Loan
Obligations and shall be secured by the Liens created by the Mortgage and the
other Loan Documents as fully and effectively and with the same priority as
every other obligation thereunder and, if not paid within ten (10) days after
demand, shall thereafter, to the extent permitted under applicable law, bear
interest at the Advances Rate until the date of payment.
6.22 ACQUISITION OF ADDITIONAL PROPERTY
In the event that at any time during the Term the Borrower holds the
fee title to or a leasehold interest in any real property and/or personal
property which is used in any way in connection with any Facility (but is not
subject to the liens created by the Mortgage), the Borrower shall (A) provide
the Lender with prior notice of such acquisition and (B) shall take such
actions and enter into such agreements (substantially similar to the Loan
Documents) as the Lender shall reasonably request in order to grant the Lender
a first priority mortgage or other security interest in such real property and
personal property, subject only to the Permitted Encumbrances.
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6.23 [INTENTIONALLY DELETED].
6.24 ANNUAL FACILITY UPGRADE EXPENDITURES.
The Borrower shall make an Annual Facility Upgrade Expenditure in each
Facility in an amount no less than TWO HUNDRED FIFTY DOLLARS ($250) multiplied
by the number of units in such Facility, such amount to be increased as of the
first day of the second Loan Year, and as of the first day of each subsequent
Loan Year, equal to the product of (I) TWO HUNDRED FIFTY DOLLARS ($250)
multiplied by (II) the Consumer Price Adjustment Factor.
7. THE LENDER'S RIGHT TO MAKE PAYMENTS AND TAKE OTHER ACTION
The Lender may, after ten (10) Business Days' prior notice to the
Borrower of its intention so to do (except in an emergency when such shorter
notice shall be given as is reasonable under the circumstances), pay any sums
due or claimed to be due for labor or materials furnished in connection with
the ownership, construction, development, maintenance, management, repair, use
or operation of the Mortgaged Property, and any other sums which in the
reasonable opinion of the Lender, or its attorneys, it is expedient to pay, and
may take such other and further action which in the reasonable opinion of the
Lender is necessary in order to secure the protection and priority of the
security interests granted to the Lender pursuant to the Loan Documents and the
performance of all obligations under the Loan Documents. The Lender, in its
sole and absolute discretion, may charge any such payments against any advance
that may otherwise be due hereunder to the Borrower or may otherwise collect
such amounts from the Borrower, and the Borrower agrees to repay to the Lender
all such amounts, notwithstanding that the aggregate indebtedness of the
Borrower to the Lender hereunder may exceed the Loan Amount. Any amount which
is not so charged against advances due hereunder and all costs and expenses
reasonably incurred by the Lender in connection therewith (including, without
limitation, attorneys' fees and expenses and court costs) shall be a demand
obligation of the Borrower and, to the extent permitted by applicable law,
shall be added to the Loan Obligations and secured by the Liens created by the
Loan Documents, as fully and effectively and with the same priority as every
other obligation of the Borrower thereunder and, if not paid within ten (10)
days after demand, shall thereafter, to the extent permitted under applicable
law, bear interest at the Advances Rate until the date of payment.
If the Borrower fails to observe or cause to be observed any of the
provisions of this Section and such failure continues beyond any applicable
notice or cure period provided for under this Agreement, the Lender or a
lawfully appointed receiver of the Mortgaged Property, at their respective
options, from time to time may perform, or cause to be performed, any and all
repairs and such other work as they deem necessary to bring the Mortgaged
Property into compliance with the provisions of this Agreement may enter upon
the Mortgaged Property for any of the foregoing purposes, and the Borrower
hereby waives any claim against the Lender or such receiver arising out of such
entry or out of any other act carried out pursuant to this
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Section. All amounts so expended or incurred by the Lender and by such receiver
and all costs and expenses reasonably incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court costs),
shall be a demand obligation of the Borrower to the Lender or such receiver,
and, to the extent permitted by law, shall be added to the Obligations and
shall be secured by the Liens created by the Loan Documents as fully and
effectively and with the same priority as every other obligation of the
Borrower secured thereunder and, if not paid within ten (10) days after demand,
shall thereafter, to the extent permitted by applicable law, bear interest at
the Advances Rate until the date of payment.
8. INSURANCE; CASUALTY; TAKING
8.1 GENERAL INSURANCE REQUIREMENTS.
The Borrower shall at its sole cost and expense keep the Mortgaged
Property and the business operations conducted thereon insured as set forth
below.
8.1.01 TYPES AND AMOUNTS OF INSURANCE.
The Borrower's insurance shall include the following:
A. property loss and physical damage insurance on an
all-risk basis (with only such exceptions as the
Lender may in its reasonable discretion approve)
covering the Mortgaged Property (exclusive of the
Land) for its full replacement cost, which cost
shall be reset once a year at the Lender's option,
with an agreed-amount endorsement and a deductible
not in excess of TEN THOUSAND DOLLARS ($10,000.00).
Such insurance shall include, without limitation,
the following coverages: (I) increased cost of
construction, (II) cost of demolition, (III) the
value of the undamaged portion of the Facility and
(IV) contingent liability from the operation of
building laws, less exclusions provided in the
normal "All Risk" insurance policy. During any
period of construction, such insurance shall be on a
builder's-risk, completed value, non-reporting form
with permission to occupy;
B. flood insurance (if the Mortgaged Property or any
portion thereof is situated in an area which is
considered a flood risk area by the U.S. Department
of Housing and Urban Development or any other
Governmental Authority that may in the future have
jurisdiction over flood risk analysis) in limits
reasonably acceptable to the Lender;
C. boiler and machinery insurance (including related
electrical apparatus and components) under a
standard comprehensive form, providing coverage
against loss or damage caused by explosion of steam
boilers, pressure
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vessels or similar vessels, now or hereafter
installed on the Mortgaged Property, in limits
reasonably acceptable to the Lender;
D. earthquake insurance (if deemed necessary by the
Lender) in limits and with deductibles reasonably
acceptable to the Lender;
E. environmental impairment liability insurance (if
available) in limits and with deductibles reasonably
acceptable to the Lender;
F. business interruption insurance in an amount equal
to the aggregate amount of the principal and
interest payments to be made in one year under the
Note plus the aggregate sum of the Impositions
relating to the Mortgaged Property due and payable
during one (1) year;
G. commercial general public liability insurance
including coverages commonly found in the Broad Form
Commercial Liability Endorsements with amounts not
less than FIVE MILLION DOLLARS ($5,000,000) per
occurrence with respect to bodily injury and death
and THREE MILLION DOLLARS ($3,000,000) for property
damage;
H. professional liability insurance in an amount not
less than TEN MILLION DOLLARS ($10,000,000) for each
medical incident;
I. physical damage insurance on an all-risk basis (with
only such exceptions as the Lender in its reasonable
discretion shall approve) covering the Borrower's
tangible Personal Property for the full replacement
cost thereof and with a deductible not in excess of
one percent (1%) of the full replacement cost
thereof;
J. Workers' Compensation and Employers' Liability
Insurance providing protection against all claims
arising out of injuries to all employees of the
Borrower or of a sub-contractor (employed on the
Mortgaged Property or any portion thereof) in
amounts equal for Workers' Compensation, to the
statutory benefits payable to employees in the state
in which the Mortgaged Property is located and for
Employers' Liability, to limits of not less than ONE
HUNDRED THOUSAND DOLLARS ($100,000) for injury by
accident, ONE HUNDRED THOUSAND DOLLARS ($100,000)
per employee for disease and FIVE HUNDRED THOUSAND
DOLLARS ($500,000) disease policy limit;
K. subsidence insurance (if deemed necessary by the
Lender) in limits acceptable to the Lender; and
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L. such other insurance as the Lender from time to time
may reasonably require and also, as may from time to
time be required by applicable Legal Requirements.
8.1.02 INSURANCE COMPANY REQUIREMENTS.
All such insurance required by this Agreement or any of the
other Loan Documents shall be issued and underwritten by insurance
companies licensed to do insurance business by, and in good standing
under the laws of, the state where the Mortgaged Property is situated
and which companies have and maintain a rating of A-X or better by
A.M. Best Co.
8.1.03 POLICY REQUIREMENTS.
Every policy of insurance from time to time required under
this Agreement or any of the other Loan Documents (other than worker's
compensation) shall name the Lender as loss payee, mortgagee, secured
party and additional named insured as its interest may appear. If an
insurance policy covers properties other than the Mortgaged Property,
then the Lender shall be so named with respect only to the Mortgaged
Property. Each such policy, where applicable or appropriate, shall:
A. include an agreed amount endorsement and loss payee,
additional named insured, mortgagee and secured
party endorsements, in forms acceptable to the
Lender in its sole and absolute discretion;
B. provide that the coverages may not be cancelled or
materially modified or allowed to expire except upon
thirty (30) days' prior written notice to the
Lender;
C. be payable to the Lender notwithstanding any defense
or claim that the insurer may have to the payment of
the same against any other Person holding any other
interest in the Mortgaged Property;
D. be endorsed with standard noncontributory clauses in
favor of and in form reasonably acceptable to the
Lender;
E. expressly waive any right of subrogation on the part
of the insurer against the Lender or the Borrowing
Group; and
F. otherwise be in such forms as shall be reasonably
acceptable to the Lender.
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8.1.04 NOTICES; CERTIFICATES AND POLICIES.
The Borrower shall promptly provide to the Lender copies of
any and all notices (including notice of non-renewal), claims and
demands which the Borrower receives from insurers of the Mortgaged
Property. At least ten (10) days prior to the expiration of any
insurance policy required hereunder, the Borrower shall deliver to the
Lender certificates and evidence of insurance relating to all renewals
and replacements thereof, together with evidence, satisfactory to the
Lender, of payment of the premiums thereon. The Borrower shall deliver
to the Lender original counterparts or copies certified by the
insurance company to be true and complete copies, of all insurance
policies required hereunder not later than the earlier to occur of (A)
thirty (30) days after the effective date of each such policy and (B)
ten (10) days after receipt thereof by the Borrower.
8.1.05 THE LENDER'S RIGHT TO PLACE INSURANCE.
If the Borrower shall fail to obtain any insurance policy
required hereunder, or shall fail to deliver the certificate and
evidence of insurance relating to any such policy to the Lender, or if
any insurance policy required hereunder (or any part thereof) shall
expire or be cancelled or become void or voidable by reason of the any
breach of any condition thereof, or if the Lender determines that such
insurance coverage is unsatisfactory by reason of the failure or
impairment of the capital of any insurance company which wrote any
such policy, upon demand by the Lender, the Borrower shall promptly
obtain new or additional insurance coverage on the Mortgaged Property,
or for those risks required to be insured by the provisions hereof,
satisfactory to the Lender, and, at its option, the Lender may obtain
such insurance and pay the premium or premiums therefor; in which
event, any amount so paid or advanced by the Lender and all costs and
expenses reasonably incurred by the Lender in connection therewith
(including, without limitation, attorneys' fees and expenses and court
costs), shall be a demand obligation of the Borrower to the Lender
and, to the extent permitted by law, shall be added to the Loan
Obligations and shall be secured by the Liens created by the Loan
Documents as fully and effectively and with the same priority as every
other obligation of the Borrower secured thereunder and, if not paid
within ten (10) days after demand, shall thereafter, to the extent
permitted under applicable law, bear interest at the Advances Rate
until the date of payment.
8.1.06 PAYMENT OF PROCEEDS.
All insurance policies required hereunder (except for general
public liability, professional liability and workers' compensation and
employers liability insurance) shall provide that in the event of
loss, injury or damage, all proceeds shall be paid to the Lender alone
(rather than jointly to the Borrower and the Lender). The Lender is
hereby authorized to adjust and compromise any such loss with the
consent of the Borrower or, following any Event of Default, whether or
not cured, without the consent of the Borrower, and to collect and
receive such proceeds in the name of the Lender and the
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Borrower, and the Borrower appoints the Lender (or any agent
designated by the Lender) as the Borrower's attorney-in-fact with full
power of substitution, to endorse the Borrower's name upon any check
in payment thereof. Subject to the provisions of Section 8.3 hereof,
such insurance proceeds shall be applied first toward reimbursement of
all costs and expenses reasonably incurred by the Lender in collecting
said insurance proceeds, then toward payment of the Loan Obligations
or any portion thereof, then due and payable, in such order as the
Lender determines, and then in whole or in part toward restoration,
repair or reconstruction of the Mortgaged Property for which such
insurance proceeds shall have been paid. In the event the Lender shall
apply such proceeds towards the repayment of the Loan Obligations,
provided that no Loan Default then exists, no Prepayment Fee shall be
due in connection therewith.
8.1.07 IRREVOCABLE POWER OF ATTORNEY.
The power of attorney conferred on the Lender pursuant to the
provisions of Section 8.1, being coupled with an interest, shall be
irrevocable for as long as this Agreement is in effect or any Loan
Obligations are outstanding, and shall not be affected by any
disability or incapacity which the Borrower may suffer and shall
survive the same. Such power of attorney, is provided solely to
protect the interests of the Lender and shall not impose any duty on
the Lender to exercise any such power, and neither the Lender nor such
attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its
gross negligence or wilful misconduct.
8.1.08 BLANKET POLICIES.
Notwithstanding anything to the contrary contained herein,
the Borrower's obligations to carry the insurance required hereunder
may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by the Borrower and its
Affiliates; provided, however, that the coverage afforded to the
Lender shall not be reduced or diminished or otherwise be different
from that which would exist under a separate policy meeting all other
requirements of this Agreement by reason of the use of such blanket
policy of insurance, and provided, further that the requirements of
Section 8.1 are otherwise satisfied.
8.1.09 NO SEPARATE INSURANCE.
The Borrower shall not, on the Borrower's own initiative or
pursuant to the request or requirement of any other Person, take out
separate insurance concurrent in form or contributing in the event of
loss with the insurance required hereunder to be furnished by the
Borrower, or increase the amounts of any then existing insurance by
securing an additional policy or additional policies, unless (A) all
parties having an insurable interest in the subject matter of the
insurance, including the Lender, are included therein as additional
insureds and (B) losses are payable under said insurance
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in the same manner as losses are required to be payable under this
Agreement. The Borrower shall immediately notify the Lender of the
taking out of any such separate insurance or of the increasing of any
of the amounts of the then existing insurance by securing an
additional insurance policy or policies.
8.1.10 ASSIGNMENT OF UNEARNED PREMIUMS.
The Borrower hereby assigns to the Lender all rights of the
Borrower in and to any unearned premiums on any insurance policy
required hereunder to be furnished by the Borrower which may become
payable or are refundable after the occurrence of an Event of Default
hereunder, which amounts may be utilized by the Lender for any
purposes allowed hereunder or credited against the Loan Obligations.
In the event of a foreclosure of the Mortgaged Property or a
conveyance of the Mortgaged Property in connection with a deed-in-lieu
of foreclosure transaction, the insurance policies required to be
maintained hereunder, including all right, title and interest of the
Borrower thereunder, shall become the absolute property of the Lender.
8.2 FIRE OR OTHER CASUALTY OR CONDEMNATION.
8.2.01 RESTORATION FOLLOWING FIRE, CASUALTY OR CONDEMNATION.
In the event of any damage or destruction to any portion of
the Mortgaged Property by reason of fire or other hazard or casualty
(a "Casualty") or a taking by power of eminent domain or conveyance in
lieu thereof of any portion of the Mortgaged Property (a
"Condemnation"), the Borrower shall give immediate written notice
thereof to the Lender and, subject to the terms of Section 8.3 hereof,
the Borrower shall proceed with reasonable diligence, in full
compliance with all applicable Legal Requirements, to perform such
repairs, replacement and reconstruction work (hereinafter referred to
as the "Work") to restore the applicable portion of the Mortgaged
Property to the condition it was in immediately prior to such damage
or destruction and to a condition adequate to operate the Facility
located on said portion of the Mortgaged Property for its Primary
Intended Use and in compliance with Legal Requirements. All Work shall
be performed and completed in accordance with all Legal Requirements
and the other requirements of this Agreement within one hundred and
eighty (180) days following the occurrence of the damage or
destruction plus a reasonable time to compensate for Unavoidable
Delays (including for the purposes of this paragraph, delays in
obtaining Permits and in adjusting insurance losses), but in no event
beyond three-hundred and sixty-five (365) days following the
occurrence of the Casualty or the Condemnation.
8.2.02 PROCEDURES.
In the event that any Casualty results in non-structural
damage to any portion of the Mortgaged Property in excess of
TWENTY-FIVE THOUSAND DOLLARS ($25,000), or in any structural damage to
any portion of the Mortgaged Property
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regardless of the extent of such structural damage, or in any event of
Condemnation, prior to commencing the Work, the Borrower shall comply
with the following requirements:
A. The Borrower shall furnish to the Lender complete
plans and specifications for the Work (collectively,
the "Plans and Specifications"), for the Lender's
approval, in each instance, which approval shall not
be unreasonably withheld. The Plans and
Specifications shall bear the signed approval
thereof by an architect, licensed to do business in
the state where the Mortgaged Property is located,
reasonably satisfactory to the Lender and shall be
accompanied by a written estimate from the
architect, bearing the architect's seal, of the
entire cost of completing the Work, and to the
extent feasible, the Plans and Specifications shall
provide for Work of such nature, quality and extent,
that, upon the completion thereof, the applicable
portion of the Mortgaged Property shall be at least
equal in value and general utility to its value and
general utility prior to the Casualty or
Condemnation and shall be adequate to operate the
Facility located on such portion of the Mortgaged
Property for its Primary Intended Use;
B. The Borrower shall furnish to the Lender certified
or photostatic copies of all Permits and Contracts
required by all applicable Legal Requirements in
connection with the commencement and conduct of the
Work;
C. The Borrower shall furnish to the Lender a cash
deposit or a payment and performance bond sufficient
to pay for completion of and payment for the Work in
an amount not less than the architect's estimate of
the entire cost of completing the Work, less the
amount of property insurance proceeds, if any, then
held by the Lender and which the Lender shall be
required to apply toward restoration of the
Mortgaged Property as provided in Section 8.3;
D. The Borrower shall furnish to the Lender such
insurance with respect to the Work (in addition to
the insurance required under Section 8.1 hereof) in
such amounts and in such forms as is reasonably
required by the Lender; and
E. The Borrower shall not commence any of the Work
until the Borrower shall have complied with the
requirements set forth in clauses A through D
immediately above, as applicable, and thereafter the
Borrower shall perform the Work diligently, in a
good and workmanlike fashion and in good faith in
accordance with (I) the Plans and Specifications
referred to clause A immediately above, (II) the
Permits and Contracts referred to in
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clause B immediately above and (III) all applicable
Legal Requirements and other requirements of this
Agreement.
8.2.03 DISBURSEMENT OF INSURANCE PROCEEDS AND CONDEMNATION AWARDS.
If, as provided in Section 8.3, the Lender has elected or is
required to apply any Condemnation awards or insurance proceeds toward
repair or restoration of the Mortgaged Property, then as long as the
Work is being diligently performed by the Borrower in accordance with
the terms and conditions of this Agreement, the Lender shall disburse
such insurance proceeds from time to time during the course of the
Work in accordance with and subject to satisfaction of the following
provisions and conditions. The Lender shall not be required to make
disbursements more often than at thirty (30) day intervals. The
Borrower shall submit a written request for each disbursement at least
ten (10) Business Days in advance and shall comply with the following
requirements in connection with each disbursement:
A. Prior to the commencement of any Work, the Borrower
shall have received the Lender's written approval of
the Plans and Specifications (which approval shall
not be unreasonably withheld) and the Work shall be
supervised by an experienced construction manager
with the consultation of an architect or engineer
qualified and licensed to do business in the state
where the Mortgaged Property is located;
B. Each request for payment shall be accompanied by (x)
a certificate of the architect or engineer, bearing
the architect's or engineer's seal, and (y) a
certificate of the general contractor, qualified and
licensed to do business in the state where the
Mortgaged Property is located performing the Work
(collectively, the "Work Certificates") each dated
not more than ten (10) days prior to the application
for withdrawal of funds, and each stating:
i. that all of the Work performed as of the
date of the certificates has been
completed in compliance with the approved
Plans and Specifications, applicable
Contracts and all applicable Legal
Requirements;
ii. that the sum then requested to be
withdrawn has been paid by the Borrower or
is due to contractors, subcontractors,
materialmen, engineers, architects or
other Persons, whose names and addresses
shall be stated therein, who have rendered
or furnished certain services or materials
for the Work, and the certificate shall
also include a brief description of such
services and materials and the principal
subdivisions or categories thereof and the
respective amounts so paid or due to each
of said Persons in respect thereof
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and stating the progress of the Work up to
the date of said certificate;
iii. that the sum then requested to be
withdrawn, plus all sums previously
withdrawn, do not exceed the cost of the
Work insofar as actually accomplished up
to the date of such certificate;
iv. that the remainder of the funds held by
the Lender will be sufficient to pay for
the full completion of the Work in
accordance with the Plans and
Specifications;
v. that no part of the cost of the services
and materials described in the applicable
Work Certificate has been or is being made
the basis of the withdrawal of any funds
in any previous or then pending
application; and
vi. that, except for the amounts, if any,
specified in the applicable Work
Certificate to be due for services and
materials, there is no outstanding
indebtedness known, after due inquiry,
which is then due and payable for work,
labor, services or materials in connection
with the Work which, if unpaid, might
become the basis of a vendor's,
mechanic's, laborer's or materialman's
statutory or other similar Lien upon the
Mortgaged Property;
C. The Borrower shall deliver to the Lender
satisfactory evidence that the applicable portion of
the Mortgaged Property and all materials and all
property described in the Work Certificates are free
and clear of all Liens, except (i) Liens, if any,
securing indebtedness due to Persons (whose names
and addresses and the several amounts due them shall
be stated therein) specified in an applicable Work
Certificate, which Liens shall be discharged upon
disbursement of the funds then being requested, (ii)
the Mortgage and (iii) the Permitted Encumbrances.
The Lender shall accept as satisfactory evidence of
the foregoing lien waivers in customary form from
the general contractor and all subcontractors
performing the Work, together with an endorsement of
its title insurance policy (relating to the
applicable portion of the Mortgaged Property) in
form acceptable to the Lender, dated as of the date
of the making of the then current disbursement,
confirming the foregoing;
D. If the Work involves alteration or restoration of
the exterior of any Improvement that changes the
footprint of any Improvement, the Borrower shall
deliver to the Lender, upon the request of the
Lender, an "as-built" survey of the applicable
portion of the Land upon which the Work is performed
dated of a date within ten (10) days prior to the
making of the
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first and final advances (or revised to a date
within ten (10) days prior to each such advance)
showing no encroachments other than (i) such
encroachments, if any, by any Improvement of any of
the Permitted Encumbrances as are in existence as of
the date hereof and (II) those, if any, acceptable
to the Lender;
E. The Borrower shall deliver to the Lender an opinion
of counsel (satisfactory to the Lender both as to
counsel and as to the form of opinion) prior to the
first advance opining that all necessary Permits for
the repair, replacement and/or restoration of the
applicable portion of the Mortgaged Property have
been obtained and that such portion of the Mortgaged
Property, if repaired, replaced or rebuilt in
accordance, in all material respects, with the
approved Plans and Specifications and such Permits,
shall comply with all applicable Legal Requirements
and (ii) an architect's certificate (satisfactory to
the Lender both as to the architect and as to the
form of the certificate) prior to the final advance,
certifying that the applicable portion of the
Mortgaged Property was repaired, replaced or rebuilt
in accordance, in all material respects, with the
approved Plans and Specifications and complies with
all applicable Legal Requirements, including,
without limitation, all Permits referenced in the
foregoing clause (i);
F. There shall be no Loan Default or any state of facts
existing which, with the giving of notice or passage
of time, or both, would constitute any Loan Default;
G. The Lender, at its option, may waive any of the
foregoing requirements in whole or in part in any
instance.
H. Upon compliance by the Borrower with the foregoing
requirements (except for such requirements, if any,
as the Lender may have expressly elected to waive),
and to the extent of (I) the insurance proceeds, if
any, which the Lender may be required to apply to
restoration of the Mortgaged Property pursuant to
the provisions of this Agreement, and (II) all other
cash deposits made by the Borrower, the Lender shall
make available for payment to the Persons named in
the Work Certificate the respective amounts stated
in said Work Certificate to be due, subject to a
retention of ten percent (10%) as to all hard costs
of the Work (the "Retainage"). It is understood that
the Retainage is intended to provide a contingency
fund to assure the Lender that the Work shall be
fully completed in accordance with the Plans and
Specifications and the requirements of the Lender.
Upon the full and final completion of all of the
Work in accordance with the provisions hereof, the
Retainage shall be made available for payment to
those Persons entitled thereto;
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I. Upon completion of the Work, and as a condition
precedent to making any further advance, in addition
to the requirements set forth above, the Borrower
shall promptly deliver to the Lender:
i. written certificates of the architect or
engineer, bearing the architect's or
engineer's seal, and the general
contractor, certifying that the Work has
been fully completed in a good and
workmanlike manner in accordance with the
Plans and Specifications and all Legal
Requirements;
ii. a written report and endorsement of its
title insurance policy (relating to the
applicable portion of the Mortgaged
Property) in form reasonably acceptable to
the Lender insuring the Mortgaged Property
against all mechanic's and materialman's
liens accompanied by the final lien waivers
from the general contractor and all
subcontractors;
iii. a certificate by the Borrower in form and
substance reasonably satisfactory to the
Lender, listing all costs and expenses in
connection with the completion of the Work
and the amount paid by the Borrower with
respect to the Work; and
iv. a temporary certificate of occupancy (if
obtainable) and all other applicable
Permits and Contracts (that have not
previously been delivered to the Lender)
issued by or entered into with any
Governmental Authority with respect to the
Mortgaged Property and its Primary
Intended Use and by the appropriate Board
of Fire Underwriters or other similar
bodies acting in and for the locality in
which the applicable portion of the
Mortgaged Property is situated; provided
that within thirty (30) days after
completion of the Work, the Borrower shall
obtain and deliver to the Lender a
permanent certificate of occupancy for the
applicable portion of the Mortgaged
Property upon which the Work was
performed;
J. Upon completion of the Work and the delivery of the
documents required pursuant to the provisions of
this Section 8.2, the Lender shall pay the Retainage
to the Borrower or to those Persons entitled thereto
and if there shall be insurance proceeds, awards or
cash deposits, other than the Retainage, held by the
Lender in excess of the amounts withdrawn pursuant
to the foregoing provisions, then the Lender, shall
pay such proceeds, awards or cash deposits to the
Borrower; and
K. No inspections or any approvals of the Work during
or after construction shall constitute a warranty or
representation by the Lender, or any of its
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agents, as to the technical sufficiency, adequacy or
safety of any structure or any of its component
parts, including, without limitation, any fixtures,
equipment or furnishings, or as to the subsoil
conditions or any other physical condition or
feature pertaining to the Mortgaged Property. All
acts, including any failure to act, relating to the
Lender are performed solely for the benefit of the
Lender to assure the payment and performance of the
Loan Obligations and are not for the benefit of the
Borrower or the benefit of any other Person.
8.3 DISPOSITION OF INSURANCE PROCEEDS.
8.3.01 PROCEEDS TO BE RELEASED TO PAY FOR WORK.
In the event of any Casualty or Condemnation, the Lender, in
its sole and absolute discretion, may decide whether and to what
extent, if any, proceeds of insurance policies or Condemnation awards
shall be made available to the Borrower for repair or restoration of
the Mortgaged Property. Notwithstanding the foregoing, the Lender
hereby agrees to make insurance proceeds or Condemnation awards
available to the Borrower for repair or restoration of the Mortgaged
Property, provided that:
A. Not more than thirty percent (30%) of the fair
market value of the applicable Facility subject to
the Casualty or Condemnation is damaged or taken;
B. No Loan Default shall then exist, nor any state of
facts or conditions which, with the giving of notice
or passage of time, or both, would constitute such a
Loan Default;
C. The Borrower demonstrates to the Lender's
satisfaction that the Borrower has the financial
ability to satisfy its obligations under the Loan
Documents during such repair or restoration;
D. No Lease (excluding Residence Agreements) affecting
the Mortgaged Property immediately prior to such
Casualty or Condemnation shall have been cancelled
or terminated, nor contain any still exercisable
right to cancel or terminate, due to such Casualty
or Condemnation if and to the extent that the income
from such Lease is necessary in order to avoid the
violation of any of the financial covenants set
forth in this Agreement or otherwise to avoid the
creation of a Loan Default; and
E. The insurance proceeds or Condemnation awards are
released under the funding arrangements specified in
Section 8.2 hereof.
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8.3.02 PROCEEDS NOT TO BE RELEASED TO PAY FOR WORK.
If the Lender is not required to and elects not to make the
insurance proceeds or Condemnation awards available for repair or
restoration of the Mortgaged Property, then such proceeds or awards
shall be applied to reduce Loan Obligations, in which event the
Borrower shall not be obligated to repair or restore the Mortgaged
Property. Any application of such proceeds or awards toward payment of
the Loan Obligations shall be at par without any Prepayment Fee, but
shall not cause any reduction in the monthly payments due under the
Note until the outstanding principal indebtedness due thereunder has
been paid in full; provided, however, that if there then exists any
Loan Default, the Prepayment Fee shall also be due.
Furthermore, if the Lender is not required to and elects not
to make the insurance proceeds or Condemnation awards available for
the repair and restoration of the Mortgaged Property, in addition to
applying such proceeds or awards to the Loan Obligations, as
aforesaid, the Lender, at its option and in its sole and absolute
discretion, may elect to declare the Loan Obligations due and payable
upon sixty (60) days' prior written notice to the Borrower. Upon such
acceleration, provided that no Loan Default then exists, the Borrower
shall not be required to pay a Prepayment Fee to the Lender.
8.3.03 THE BORROWER RESPONSIBLE FOR SHORT-FALL.
If the cost of the Work exceeds the amount of proceeds
received by the Lender from the property insurance required under this
Agreement or the amount of the Condemnation award received by the
Lender in accordance with the terms hereof (net of costs and expenses
incurred by the Lender in collecting the same), the Borrower shall be
obligated to contribute any excess amount needed to repair or restore
the Mortgaged Property and pay for the Work. Such amount shall be paid
by the Borrower to the Lender together with any other property
insurance proceeds for application to the cost of the Work.
8.4 THE BORROWER'S PROPERTY.
All insurance proceeds payable by reason of any loss of or damage to
any of the Borrower's Personal Property shall be paid to the Lender as secured
party, subject to the rights of the holders of any Permitted Prior Security
Interests, and shall be paid by the Lender to the Borrower to reimburse the
Borrower for the cost of repairing or replacing the damaged Personal Property
subject to the provisions and conditions set forth in the other provisions of
this Agreement, mutatis, mutandis.
8.5 RESTORATION OF THE BORROWER'S PROPERTY.
If the Borrower is required or elects to restore any Facility, the
Borrower shall either (A) restore all alterations and improvements made by the
Borrower, and the Borrower's Personal Property relating to such Facility, or
(B) replace such alterations and improvements and the
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Borrower's Personal Property relating to such Facility with improvements or
items of the same or better quality and utility in the operation thereof.
8.6 OBLIGATION TO ACCOUNT.
Upon the Borrower's written request, which may not be made more than
once in any three (3) month period, the Lender shall provide the Borrower a
written accounting of the application of all insurance proceeds received by the
Lender.
8.7 FIRE AND OTHER CASUALTY; SELF-HELP.
If, within one hundred twenty (120) days after the occurrence of any
non-structural damage to any Facility in excess of TWENTY-FIVE THOUSAND DOLLARS
($25,000), any structural damage to any Facility regardless of the extent of
such structural damage, or any Condemnation, the Borrower shall not have
submitted to the Lender and received the Lender's approval of the Plans and
Specifications for the repair, replacement or rebuilding of such Facility or
shall not have obtained approval of such Plans and Specifications from all
Governmental Authorities whose approval is required pursuant to applicable
Legal Requirements, or if, after the date upon which such Plans and
Specifications are approved by the Lender and all such Governmental Authorities
(such date is referred to herein as the "Approval Date"), the Borrower shall
fail to commence promptly such repair, replacement or rebuilding, or if the
Borrower fails to complete such repair, replacement or rebuilding within one
hundred twenty (120) days following the Approval Date or is delinquent in the
payment to mechanics, materialmen or others of the costs incurred in connection
with such work, or, in the case of any non-structural loss or damage not in
excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000), if the Borrower shall fail to
promptly repair, replace or rebuild such Facility, then, in addition to all
other rights herein set forth, the Lender, or any lawfully appointed receiver
of such Facility, may at their respective options, perform or cause to be
performed such repair, replacement or rebuilding, and may take such other steps
as they deem advisable to perform such repair, replacement or rebuilding, and
may enter upon the Mortgaged Property for any of the foregoing purposes, and
the Borrower hereby waives, for the Borrower and all others holding under the
Borrower, any claim against the Lender or such receiver arising out of anything
done by the Lender or such receiver pursuant to this Section 8.7, and the
Lender may apply insurance proceeds (without the need to fulfill the
requirements of Section 8) to reimburse the Lender or such receiver for all
amounts expended or reasonably incurred by them, respectively, in connection
with the performance of such work (including, without limitation, attorneys'
fees and expenses and court costs), and any excess costs and expenses remaining
after any such application of the insurance proceeds shall be a demand
obligation of the Borrower to the Lender or such receiver, and, to the extent
permitted by law, shall be added to the Loan Obligations and shall be secured
by the Liens created by the Loan Documents as fully and effectively and with
the same priority as every other obligation of the Borrower secured thereunder
and, if not paid within ten (10) days after demand, shall thereafter, to the
extent permitted under applicable law, bear interest at the Advances Rate until
the date of payment.
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8.8 RENT LOSS AND/OR BUSINESS INTERRUPTION INSURANCE PROCEEDS.
If the Borrower shall promptly and diligently commence to repair,
replace and restore any damage occurring to the Mortgaged Property, and no Loan
Default then exists and no state of facts exists which, with the giving of
notice or passage of time, or both, would constitute a Loan Default, then the
Lender shall each month pay to the Borrower out of the rent loss and/or
business interruption insurance proceeds actually received the Lender
(collectively the "Rent Insurance Proceeds") a sum equal to that amount, if
any, of the Rent Insurance Proceeds paid by the insurer which is allocable to
the rental loss and/or business interruption for the preceding month minus an
amount equal to the sum of the debt service on the Loan due under the Note for
such month plus any Impositions relating to the applicable portion of the
Mortgaged Property then due and payable. At its option, the Lender may waive
any of the foregoing conditions to the payment of Rent Insurance Proceeds. If
the Borrower does not fulfill the foregoing conditions entitling the Borrower
to monthly disbursements of Rent Insurance Proceeds, then such Rent Insurance
Proceeds may be applied by the Lender, at the Lender's option, toward payment
of the Loan Obligations and/or to the payment of the cost of such repair,
replacement or restoration of the applicable Facility, and/or to the payment of
any Imposition required to be paid by the Borrower (the nonpayment of which is
a default under this Agreement), and/or to the payment of any monthly tax
deposit, any monthly insurance deposit or other amount required to be paid by
the Borrower under the provisions of this Agreement.
9. PERMITTED CONTESTS
Unless a Loan Default then exists or any state of facts which, with
the giving of notice or the passage of time or both would constitute a Loan
Default, upon prior written notice to the Lender, any member of the Borrowing
Group at their sole cost and expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, any Legal Requirement, the decision of any Governmental
Authority related to the operation of the Mortgaged Property for its Primary
Intended Use or any Lien or claim not otherwise permitted by in this Agreement;
provided, that (a) prior written notice of such contest is given to the Lender,
(b) in the case of an unpaid Imposition, Lien or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from the
Lender and/or any member of the Borrowing Group and compliance by any
applicable member of the Borrowing Group with the contested Legal Requirement
or other matter may legally be delayed pending the prosecution of any such
proceeding without the occurrence or creation of any Lien, charge or liability
of any kind against the Mortgaged Property, (c) neither the Mortgaged Property
nor any interest of the Lender therein would be in any immediate danger of
being sold, forfeited, attached or lost as a result of such proceeding, (d) in
the case of a Legal Requirement, neither the Lender nor any member of the
Borrowing Group would be in any immediate danger of civil or criminal liability
for failure to comply therewith pending the outcome of such proceedings, (e) in
the event that any such contest shall involve a sum of money or potential loss
in excess of TEN THOUSAND DOLLARS ($10,000), then, in any such event, the
Borrower shall deliver to the Lender an Officer's Certificate and opinion of
counsel, if the Lender deems the
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delivery of an opinion to be appropriate, opinioning as to the validity of the
statements set forth in clauses (b), (c) and (d), to the extent applicable, (f)
the Borrower shall give such cash security as may be demanded in good faith by
the Lender to insure the ultimate payment of any fine, penalty, interest or
cost and to prevent any sale or forfeiture of the affected portion of the
Mortgaged Property by reason of such non-payment or non-compliance, (g) if such
contest be finally resolved against the Lender or any member of the Borrowing
Group, the Borrower shall promptly pay (or cause to be paid) the amount
required to be paid, together with all interest and penalties accrued thereon
and, if applicable, the Borrower, shall comply with and shall cause any Lessee
and any Manager to comply with the applicable Legal Requirement and (h) no
state of facts or circumstance exist which constitutes, or with the passage of
time and/or the giving of notice, could constitute a Loan Default; provided,
however, the provisions of this Section 9 shall not be construed to permit the
Borrower to contest the payment of any other sums payable by the Borrower to
the Lender under any of the Loan Documents.
10. EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default" hereunder
and shall entitle the Lender to exercise its remedies hereunder and under any
of the other Loan Documents:
A. any failure of the Borrower to pay any amount due hereunder
or under any of the other Loan Documents within ten (10) days
following the date when such payment was due;
B. any failure in the observance or performance of any other
covenant, term, condition or warranty provided in this
Agreement or any of the other Loan Documents, other than the
payment of any monetary obligation and other than as
specified in subsections (C) through (V) below (referred to
herein as a "Failure to Perform"), continuing for thirty (30)
days after the giving of notice by the Lender to the Borrower
specifying the nature of the Failure to Perform; except as to
matters not susceptible to cure within thirty (30) days,
provided that with respect to such matters, (I) the Borrower
commences the cure thereof within thirty (30) days after the
giving of such notice by the Lender to the Borrower, (II) the
Borrower continuously prosecutes such cure to completion,
(III) such cure is completed within ninety (90) days after
the giving of such notice by the Lender to the Borrower and
(IV) such Failure to Perform does not impair the Lender's
rights with respect to the Mortgaged Property or otherwise
impair the Collateral or the Lender's security interest
therein;
C. the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and
grace periods, if any, under any of the other Loan Documents;
D. if any representation, warranty or statement contained herein
or in any of the other Loan Documents proves to be untrue in
any material respect as of the date
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when made or at any time during the Term if such
representation or warranty is a continuing representation or
warranty pursuant to Section 6.5;
E. if any member of the Borrowing Group shall (i) voluntarily be
adjudicated a bankrupt or insolvent, (ii) seek or consent to
the appointment of a receiver or trustee for itself or for
the Mortgaged Property, (iii) file a petition seeking relief
under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, (iv) make a general
assignment for the benefit of creditors, (v) make or offer a
composition of its debts with its creditors or (vi) be unable
to pay its debts as such debts mature;
F. if any court shall enter an order, judgment or decree
appointing, without the consent of any member of the
Borrowing Group, a receiver or trustee for such member or for
any of the Mortgaged Property, and such order, judgment or
decree shall remain in force, undischarged or unstayed, sixty
(60) days after it is entered;
G. if any petition is filed against any member of the Borrowing
Group which seeks relief under the bankruptcy or other
similar laws of the United States, any state or any other
jurisdiction and such petition is not dismissed within sixty
(60) days after it is filed;
H. in the event that, without the prior written consent of the
Lender, in each instance, which consent may be withheld by
the Lender in its sole and absolute discretion:
i. there shall be a change in the Person or Persons
presently in control of any member of the Borrowing
Group (whether by operation of law or otherwise);
ii. all or any portion of the interest of any partner or
member of any member of the Borrowing Group shall
be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or
otherwise transferred (whether by operation of law
or otherwise), if such member of the Borrowing Group
shall be a partnership, joint venture, syndicate or
other group;
iii. except in connection with the exercise by the Lender
under the Warrant of its right to become a
shareholder of the Guarantor, any of the shares of
the issued and outstanding capital stock of any
member of the Borrowing Group shall be, on any one
or more occasions, directly or indirectly, sold,
assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise), if such
member of the Borrowing Group shall be a
corporation; or
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iv. all or any portion of the beneficial interest in any
member of the Borrowing Group shall be, directly or
indirectly, sold or otherwise transferred (whether
by operation of law or otherwise), if such member of
the Borrowing Group shall be a trust;
I. the death, incapacity, liquidation, dissolution or
termination of existence of the any member of the Borrowing
Group or the merger of any member of the Borrowing Group with
any other Person;
J. the occurrence of a default or breach of condition continuing
beyond the expiration of the applicable notice and grace
periods, if any, in connection with the payment or
performance of any other material obligation of the Borrower
or any Lessee, whether or not the applicable creditor or
obligee elects to declare the obligations of the Borrower or
the applicable Lessee under the applicable agreement due and
payable or to exercise any other right or remedy available to
such creditor or obligee, if such creditor's or obligee's
rights and remedies may involve or result in (i) the taking
of possession of the Mortgaged Property or (ii) the assertion
of any other right or remedy that, in the Lender's reasonable
opinion, may impair the Borrower's ability punctually to
perform all of its obligations under this Agreement and the
other Loan Documents, may impair such Lessee's ability to
punctually perform all of its obligations under its Lease or
may materially impair the Lender's security for the Loan;
provided, however, that in any event, the election by the
applicable creditor or obligee to declare the obligations of
the Borrower under the applicable agreement due and payable
or to exercise any other right or remedy available to such
creditor or obligee shall be an Event of Default hereunder
only if such obligations, individually or in the aggregate,
are in excess of FIVE HUNDRED THOUSAND DOLLARS ($500,000);
K. the occurrence of a Related Party Default;
L. the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and
grace periods, if any, under any credit agreement, loan
agreement or other agreement establishing a major line of
credit (or any documents executed in connection with such
lines of credit) on behalf of any member of the Borrowing
Group whether or not the applicable creditor has elected to
declare the indebtedness due and payable under such line of
credit or to exercise any other right or remedy available to
it. For the purposes of this provision, a major line of
credit shall mean and include any line of credit established
in an amount equal to or greater than ONE MILLION DOLLARS
($1,000,000);
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M. except as a result of any Casualty or a partial or complete
Condemnation, if the Borrower or any Lessee ceases operation
of any Facility for a period in excess of thirty (30) days;
N. if one or more judgments against the Borrower or any Lessee
or attachments against the Mortgaged Property which in the
aggregate exceed ONE HUNDRED THOUSAND DOLLARS ($100,000) or
which may materially and adversely interfere with the
ownership and/or the operation of any Facility remain unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for
a period of thirty (30) days;
O. if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE
HUNDRED THOUSAND DOLLARS ($500,000) shall be rendered against
any member of the Borrowing Group and either (i) enforcement
proceedings shall have been commenced by any creditor upon
such award or judgment or (ii) such award or judgment shall
continue unsatisfied and in effect for a period of ten (10)
consecutive days without an insurance company satisfactory to
the Lender (in its sole and absolute discretion) having
agreed to fund such award or judgment in a manner
satisfactory to the Lender (in its sole and absolute
discretion) and in either case such award or judgment shall,
in the reasonable opinion of the Lender, have a material
adverse affect on the ability of any member of the Borrowing
Group to operate any Facility;
P. if any Provider Agreement material to the operation or
financial condition of any member of the Borrowing Group
shall be terminated prior to the expiration of the term
thereof or, without the prior written consent of the Lender,
in each instance, which consent may be withheld in the
Lender's reasonable discretion, shall not be renewed or
extended upon the expiration of the stated term thereof;
Q. if, after the Borrower or any Lessee has obtained approval
for participation in the Medicare and/or Medicaid programs
with regard to the operation of any Facility, a final
unappealable determination is made by the applicable
Governmental Authority that the Borrower or any Lessee shall
have failed to comply with applicable Medicare and/or
Medicaid regulations in the operation of such Facility, as a
result of which failure the Borrower or such Lessee is
declared ineligible to continue its participation in the
Medicare and/or Medicaid programs;
R. if any member of the Borrowing Group receives notice of a
final unappealable determination by applicable Governmental
Authorities of the revocation of any Permit required for the
lawful construction or operation of any Facility in
accordance with its Primary Intended Use or the loss of any
Permit under any other circumstances under which any member
of the Borrowing Group is required
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to cease the operation of any Facility in accordance with its
Primary Intended Use;
S. any failure to maintain the insurance required pursuant to
Section 8 of this Agreement in force and effect at all times
until the Loan Obligations are fully paid and performed and
the Mortgage is discharged;
T. the entry of an order by a Court with jurisdiction over the
Mortgaged Property to close any Facility, to transfer one or
more residents from any Facility as a result of a finding or
determination of abuse or neglect or to take any action to
eliminate an emergency situation then existing at any
Facility;
U. the appointment of a temporary manager (or operator) for the
Mortgaged Property by any Governmental Authority; and
V. any failure to replenish the Cash Collateral, if required,
pursuant to Section 1 of the Deposit Pledge Agreement.
11. REMEDIES IN EVENT OF DEFAULT
Upon the occurrence of an Event of Default, at the option of the
Lender, which may be exercised at any time after an Event of Default shall have
occurred, the entire outstanding principal balance of the Loan, together with
all interest (including, without limitation, Additional Interest), costs,
charges and other amounts due under all of the Loan Documents, shall
immediately become due and payable and upon such acceleration, all amounts due
hereunder shall bear interest at the Advances Rate. Subject to the requirements
of applicable law, all materials at that time on or near the Mortgaged Property
which are the property of the Borrower shall be subject to the Liens created by
the Loan Documents. The Lender is authorized, but not obligated in any event,
to do all such things in connection with the operation of the Facilities the
Lender, in its sole and absolute discretion, may deem advisable, including,
without limitation, the right to make any payments with respect to any
obligation of the Borrower to the Lender or to any other Person in connection
with the operation of the Facilities and to take any and all such action,
either in the Lender's own name or in the name of the Borrower, and the
Borrower hereby grants the Lender an irrevocable power of attorney to act in
its name in connection with the foregoing. This power of attorney, being
coupled with an interest, shall be irrevocable until all of the Obligations are
fully paid and performed and shall not be affected by any disability or
incapacity which the Borrower may suffer and shall survive the same. The power
of attorney conferred on the Lender by the provisions of this Section 11 is
provided solely to protect the interests of the Lender and shall not impose any
duty on the Lender to exercise any such power and neither the Lender nor such
attorney-in-fact shall be liable for any act, omission, error in judgment or
mistake of law, except as the same may result from its gross negligence or
wilful misconduct. In the event that the Lender takes possession of the
Mortgaged Property and assumes control of any Facility as aforesaid, it shall
not be obligated to continue the operation of the same for any period of time
longer than the Lender shall see fit (in its sole and absolute
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discretion), and the Lender may thereafter, at any time, abandon its efforts
and refuse to make further payments for the account of the Borrower.
In addition, at the Lender's option and without demand, notice or
protest, the occurrence of any such Event of Default shall also constitute a
default under any one or more of the Related Party Agreements.
12. GENERAL
12.1 AGREEMENT NOT ASSIGNABLE.
The Borrower shall not suffer any attachment, whether by trustee
process or otherwise, to be made or attempted against the Borrower's interest
in, to or under this Agreement or any of the other Loan Documents or in or to
any payment, advance or other sums hereunder or thereunder, and shall not,
without the prior written consent of the Lender (in each instance, which
consent may be withheld in the Lender's sole and absolute discretion), assign
or transfer any of the same or any interest therein. Any such assignment or
transfer made without the Lender's consent shall be void and of no force or
effect.
12.2 JOINT AND SEVERAL.
If any party to this Agreement or any of the other Loan Documents
shall be comprised of more than one Person, all agreements, conditions,
covenants, provisions, stipulations, powers of attorney, authorizations,
waivers, releases, options, undertakings, rights and benefits made or given by
such party shall be joint and several, and shall bind and affect all Persons
who are defined therein as such party as fully as though all of them were
specifically named therein wherever any term identifying such party is used.
12.3 REMEDIES CUMULATIVE.
The rights and remedies set forth under this Agreement are in addition
to all other rights and remedies afforded to the Lender under any of the other
Loan Documents or at law or in equity, all of which are hereby reserved by the
Lender, and this Agreement is made and accepted without prejudice to any such
rights and remedies. All of the rights and remedies of the Lender under each of
the Loan Documents shall be separate and cumulative and may be exercised
concurrently or successively in the Lender's sole and absolute discretion.
12.4 FURTHER ASSURANCES.
At any time and from time to time, upon the written request by the
Lender, the Borrower and the Guarantor shall promptly make, execute and
deliver, or cause to be made, executed and delivered, to the Lender and, where
appropriate, cause to be recorded or filed (and, from time to time thereafter,
to be re-recorded or refiled) at such time and in such offices and places as
shall be deemed desirable by the Lender (in its sole and absolute discretion),
any such
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agreements, amendments, assignments, instruments of further assurance,
certificates and other documents as the Lender may, in its sole and absolute
discretion, deem desirable to (A) enable the Lender to negotiate the Note and
to assign the Loan Documents or any portion of its interest; (B) enable the
Lender to enter into participation agreements with respect to all or any
portion of the Obligations or (C) effectuate, complete, perfect or continue and
preserve the rights, remedies and obligations under any of the Loan Documents,
including, without limitation, any document requested in order to the security
interests created under the Loan Documents as first priority security interests
in the Collateral; provided, however, that, except as to the costs and expenses
reasonably incurred by the Lender in connection with the items referred to in
the foregoing clause (c), no such additional document or other instrument
requested by the Lender hereunder shall increase the Obligations.
Any failure by the Borrower or the Guarantor to comply with any
request pursuant to this Section 12.4 within twenty (20) days after such
written request is made by the Lender shall be an Event of Default hereunder
and upon such Event of Default, the Lender may make, execute, record, file,
re-record and refile any and all such amendments, assignments, instruments,
certificates and documents for and in the name of the Borrower or the
Guarantor, and the Borrower and the Guarantor each hereby appoints the Lender
as its attorney-in-fact, with full power of substitution, to take such actions
(on behalf of and in the name of the Borrower or the Guarantor as the case may
be) as the Lender, in its sole and absolute discretion, may deem necessary or
desirable to effectuate the intent of this Section 12.4.
The power of attorney conferred on the Lender by the provisions of
this Section 12.4, being coupled with an interest, shall be irrevocable until
the Obligations are fully paid and performed and shall not be affected by any
disability or incapacity which either the Borrower or the Guarantor may suffer
and shall survive the same. Such power of attorney is provided solely to
protect the interests of the Lender and shall not impose any duty on the Lender
to exercise any such power and neither the Lender nor such attorney-in-fact
shall be liable for any act, omission, error in judgment or mistake of law,
except as the same may result from its gross negligence or willful misconduct.
12.5 INVALIDITY.
If any provision of this Agreement or any of the other Loan Documents
or the application thereof to any Person or circumstance, for any reason and to
any extent, shall be held to be invalid or unenforceable, neither the remainder
of this Agreement or other Loan Document nor the application of such provision
to any other Person or circumstance shall be affected thereby, but rather the
same shall be enforced to the greatest extent permitted by applicable law.
Notwithstanding the foregoing, it is the intention of the parties
hereto that if any provision of any of the Loan Documents is capable of two (2)
constructions, one of which would render the provision void and the other of
which would render the provision valid, then such provision shall be construed
in accordance with the construction which renders such provision valid.
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12.6 MARSHALLING, JURY TRIAL AND OTHER RIGHTS.
To the maximum extent permitted by law, the Borrower and the Guarantor
each hereby waives and renounces for itself, its heirs, executors,
administrators, legal representatives, successors and assigns, all rights to
the benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption, appraisement,
exemption and homestead now provided, or which may hereafter be provided, by
the Constitution and laws of the United States of America and of any state
thereof, both as to itself and in and to all of its property, real and
personal, against the enforcement and collection of the Obligations. The
Borrower and the Guarantor each hereby (A) transfers, conveys and assigns to
the Lender a sufficient amount of such homestead or exemption as may be set
apart in bankruptcy, to pay the obligations of the Borrower and the Guarantor
under the Loan Documents in full, with all costs of collection, (B) directs any
trustee in bankruptcy having possession of such homestead or exemption to
deliver to the Lender a sufficient amount of property or money set apart as
exempt to pay the obligations of the Borrower and the Guarantor under the Loan
Documents and (C) appoints the Lender as its attorney-in-fact, with full power
of substitution, to claim any and all homestead exemptions allowed by law.
The power of attorney conferred on the Lender pursuant to the
provisions of this Section 12.6 being coupled with an interest, shall be
irrevocable until all of the Obligations has been fully paid and performed,
shall not be affected by any disability or incapacity which either the Borrower
or the Guarantor may suffer and shall survive the same. Such power of attorney,
is provided solely to protect the interests of the Lender and shall not impose
any duty on the Lender to exercise any such power, and neither the Lender nor
such attorney-in-fact shall be liable for any act, omission, error in judgment
or mistake of law, except as the same may result from its gross negligence or
wilful misconduct.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE PARTIES HERETO EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY NOW OR
HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE LOAN OR ANY OF THE LOAN DOCUMENTS.
The Borrower and the Guarantor each hereby certifies that neither the
Lender, nor any of the Lender's representatives, agents or counsel has
represented, expressly or otherwise, that the Lender would not, in the event of
any such suit, action or proceeding, seek to enforce this waiver of the right
to trial by jury, and acknowledges that the Lender has been induced by this
waiver (among other things) to enter into the loan transaction evidenced by the
Loan Documents, and further acknowledges that it (I) has read the provisions of
this Agreement and in particular, the paragraph containing this waiver; (II)
has consulted legal counsel; (III) understands the rights that it is granting
in this Agreement and the rights that it is waiving in this paragraph in
particular and (IV) makes the waivers set forth herein knowingly, voluntarily
and intentionally.
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12.7 NO WAIVERS.
The Lender shall not by any act, delay, omission or otherwise
(including, without limitation, the exercise of any right or remedy hereunder)
be deemed to have waived any of its rights or remedies hereunder or under any
of the other Loan Documents unless such waiver is in writing and signed by the
Lender, and then, only to the extent specifically set forth therein. No waiver
at any time of any of the terms, conditions, covenants or warranties of any of
the Loan Documents shall be construed as a waiver of any other term, condition,
covenant or warranty of any of the Loan Documents, nor shall such a waiver in
any one instance or circumstance be construed as a waiver of the same term,
condition, covenant or warranty in any subsequent instance or circumstance. No
such failure, delay or waiver shall be construed as creating a requirement that
the Lender must thereafter, as a result of such failure, delay or waiver, give
notice to any member of the Borrowing Group or any other Person that the Lender
does not intend to give a further waiver or to refrain from insisting upon the
strict performance of the terms, conditions, covenants and warranties set forth
in the Loan Documents before the Lender can exercise any of its rights or
remedies under any of the Loan Documents or before any Loan Default can occur
or as establishing a course of dealing for interpreting the conduct of and
agreements between the Lender and any member of the Borrowing Group or any
other Person.
The acceptance by the Lender of any payment that is less than payment
in full of all amounts due under any of the Loan Documents at the time of the
making of such payment shall not (A) constitute a waiver of the right to
exercise any of the Lender's remedies at that time or at any subsequent time,
(B) constitute an accord and satisfaction or (C) nullify any prior exercise of
any remedy; without the express written consent of the Lender. Any failure by
the Lender to accelerate the indebtedness due under this Agreement or any of
the other Loan Documents by reason of a default hereunder or thereunder, any
acceptance by the Lender of a past due installment, or any indulgence granted
by the Lender from time to time shall not be construed (I) as a novation of
this Agreement or any of the other Loan Documents or as a reinstatement of the
indebtedness evidenced thereby or as a waiver of such right of acceleration or
of the right of the Lender thereafter to insist upon strict compliance with the
terms of this Agreement or any of the other Loan Documents or (II) to prevent
the exercise of such right of acceleration or any other right granted hereunder
or under applicable law; and, to the maximum extent permitted by law, the
Borrower and the Guarantor each hereby expressly waives the benefit of any
statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
Whether or not for consideration paid or payable to the Lender and,
except as may be otherwise specifically agreed to by the Lender, no forbearance
on the part of the Lender or extension of the time for the payment of the whole
or any part of the Obligations, or any other indulgence given by the Lender to
the Borrower or any other Person, shall operate to release or in any manner
affect the original liability of the Borrower or such other Person, or the
priority of the Mortgage or to limit, prejudice or impair any right of the
Lender, including, without limitation, the right to realize upon the
Collateral, or any part thereof, for any of the
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obligations evidenced or secured by the Loan Documents; notice of any such
extension, forbearance or indulgence being hereby waived by the Borrower and
the Guarantor and all those claiming by, through or under the Borrower or the
Guarantor.
12.8 USURY.
In the event that fulfillment of any provision of any of the Loan
Documents, at the time performance of such provision shall be due and as a
result of any circumstance, shall involve transcending the limit of validity
presently or hereinafter prescribed by any applicable usury statute or any
other law, with regard to obligations of like character and amount, then ipso
facto the obligation to be fulfilled shall be reduced to the limit of such
validity, so that in no event shall any exaction be possible under any of the
Loan Documents that is in excess of the limit of such validity. In no event
shall the Borrower or the Guarantor be bound to pay for the use, forbearance or
detention of the money loaned pursuant hereto, interest of more than the
maximum rate, if any, permitted by law to be charged by the Lender; the right
to demand any such excess being hereby expressly waived by the Lender.
12.9 PARTICIPANTS.
The Lender reserves the right, from time to time during the Term, to
(a) enter into participation agreements with respect to the Loan or (b) assign,
directly or as collateral, all or any portion of the Obligations or all of the
Lender's rights therein; and each member of the Borrowing Group shall cooperate
with the Lender in connection with the execution of any such participation
agreements or the transfer of any such assignments.
Such cooperation shall include without limitation:
A. supplying financial statements of the Borrower, the
Guarantor, any Lessee, and of the Facility;
B. providing estoppel certificates (i) consenting to such
participations or assignments, (ii) confirming the respective
obligations of each member of the Borrowing Group under the
Loan Documents, (iii) confirming the amount of the then
outstanding principal balance of the Loan and the amounts of
any tax or insurance escrow deposits held by the Lender, (iv)
stating whether any member of the Borrowing Group has any
defenses, offsets or credits against the payment of any
amounts due or the performance of any obligations under the
Loan Documents and (v) stating whether any default or any
state of facts which, with the passing of time or the giving
of notice or both, could constitute a default, exists under
the Loan Documents;
C. making such modifications or alterations to the Loan
Documents as the Lender may reasonably request; provided,
however that such modifications and alterations shall not
increase any of the Borrower's or the Guarantor's monetary
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obligations under the Loan Documents or materially modify any
other obligations of the Borrower or the Guarantor under the
Loan Documents;
D. providing such other documentation relating to the Loan and
the Mortgaged Property as the Lender may reasonably request;
and
E. making the Mortgaged Property available for inspection upon
reasonable notice from the Lender.
The Lender shall have the right to provide potential participants and
assignees with any and all financial, licensing and other information provided
to the Lender pursuant to the Loan Documents upon informing such recipients of
the confidential nature of such information. The terms and conditions of any
participation agreements with respect to the Loan or any assignment of all or
any of the obligations evidenced or secured by the Loan Documents and the
Lender's rights and remedies therein shall be determined by the Lender in its
sole and absolute discretion.
12.10 SUCCESSORS AND ASSIGNS.
This Agreement and the other Loan Documents shall be binding on and
inure to the benefit of (A) the Borrower and the Guarantor and their respective
heirs, executors, administrators, legal representatives and permitted
successors and assigns and (B) the Lender, any other Person who may now or
hereafter hold any interest in the Loan and their respective successors and
assigns. Notwithstanding the foregoing, neither the Borrower nor the Guarantor
shall assign any of its rights or obligations hereunder or under any of the
Loan Documents without the prior consent of the Lender, in each instance, which
consent may be withheld in the Lender's sole and absolute discretion.
12.11 NO THIRD PARTY BENEFICIARIES.
This Agreement and the other Loan Documents are solely for the benefit
of the Lender, its successors, assigns and participants (if any), the Meditrust
Entities, the Indemnified Parties, the Borrower and the Guarantor, and, except
as otherwise expressly set forth in any of the Loan Documents, nothing
contained therein shall confer upon anyone other than such parties any right to
insist upon or to enforce the performance or observance of any of the
obligations contained therein. All conditions to the obligations of the Lender
to advance or make available the proceeds of the Loan, insurance proceeds or
Condemnation awards, or to release any deposits held for Impositions or
insurance proceeds are imposed solely and exclusively for the benefit of the
Lender, its successors, assigns and participants and the Meditrust Entities. No
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms and no other Person shall, under any circumstances,
be a beneficiary of such conditions, any or all of which may be freely waived
in whole or in part by the Lender at any time, if, in the Lender's sole and
absolute discretion, the Lender deems it advisable or desirable to do so.
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12.12 GOVERNING LAW; JURISDICTION.
Except as may be otherwise expressly provided in this Section 12.12,
elsewhere in this Agreement and in any of the other Loan Documents, all claims
relating, in any way, to the negotiation and/or consummation of the Loan, the
Lender's relationship with any member of the Borrowing Group in connection with
the Loan and/or the performance of any obligation under any of the Loan
Documents shall in all respects be governed, construed, applied and enforced in
accordance with the internal laws of the Commonwealth of Massachusetts without
regard to principles of conflicts of law. Notwithstanding the foregoing choice
of law:
A. the procedures governing the creation, perfection and
priority of the Liens pertaining to real property and
tangible personal property created by the Mortgage and the
Assignment of Leases and the enforcement by the Lender of its
foreclosure and other remedies against the Borrower under the
Mortgage, the Assignment of Leases and the other Loan
Documents with respect to the Mortgaged Property or other
Collateral, including by way of illustration, but not in
limitation, actions for foreclosure, for injunctive relief or
for the appointment of a receiver shall be governed by the
laws of the state where such Mortgaged Property or other
Collateral are located;
B. the Lender shall comply with applicable law in the state
where the Mortgaged Property or other Collateral is located
to the extent required by the law of such jurisdiction in
connection with the foreclosure of the Liens created under
the Mortgage and the other Loan Documents with respect to the
Mortgaged Property or other Collateral; and
C. the provisions of Federal law and the law of the state where
the Mortgaged Property is located shall apply in defining the
terms Hazardous Substances, Environmental Laws and Legal
Requirements as such terms are used in Loan Documents, with
respect to the Mortgaged Property and the Borrowing Group.
Nothing contained herein or in any provisions of the other Loan
Documents shall be construed to provide that the substantive law of the state
where the Mortgaged Property or any other Collateral is located shall apply to
any parties' rights and obligations under any of the Loan Documents, which,
except as expressly provided in clauses (A), (B) and (C) above, are and shall
continue to be governed by the substantive law of the Commonwealth of
Massachusetts. In addition, the fact that portions of the Loan Documents may
include provisions drafted to conform to the law of the State where the
Mortgaged Property is located is not intended, nor shall it be deemed, in any
way, to derogate the parties' choice of law as set forth or referred to in this
Loan Agreement or in the other Loan Documents. The parties further agree that
the Lender may enforce its rights under the Loan Documents including, but not
limited to, its rights to sue the Borrower or to collect any outstanding
indebtedness in accordance with applicable law.
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<PAGE> 71
Each party hereto hereby consents to personal jurisdiction in any
state or Federal court located within the Commonwealth of Massachusetts, as
well as to the jurisdiction of all courts from which an appeal may be taken
from the aforesaid courts, for the purposes of any suit, action or other
proceeding arising out of, or with respect to any of the Loan Documents, the
negotiation and/or consummation of the Loan, the Lender's relationship with any
member of the Borrowing Group in connection with the Loan and/or the
performance of any obligation or exercise of any remedy under any of the Loan
Documents and expressly waives any and all objections it may have as to venue
in any of such courts.
12.13 NOTICES.
Any notice, request, demand, statement or consent made hereunder or
under any of the other Loan Documents shall be in writing and shall be deemed
duly given if personally delivered, sent by certified mail, return receipt
requested, or sent by a nationally recognized commercial overnight delivery
service with provisions for a receipt, postage or delivery charges prepaid, and
shall be deemed given when postmarked or placed in the possession of such mail
or delivery service and addressed as follows:
If to the Borrower: ______________________
_____________________________
_____________________________
With copies to: ______________________
_____________________________
_____________________________
and
Kirkpatrick & Lockhart
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: _______________________
If to the Guarantor: Balanced Care Corporation
_____________________________
_____________________________
Attn: President
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<PAGE> 72
With copies to: Balanced Care Corporation
______________________________
_____________________________
Attn: General Counsel
and
Kirkpatrick & Lockhart
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: ______________________
If to the Lender: Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attn: ______________________
or at such other place as either party hereto may from time to time hereafter
designate to the other in writing. Any notice given to the Borrower or the
Guarantor by the Lender at any time shall not imply that such notice or any
further or similar notice was or is required.
12.14 LIMITATION OF LIABILITY.
The Declaration of Trust establishing the sole shareholder of the
Lender, Meditrust, a Massachusetts business trust (referred to herein as
"Meditrust"), dated August 6, 1985 (referred to herein as the "Declaration"), a
copy of which, together with all amendments thereto, is duly filed in the
office of the Secretary of State of the Commonwealth of Massachusetts, provides
that the name "Meditrust" 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 Meditrust or any of its
Subsidiaries shall be held to any personal liability, jointly, or severally,
for any obligation of, or claim against Meditrust or any of its Subsidiaries.
All Persons dealing with Meditrust or the Lender, in any way, shall look only
to the assets of Meditrust or the
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<PAGE> 73
Lender, respectively, for the payment of any sum or the performance of any
obligation. Furthermore, in no event shall the Lender or Meditrust ever be
liable to the Borrower, the Guarantor or any other Person for any indirect or
consequential damages incurred by the Borrower, the Guarantor or such other
Person, resulting from any cause whatsoever. Notwithstanding the foregoing, the
Borrower and the Guarantor hereby acknowledge and agree that Meditrust is not a
party to this Agreement or any of the other Loan Documents and that the
Borrower and the Guarantor shall look only to the assets of the Lender for the
payment of any sum or performance of any obligation due by or from the Lender
pursuant to the terms and provisions of the Loan Documents.
12.15 ESTOPPEL CERTIFICATE.
Within ten (10) days after written request of any other party hereto,
any party to this Agreement shall furnish a certificate or affidavit, duly
acknowledged, stating the amount then due or outstanding under the Loan
Documents, whether there are any defaults under any of the Loan Documents and
whether or not any offsets or defenses exist against the Obligations, and if
so, specifying such offsets and defenses. Within ten (10) days following the
written request of the Lender, the Borrower shall furnish a certificate or
affidavit, duly acknowledged, stating the amount then due under any other
documents evidencing any indebtedness of the Borrower secured by a Lien
relating to the Mortgaged Property, whether there are any defaults under such
documents and whether or not any offsets or defenses exist against the amount
due thereunder and if so, specifying such offsets and defenses.
12.16 NO JOINT VENTURE OR PARTNERSHIP.
Neither anything contained in any of the Loan Documents, nor the acts
of the parties hereto shall be construed to create a partnership or joint
venture between the Borrower or the Guarantor and the Lender. Neither the
Borrower nor the Guarantor is the agent or representative of the Lender, and
nothing contained herein or in any of the other Loan Documents shall be
construed to make the Lender liable to any Person for goods delivered or
services performed with respect to the Mortgaged Property or for debts or
claims accruing against the Borrower or the Guarantor.
12.17 AMENDMENTS, WAIVERS AND MODIFICATIONS.
Except as otherwise expressly provided herein or in any other Loan
Document, none of the terms, covenants, conditions, warranties or
representations contained in this Agreement or in any of the other Loan
Documents may be renewed, replaced, amended, modified, extended, substituted,
revised, waived, consolidated or terminated, except by an agreement, in
writing, signed by (A) all parties to this Agreement or the other applicable
Loan Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination or (B) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Agreement shall extend
and be applicable to all renewals, replacements, amendments, extensions,
substitutions, revisions,
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<PAGE> 74
consolidations and modifications of the Loan Documents, the Leases, the
Management Agreements, the Related Party Agreements, the Permits and/or the
Contracts; and all references herein and in the other Loan Documents to any of
the Loan Documents, the Leases, the Management Agreements, the Related Party
Agreements, the Permits and the Contracts shall be deemed to include any
renewals, replacements, amendments, extensions, substitutions, revisions,
consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the
Loan Documents, whether express or implied, to any renewal, replacement,
amendment, extension, substitution, revision, consolidation or modification of
any of the Loan Documents or of any Lease, Management Agreement, Related Party
Agreement, Permit or Contract is not intended to constitute an agreement or
consent by the Lender to any such renewal, replacement, amendment, extension,
substitution, revision, consolidation or modification of any of the Loan
Documents or any Lease, Management Agreement, Related Party Agreement, Permit
or Contract; but, rather as a reference only to those instances where the
Lender may give, agree or consent to any such renewal, replacement, amendment,
extension, substitution, revision, consolidation or modification, as the same
may be required pursuant to the terms, covenants and conditions of any of the
Loan Documents.
12.18 WAIVERS.
The Borrower and the Guarantor jointly and severally, waive
presentment for payment, demand, protest, notice of nonpayment, notice of
dishonor, protest of any dishonor, suretyship defenses, notice of protest and
protest of the Loan Documents and the Related Party Agreements, and all other
notices in connection with (A) the delivery or the acceptance of the Loan
Documents and/or the Related Party Agreements and any reliance thereon and/or
(B) the performance, default (except notice of default as specifically
elsewhere required under any of the Loan Documents or any of the Related Party
Agreements) or enforcement of any obligation under any of the Loan Documents or
any of the Related Party Agreements, and agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver or modification granted or consented to by the Lender (or any
of the other Meditrust Entities); and the Borrower and the Guarantor consent to
any and all extensions of time, renewals, waivers or modifications that may be
granted or consented to by the Lender (or any of the other Meditrust Entities)
with respect to the payment or performance of any obligation under any of the
Loan Documents or the Related Party Agreements and to the release of the
Collateral (or any part thereof) and/or any other collateral securing any of
the Related Party Agreements, with or without substitution, and agree that
additional makers, endorsers, guarantors or sureties may become parties to the
Loan Documents and/or any of the Related Party Agreements without notice to
them or affecting the liability of the Borrower and the Guarantor under the
Loan Documents.
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<PAGE> 75
12.19 CONTRIBUTION.
No Person obligated on account of any of the Loan Documents may seek
contribution from any other Person also obligated unless and until all
liabilities, obligations and indebtedness to the Lender of the Person from whom
contribution is sought have been satisfied in full.
12.20 CAPTIONS AND HEADINGS.
The captions and headings set forth in this Agreement and the other
Loan Documents are included for convenience and reference only and the words
contained therein shall in no way be held or deemed to define, limit, describe,
explain, modify, amplify or add to the interpretation, construction or meaning
of, or the scope or intent of, this Agreement, any of the other Loan Documents
or any part hereof or thereof.
12.21 TIME OF THE ESSENCE.
Time is of the essence of each and every term, condition, covenant and
warranty set forth in this Agreement and in the other Loan Documents.
12.22 COUNTERPARTS.
This Agreement and the other Loan Documents may be executed in one or
more counterparts, each of which taken together shall constitute an original
and all of which shall constitute one and the same instrument.
12.23 RULES OF CONSTRUCTION.
References in this Agreement and each of the other Loan Documents to
"herein", "hereof" and "hereunder" shall be deemed to refer to this Agreement
or each such other Loan Document, as the case may be, and shall not be limited
to the particular text or Section in which such words appear. The use in the
Loan Documents of any gender shall include all genders and the singular number
shall include the plural and vice versa as the context may require. References
in the Loan Documents to the Lender's attorneys shall be deemed to include,
without limitation, special counsel and local counsel for the Lender.
References in the Loan Documents to attorneys' fees and expenses shall be
deemed to include all costs for administrative, paralegal and other support
staff.
References in the Loan Documents to the Mortgaged Property shall be
deemed to include references to all of the Mortgaged Property and references to
any portion thereof. References in the Loan Documents to the Land shall be
deemed to include references to all of the Land and references to any portion
thereof. References in the Loan Documents to the Loan Obligations shall be
deemed to include references to all of the Loan Obligations and references to
any portion thereof. References in the Loan Documents to the Obligations shall
be deemed to include references to all of the Obligations and references to any
portion thereof. The word
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<PAGE> 76
"foreclosure" as used in any of the Loan Documents shall be deemed to include
the acquisition of the Mortgaged Property by voluntary deed or assignment in
lieu of foreclosure.
All exhibits annexed to any of the Loan Documents as referenced
therein shall be deemed incorporated in such Loan Document by such annexation
and/or reference.
As used in any of the Loan Documents, the term "including", when
following any general statement, will not be construed to limit such statement
to the specific items or matters as provided immediately following the term
"including" (whether or not non-limiting language such as "without limitation"
or "but not limited to" or words of similar import are also used), but rather
will be deemed to refer to all items or matters that could reasonably fall
within the broader scope of the general statement.
All accounting terms not specifically defined in the Loan Documents
shall be construed in accordance with GAAP. Any requirement that financial
statements be Consolidated in form shall apply only to such financial
statements as relate to a period during any portion of which the relevant
Person has one or more Subsidiaries.
12.24 GENERAL PROVISIONS APPLICABLE TO ALL LOAN DOCUMENTS.
The provisions of Section 12 hereof shall apply to all Loan Documents
as if set forth in full therein, except as may be otherwise expressly provided
in any other Loan Document.
12.25 ENTIRE AGREEMENT.
This Agreement and the other Loan Documents set forth the entire
agreement of the parties with respect to the subject matter hereof and shall
supersede the Letter of Intent in its entirety.
13. INDEMNIFICATIONS
13.1 BROKER'S FEE INDEMNIFICATION.
The Borrower shall and hereby agrees to indemnify, defend (with
counsel acceptable to the Lender) and hold the Lender harmless from and against
any and all claims for any premiums or other charges, finder's fees, taxes,
brokerage fees or commissions and other similar compensation due in connection
with the Loan, except such claims by any Person with whom the Lender has dealt
in connection with the Loan without the Borrower's knowledge. Notwithstanding
the foregoing, the Lender shall have the option of conducting its own defense
against any such claims with counsel of the Lender's choice, but at the expense
of the Borrower, as aforesaid. This indemnification shall include all
attorneys' fees and expenses and court costs reasonably incurred by the Lender
in connection with the defense against any such claims and the enforcement of
this indemnification and shall survive the complete payment and performance of
the Borrower's obligations under the Loan Documents.
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<PAGE> 77
13.2 GENERAL INDEMNIFICATION.
With the exception of any claim involving any member of the Borrowing
Group and any of the Indemnified Parties in which a final decision is issued by
a court of competent jurisdiction in favor of such member of the Borrowing
Group and all appeal periods having lapsed or been exhausted, the Borrower and
the Guarantor shall and hereby agree to jointly and severally indemnify, defend
(with counsel acceptable to the Lender), and hold the Indemnified Parties
harmless against (a) any claim brought or threatened against any of the
Indemnified Parties by any member of the Borrowing Group or by any other Person
on account of (i) the Lender's relationship with any member of the Borrowing
Group in connection with the Loan and (ii) the Lender's negotiation of,
entering into and/or performing any of its obligations and/or exercising any of
its rights and remedies under any of the Loan Documents and (b) any and all
losses, damages, claims, liabilities, obligations, causes of action, costs and
expenses arising out of or resulting from (i) the use and occupancy of the
Mortgaged Property or any business conducted therein, (ii) any act, fault,
omission to act or misconduct by (x) any member of the Borrowing Group, (y) any
Affiliate of the Borrower or (z) any employee, agent, licensee, business
invitee, guest, customer, contractor or sublessee of any of the foregoing
parties, relating to, directly or indirectly the Mortgaged Property, (iii) any
accident, injury or damage whatsoever caused to any Person, including, without
limitation, any claim of malpractice, or to the property of any Person in,
about, around or outside of the Mortgaged Property where such accident, injury
or damage results or is claimed to have resulted from any act, fault, omission
to act or misconduct by any member of the Borrowing Group, any Affiliate of the
Borrower or any employee, agent, licensee, contractor or sublessee of any of
the foregoing parties, (iv) any Loan Default and/or (v) any attempt by any
member of the Borrowing Group or any Affiliate of the Borrower to transfer or
relocate any of the Permits to any location other than the Mortgaged Property.
The aforesaid indemnification agreement shall include, without limitation,
attorneys' fees and expenses, court costs and other expenses of litigation
incurred by the Lender in connection with any such matters and with the
enforcement of said indemnification. All matters covered by the aforesaid
indemnification agreement may be defended, compromised, settled or pursued by
the Lender with counsel of the Lender's selection, but at the expense of the
Borrower and the Guarantor. The provisions of this Section 13.2 shall survive
the complete payment and performance of the Loan Obligations and the
foreclosure of the Mortgage.
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<PAGE> 78
EXECUTED as a sealed instrument as of the day and year first above
mentioned.
WITNESS: LENDER:
MEDITRUST MORTGAGE INVESTMENTS, INC.,
a Delaware corporation
By:
- -------------------------- ----------------------------------
Name: Name:
Title:
WITNESS: BORROWER:
-------------------------
By:
- -------------------------- ----------------------------------
Name: Name:
Title:
WITNESS: GUARANTOR:
BALANCED CARE CORPORATION,
a Delaware corporation
By:
- -------------------------- ----------------------------------
Name: Name:
Title:
78
<PAGE> 79
SCHEDULE TO EXHIBIT 10.19 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
LOAN AGREEMENT
<TABLE>
<CAPTION>
BORROWER LENDER LOAN AMOUNT DATE
-------- ------ ----------- ----
<S> <C> <C> <C>
BCC of Wisconsin, Inc. Meditrust Mortgage $ 5,045,869.00 5/2/96
Investments, Inc.
Hawthorn Health Properties, Inc. and Meditrust Mortgage $41,385,000.00 8/30/96
Hawthorn Properties Investments, Inc.
BCC at Nevada Park Care Center, Inc. and BCC Meditrust Mortgage $3,115,000.00 8/30/96
at Republic Park Center, Inc. Investments, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.20
FORM OF PROMISSORY NOTE
$_________
FOR VALUE RECEIVED, _______________________________________________
having an address at ______________________________________________________,
(the "Maker") promises to pay to the order of MEDITRUST MORTGAGE INVESTMENTS,
INC., a Delaware corporation ("Lender") (the Lender together with each
successor, owner, endorsee, bearer and holder of this Note being hereinafter
referred to as the "Holder") at its principal place of business located at 197
First Avenue, Needham Heights, Massachusetts, 02194, or at such other place as
the Holder of this Note may from time to time designate in writing, in lawful
money of the United States of America, in immediately available Federal funds or
the equivalent the principal sum of _____________DOLLARS ($_________) or so much
thereof as shall have been advanced to the Maker, with interest on so much
thereof as shall from time to time be outstanding at the "Interest Rate" (as
hereinafter defined), except as otherwise expressly provided in that certain
Loan Agreement of even date herewith by and among the Lender, the Maker and
Balanced Care Corporation, a Delaware corporation (the "Loan Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.
The Maker covenants and agrees to make the following payments to the
Holder:
a. on the date hereof, the Maker shall pay to the Holder, interest
only on the outstanding principal balance, calculated at the
Interest Rate, from the date hereof through and including ______,
b. commencing on ____________ and the first day of each calendar
month thereafter through and including ___________, the Maker
shall pay to the Holder monthly installments of interest in
arrears with interest accruing on the outstanding principal
balance at the Interest Rate;
c. commencing on ____________ and on the first day of each calendar
month thereafter through and including ___________, the Maker
shall pay to the Holder equal monthly installments of principal
and interest in arrears [based upon a thirty (30) year
amortization schedule with interest accruing on the outstanding
principal balance at the Interest Rate]; and
d. on ____________ (hereinafter referred to as the "Maturity Date"),
the Maker shall pay to the Holder the entire principal balance
then remaining unpaid, together with accrued and unpaid interest
thereon and any costs, charges and other amounts due under this
Note and all of the other Loan Documents.
<PAGE> 2
In addition to the monthly payments of principal and interest set forth
above, commencing on __________________ and on the first day of each calendar
month throughout the remainder of the Term, the Borrower shall pay to the
Lender, as additional interest ("Additional Interest"), an amount equal to
one-twelfth (1/12) of the annual additional interest amount for the applicable
twelve month period during the Term as indicated on EXHIBIT A attached hereto.
Furthermore, on ____________, the Borrower shall also pay to the Lender ______
_______________________ DOLLARS ($______), representing Additional ___________
Interest accrued from ______________ through _________________.
The Maker have no right to extend or renew the loan evidenced by this
Note and the other Loan Documents.
As used herein, the term "Interest Rate" shall be defined as the rate
of interest per annum equal to Ten and 61/100 percent (10.61%). Interest
hereunder shall be calculated on the basis of a 360-day year, but charged for
the actual days elapsed during each calendar year (or portion thereof) that the
indebtedness evidenced by this Note remains outstanding.
This Note is issued pursuant to, is entitled to the benefits of, and
is subject to the provisions of the Loan Agreement. This Note is secured by the
Collateral and the Loan Documents. The principal of this Note is subject to
prepayment in whole or in part in the manner and to the extent specified in the
Loan Agreement.
In the event that any Loan Default shall occur and be continuing, the
entire unpaid principal amount of this Note and all of the unpaid interest
accrued thereon may become or be declared due and payable in the manner and
with the effect provided in the Loan Agreement.
The Maker and all endorsers hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note and assent to the
extensions of the time of payment or forbearance or other indulgence without
notice.
THIS NOTE AND THE OBLIGATIONS OF THE MAKER HEREUNDER SHALL BE GOVERNED
BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).
2
<PAGE> 3
IN WITNESS WHEREOF, the Maker has caused this Note to be signed in its
corporate name as an instrument under seal by its duly authorized officer on
the date and in the year first above written.
WITNESS: MAKER:
--------------------------------
By:
- ----------------------------- -----------------------------
Name: Name:
Title:
3
<PAGE> 4
SCHEDULE TO EXHIBIT 10.20 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
PROMISSORY NOTE
<TABLE>
<CAPTION>
MAKER LENDER/HOLDER NOTE AMOUNT DATE
----- ------------- ----------- ----
<S> <C> <C> <C>
BCC of Wisconsin, Inc. Meditrust Mortgage $ 5,045,869.00 5/2/96
Investments, Inc.
Hawthorn Health Properties, Inc. and Meditrust Mortgage $41,385,000.00 8/30/96
Hawthorn Properties Investments, Inc.
BCC at Nevada Park Care Center, Inc. and BCC Meditrust Mortgage $ 3,115,000.00 8/30/96
at Republic Park Center, Inc. Investments, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.21
FORM OF LEASE
THIS LEASE ("Lease") dated as of January 31, 1997 is entered into by
and between ("Lessor") _____________________, and _____________________,
("Lessee").
ARTICLE I
LEASED PROPERTY; TERM
Upon and subject to the terms and conditions hereinafter set forth,
Lessor leases to Lessee and Lessee rents from Lessor all of Lessor's rights and
interest in and to the following real property (collectively, the "Leased
Property"):
a) the real property more particularly described on Exhibit A attached
hereto together with all covenants, licenses, privileges and benefits thereto
belonging and any easements, rights-of-way, rights of ingress and egress or
other interests of Lessor in, on or to any land, highway, street, road or
avenue, open or proposed, in, on, across, in front of abutting or adjoining
such real property, including all strips and gores adjacent to or lying between
such real property and any adjacent real property (the "Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind (including all alleyways and connecting
tunnels, crosswalks, sidewalks, landscaping, parking lots and structures and
roadways appurtenant to such buildings and structures presently or hereafter
situated upon the Land, and Capital Additions financed by Lessor (but
specifically excluding Capital Additions financed by Lessee), drainage and all
above-ground and underground utility structures) (collectively the "Leased
Improvements");
(c) all permanently affixed equipment, machinery, fixtures and other
items of real and/or personal property, including all components thereof, now
and hereafter located in on or used in connection with and permanently affixed
to or incorporated into the Leased Improvements, including 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 and fire and theft protection equipment, carpet, moveable or
immoveable walls or partitions and built-in oxygen and vacuum systems, all of
which 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
Personal Property (collectively the "Fixtures");
(d) the Personal Property;
<PAGE> 2
(e) to the extent permitted by law, all permits, approvals and other
intangible property or any interest therein now or hereafter owned or held by
Lessor in connection with the Leased Property, or any business or businesses
now or hereafter conducted by Lessee or any Tenant or with the use thereof,
including all leases, contract rights, agreements, trade names, water rights
and reservations, zoning rights, business licenses and warranties (including
those relating to construction or fabrication) related to the Leased Property
or any part thereof, but specifically excluding the general corporate
trademarks, service marks, logos, insignia or books and records of Lessor or
Lessee; and
(f) all site plans, surveys, soil and substrata studies, architectural
drawings, plans and specifications, engineering plans and studies, floor plans,
landscape plans, and other plans and studies that relate to the Land or the
Leased Improvements and are in Lessor's possession or control.
SUBJECT, HOWEVER, to the Permitted Exceptions, to have and to hold for
a fixed term of 11 years (the "Initial Term") commencing on February 1, 1997
(the "Commencement Date") and ending at midnight on the last day of the 132nd
month after the Commencement Date.
ARTICLE II
RENT
2.1 MINIMUM RENT AND ADJUSTMENTS TO MINIMUM RENT. Lessee shall pay to
Lessor without notice, demand, set off (except as set forth in Section 30.2 or
Article XXXII hereof) or counterclaim, in advance in lawful money of the United
States of America, at Lessor's address set forth herein or at such other place
or to such other person, firms or corporations as Lessor from time to time may
designate in writing, Minimum Rent, as adjusted annually pursuant to Section
2.1(b) during the Term, as follows:
(a) Minimum Rent. Lessee will pay to Lessor as rent (as adjusted from
time to time in accordance with Section 2.1(b), the "Minimum Rent") for the
Leased Property the annual sum of $__________ payable in advance in 12 equal,
consecutive monthly installments of $_________, on the first day of each
calendar month of the Term. Minimum Rent shall be prorated as to any partial
month, and is subject to adjustment as provided in Sections 2.1(b), 9.3(b)(iv)
and 20.1 below; and
(b) Increases to Minimum Rent. Commencing on the first anniversary
date of the Commencement Date and on each anniversary date thereafter
throughout the remainder of the Initial Term and any Extended Term (each such
anniversary date individually being referred to as an "Adjustment Date"), the
then current Minimum Rent shall be increased annually effective as of such
Adjustment Date By 125% of the increase in the Consumer Price Index for the
Base Period (as defined below); provided, however, if the increase in the
Consumer Price Index for
2
<PAGE> 3
such Base Period is greater than 2.4%, Lessor and Lessee mutually agree to use
their best efforts to negotiate the increase in Minimum Rent based on the fair
rental value of the Leased roperty to become effective on the Adjustment Date.
As used herein, "Base Period" shall mean the following:
(i) For the first Adjustment Date, the twelve-month period
commencing on the first day of the month that is two months prior to the
Commencement Date; and
(ii) For each subsequent Adjustment Date, the Twelve month
period commencing on the first day of the month that is two months prior to the
previous Adjustment Date.
(c) Capital Expenditures. Lessee shall make an annual Facility upgrade
expenditure in an amount equal to $200 per bed for capital improvements, such
amount to be increased $50 per bed on each Adjustment Date. If requested by
Lessor, Lessee shall promptly provide evidence of such capital expenditures. In
the event Lessee fails to make the required capital expenditure in any Lease
year, Lessee shall deposit in a money market account with an Acceptable
Financial Institution amounts not less than the difference between the required
capital expenditures and the amounts actually spent. Such account shall be in
the name of the Lessor. Lessee shall make detailed requests for such funds in
writing to Lessor in the same form as a Request pursuant to Section 9.3 hereof.
Within 30 days of such Request, Lessor shall reasonably approve the amount of
requested funds and make mutually agreeable arrangements for the disbursement
of the funds or provide Lessee with written notice in reasonable detail
specifying Lessor's objections to such Request.
(d) Lease Deposit. On the Commencement Date, Lessee must deposit with
an Acceptable Financial Institution and thereafter maintain with Lessor a lease
deposit equal to approximately six (6) months Minimum Rent, rounded upward to
the nearest $1,000.00. Lessor reserves the right to require additional deposits
if the Minimum Rents increases during the Term. Upon achievement of a Rent
Coverage Ratio (as hereinafter defined), on a combined basis, of 1.25 (or
greater) to 1.0, provided no Default or Event of Default (as hereinafter
defined) exists, such lease deposit may be reduced upon Lessee's request to
three (3) months Minimum Rent, rounded upward to the nearest $1,000.00.
(e) Payment of Minimum Rent. All payments of Minimum Rent shall be
made in lawful money of the United States by wire/ACH transfer of same day
funds to Lessor's account #0000041032 at First Commercial Bank, Birmingham,
Alabama. ABA Routing #062003605, Attention: Todd Beard, with advice to
__________ at (205) 967-2092 (or such other account or location specified by
Lessor from time to time in writing) on or before 2:00 p.m., Birmingham time,
on any Business Day.
2.2 CALCULATION OF INCREASES TO MINIMUM RENT. On or about each
Adjustment Date Lessor will calculate the increase in the Minimum Rent pursuant
to the provisions of Section 2.l(b) and will provide Lessee with written notice
of same.
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2.3 ADDITIONAL CHARGES. Lessee will also pay and discharge as and when
due (a) all other amounts, liabilities, obligations and Impositions, which
Lessee assumes or agrees to pay under this Lease including, to the extent
applicable, any condominium association dues, assessments or other charges and
(b) in the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) above, Lessee will also promptly pay and discharge
every fine, penalty, interest and cost which may be added for non-payment or
late payment of such items (the items referred to in clauses (a) and (b) above
being referred to herein collectively as the "Additional Charges"), and Lessor
shall have all legal, equitable and contractual rights, powers and remedies
provided in this Lease, by statute or otherwise, in the case of non-payment of
the Additional Charges as well as the Minimum Rent. If any installment of
Minimum Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Lessor) shall not be paid within ten (10) days
after the date when due, Lessee will pay Lessor on demand, as Additional
Charges, interest (to the extent permitted by law) computed at the Overdue Rate
on the amount of such installment, from the due date when due to the date of
payment in full thereof. In the event Lessor provides Lessee with written
notice of failure to timely pay any installment of Minimum Rent or any
Additional Charges pursuant to Section 15.1(b) more than three times within any
twelve-month period, Lessee shall pay an administrative fee to Lessor in the
amount of $500.00 per year for such twelve-month period. To the extent that
Lessee pays any Additional Charges to Lessor or the Facility Mortgagee pursuant
to any requirement of this Lease, Lessee shall be relieved of its obligation to
pay such Additional Charges to the entity to which such Additional Charges
would otherwise be due. Additional charges shall be deemed Rent hereunder.
2.4 NET LEASE. The Rent shall be paid absolutely net to Lessor, so
that this Lease shall yield to Lessor the full amount of the installments of
Minimum Rent and the payments of Additional Charges throughout the Term but
subject to any provisions of this Lease which expressly provide for payments by
Lessor or the adjustment of the Rent or other charges.
2.5 RENT COVERAGE. From and after September 30, 1997, for the
Applicable Period, the Facilities (on a combined basis) must achieve and
maintain the following:
(a) A Rent Coverage Ratio of not less than 1.25 to 1.0, and
(b) An Adjusted Rent Coverage Ratio of not less than 1.0 to 1.0.
From and after September 30, 1997, for the Applicable Period, the
Facility must achieve and maintain a Rent Coverage Ratio of not less than 1.2
to 1.0.
"Rent Coverage Ratio" means, for each Applicable Period, the ratio of
(i) Cash Flow, plus management fees as determined on an accrual basis of
accounting for the Facility (or Facilities, if applicable), to (ii) the Minimum
Rent payable under the Lease (or Leases, if applicable).
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"Adjusted Rent Coverage Ratio" means, for each Applicable Period, the
ratio of (i) Cash low to (ii) the Minimum Rent payable under the Leases.
"Cash Flow" means the pre-tax income of the Facility (or Facilities,
if applicable) plus (i) lease expense with respect to the Lease (or Leases, if
applicable) and (ii) non-cash expenses or allowances for depreciation and
amortization with respect to the Facility (or Facilities, if applicable). In
calculating "pre-tax" income, any extraordinary income or extraordinary loss
shall be excluded.
Rent Coverage will be measured quarterly and the first such test shall
consist of an Applicable Period of 3 months, the second such test will consist
of an Applicable Period of 6 months, the third such test will consist of an
Applicable Period of 9 months, and each subsequent test will consist of an
Applicable Period of 12 months.
2.6 GUARANTY/GUARANTOR.
(a) The Rent and other obligations pursuant to the Lease are
unlimitedly guaranteed by Balanced Care Corporation ("Guarantor") pursuant to a
guaranty agreement ("Guaranty") executed simultaneously herewith which is
attached hereto as Exhibit 2.6 and made a part hereof.
(b) Throughout the Term of the Lease, Guarantor shall maintain the
following:
(i) a ratio of consolidated current assets to consolidated
current liabilities equal to or greater than 1.0 to 1.0.;
(ii) a tangible net worth equal to or greater than
$5,000,000, unless otherwise approved (or waived) by Lessor, approval
of which shall not be unreasonably withheld (for purposes of this
Section 2.6(b)(ii), the line item identified as "Mandatorily
Redeemable Preferred B Stock" reflected on Guarantor's consolidated
financial statement shall be included in Guarantor's shareholder's
equity).
(iii) a Consolidated Cash Flow Coverage not less than 1.0 to
1.0.
"Consolidated Cash Flow Coverage" shall mean a ratio of (i) earnings
before interest, taxes, depreciation, amortization, rent and its home office
expense minus an assumed five percent (5%) management fee to (ii) all interest
and rent payments.
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ARTICLE III
IMPOSITIONS
3.1 PAYMENT OF IMPOSITIONS. Subject to Article XI relating to
permitted contests, Lessee will pay or cause to be paid all Impositions before
any fine, penalty, interest or cost may be added for non-payment, such payments
to be made directly to the taxing authorities where feasible, and Lessee will
promptly, upon request, furnish to Lessor copies of official receipts or other
satisfactory proof evidencing such payments. Lessee's obligation to pay such
Impositions and the amount thereof shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof. If any such Imposition may lawfully be paid in installments (whether
or not interest shall accrue on the unpaid balance of such Imposition), Lessee
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, shall pay such
installments during the Term hereof as the same becomes due and before any
fine, penalty, premium, further interest or cost may be added thereto. Lessor,
at its expense, shall, to the extent permitted by applicable law, prepare and
file all tax returns and reports as may be required by governmental authorities
in respect of Lessor's net income, gross receipts, franchise taxes and taxes on
its capital stock. Lessee, at its expense, shall, to the extent 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 governmental
authorities. If any refund shall be due from any taxing authority in respect of
any Imposition paid by Lessee, the same shall be paid over to or retained by
Lessee if no Event of Default shall have occurred hereunder and be continuing.
Any such funds retained by Lessor due to an Event of Default shall be applied
as provided in Article XV. Lessor and Lessee shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made
with respect to the Leased Property as may be necessary to prepare any required
returns and reports. In the event governmental authorities classify any
property covered by this Lease as personal property, Lessee shall file all
personal property tax returns in such jurisdictions where filing is required.
Lessor and Lessee will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property so
classified as personal property. Where Lessor is legally required to file
personal property tax returns, and Lessee is obligated for the same hereunder,
Lessee will be provided with copies of assessment notices in sufficient time
for Lessee to file a protest. Lessee may upon giving 30 days' prior written
notice to Lessor, at Lessee's option and at Lessee's sole cost and expense,
protest, appeal, or institute such other proceedings as Lessee may deem
appropriate to effect a reduction of real estate or personal property
assessments and Lessor, if requested by Lessee and at Lessee's expense as
aforesaid, shall fully cooperate with Lessee in such protest, appeal, or other
action. Billings for reimbursement by Lessee to Lessor of personal property
taxes shall be accompanied by copies of an invoice therefor and payments
thereof which identify the personal property with respect to which such
payments are made. Lessor will cooperate with Lessee in order that Lessee may
fulfill its obligations hereunder, including the execution of any instruments
or documents reasonably requested by Lessee.
3.2 PRORATION OF IMPOSITIONS. Impositions imposed in respect of the
tax-fiscal period during which the Term terminates shall be prorated between
Lessor and Lessee, whether or not such Imposition is imposed before or after
such termination, and Lessee's and Lessor's obligation to pay their respective
prorated shares thereof shall survive such termination.
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3.3 UTILITY CHARGES. Lessee will, or will cause Tenants to, contract
for, in its own name, and will pay or cause to be paid all charges for,
electricity, power, gas, oil, water and other utilities used in the Leased
Property during the Term.
3.4 INSURANCE PREMIUMS. Lessee will contract for, in its own name, and
will pay or cause to be paid all premiums for, the insurance coverage required
to be maintained by Lessee pursuant to Article XII during the Term.
ARTICLE IV
NO TERMINATION
Except as provided in this Lease and to the extent provided by law,
Lessee shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Lessor to modify surrender or
terminate the same, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent, nor shall the
respective obligations of Lessor and Lessee be otherwise affected by reason of
(a) any damage to, or destruction of, the Leased Property or any portion
thereof from whatever cause or any Taking of the Leased Property or any portion
thereof, except as otherwise provided in Articles XIII or XIV, (b) the lawful
or unlawful prohibition of or restriction upon, Lessee's use of the Leased
Property, or any portion thereof, or the interference with such use by any
person, corporation, partnership or other entity or by reason of eviction by
paramount title, (c) any claim which Lessee has or might have against Lessor or
by reason of any default or breach of any warranty by Lessor under this Lease
or any other agreement between Lessor and Lessee or to which Lessor and Lessee
are parties, (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of Lessor, or (e) for any other
cause whatsoever whether similar or dissimilar to any of the foregoing. Lessee
hereby specifically waives all rights arising from any occurrence whatsoever
which may now or hereafter be conferred upon it by law to (i) modify, surrender
or terminate this Lease or quit or surrender the Leased Property or any portion
thereof, or (ii) entitle Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. The obligations of Lessor and
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be
terminated pursuant to the express provisions of this Lease. Notwithstanding
the foregoing, Lessee shall have the right by separate and independent action
to pursue any claim or seek any damages it may have against Lessor as a result
of a breach by Lessor of the terms of this Lease.
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ARTICLE V
OWNERSHIP OF LEASED PROPERTY
5.1 OWNERSHIP OF THE PROPERTY. Lessee acknowledges that the Leased
Property is the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms and conditions of this
Lease.
5.2 PERSONAL PROPERTY. Lessee 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 the Personal Property, and
may remove, replace or substitute for the same from time to time in the
Ordinary Course of Business. Lessee shall provide and maintain during the
entire Term all such Personal Property as shall be necessary in order to
operate the Facility in compliance with all licensure and certification
requirements, in compliance with all applicable Legal Requirements and
Insurance Requirements and otherwise in accordance with customary practice in
the industry for the Primary Intended Use. Lessee shall provide Lessor with a
list of Personal Property provided by Lessee, updated at least semi-annually
for all items of Personal Property with a value in excess of $50,000.
ARTICLE VI
CONDITION AND USE OF LEASED PROPERTY
6.1 CONDITION OF THE LEASED PROPERTY. Lessee acknowledges receipt and
delivery of possession of the Leased Property and that Lessee has examined and
otherwise acquired knowledge of the condition of the Leased Property prior to
the execution and delivery of this Lease and has found the same to be in good
order and repair and satisfactory for its purpose hereunder. Lessee is leasing
the Leased Property "as is" in its present condition. Lessee waives any claim
or action against Lessor in respect of the condition of the Leased Property.
LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
SUITABILITY, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE
ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT IN ALL RESPECTS.
6.2 USE OF THE LEASED PROPERTY.
(a) After the Commencement Date and during the entire Term, Lessee
shall use or cause to be used the Leased Property and the improvements thereon
as a personal care facility and for such other uses as may be necessary in
connection with or incidental to such use (the "Primary Intended Use"). Lessee
shall not use the Leased Property or any portion thereof for
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any other use without the prior written consent of Lessor, which consent shall
not be unreasonably withheld or delayed.
(b) Lessee covenants that it will obtain and maintain all material
approvals needed to use and operate the Leased Property and the Facility for
the Primary Intended Use in compliance with all applicable Legal Requirements.
(c) Lessee covenants and agrees that during the Term it will use its
reasonable best efforts to operate continuously the Leased Property in
accordance with its Primary Intended Use and to maintain its certifications for
reimbursement, if any, and licensure and its accreditation, if compliance with
accreditation standards is required to maintain the operations of the Facility
and if a failure to comply would adversely affect operations of the Facility.
(d) Lessee shall not commit or suffer to be committed any waste
(ordinary wear and tear excepted) on the Leased Property or in the Facility or
cause or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property or any
portion thereof, including any Capital Addition whether or not financed by
Lessor, to be used in such a manner as (i) might reasonably tend to impair
Lessor's estate therein or in any portion thereof, or (ii) may reasonably
result in a claim or claims of adverse usage or adverse possession by the
public, as such, or of implied dedication of the Leased Property or any portion
thereof.
(f) Lessee will not utilize any Hazardous Materials on the Leased
Property except in accordance with applicable Legal Requirements and will not
permit any contamination which may require remediation under any applicable
Hazardous Materials Law. Lessee agrees not to dispose of any Hazardous
Materials or substances within the sewerage system of the Leased Property, and
that it will handle all "red bag" wastes in accordance with applicable
Hazardous Materials Laws.
6.3 MANAGEMENT OF FACILITY. Unless otherwise agreed to in writing by
Lessor (i) Lessee shall cause the Facility to be managed (including any leasing
activities) at all times by Lessee or an Affiliate of Lessee, (ii) Lessee shall
not enter into any agreement (oral or written) with respect to such management
and leasing activities unless the terms thereof and the proposed manager or
leasing agent have been approved in writing by Lessor, (iii) all such
management or leasing agreements must be in writing, and (iv) all management or
leasing agreements with an Affiliate of Lessee must contain provisions to the
effect that (A) the obligation of Lessee to pay management fees is subordinate
to its obligation to pay the Rent, and (B) the manager shall not have the right
to collect any management fees during the continuance of an Event of Default.
6.4 LESSOR TO GRANT EASEMENTS. Lessor will, from time to time, at the
request of Lessee and at Lessee's cost and expense, but subject to the approval
of Lessor (a) grant easements and other rights in the nature of easements, (b)
release existing easements or other rights in the nature of easements which are
for the benefit of the Leased Property, (c) dedicate or
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transfer unimproved portions of the Leased Property for road, highway or other
public purposes, (d) execute petitions to have the Leased Property annexed to
any municipal corporation or utility district, (e) execute amendments to any
covenants and restrictions affecting the Leased Property, and (f) execute and
deliver to any person such instruments as may be necessary or appropriate to
confirm or effect such grants, releases, dedications and transfers (to the
extent of its interest in the Leased Property), but only upon delivery to
Lessor of an Officer's Certificate stating (and such other information as
Lessor may reasonably require confirming) that such grant, release, dedication,
transfer, petition or amendment has no adverse effect on the Primary Intended
Use of the Leased Property and does not reduce the value thereof.
ARTICLE VII
LEGAL, INSURANCE AND FINANCIAL REQUIREMENTS
7.1 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS. Subject to
Article XI relating to permitted contests, Lessee, at its expense, will
promptly (a) comply with all material Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, whether or not compliance therewith shall
require structural change in any of the Leased Improvements or interfere with
the use and enjoyment of the Leased Property, and (b) directly or indirectly
with the cooperation of Lessor, but at Lessee's sole cost and expense, procure,
maintain and comply with all material licenses, certificates of need, if any,
and other authorizations required for (i) any use of the Leased Property then
being made, and for (ii) the proper erection, installation, operation and
maintenance of the Leased Improvements or any part thereof, including any
Capital Additions.
7.2 LEGAL REQUIREMENT COVENANTS. Lessee covenants and agrees that the
Leased Property shall not be used for any unlawful purpose. Lessee shall,
directly or indirectly with the cooperation of Lessor, but at Lessee's sole
cost and expense, acquire and maintain all material licenses, certificates,
permits and other authorizations and approvals needed to operate the Leased
Property in its customary manner for the Primary Intended Use and any other use
conducted on the Leased Property as may be permitted from time to time
hereunder. Lessee further covenants and agrees that Lessee's use of the Leased
Property and Lessee's maintenance, alteration, and operation of the same, and
all parts thereof, shall at all times conform to all applicable Legal
Requirements.
7.3 OCCUPANCY. From and after September 30, 1997, the Lessee must
achieve and maintain a daily average occupancy of the Facility of not less than
75% for each calendar quarter. For the first quarter that the Facility fails to
achieve and maintain this daily average occupancy, Lessee shall cause the
Manager to use its best efforts to increase occupancy at the Facility. After
the Facility fails to achieve and maintain this daily average occupancy for two
(2) consecutive calendar quarters, Lessee shall engage a consultant acceptable
to Lessor, with recognized expertise in the long term care industry, to assist
Manager in improving the Facility's occupancy level. If for three (3)
consecutive quarters the Facility fails to maintain its occupancy
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requirements and if at such time the Rent Coverage Ratio for the Facility is
less than 1.40 to 1.0, then, for so long as such conditions exist, the Lessee
shall not be permitted to exercise its purchase rights provided for in Section
29 or its renewal rights provided for in Section 34.
ARTICLE VIII
REPAIRS; RESTRICTIONS AND ANNUAL INSPECTIONS
8.1 MAINTENANCE AND REPAIR.
(a) Lessee, at its expense, will keep the Leased Property and all
private roadways, sidewalks, and curbs appurtenant thereto in reasonably good
order and repair (whether or not the need for such repairs occurs as a result
of Lessee's use, any prior use, the elements, the age of the Leased Property or
any portion thereof), and except as otherwise provided in Articles XIII and
XIV, with reasonable promptness will make all necessary and appropriate repairs
thereto of every kind and nature (including remodeling to the extent necessary
to maintain the Leased Property in a condition substantially the same as exists
on the date hereof), whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to or after the commencement of the Term
of this Lease (concealed or otherwise). All repairs and remodeling shall, to
the extent reasonably achievable, be at least equivalent in quality to the
original work and shall be accomplished by Lessee or a party selected by
Lessee. Lessee will not take or omit to take any action the taking or omission
of which might materially impair the value or usefulness of the Leased Property
or any part thereof for the Primary Intended Use. If Lessee fails to complete
or to diligently pursue completion of any of its obligations hereunder, or if
Lessor reasonably determines that action is necessary and is not being taken
Lessor may, on giving 30 days' written notice to Lessee (other than in a case
reasonably deemed by Lessor to be an emergency, in which case no such notice
shall be required), without demand on Lessee, perform any such obligations in
such manner and to such extent and take such other action as Lessor may deem
appropriate, and all costs, expenses and charges of Lessor relating to any such
action shall constitute Additional Charges and shall be payable by Lessee to
Lessor in accordance with Section 2.3.
(b) Except for the use of any insurance proceeds (to the extent
required by Sections 13.1 and 13.2) and any Award (to the extent required by
Section 14.3) or the gross negligence or willful acts of Lessor, Lessor shall
not under any circumstances be required to build or rebuild any improvements on
the Leased Property, or to make any repairs, replacements, alterations,
restorations, or renewals of any nature or description to the Leased Property,
whether ordinary or extraordinary, structural or nonstructural, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto in
connection with this Lease, or to maintain the Leased Property in any way.
(c) Nothing contained in this Lease and no action or inaction by
Lessor shall be construed as (i) constituting the consent or request of Lessor,
expressed or implied, to any
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contractor, subcontractor, laborer, materialman or vendor to or for the
performance of any particular labor or services or the furnishing of any
particular materials or other property for the construction, alteration,
addition, repair or demolition of or to the Leased Property or any part
thereof, or (ii) giving Lessee any right, power or permission to contract for
or permit the performance of any labor or services or the finishing of any
materials or other property in such fashion as would permit the making of any
claim against Lessor in respect thereof or to make any agreement that may
create, or in any way be the basis for, any right, title, interest, lien, claim
or other encumbrance upon the estate of Lessor in the Leased Property or any
portion thereof.
(d) Unless Lessor shall convey any of the Leased Property to Lessee
pursuant to the provisions of this Lease, Lessee will, upon the expiration or
prior termination of this Lease, vacate and surrender the Leased Property to
Lessor in the condition in which the Leased Property was originally received
from Lessor, except for ordinary wear and tear (subject to the obligation of
Lessee to maintain the Property in good order and repair during the entire
Term), damage caused by the gross negligence or willful acts of Lessor, and
damage or destruction described in Article XIII or resulting from a Taking
described in Article XIV which Lessee is not required by the terms of this
Lease to repair or restore, and except as repaired, rebuilt restored, altered
or added to as permitted or required by the provisions of this Lease.
8.2 ENCROACHMENTS; RESTRICTIONS. If any of the Improvements shall at
any time, encroach upon any property street or right-of-way adjacent to the
Leased Property, or shall violate the agreements or conditions contained in any
applicable Legal Requirement, lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof or shall impair the rights
of others under any easement or right-of-way to which the Leased Property is
subject, then promptly upon the request of Lessor, Lessee shall at its expense
subject to its right to contest the existence of any such encroachment,
violation or impairment, (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 Lessor or Lessee, or (b)
make such changes in the Improvements, and take such other actions as Lessor in
the good faith exercise of its judgment deems reasonably practicable, to remove
such encroachment, or 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 be able to continue the
operation of the Facility for the Primary Intended Use substantially in the
manner and to the extent the Facility was operated prior to the assertion of
such violation or encroachment. Any such alteration shall be made in conformity
with the applicable requirements of Article IX. Lessee's obligations under this
Section 8.2 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 and
Lessee shall be entitled to a credit for any sums recovered by Lessor under any
such policy of title or other insurance.
8.3 INSPECTIONS. From time to time during the Term, Lessor and its
agents shall have the right to inspect the Leased Property and all systems
contained therein at any reasonable time to determine Lessee's compliance with
its obligations under this Lease, including those
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obligations set forth in Article VII and this Article VIII. Lessee shall be
responsible for the costs of such inspections which costs shall equal $1,000.00
per year during the Term.
ARTICLE IX
CAPITAL ADDITIONS
9.1 Construction of Capital Additions to the Leased Property.
(a) If no Event of Default shall have occurred and be continuing,
Lessee shall have the right, upon and subject to the terms and conditions set
forth below, to construct or install Capital Additions on the Leased Property
with the prior written consent of Lessor which consent shall not be
unreasonably withheld; provided that Lessee shall not be permitted to create
any Encumbrance on the Leased Property in connection with such Capital Addition
without first complying with Section 9.l(b) hereof. Prior to commencing
construction of any Capital Addition, Lessee shall submit to Lessor in writing
a proposal setting forth in reasonable detail any proposed Capital Addition and
shall provide to Lessor such plans and specifications, permits, licenses,
contracts and other information concerning the proposed Capital Addition as
Lessor may reasonably request. 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.
Notwithstanding the foregoing, Lessee shall be permitted to construct or
install Capital Additions whose cost does not exceed $25,000 in any one Lease
year without the need to obtain the prior written consent of Lessor provided
that such improvements shall be architecturally integrated into and consistent
with the Leased Property.
(b) Prior to commencing construction of any Capital Addition, Lessee
shall first request Lessor to provide funds to pay for such Capital Addition in
accordance with the provisions of Section 9.3 unless the Capital Addition Cost
is less than $25,000. If Lessor declines or is unable to provide such financing
on terms acceptable to Lessee and Lessee rejects Lessor's offer of financing,
Lessee may arrange or provide other financing, subject to the provisions of
Section 9.2. Lessor will reasonably cooperate with Lessee regarding the grant
of any consents or easements or the like necessary or appropriate in connection
with any Capital Addition; provided that no Capital Addition shall be made
which would tie in or connect any Leased Improvements on the Leased Property
with any other improvements on property adjacent to the Leased Property (and
not part of the Land covered by this Lease) including tie-ins of buildings or
other structures or utilities, unless Lessee shall have obtained the prior
written approval of Lessor, which approval shall not be unreasonably withheld.
All proposed Capital Additions shall be architecturally integrated into and
consistent with the Leased Property.
9.2 Capital Additions Financed by Lessee. If Lessee finances or
arranges to finance any Capital Addition with a party other than Lessor or if
Lessee pays cash for any Capital Addition, this Lease shall be and hereby is
amended to provide as follows:
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(a) There shall be no adjustment in the Minimum Rent by reason of any
such Capital Addition.
(b) Upon the expiration or earlier termination of this Lease, Lessor
shall compensate Lessee for all Capital Additions (if consented to by Lessor
and Lessor's consent is required) paid for or financed by Lessee in any of the
following ways:
(i) By purchasing all Capital Additions paid for by Lessee
from Lessee for cash in the amount of the Fair Market Added Value at the time
of purchase by Lessor of all such Capital Additions paid for or financed by
Lessee; or
(ii) any other arrangement regarding such compensation as
shall be mutually acceptable to Lessor and Lessee.
Any amount owed by Lessee to Lessor under this Lease at such termination or
expiration may be deducted from any compensation for Capital Additions payable
by Lessor to Lessee under this Section 9.2.
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR.
(a) Lessee shall request that Lessor provide or arrange financing for
a Capital Addition by providing to Lessor such information about the Capital
Addition as Lessor may reasonably request (a "Request"), including all
information referred to in Section 9.1 above. Lessor may, but shall be under no
obligation to, provide or obtain the funds necessary to meet the Request.
Within 30 days of receipt of a Request, Lessor shall notify Lessee as to
whether it will finance the proposed Capital Addition and, if so, the terms and
conditions upon which it would do so, including the terms of any amendment to
this Lease. In no event (i) shall the portion of the projected Capital
Addition Cost comprised of land (if any), materials, labor charges, a five
percent (5%) development fee and fixtures be less than 100% of the total amount
of such cost, or (ii) shall Lessee or any of its Affiliates be entitled to any
commission or development fee (other than described in (i)), directly or
indirectly, as a portion of the Capital Addition Cost. Any Capital Addition not
financed by Lessor must still be approved in writing by Lessor pursuant to the
terms of Section 9.1 hereof, which consent will not be unreasonably withheld.
Lessee may withdraw its Request by notice to Lessor at any time before or after
receipt of Lessor's terms and conditions.
(b) If Lessor agrees to finance the proposed Capital Addition,
Lessor's obligation to advance any funds shall be subject to receipt of all of
the following, in form and substance reasonably satisfactory to Lessor:
(i) such loan documentation as may be required by Lessor;
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(ii) any information, certificates, licenses, permits or
documents requested by Lessor, or by any lender with whom Lessor has agreed or
may agree to provide financing which are necessary or appropriate to confirm
that Lessee 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;
(iii) an Officer's Certificate and, if requested, a
certificate from Lessee's architect, setting forth in detail reasonably
satisfactory to Lessor the projected (or actual, if available) cost of the
proposed Capital Addition;
(iv) an amendment to this Lease, duly executed and
acknowledged in form and substance satisfactory to Lessor and Lessee (the
"Lease Amendment"), containing such provisions as may be necessary or
appropriate due to the Capital Addition, including any appropriate changes in
the legal description of the Land and the Rent, all such changes to be mutually
agreed upon by Lessor and Lessee;
(v) a deed conveying title to Lessor to any land and
improvements or other rights acquired for the purpose of constructing the
Capital Addition, free and clear of any liens or encumbrances except those
approved in writing by Lessor and, both prior to and following completion of
the Capital Addition, an as-built survey thereof reasonably satisfactory to
Lessor;
(vi) endorsements to any outstanding policy of title
insurance covering the Leased Property or a supplemental policy of title
insurance covering the Leased Property reasonably satisfactory in form and
substance to Lessor (A) updating the same without any additional exceptions,
except as may be permitted by Lessor; and (B) 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 (vii) below);
(vii) if required by Lessor, (A) an owner's policy of title
insurance insuring fee simple title to any land conveyed to Lessor pursuant to
subparagraph (v), free and clear of all liens and encumbrances except those
approved by Lessor and (B) a lender's policy of title insurance satisfactory in
form and substance to Lessor and the Lending Institution advancing any portion
of the Capital Addition Cost;
(viii) if required by Lessor upon completion of the Capital
Addition, an M.A.I. appraisal of the Leased Property; and
(ix) such other certificates (including endorsements
increasing the insurance coverage, if any, at the time required by Section
12.1), documents, customary opinions of Lessee's counsel, appraisals, surveys,
certified copies of duly adopted resolutions of the Board of Directors of
Lessee authorizing the execution and delivery of the Lease Amendment and any
other instruments or documents as may be reasonably required by Lessor.
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(c) Upon making a Request to finance a Capital Addition, whether or
not such financing is actually consummated, Lessee shall pay the reasonable
costs and expenses of Lessor and any Lending Institution which has committed to
finance such Capital Addition paid or incurred in connection with the financing
of the Capital Addition including (i) the fees and expenses of their respective
counsel, (ii) the amount of any recording or transfer taxes and fees, (iii)
documentary stamp taxes, if any, (iv) title insurance charges, (v) appraisal
fees, if any, and (vi) commitment fees, if any.
9.4 REMODELING AND NON-CAPITAL ADDITIONS. Lessee shall have the right
and the obligation to make additions, modifications or improvements to the
Leased Property which are not Capital Additions, including tenant improvements
made in connection with the Tenant Leases, from time to time as may reasonably
be necessary for its uses and purposes and to permit Lessee to comply fully
with its obligations set forth in this Lease; provided that such action will be
undertaken expeditiously, in a workmanlike manner and will not significantly
alter the character or purpose or detract from the value or operating
efficiency of the Leased Property and will not significantly impair the revenue
producing capability of the Leased Property or adversely affect the ability of
Lessee to comply with the provisions of this Lease. Title to all non-Capital
Additions, modifications and improvements shall, without payment by Lessor at
any time, be included under the terms of this Lease and, upon expiration or
earlier termination of this Lease, shall pass to and become the property of
Lessor.
9.5 SALVAGE. All materials which are scrapped or removed in connection
with the making of either Capital Additions permitted by Section 9.1 or repairs
required by Article VIII shall be or become the property of Lessor; provided
that Lessor may require Lessee to dispose of such materials and remit the net
proceeds thereof to Lessor within 15 days of such disposal.
ARTICLE X
LIENS
Subject to the provisions of Article XI relating to permitted
contests, Lessee will not directly or indirectly create or suffer to exist and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim, or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, set forth in Exhibit B attached hereto, (c)
restrictions, liens and other encumbrances which are consented to in writing by
Lessor, or any easements granted pursuant to the provisions of Section 6.4 of
this Lease, (d) liens for those taxes of Lessor which Lessee is not required to
pay hereunder, (e) subleases permitted by Article XXIII, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (1) the same are not yet payable or are payable without the addition of
any fine or penalty or (2) such liens are in the process of being contested in
accordance with the provisions of Article XI, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed or not yet due,
provided that (1) the payment of such sums shall not be postponed for more than
60 days after the completion of the action (including any appeal from any
judgment rendered therein)
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giving rise to such lien and such reserve or other appropriate provisions as
shall be required by law or generally accepted accounting principles shall have
been made therefor or (2) any such liens are in the process of being contested
in accordance with the provisions of Article XI, and (h) any Encumbrance placed
on the Leased Property by Lessor.
ARTICLE XI
PERMITTED CONTESTS
Lessee, after ten days' prior written notice to Lessor, on its own or
on Lessor's behalf (or in Lessor's name), but at Lessee's expense, may contest,
by appropriate legal proceedings conducted in good faith and with due
diligence, the amount, validity or application, in whole or in part, of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively "Charge") not otherwise permitted by
Article X, which is required to be paid or discharged by Lessee or any Tenant;
provided that (a) in the case of an unpaid Charge, the commencement and
continuation of such proceedings, or the posting of a bond or certificate of
deposit as may be permitted by applicable law, shall suspend the collection
thereof from Lessor and from the Leased Property; (b) neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; (c)
Lessor would not be in any immediate danger of civil or criminal liability for
failure to comply therewith pending the outcome of such proceedings; (d) in the
event that any such contest shall involve a sum of money or potential loss in
excess of $50,000.00, then Lessee shall deliver to Lessor and its counsel an
Officer's Certificate as to the matters set forth in clauses (a), (b) and (c)
and such opinions of legal counsel as Lessor may reasonably request; (e) in the
case of an Insurance Requirement, the coverage required by Article XII shall be
maintained; and (f) if such contest be finally resolved against Lessor or
Lessee, Lessee shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties accrued
thereon, or otherwise comply with the applicable Charge; provided further that
nothing contained herein shall be construed to permit Lessee to contest the
payment of the Rent, or any other sums payable by Lessee to Lessor hereunder.
Lessor, at Lessee' s expense, shall execute and deliver to Lessee such
authorizations and other documents as may reasonably be required in any such
contest and, if reasonably requested by Lessee or if Lessor so desires and then
at its own expense, Lessor shall join as a party therein. Lessor shall do all
things reasonably requested by Lessee in connection with such action. Lessee
shall indemnify and save Lessor harmless against any liability, cost or expense
of any kind that may be imposed upon Lessor in connection with any such contest
and any loss resulting therefrom.
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ARTICLE XII
INSURANCE
12.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease,
Lessee shall at all times keep the Leased Property, and all property located in
or on the Leased Property insured with the kinds and amounts of insurance
described below and written by companies reasonably acceptable to Lessor
authorized to do insurance business in the state in which the Leased Property
is located. The policies must name Lessor as an additional insured and losses
shall be payable to Lessor and/or Lessee as provided in Article XIII. In
addition, the policies shall name as an additional insured the holder
("Facility Mortgagee") of any mortgage, deed of trust or other security
agreement securing any Encumbrance placed on the Leased Property or any part
thereof in accordance with the provisions of Article XXXII ("Facility
Mortgage"), if any, by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment in excess of $100,000.00 shall require the
written consent of Lessor and each affected Facility Mortgagee. Evidence of
insurance shall be deposited with Lessor and if requested, with any Facility
Mortgagee(s). If any provision of any Facility Mortgage which constitutes a
first lien on the Leased Property requires deposits of insurance to be made
with such Facility Mortgagee, Lessee shall either pay to Lessor monthly the
amounts required and Lessor shall transfer such amounts to such Facility
Mortgagee or, pursuant to written direction by Lessor, Lessee shall make such
deposits directly with such Facility Mortgagee. The policies on the Leased
Property, including the Leased Improvements, the Fixtures and the Personal
Property, shall insure against the following risks:
(a) Loss or damage by fire, vandalism and malicious mischief extended
coverage perils commonly known as "All Risk" and all physical loss perils,
including sprinkler leakage and business interruption, in an amount not less
than 90% of the then Full Replacement Cost thereof (as defined below in Section
12.2) after deductible with a replacement cost endorsement sufficient to
prevent Lessee from becoming a co-insurer together with an agreed value
endorsement;
(b) Loss or damage by explosion of steam boilers, pressure vessels or
similar apparatus now or hereafter installed in the Facility, in such limits
with respect to any one accident as may be reasonably requested by Lessor from
time to time;
(c) Loss or damage by hurricane and earthquake in the amount of the
Full Replacement Cost, after deductible;
(d) Loss of rental under a rental value insurance policy covering risk
of loss during the first 6 months of reconstruction necessitated by the
occurrence of any of the hazards described in Sections 12.1(a), 12.1(b) or 12.1
(c), in an amount sufficient to prevent Lessee from becoming a co-insurer;
provided that in the event that Lessee shall not be in default hereunder and
Lessor shall receive any proceeds from such rental insurance which when added
to rental amounts received with respect to the applicable time period exceed
the amount of rental owed by Lessee hereunder, Lessor shall immediately pay
such excess to Lessee;
(e) Claims for personal injury or property damage under a policy of
comprehensive general public liability insurance including insurance against
assumed or contractual liability including indemnities under this Lease, with
amounts not less than $5,000,000.00 per occurrence
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in respect of bodily injury and death and $5,000,000.00 for property damage;
provided that if it becomes customary for tenants occupying similar buildings
in the same City where the Leased Property is located to be required to provide
liability coverage with higher limits than the foregoing, then Lessee shall
provide Lessor with an insurance policy with coverage limits that are not less
than such customary limits; and
(f) Flood (when the Leased Property is located in whole or in part
within a designated flood plain area) and such other hazards and in such
amounts as may be customary for comparable properties in the area and if
available from insurance companies authorized to do business in the state in
which the Leased Property is located.
12.2 REPLACEMENT COST. The term "Full Replacement Cost" as used herein
shall mean the actual replacement cost of the Facility from time to time,
including increased cost of construction endorsement, less exclusions provided
in the normal fire insurance policy. In the event Lessor or Lessee believes
that the Full Replacement Cost has increased or decreased at any time during
the Term, it shall have the right at its own expense to have such Full
Replacement Cost redetermined by the insurance company which is then providing
the largest amount of casualty insurance carried on the Leased Property,
hereinafter referred to as the "impartial appraiser. The party desiring to have
the Full Replacement Cost so redetermined shall forthwith, on receipt of such
determination by the impartial appraiser, give written notice thereof to the
other party hereto. The determination of such impartial appraiser shall be
final and binding on the parties hereto, and Lessee shall forthwith increase,
or may decrease, the amount of the insurance carried pursuant to this Article
to the amount so determined by the impartial appraiser.
12.3 ADDITIONAL INSURANCE. In addition to the insurance described
above, Lessee shall maintain such additional insurance as may be reasonably
required from time to time by any Facility Mortgagee which is consistent with
insurance coverage for similar properties in the city, county and state where
the Leased Property is located, or required pursuant to any applicable Legal
Requirement, and shall at all times maintain or cause to be maintained adequate
worker's compensation insurance coverage for all persons employed by Lessee on
the Leased Property in accordance with all applicable Legal Requirements.
12.4 WAIVER OF SUBROGATION. All insurance policies carried by either
party covering the Leased Property, the Fixtures, the Facility and/or the
Personal Property, including contents, fire and casualty insurance, shall
expressly waive any right of subrogation on the part of the insurer against the
other party. The parties hereto agree that their policies will include such a
waiver clause or endorsement so long as the same is obtainable without extra
cost, and in the event of such an extra charge the other party, at its
election, may request and pay the same, but shall not be obligated to do so.
12.5 FORM OF INSURANCE. All of the policies of insurance referred to
in this Section shall be written in form reasonably satisfactory to Lessor by
insurance companies reasonably
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satisfactory to Lessor: provided that the deductibles for insurance required by
Sections 12.1 (a) through 12.1 (d) shall be no greater than $50,000.00 and the
deductible for coverage required by Section 12.1(e) shall be no greater than
$100,000.00. Lessee shall pay all premiums therefor, and deliver such policies
for certificates thereof to Lessor prior to their effective date (and with
respect to any renewal policy, at least 30 days prior to the expiration of the
existing policy). In the event of the failure of Lessee to effect such
insurance in the names herein called for or to pay the premiums therefor, or to
deliver such policies or certificates thereof to Lessor at the times required,
Lessor shall be entitled, but shall have no obligation, to enact such insurance
and pay the premiums therefor, which premiums shall be repayable by Lessee to
Lessor upon written demand therefor, and failure to repay the same shall
constitute an Event of Default within the meaning of Section 15.1(c). Each
insurer mentioned in this Section shall agree, by endorsement on the policy or
policies issued by it, or by independent instrument furnished to Lessor, that
it will give to Lessor prior written notice before the policy or policies in
question shall be altered, allowed to expire or canceled.
12.6 CHANGE IN LIMITS. In the event that Lessor shall at any time
reasonably and in good faith believe the limits of the personal injury,
property damage or general public liability insurance then carried to be
insufficient, the parties shall endeavor to agree on the proper and reasonable
limits for such insurance to be carried and such insurance shall thereafter be
carried with the limits thus agreed on until further change pursuant to the
provisions of this Section. If the parties shall be unable to agree thereon,
the proper and reasonable limits for such insurance shall be determined by an
impartial third party selected by the parties the costs of which shall be
divided equally between the parties. Such redeterminations, whether made by the
parties or by arbitration shall be made no more frequently than every year.
Nothing herein shall permit the amount of insurance to be reduced below the
amount or amounts reasonably required by any Facility Mortgagee.
12.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Section, Lessee's obligations to carry the insurance provided
for herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee; provided that the
coverage afforded Lessor will not be reduced or diminished or otherwise be
different from that which would exist under separate policies meeting all other
requirements of this Lease: provided further that the requirements of this
Article XII are otherwise satisfied.
12.8 NO SEPARATE INSURANCE. Without the prior written consent of
Lessor, Lessee shall not on Lessee's own initiative or pursuant to the request
or requirement of any third party, take out separate insurance concurrent in
form or contributing in the event of loss with that required in this Article
XII to be furnished by, or which may reasonably be required by a Facility
Mortgagee to be furnished by, Lessee, or increase the amounts of any
then-existing insurance required under this Article XII by securing an
additional policy or additional policies, unless all parties having an
insurable interest in the subject matter of the insurance, including in all
cases Lessor and all Facility Mortgagees, are included therein as additional
insureds and the loss is
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payable under said insurance in the same manner as losses are required to be
payable under this Lease. Lessee shall immediately notify Lessor of the taking
out of any such separate insurance or of the increasing of any of the amounts
of the then-existing insurance required under this Article XII by securing an
additional policy or additional policies.
12.9 INSURANCE FOR CONTRACTORS. If Lessee shall engage or cause to be
engaged any contractor to perform work on the Leased Property, Lessee shall
require such contractor to carry and maintain insurance coverage comparable to
the foregoing requirements, at no expense to Lessor; provided that in cases
where such coverage is excessive in relation to the work being done, Lessee may
allow any such contractor to carry or maintain alternative coverage in
reasonable amounts upon Lessor's prior written consent which shall not be
unreasonably withheld.
ARTICLE XIII
FIRE AND CASUALTY
13.1 INSURANCE PROCEEDS. All proceeds payable by reason of any loss or
damage to the Leased Property or any portion thereof, and insured under any
policy of insurance required by Article XII of this Lease shall be paid to
Lessor and held by Lessor in trust (subject to the provisions of Section 13.7)
and shall be made available for reconstruction or repair, as the case may be,
of any damage to or destruction of the Leased Property, or any portion thereof,
and shall be paid out by Lessor from time to time for the reasonable cost of
such reconstruction or repair in accordance with this Article XIII after Lessee
has expended an amount equal to or exceeding the deductible under any
applicable insurance policy. Any excess proceeds of insurance remaining after
the completion of the restoration or reconstruction of the Leased Property
shall be retained by Lessee free and clear upon completion of any such repair
and restoration except as otherwise specifically provided below in this Article
XIII; provided that in the event neither Lessor nor Lessee is required or
elects to repair or restore the Leased Property, then all such insurance
proceeds shall be retained by Lessor. All salvage resulting from any risk
covered by insurance shall belong to Lessee, including any salvage relating to
Capital Additions paid for by Lessee.
13.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED BY
INSURANCE.
(a) Facility Rendered Unsuitable for Its Primary Intended Use. Except
as provided in Section 13.7, if during the Term, the Facility is totally or
partially destroyed from a risk covered by the insurance described in Article
XII and the Facility thereby is rendered Unsuitable for its Primary Intended
Use, such damage or destruction shall not terminate this Lease and all of
Lessee's obligations with respect to payment of the Rent shall continue in full
force and effect and shall not be affected thereby and Lessee shall either:
(i) apply all proceeds payable with respect thereto to
restore the Facility to substantially the same condition as existed immediately
prior to such damage or destruction, or
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(ii) offer either (A) to acquire the Leased Property from
Lessor for a purchase price equal to the Minimum Repurchase Price of the Leased
Property immediately prior to such damage or destruction or (B) to substitute a
new property or properties for the Leased Property pursuant to and in
accordance with the provisions of Article XX (which offers Lessor may in its
sole discretion refuse).
Lessee shall give written notice to Lessor within 60 days after the date of
such damage or destruction whether Lessee chooses option (i) or option (ii),
and if option (ii) is chosen, such notice shall be accompanied by the offer
referred to therein. In the event Lessee fails to give such notice or does not
make an offer under option (ii), Lessee shall promptly proceed to restore the
Facility to substantially the same condition as existed immediately prior to
the damage or destruction. If Lessor does not accept Lessee's offer to
substitute for or purchase the Leased Property within 30 days after the date of
such offer, Lessee's offer shall be deemed withdrawn on such 30th day and
Lessee shall promptly proceed to restore the Facility to substantially the same
condition as existed immediately prior to such damage for destruction.
(b) Facility Not Rendered Unsuitable for Its Primary Intended Use.
Except as provided in Section 13.7, if during the Term, the Facility is
partially destroyed from a risk covered by the insurance described in Article
XII, but the Facility is not thereby rendered Unsuitable for its Primary
Intended Use, Lessee shall restore the Facility to substantially the same
condition as existed immediately prior to the damage or destruction and such
damage or destruction shall not terminate this Lease and all of Lessee's
obligations hereunder, including Lessee's obligations with respect to the
payment of the Rent, shall continue in full force and effect and shall not be
affected thereby; provided that if Lessee cannot within a reasonable time
obtain all necessary governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need, after diligent
efforts to do so, in order to be able to perform all required repair and
restoration work and to operate the Facility for its Primary Intended Use in
substantially the same manner as immediately prior to such damage or
destruction then Lessee shall either offer, either:
(i) offer either (A) to acquire that Leased Property from Lessor for a
purchase price equal to the Minimum Repurchase Price immediately prior to such
damage or destruction, or (B) to substitute a new property or properties for
the Leased Property pursuant to and in accordance with the provisions of
Article XX (which offers Lessor in its sole discretion may refuse), or
(ii) after the fourth anniversary of the Commencement Date, offer to
purchase the Leased Property from Lessor for a purchase price equal to the
Minimum Repurchase Price of the Leased Property immediately prior to such
damage or destruction.
Lessee shall give written notice to Lessor within 60 days after the
date of such damage or destruction whether Lessee chooses option (i) or option
(ii), and if option (i) is chosen, such
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notice shall be accompanied by the offer referred to therein. In the event
Lessee fails to give such notice or does not make an offer under option (i),
Lessee shall promptly proceed to restore the Facility to substantially the same
condition as existed immediately prior to the damage or destruction. If Lessor
does not accept Lessee's offer to substitute for or purchase the Leased
Property within 30 days after the date of such offer, Lessee's offer shall be
deemed withdrawn on such 30th day and Lessee shall promptly proceed to restore
the Facility to substantially the same condition as existed immediately prior
to such damage for destruction.
13.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT COVERED
BY INSURANCE. Except as provided in Section 13.7, if during the Term the
Facility is totally or materially destroyed from a risk (including earthquake)
not covered by the insurance described in Article XII, whether or not such
damage or destruction renders the Facility Unsuitable for Its Primary Intended
Use, Lessee shall:
(i) restore the Facility to substantially the same condition
it was in immediately prior to such damage or destruction and such damage or
destruction shall not terminate this Lease, and all of Lessee's obligations
hereunder, including Lessee's obligations with respect to the payment of the
Rent, shall continue in full force and effect and not be affected thereby, or
(ii) offer either (A) to acquire the Leased Property from
Lessor for a purchase price equal to the Minimum Repurchase Price immediately
prior to such damage or destruction, or (B) to substitute a new property or
properties for the Leased Property pursuant to and in accordance with the
provisions of Article XX (which offers Lessor in its sole discretion may
refuse); provided that if such damage or destruction is not material in the
reasonable opinion of Lessor, Lessee shall restore the Facility to
substantially the same condition as existed immediately prior to any such
damage or destruction.
Lessee shall give written notice to Lessor within 60 days after the date of
such damage or destruction whether Lessee chooses option (i) or option (ii),
and if option (ii) is chosen such notice shall be accompanied by the offer
referred to therein. If Lessor does not accept Lessee's offer to substitute for
or purchase the Leased Property within 30 days after the date of such offer
Lessee's offer shall be deemed to be withdrawn on such 30th day. If such offer
is so withdrawn, or if Lessee fails to purchase the Leased Property or to
provide a Substitute Property in accordance with Article XX, then such damage
and destruction shall be deemed to be a total Taking of such Facility under
Section 14.2 and the provisions of said Section 14.2 shall apply to the rights
of the parties and all insurance proceeds payable in connection with such
damage or destruction shall be treated as if such proceeds constituted an
"Award" under said Section 14.2
13.4 LESSEE'S PROPERTY. Lessee shall use any insurance proceeds
payable by reason of any loss of or damage to any of the Personal Property to
restore such Personal Property to the Leased Property with items of
substantially equivalent value to the items being replaced.
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13.5 RESTORATION OF LESSEE'S PROPERTY. If Lessee is required or elects
to restore the Facility as provided in Sections 13.2 or 13.3, Lessee shall also
restore the Personal Property related thereto as required by Section 13.4 and
all Capital Additions paid for or financed by Lessor. Insurance proceeds
payable by reason of damage to Capital Additions paid for or financed by Lessor
shall be paid to Lessor and Lessor shall hold such insurance proceeds in trust
to pay the cost of repairing or replacing such Capital Additions in the event
Lessee does not purchase or substitute other property or properties for the
Leased Property.
13.6 NO ABATEMENT OF THE RENT. This Lease shall remain in full force
and effect and Lessee's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during any period required
for repair and restoration.
13.7 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of
Sections 13.2 or 13.3 to the contrary, if damage to or destruction of the
Facility occurs during the last 12 months of the Term, and if such damage or
destruction cannot be fully repaired and restored within the lesser of (i) six
months or (ii) the period remaining in the Term immediately following the date
of loss, then either party shall have the right to terminate this Lease by
giving notice of termination to the other within 30 days after the date of such
damage or destruction, in which event Lessor shall be entitled to retain the
insurance proceeds and Lessee shall pay to Lessor on demand the amount of any
deductible or uninsured loss arising in connection therewith; provided that any
such notice given by Lessor shall be void and of no force and effect if Lessee
exercises an available option to extend the Term for one Extended Term, or one
additional Extended Term, as the case may be, within 30 days following receipt
of such termination notice.
13.8 PURCHASE OR SUBSTITUTION. In the event Lessor accepts any offer
by Lessee to purchase the Leased Property or to substitute a property or
properties for the Leased Property, this Lease shall terminate upon payment of
the purchase price and execution and delivery of all documentation in
accordance with Article XVII, or execution and delivery of all documents
required in connection with a Substitute Property under Article XX. Lessor
shall remit to Lessee, or in the case of a purchase allow Lessee a credit
toward the purchase price, an amount equal to all insurance proceeds being held
in trust by Lessor.
13.9 WAIVER. Lessee hereby knowingly and expressly waives any
statutory or common law rights of termination which may arise by reason of any
damage or destruction of the Facility.
ARTICLE XIV
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease
by Condemnation, the rights and obligations of the parties shall be determined
by this Article XIV.
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14.2 TOTAL TAKING. If there is a Taking of all of the Leased Property
by Condemnation, this Lease shall terminate on the Date of Taking, and the
Minimum Rent and all Additional Charges paid or payable hereunder shall be
apportioned and paid to the Date of Taking.
14.3 PARTIAL TAKING. If there is a Taking of a portion of the Leased
Property by Condemnation such that the Facility is not thereby rendered
Unsuitable for Its Primary Intended Use, this Lease shall not terminate and all
of Lessee's obligations hereunder, including Lessee's obligations with respect
to the payment of the Rent, shall continue in full force and effect and shall
not be affected thereby. If however, the Facility is thereby rendered
Unsuitable for Its Primary Intended Use, Lessee shall either:
(i) at Lessee's expense, restore the Facility to the extent
possible, to substantially the same condition as existed immediately prior to
the partial Taking, in which case the proceeds of any Award shall be applied to
such restoration to the extent necessary or appropriate, or
(ii) offer either (A) to acquire the Leased Property from
Lessor for a purchase price equal to the Minimum Repurchase Price of the Leased
Property immediately prior to such partial Taking, or (B) to substitute a new
property or properties for the Leased Property pursuant to and in accordance
with the provisions of Article XX (which offers Lessor may in its sole
discretion refuse), or
(iii) terminate this Lease effective upon the effective date
of such Taking.
Lessee will give written notice to Lessor within 60 days after Lessee receives
notice of the Taking whether Lessee chooses option (i), option (ii) or option
(iii), and if option (ii) is chosen, such notice shall be accompanied by the
offer referred to therein. In the event Lessor does not accept Lessee's offer
to so purchase the Leased Property within 30 days after receipt of the notice
described in the preceding sentence, Lessee may either (a) withdraw its offer
to purchase the Leased Property and proceed to restore the Facility, to the
extent possible, to substantially the same condition as existed immediately
prior to before the partial Taking, or (b) terminate the offer and this Lease
by written notice to Lessor.
14.4 RESTORATION. If there is a partial Taking of the Leased Property
and this Lease remains in full force and effect pursuant to any provision of
this Article XIV. Lessee shall accomplish all necessary restoration in order
that the Leased Property may continue to be used for its Primary Intended Use.
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14.5 AWARD DISTRIBUTION. In the event Lessee purchases the Leased
Property pursuant to Section 14.3 or Lessor accepts any offer by Lessee to
purchase the Leased Property or to provide a Substitute Property therefor
pursuant to this Article XIV, then the entire Award shall belong to Lessee and
Lessor agrees to assign to Lessee all of its rights thereto. Except as
otherwise expressly provided in this Article XIV, in any other event the entire
Award shall belong to and be paid to Lessor; provided that if this Lease is
terminated in accordance with Section 14.2 and subject to the rights of any
Facility Mortgagees, Lessee shall be entitled to receive from the Award any sum
attributable to any Capital Additions for which Lessee would be entitled to
reimbursement at the end of the Term pursuant to the provisions of Section
9.2(b), but only if any to the extent such Award expressly includes such items
and allocates a value thereto. If Lessee is required or elects to restore the
Facility, Lessor agrees that, subject to the rights of the Facility Mortgagees,
its portion of the Award shall be used for such restoration and it shall hold
such portion of the Award in trust, for application to the costs of the
restoration.
14.6 TEMPORARY TAKING. The Taking of the Leased Property, or any part
thereof, by military or other public authority shall constitute a Taking by
Condemnation only when the use and occupancy by the Taking authority has
continued for longer than six months. During any such six-month period all the
provisions of this Lease shall remain in full force and effect and the Rent
shall not be abated or reduced during such period of Taking; provided that to
the extent any compensation is paid by the Taking authority as a result of such
temporary Taking, Lessee will retain such compensation.
14.7 PURCHASE OR SUBSTITUTION. In the event Lessor accepts any offer
by Lessee to purchase the Leased Property or to substitute a property or
properties for the Leased Property this Lease and Lease obligations shall
terminate upon payment of the purchase price and execution and delivery of all
appropriate documentation in accordance with Article XVII, or execution and
delivery of all documents required in connection with a Substitute Property
under Article XX.
ARTICLE XV
DEFAULT
15.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute events of default (individually, an "Event of
Default" and collectively, "Events of Default") hereunder:
(a) An event of default shall occur under any other lease or other
agreement between Lessor or any of its Affiliates and Lessee or any of its
Affiliates, or
(b) Lessee shall fail to make a payment of the Rent payable by Lessee
under this Lease when the same becomes due and payable and such failure
continues for a period of ten calendar days after written notice from Lessor to
Lessee, or
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(c) Lessee shall fail to observe or perform any other term covenant or
condition of this Lease or any document executed in connection herewith and
such failure is not cured by Lessee within a period of 30 days after receipt by
Lessee of notice thereof from Lessor, unless such failure cannot with due
diligence be cured within a period of 30 days, in which case such failure shall
not be deemed to continue if Lessee proceeds promptly and with due diligence to
cure the failure and diligently completes the curing thereof (as soon as
reasonably possible), or
(d) Lessee shall:
(i) admit in writing its inability to pay its debts generally
as they become due
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency law and such petition is not discharged within
sixty days of filing,
(iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or of
the whole or any substantial part of its property,
(v) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof,
(e) Lessee or Guarantor shall default beyond any applicable grace
period contained in one or more major credit facilities which by their terms
would permit an outstanding balance equal to or greater than $1,000,000.00 in
the aggregate and the same shall be accelerated by the lenders or other
applicable parties,
(f) Lessee shall default beyond any applicable grace period contained
in one or more of the Leases,
(g) An Event of Default should occur pursuant to the Guaranty, or
(h) any certificate, financial statement or information, or any
representation or warranty provided herein or pursuant to this Lease by Lessee
should prove to be false or misleading in any material respect. Notwithstanding
the foregoing, it shall not be an Event of Default hereunder if upon
discovering such false or misleading statements and before Lessor relies upon
the same (i) Lessor notifies Lessee and (ii) Lessee, within ten (10) days of
such notice, takes appropriate action necessary to correct such false or
misleading statements.
15.2 REMEDIES. If an Event of Default shall have occurred, Lessor may,
at its election then or at any time thereafter, pursue any one or more of the
following remedies, in addition to
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any remedies which may be permitted by law or by other provisions of this
Lease, without further notice or demand except as hereinafter provided:
(a) Without any notice or demand whatsoever, Lessor may take any one
or more actions permissible at law to ensure performance by Lessee of Lessee's
covenants and obligations under this Lease. In this regard, it is agreed that
if Lessee abandons or vacates the Leased Property, Lessor may enter upon and
take possession of such Leased Property in order to protect it from
deterioration and continue to demand from Lessee the monthly rentals and other
charges provided in this Lease. Lessor shall use reasonable efforts to relet
but shall have no absolute obligation to relet. If Lessor does, at its sole
discretion, elect to relet the Leased Property, such action by Lessor shall not
be deemed as an acceptance of Lessee's surrender of the Leased Property unless
Lessor expressly notifies Lessee of such acceptance in writing, Lessee hereby
acknowledging that Lessor shall otherwise be reletting as Lessee's agent. It is
further agreed in this regard that in the event of any Event of Default
described in this Article XV, Lessor shall have the right to enter upon the
Leased Property and do whatever Lessee is obligated to do under the terms of
this Lease, Lessee agrees to reimburse Lessor on demand for any reasonable
expenses which Lessor may incur in thus effecting compliance with Lessee's
obligations under this Lease and further agrees that Lessor shall not be liable
for any damages resulting to Lessee from such action, except as may result from
Lessor's gross negligence or willful misconduct.
(b) Lessor may terminate this Lease by written notice to Lessee, in
which event Lessee shall immediately surrender the Leased Property to Lessor,
and if Lessee fails to do so, Lessor may, without prejudice to any other remedy
which Lessor may have for possession or arrearage in rent (including any
interest which may have accrued pursuant to Section 2.3 of this Lease or
otherwise), enter upon and take possession of the Leased Property and expel or
remove Lessee and any other person who may be occupying said premises or any
part thereof other than Tenants pursuant to Tenant Leases. In addition Lessee
agrees to pay to Lessor on demand the amount of all loss and damage which
Lessor may suffer by reason of any termination effected pursuant to this
subsection (b), said loss and damage to be determined, at Lessor's option, by
either of the following alternative measures of damages:
(i) Although Lessor shall be under no absolute obligation to
attempt and shall be obligated only to use reasonable efforts, to relet the
Leased Property, until the Leased Property is relet Lessee shall pay to Lessor
on or before the first day of each calendar month the monthly rentals and other
charges provided in this Lease. After the Leased Property has been relet by
Lessor, Lessee shall pay to Lessor on the 10th day of each calendar month the
difference between the monthly rentals and other charges provided in this Lease
for the preceding calendar month and that actually collected by Lessor for such
month. If it is necessary for Lessor to bring suit in order to collect any
deficiency, Lessor shall have a right to allow such deficiencies to accumulate
and to bring an action on several or all of the accrued deficiencies at one
time. Any such suit shall not prejudice in any way the right of Lessor to bring
a similar action for any subsequent deficiency or deficiencies. Any amount
collected by Lessor from subsequent tenants for any calendar month in excess of
the monthly rentals and other charges provided in this Lease
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shall be credited to Lessee in reduction of Lessee's liability for any calendar
month for which the amount collected by Lessor will be less than the monthly
rentals and other charges provided in this Lease, but Lessee shall have no
right to such excess other than the above described credit; or
(ii) When Lessor desires, Lessor may demand a final
settlement not to exceed the Minimum Repurchase Price at the time of such final
settlement Upon demand for a final settlement, Lessor shall have a right to,
and Lessee hereby agrees to pay, the difference between the total of all
monthly rentals and other charges provided in this Lease for the remainder of
the Term and the reasonable rental value of the Leased Property for such period
(including a reasonable time to relet the Leased Property), as determined
pursuant to the provisions of Article XXVIII hereof, such difference to be
discounted to present value at a rate equal to the lowest rate of
capitalization (highest present worth) reasonably consistent with industry
standards at the time of such determination and allowed by applicable law.
The rights and remedies of Lessor hereunder are cumulative, and
pursuit of any of the above remedies shall not preclude pursuit of any other
remedies prescribed in other sections of this Lease and any other remedies
provided by law or equity. Forbearance by Lessor to enforce one or more of the
remedies herein provided upon an Event of Default shall not be deemed or
construed to constitute a waiver of such Event of Default. Exercise by Lessor
of any one or more remedies shall not constitute an acceptance of surrender of
the Leased Property by Lessee, it being understood that such surrender can be
effected only by the prior written agreement of Lessor and Lessee.
15.3 ADDITIONAL EXPENSES. In addition to payments required pursuant to
subsections (a) and (b) of Section 15.2 above, Lessee shall compensate Lessor
for all reasonable expenses incurred by Lessor in repossessing the Leased
Property (including any increase in insurance premiums caused by the vacancy of
the Leased Property), all reasonable expenses incurred by Lessor in reletting
(including repairs, remodeling, replacements, advertisements and brokerage
fees), all reasonable concessions granted to a new tenant upon reletting
(including renewal options), all fees and expenses incurred by Lessor as a
direct or indirect result of any appropriate action by a Facility Mortgagee,
any expenses of Lessor incurred for the installation of separate lines or
meters for any public utilities not previously metered separately from adjacent
property of Lessee and a reasonable allowance for Lessor's administrative
efforts, salaries and overhead attributable directly or indirectly to Lessee's
default and Lessor's pursuing the rights and remedies provided herein and under
applicable law.
15.4 WAIVER. If this Lease is terminated pursuant to law or the
provisions of this Article XV, Lessee waives, to the extent permitted by
applicable law, (a) any right of redemption, reentry or repossession and (b)
the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt.
15.5 APPLICATION OF FUNDS. All payments otherwise payable to Lessee
which are received by Lessor under any of the provisions of this Lease during
the existence or continuance
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of any Event of Default shall be applied to Lessee's obligations in the order
which Lessor may reasonably determine or as may be prescribed by the laws of
the state in which the Facility is located.
15.6 NOTICES BY LESSOR. The provisions of this Article XV concerning
notices shall be liberally construed insofar as the contents of such notices
are concerned, and any such notice shall be sufficient if it shall generally
apprise Lessee of the nature and approximate extent of any default.
ARTICLE XVI
LESSOR'S RIGHT TO CURE
If Lessee, without the prior written consent of Lessor, shall fail to
make any payment, or to perform any act required to be made or performed under
this Lease and to cure the same within the relevant time periods provided in
Section 15.1, Lessor, without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) make such payment or perform
such act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and take all
such action thereon as, in Lessor's opinion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Lessee. All sums so paid
by Lessor, together with a late charge thereon (to the extent permitted by law)
at the Overdue Rate from the date on which such sums or expenses are paid or
incurred by Lessor, and all costs and expenses (including reasonable attorneys'
fees and expenses, in each case, to the extent permitted by law) so incurred
shall be paid by Lessee to Lessor on demand. The obligations of Lessee and
rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Lease.
ARTICLE XVII
PURCHASE OF THE LEASED PROPERTY
In the event Lessee purchases the Leased Property from Lessor pursuant
to any of the terms of this Lease, Lessor shall, upon receipt from Lessee of
the applicable purchase price together with full payment of any unpaid Rent due
and payable with respect to any period ending on or before the date of the
purchase and any other amounts owing to Lessor hereunder, deliver to Lessee an
appropriate special warranty deed and any other documents reasonably requested
by Lessee to convey the interest of Lessor in and to the Leased Property to
Lessee, and such other standard documents usually and customarily prepared in
connection with such transfers, free and clear of all encumbrances other than
(a) those that Lessee has agreed hereunder to pay or discharge, (b) those
mortgage liens, if any, which Lessee has agreed in writing to accept and to
take title subject to, (c) any other Encumbrances permitted to be imposed on
the Leased Property under the provisions of Article XXXII which are assumable
at no cost to Lessee, and (d) any matters affecting the Leased Property on or
as of the Commencement Date. The difference
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between the applicable purchase price and the total of the encumbrances
assigned or taken subject to shall be paid in cash to Lessor, or as Lessor may
direct, in federal or other immediately available funds except as otherwise
mutually agreed by Lessor and Lessee. The closing of any such sale shall be
contingent upon and subject to Lessee obtaining all required governmental
consents and approvals for such transfer. If such sale shall fail to be
consummated by reason of the inability of Lessee to obtain all such approvals
and consents, any options to extend the Term which otherwise would have expired
during the period from the date when Lessee elected or became obligated to
purchase the Leased Property until Lessee's inability to obtain the approvals
and consents is confirmed shall be deemed to remain in effect for 30 days after
the end of such period. The closing with respect to any such sale shall be
appropriately timed to accommodate the determination of the Minimum Repurchase
Price in accordance with Article XXVIII. All expenses of such conveyance,
including the cost of title examination or standard coverage title insurance,
attorneys' fees incurred by Lessor in connection with such conveyance, transfer
taxes and recording fees shall be paid by Lessee. Additionally, any sale to
Lessee shall be subject to delivery of an opinion of Lessor's counsel
confirming that (i) the sale will not result in ordinary recapture income to
Lessor pursuant to Code Section 1245 or 1250 or any other Code provision, (ii)
the sale will result in income, if any, to Lessor of a type described in Code
Section 856(c)(2) or 856(c)(3) and will not result in income of the types
described in Code Section 856(c)(4) or result in the tax imposed under Code
Section 857(b)(6), and (iii) the sale, together with all other substitutions
and sales made or requested by Lessee pursuant to any other leases with Lessor
of properties hereto or any other transfers of the Leased Property or the
properties leased under other such operating leases, during the relevant time
period, will not jeopardize the qualification of Lessor as a real estate
investment trust under Code Sections 856-860.
ARTICLE XVIII
HOLDING OVER
If Lessee shall for any reason remain in possession of the Leased
Property after the expiration of the Term or any earlier termination of the
Term hereof, such possession shall be as a tenancy at will during which time
Lessee shall pay as rental each month an amount equal to the sum of (a) 150% of
the aggregate of l/12 of the aggregate Minimum Rent payable with respect to the
last complete year prior to the expiration of the Term, plus (b) all Additional
Charges accruing during such month, plus (c) all other sums, if any, payable
pursuant to the provisions of this Lease with respect to the Leased Property.
During such period of tenancy, Lessee and Lessor shall be obligated to perform
and observe all of the terms, covenants and conditions of this Lease and to
continue its occupancy and use of the Leased Property. Nothing contained herein
shall constitute the consent, express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of this Lease.
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ARTICLE XIX
ABANDONMENT
19.1 DISCONTINUANCE OF OPERATIONS ON THE LEASED PROPERTY; OFFER OF
SUBSTITUTION. If Lessee has discontinued use of the Leased Property for its
Primary Intended Use for 90 consecutive days without Lessor's prior written
consent for alterations or remodeling pursuant to Article IX, repairs or
restoration pursuant to Article XIII or Article XIV or otherwise, then provided
Lessor has not terminated this Lease pursuant to Section 15.2, Lessee may offer
to substitute a new property or properties for the Leased Property pursuant to
and in accordance with the provisions of Article XX (which offers Lessor may in
its sole discretion refuse).
19.2 OBSOLESCENCE OF THE LEASED PROPERTY; OFFER TO PURCHASE. If the
Leased Property becomes Unsuitable for its Primary Intended Use, all as set
forth in an Officer's Certificate delivered to Lessor, Lessee may on or after
the fifteenth anniversary of the Commencement Date (provided this Lease is
still in effect), purchase the Leased Property for the Minimum Repurchase Price
on the first Payment Date occurring not less than 120 days after the date of
such Officer's Certificate.
19.3 CONVEYANCE OF LEASED PROPERTY. In the event Lessee elects to
purchase the Leased Property pursuant to Section 19.2, then on the first
Payment Date occurring not less than 120 days after the date of the Officer's
Certificate referred to in Section 19.2, Lessor shall, upon receipt from Lessee
of the Minimum Repurchase Price as of the date of such purchase and all Rent
and or other sums then due and payable under this Lease (excluding any
installment of Minimum Rent due on such Payment Date), convey the Leased
Property to Lessee on such date in accordance with the provisions of Article
XVII and this Lease shall thereupon terminate as to the Leased Property.
ARTICLE XX
SUBSTITUTION OF PROPERTY
20.1 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY.
(a) In the event Lessor accepts an offer by Lessee to substitute other
property for the Leased Property under Article XIII, Article XIV or Article
XIX, and provided that no Event of Default shall have occurred and be
continuing, Lessee shall have the right (subject to the conditions set forth
below in this Article XX, and upon notice to Lessor) to substitute one or more
properties (collectively referred to as "Substitute Properties" or individually
as a "Substitute Property") for the Leased Property on a monthly Payment Date
specified in such notice (the "Substitution Date") occurring not less than 90
days after receipt by Lessor of such notice. The notice shall be in the form of
an Officer's Certificate and shall specify the reason(s) for the proposed
substitution and the proposed Substitution Date. Notwithstanding anything
contained herein to the contrary, any other substitution for the Leased
Property shall require the prior written consent of Lessor which shall be
within the sole discretion of Lessor.
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(b) If Lessee gives the notice referred to in Section 20.1(a) above,
Lessee shall present to Lessor one or more properties (or groups of properties)
each of which property (or groups of properties) shall provide Lessor with a
yield (i.e., an annual return on its equity in such property) equal to or
greater than the Current Yield (and the yield reasonably expected to be
received thereafter throughout the remainder of the term) from the Leased
Property at the time of such proposed substitution (or in the case of a
proposed substitution as a result of damage, destruction or Condemnation, the
Current Yield immediately prior to such damage, destruction or Condemnation)
and as reasonably projected over the remaining Term of this Lease and shall
have a Fair Market Value substantially equivalent to the Fair Market Value of
the Leased Property. Lessor shall have a period of 90 days within which to
review such information and either to accept or to reject the Substitute
Property or Substitute Properties so presented; provided that if Lessee is
required by a court order or administrative action to divest or otherwise
dispose of the Leased Property within a shorter time period, in which case the
time period shall be shortened appropriately to meet the reasonable needs of
Lessee, but in no event shall said period be less than 15 Business Days after
Lessor's receipt of said notice (subject to further extension for any period of
time in which Lessor is not timely provided with the information provided for
in Section 20.2 and Section 20.3 below); provided that if Lessor shall contend
that the Substitute Properties fail to meet all the conditions for substitution
set forth in this Article XX, including the provisions of Sections 20.1(c), (d)
and (e) below, the matter shall be submitted to arbitration in accordance with
Article XXXI and the time periods for Lessor's approval or rejection shall be
tolled during the period of such arbitration.
(c) It shall be a condition to consummation of any substitution
hereunder that all of the conditions set forth in Section 20.2 below, shall
have been satisfied with respect to such substitution, and to the delivery of
an opinion of counsel for Lessor confirming that (i) the substitution of the
Substitute Property for the Leased Property will qualify as an exchange solely
of property of a like-kind under Section 1031 of the Code, in which, generally,
except for "boot" such as cash needed to equalize exchange values or discharge
indebtedness, no gain or loss is recognized to Lessor, (ii) the substitution or
sale will not result in ordinary recapture income to Lessor pursuant to Code
Section 1245 or 1250 or any other Code provision, (iii) the substitution or
sale will result in income, if any, to Lessor of a type described in Code
Section 856(c)(2) or 856(c)(3) and will not result in income of the types
described in Code Section 856(c)(4) or result in the tax imposed under Code
Section 857(b)(6), and (iv) the substitution or sale, together with all other
substitutions and sales made or requested by Lessee pursuant to any other
leases with Lessor of properties hereto or any other transfers to the Leased
Property or the properties leased under other such operating leases, during the
relevant time period, will not jeopardize the qualification of Lessor as a real
estate investment trust under Code Sections 856-860.
(d) In the event that the equity value of the Substitute Property or
group of Substitute Properties (i.e., the Fair Market Value of the Substitute
Property or group of Substitute Properties minus the encumbrances subject to
which Lessor will take the Substitute Property or group of Substitute
Properties) as of the Substitution Date is greater than the equity value of the
Leased Property (i.e., the Fair Market Value of the Leased Property minus the
encumbrances
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subject to which Lessee will take the Leased Property) as of the Substitution
Date (or in the case of damage destruction or Condemnation, the Fair Market
Value immediately prior to such damage, destruction or Condemnation), Lessor
shall pay to Lessee an amount equal to the difference, subject to the
limitation set forth below. In the event that said equity value of the
Substitute Property or group of Substitute Properties is less than said equity
value of the Leased Property, Lessee shall pay to Lessor an amount equal to the
difference, subject to the limitation set forth below. Notwithstanding the
foregoing, neither Lessor nor Lessee shall be obligated to consummate any
substitution if such party would be required to make a payment to the other in
excess of an amount equal to ten percent of said Fair Market Value of the
Leased Property (the amount of cash paid by one party to the other being
hereinafter referred to as the "Cash Adjustment").
(e) The Rent for such Substitute Property in all respects shall
provide Lessor with a yield at the time of such substitution (i.e., annual
return on its investment in such Substitute Property) not less than the Current
Yield (and the yield reasonably expected to be received thereafter throughout
the remainder of the Term) from the Leased Property prior to any damage,
destruction or Condemnation, taking into account the Cash Adjustment paid or
received by Lessor and any other relevant factors.
(f) The Minimum Repurchase Price of any Substitute Property or
Substitute Properties shall be an amount equal to the Minimum Repurchase Price
of the Leased Property on the Substitution Date (i) increased by any Cash
Adjustment paid by Lessor pursuant to Section 20.1(d) above, or (ii) decreased
by any Cash Adjustment paid by Lessee pursuant to Section 20.1(d) above.
20.2 CONDITIONS TO SUBSTITUTION. On the Substitution Date, the
Substitute Property will become the Leased Property hereunder upon delivery by
Lessee to Lessor of the following, items in form and substance reasonably
satisfactory to Lessor:
(a) an Officer's Certificate representing, warranting and certifying
that (i) the Substitute Property has been accepted by Lessee for all purposes
of this Lease and there has been no material damage to the improvements located
on the Substitute Property nor is any condemnation or eminent domain proceeding
pending with respect thereto; (ii) all permits, licenses and certificates
(including a permanent, unconditional certificate of occupancy and, to the
extent permitted by law, all certificates of need and licenses) which are
necessary to permit the use of the Substitute Property in accordance with the
provisions of this Lease have been obtained and are in full force and effect;
(iii) under applicable zoning and use laws, ordinances, rules and regulations
the Substitute Property may be used for the purposes contemplated by Lessee and
all necessary subdivision approvals have been obtained; (iv) there are no
mechanic's or materialmen's liens outstanding or threatened to the knowledge of
Lessee against the Substitute Property arising out of or in connection with the
construction of the improvements thereon, other than those being contested by
Lessee pursuant to Article XI; (v) any mechanic's or materialmen's liens being
contested by Lessee will be promptly paid by Lessee if such contest is resolved
in
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favor of the mechanic or materialman; (vi) to the best knowledge of Lessee,
there exists no Event of Default under this Lease, and no defense, offset or
claim exists with respect to any sums to be paid by Lessee hereunder; and (vii)
any exceptions to Lessor's title to the Substitute Property do not materially
interfere with the intended use of the Substitute Property by Lessee;
(b) a special warranty deed with warranties against claims arising
under Lessee conveying to Lessor title to the Substitute Property free and
clear of any liens and encumbrances except those approved in writing or assumed
by Lessor;
(c) a lease duly executed, acknowledged and delivered by Lessee,
containing the same terms and conditions as are contained herein, except that
(i) the legal description of the Land shall refer to the Substitute Property,
(ii) the Minimum Repurchase Price, Rent and any Additional Charges for the
Substitute Property shall be consistent with the requirements of Section 20.1
and (iii) such other changes therein as may be necessary or appropriate under
the circumstances shall be made;
(d) a standard owner's or lessee's (as applicable) policy of title
insurance covering the Substitute Property (or a valid, binding, unconditional
commitment therefor), dated the Substitution Date, in current form and
including mechanics' and materialmen's lien coverage, issued to Lessor by a
title insurance company reasonably satisfactory to Lessor. Such policy shall
(i) insure (A) Lessor's fee title to the Substitute Property, subject to no
liens or encumbrances except those approved or assumed by Lessor, and (B) that
any restrictions affecting the Substitute Property have not been violated and
that further violation thereof will not result in a forfeiture or reversion of
title, (ii) be in an amount at least equal to the Fair Market Value of the
Substitute Property, and (iii) contain such endorsements as may be reasonably
requested by Lessor;
(e) certificates of insurance with respect to the Substitute Property
fulfilling the requirements of Article XII;
(f) current appraisals or other evidence satisfactory to Lessor, in
its sole discretion, as to the current Fair Market Values of such Substitute
Property;
(g) all available revenue data relating to the Substitute Property for
the period from the date of opening for business of the Substitute Property to
the date of Lessee's most recent Fiscal-Year end, or for the most recent three
years, whichever is less; and
(h) such other certificates, documents, opinions of counsel (which may
be in-house counsel), and other instruments as may be reasonably required by
Lessor.
20.3 CONVEYANCE TO LESSEE. On the Substitution Date Lessor will convey
the Leased Property to Lessee in accordance with the provisions of Article XVII
(except as to payment of any expenses in connection therewith which shall be
governed by Section 20.4 below) upon either (a) payment in cash therefor or (b)
conveyance to Lessor of the Substitute Property, as appropriate.
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20.4 EXPENSES. Lessee shall pay or cause to be paid, on demand, all
reasonable costs and expenses paid or incurred by Lessor in connection with the
substitution and conveyance of the Leased Property and the Substitute Property,
including (a) fees and expenses of Lessor's counsel, (b) the amount of any
recording taxes and filing fees, (c) the cost of preparing and recording, if
appropriate, a release of the Leased Property from the lien of any mortgage,
(d) broker's fees and commissions for Lessee, if any, (e) documentary stamp and
transfer taxes, if any, (f) title insurance charges, and (g) escrow fees, if
any.
ARTICLE XXI
RISK OF LOSS
Except as otherwise provided in this Lease, during the Term of this
Lease, the risk of loss or of decrease in the enjoyment and beneficial use of
the Leased Property in consequence of the damage or destruction thereof by
fire, the elements, casualties, thefts, riots, wars or otherwise, or in
consequence of foreclosures, attachments, levies or executions (other than by
Lessor and those claiming from, through or under Lessor) is assumed by Lessee
and, Lessor shall in no event be answerable or accountable therefor nor shall
any of the events mentioned in this Section entitle Lessee to any abatement of
the Rent except as specifically provided in this Lease.
ARTICLE XXII
INDEMNIFICATION
Notwithstanding the existence of any insurance or self insurance
provided for in Article XII, and without regard to the policy limits of any
such insurance or self insurance, Lessee will protect, indemnify, save harmless
and defend Lessor from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), to the extent permitted by law, imposed upon or
incurred by or asserted against Lessor by reason of: (a) any accident, injury
to or death of persons or loss to property occurring on or about the Leased
Property, including any claims of malpractice, (b) any use, misuse, no use,
condition, maintenance or repair by Lessee of the Leased Property, (c) any
Impositions (which are the obligations of Lessee to pay pursuant to the
applicable provisions of this Lease), (d) any failure on the part of Lessee to
perform or comply with any of the terms of this Lease, (e) the non-performance
of any of the terms and provisions of any and all existing and future subleases
of the Leased Property to be performed by Lessee as landlord thereunder and (f)
the violation of any Hazardous Materials Law. Any amounts which become payable
by Lessee under this Section shall be paid within ten days after liability
therefor on the part of Lessor is finally determined by litigation or otherwise
(including the expiration of any time for appeals) and, if not timely paid,
shall bear interest (to the extent permitted by law) at the Overdue Rate
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from the date of such determination to the date of payment. Lessee, at its
expense, shall contest, resist and defend any such claim, action or proceeding
asserted or instituted against Lessor or may compromise or otherwise dispose of
the same as Lessee sees fit. Lessor shall cooperate with Lessee in a reasonable
manner to permit Lessee to satisfy Lessee's obligations hereunder, including
the execution of any instruments or documents reasonably requested by Lessee.
Nothing herein shall be construed as indemnifying Lessor or its agents for
their own negligent acts or omissions or willful misconduct. Lessee's liability
for a breach of the provisions of this Article shall survive any termination of
this Lease.
ARTICLE XXIII
SUBLETTING AND ASSIGNMENT
23.1 SUBLETTING AND ASSIGNMENT. Subject to the rights of Tenants under
existing Tenant Leases and subject to the provisions of Section 23.3 below and
any other express conditions or limitations set forth herein, Lessee may,
without the consent of Lessor, sublet all or any part of the Leased Property
consistently with the Primary Intended Use. Lessor shall not unreasonably
withhold its consent to any other or further subletting or assignment; provided
that (a) in the case of a subletting, the sublessee shall comply with the
provisions of Section 23.2, (b) in the case of an assignment, the assignee
shall assume in writing and agree to keep and perform all of the terms of this
Lease on the part of Lessee to be kept and performed and shall be and become
jointly and severally liable with Lessee for the performance thereof, (c) an
original counterpart of each such sublease and assignment and assumption, duly
executed by Lessee and such sublessee or assignee, as the case may be, in form
and substance reasonably satisfactory to Lessor, shall be delivered promptly to
Lessor, and (d) in case of either an assignment or subletting, Lessee 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 Lessee hereunder. In addition to
Lessee's rights to sublet and assign as provided in this section above, Lessee
shall also have the right (upon Lessor's prior consent, which consent shall not
unreasonably be withheld) to enter into Tenant Leases which extend beyond the
Term of this Lease. To the extent that any such Tenant Leases extend beyond the
Term of this Lease. Lessor shall receive the rents from, and be responsible for
any obligations on the part of the landlord or lessor under such Tenant Leases.
Any and all such Tenant Leases shall, to the extent applicable, be subject to
the provisions of this Section and Section 23.2. No sublease or assignment
shall release Lessee or Guarantor from their obligations under the Lease or
Guaranty.
23.2 NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT. Except for
existing Tenant Leases, Lessee shall insert in each sublease permitted under
Section 23.1 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) in the event this Lease shall terminate before the
expiration of such sublease, the sublessee thereunder will, at Lessor's option,
attorn to Lessor and waive any right the sublessee may have to terminate the
sublease or to surrender possession
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thereunder as a result of the termination of this Lease and (c) in the event
the sublessee receives a written notice from Lessor or Lessor's assignees, if
any, stating that Lessee is in default under this Lease, the sublessee, shall
thereafter be obligated to pay all rentals accruing under said sublease
directly to the party giving such notice, or as such party may direct. All
rentals received from the sublessee by Lessor or Lessor's assignees, if any,
shall be credited against amounts owing by Lessee under this Lease. Lessor
agrees that notwithstanding any default, termination, expiration, sale, entry
or other act or omission of Lessee pursuant to the terms of this Lease, or at
law or in equity, Tenant's possession shall not be disturbed unless such
possession may otherwise be terminated pursuant to the terms of the applicable
Tenant Lease. Lessor hereby agrees, upon Lessee's request, to execute a
nondisturbance agreement in favor of any Tenant or in favor of any sublessee
under any sublease permitted under Section 23.1 above; provided that the Tenant
or any such sublessee has acknowledged all of the foregoing provisions and
executed all documents required by this Section 23.2.
ARTICLE XXIV
OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS
24.1 ESTOPPEL CERTIFICATE. At any time and from time to time within 20
days following written request by Lessor, Lessee will furnish to Lessor an
Officer's Certificate certifying that this Lease is unmodified and in full
force and effect (or that this Lease is in full force and effect as modified
and setting forth the modifications) the amounts of and the dates to which the
Rent has been paid, and such other matters regarding the Lease as Lessor may
reasonably request. Any such Officer's Certificate furnished pursuant to this
Article may be relied upon by Lessor, any prospective purchaser of the Leased
Property and any third parties who have an interest in the Leased Property,
including any Lender or professional advisor or Lessor.
24.2 FINANCIAL STATEMENTS AND CERTIFICATES. Lessee will furnish or
cause to be furnished the following statements to Lessor; provided that Lessor
shall keep confidential items furnished by Lessee which are not generally
available to the public:
(a) Within one hundred (100) days after the end of each year,
a copy of the consolidated audited financial statements of Guarantor with
consolidating supplemental schedules which include manager and all of
Guarantor's subsidiaries, prepared by KPMG Peat Marwick, LLP, or another
nationally recognized accounting firm or independent certified public
accounting firm acceptable to Lessor, which statements shall include a balance
sheet and a statement of income and expenses for the year then ended.
(b) [intentionally omitted]
(c) Within forty-five (45) days after the end of each
calendar quarter:
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(i) Current consolidated financial statements of Guarantor
(including manager) and consolidating financial statements of Lessee
(which shall include supplemental schedules of assets, liabilities,
income and expenses of Lessee) certified to be true and correct; and
(ii) A certificate of Lessee, in form acceptable to Lessor,
that no Default or Event of Default then exists and no event has
occurred (that has not been cured) and no condition currently exists
(herein, a "Default") that would, but for the giving of any required
notice or explanation of any applicable cure period, constitute an
Event of Default.
(d) Upon Lessor's request, within fifteen (15) days of the
end of each calendar month, an aged accounts receivable report of the Facility
from Lessee in sufficient detail to show amounts due from each class of
patient-mix (i.e. private, Medicare (if applicable), Medicaid (if applicable)
and V.A.) by the account age classifications of 30 days, 60 days, 90 days, 120
days.
(e) Upon Lessor's request, within thirty (30) days of the end
of each calendar month, a current year-to-date operating statement from the
Lessee for the Facility.
(f) Upon Lessor's request, within fifteen (15) days of the
end of each calendar month, monthly census information of the Facility in
sufficient detail to show patient-mix on a daily average basis for such month.
(g) Within ten (10) days of filing or receipt (i) all cost
reports, if any, and any amendments thereto filed with respect to the Facility
and (ii) all responses, audits reports, or inquiries with respect to such cost
reports, all of which Lessee shall prepare and file on a timely basis.
(h) Within ten (10) days of Lessee's receipt, copies of all
licensure and certification survey reports, if any, and statements of
deficiencies (with plans of correction attached thereto).
(i) Within three (3) days of Lessee's receipt, any and all
notices (regardless of form) from any and all licensing and/or certifying
agencies that the license and/or any applicable reimbursement contract or
certification of the Facility is being downgraded to a substandard category,
revoked, or suspended, or that action is pending or being considered to
downgrade to a substandard category, revoke, or suspend the Facility's license
or certification.
(j) Upon Lessor's request, evidence of payment by Lessee of
any applicable provider bed taxes or similar taxes, which taxes Lessee agrees
to pay.
The Lessee shall correct any deficiency within the date
required by any licensure and certification agency. Lessor reserves the right
to require such other financial information and
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tax returns of Lessee and Guarantor at such other times as it shall deem
necessary. All financial statements must be in such form and detail as the
Lessor shall from time to time request.
ARTICLE XXV
INSPECTION
Lessee shall permit Lessor and its authorized representatives to
inspect the Leased Property during usual business hours subject to any
security, health, safety or confidentiality requirements of Lessee, the rights
of the Tenants, any Insurance Requirements relating to the Leased Property, or
any other restrictions imposed by law or applicable regulations.
ARTICLE XXVI
QUIET ENJOYMENT
So long as Lessee shall pay all Rent as the same becomes due and shall
fully comply with all of the terms of this Lease and fully perform its
obligations hereunder, Lessee shall peaceably and quietly have, hold and enjoy
the Leased Property for the Term hereof, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor, but subject to all liens
and encumbrances of record as of the date hereof or hereafter consented to by
Lessee. No failure by Lessor to comply with the foregoing covenant shall give
Lessee any right to cancel or terminate this Lease, or to fail to pay any other
sum payable under this Lease, or to fail to perform any other obligation of
Lessee hereunder. Notwithstanding the foregoing, Lessee shall have the right by
separate and independent action to pursue any claim or seek any damages it may
have against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Article.
ARTICLE XXVII
NOTICES
Any notices, demands, approvals and other communications provided for
herein shall be in writing and shall be delivered by telephonic facsimile,
overnight air courier, personal delivery or registered or certified U.S. Mail
with return receipt requested, postage paid, to the appropriate party at its
address as follows:
If to Lessor:
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With a copy to:
Addresses for notice may be changed from time to time by
written notice to all other parties. Any communication given by mail will be
effective (i) upon the earlier of (a) three business days following deposit in
a post office or other official depository under the care and custody of the
United States Postal Service or (b) actual receipt, as indicated by the return
receipt; (ii) if given by telephone facsimile, when sent; and (iii) if given by
personal delivery or by overnight air courier, when delivered to the
appropriate address set forth.
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ARTICLE XXVIII
APPRAISAL
In the event that it becomes necessary to determine the Fair Market Value, Fair
Market Value Purchase Price, the Fair Market Added Value, the Minimum
Repurchase Price or the Fair Market Rental Value of the Leased Property or a
Substitute Property for any purpose of this Lease, the party required or
permitted to give notice of such required determination shall include in the
notice the name of a person selected to act as an appraiser on its behalf.
Within ten days after receipt of any such notice, Lessor (or Lessee, as the
case may be) shall by notice to Lessee (or Lessor, as the case may be) appoint
a second person as an appraiser on its behalf. The appraisers thus appointed
(each of whom must be a member of the American Institute of Real Estate
Appraisers or any successor organization thereto) shall, within 45 days after
the date of the notice appointing the first appraiser, proceed to appraise the
Leased Property or the Substitute Property, as the case may be, to determine
any of the foregoing values as of the relevant date (giving effect to the
impact, if any, of inflation from the date of their decision to the relevant
date) provided that if only one appraiser shall have been so appointed, or if
two appraisers shall have been so appointed but only one such appraiser shall
have made such determination within 50 days after the making of Lessee's or
Lessor's request, then the determination of such appraiser shall be final and
binding upon the parties. If two appraisers shall have been appointed and shall
have made their determinations within the respective requisite periods set
forth above and if the difference between the amounts so determined shall not
exceed ten percent of the lesser of such amounts, then the Fair Market Value or
Fair Market Added Value or the Fair Market Rental Value shall be an amount
equal to 50% of the sum of the amounts so determined. If the difference between
the amounts so determined shall exceed 10% of the lesser of such amounts, then
such two appraisers shall have 20 days to appoint a third appraiser, but if
such appraisers fail to do so, then either party may request the American
Arbitration Association or any successor organization thereto to appoint an
appraiser within 20 days of such request, and both parties shall be bound by
any appointment so made within such 20-day period. If no such appraiser shall
have been appointed within such 20 days or within 90 days of the original
request for a determination of Fair Market Value or Fair Market Added Value or
the Fair Market Rental Value, whichever is earlier, either Lessor or Lessee may
apply to any court having jurisdiction to have appointment made by such court.
Any appraiser appointed, by the American Arbitration Association or by such
court, shall be instructed to determine the Fair Market Value or Fair Market
Added Value or the Fair Market Rental Value within 30 days after appointment of
such appraiser. The determination of the appraiser which differs most in terms
of dollar amount from the determinations of the other two appraisers shall be
excluded, and 50% of the sum of the remaining two determinations shall be final
and binding upon Lessor and Lessee as the Fair Market Value or Fair Market
Added Value or the Fair Market Rental Value for such interest. However, in the
event that following the appraisal performed by said third appraiser, the
dollar amount of two of such appraisals are higher and lower, respectively,
than the dollar amount of the remaining appraisal in equal degrees, the
determinations of both the highest and lowest appraisal, respectively, shall be
rejected and the determination to the remaining appraisal shall be final and
binding upon Lessor and Lessee as the Fair Market Value or Fair Market Added
Value or the Fair Market Rental Value for such interest. This provision for
determination by appraisal
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shall be specifically enforceable to the extent such remedy is available under
applicable law, and any determination hereunder shall be final and binding upon
the parties except as otherwise provided by applicable law. Lessor and Lessee
shall each pay the fees and expenses of the appraiser appointed by it and each
shall pay one-half of the fees and expenses of the third appraiser and one-half
of all other costs and expenses incurred in connection with each appraisal.
ARTICLE XXIX
PURCHASE RIGHTS
(a) During the Term hereof (provided that no Event of Default has
occurred and is continuing), Lessee shall have a first refusal option to
purchase the Leased Property upon the same terms and conditions as Lessor, or
its successors and assigns, shall propose to sell the Leased Property, or shall
have received an offer from a third party to purchase the Leased Property,
which Lessor intends to accept (or has accepted subject to Lessee's right of
first refusal granted herein). If, during the Term, Lessor receives such an
offer or reaches such agreement with a third party or proposes to offer the
Leased Property for sale, Lessor shall promptly notify Lessee of the purchase
price and all other material terms and conditions of such agreement or proposed
sale together with a copy of such offer, and Lessee shall have 30 days after
receipt of such notice from Lessor within which time to exercise Lessee's
option to purchase. If Lessee exercises its option, then such purchase shall be
consummated within the time set forth in the third-party offer and in
accordance with the provisions of Article XVII hereof to the extent not
inconsistent herewith. If Lessee shall not exercise Lessee's option to purchase
within said 30-day period after receipt of said notice from Lessor, Lessor
shall be free for a period of 90 days after the expiration of said 30-day
period to sell the Leased Property to the third party at the price and terms
set forth in such offer. Whether or not such sale is consummated, Lessee shall
be entitled to exercise its right of first refusal as provided in this Article,
as to any subsequent sale of the Leased Property during the Term of this Lease.
(b) Purchase Option. Not more than 180 days prior to the end of the
Initial Term and each Extended Term exercised by Lessee pursuant to the terms
of Article 34, Lessee shall have the option to purchase the Leased Property
upon written notice to Lessor for a purchase price equal to the Minimum
Repurchase Price. If not sooner exercised, the option to purchase granted
hereby will expire and be of no further force and effect upon the expiration of
the Term or the earlier termination of this Lease.
ARTICLE XXX
DEFAULT BY LESSOR
30.1 Default by Lessor. Lessor shall be in default of its obligations
under this Lease if Lessor shall fail to observe or perform any term, covenant
or condition of this Lease on its part to be performed and such failure shall
continue for a period of 30 days after written notice
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thereof is received by Lessor, unless such failure cannot with due diligence be
cured within a period of 30 days, in which case such failure shall not be
deemed to continue if Lessor, within said 30-day period, proceeds promptly and
with due diligence to cure the failure and diligently completes the curing
thereof. The time within which Lessor shall be obligated to cure any such
failure shall also be subject to extension of time due to the occurrence of any
Unavoidable Delay. In the event Lessor fails to cure any such default, Lessee,
without waiving or releasing any obligations hereunder, and in addition to all
other remedies available to Lessee hereunder or at law or in equity, may
purchase the Leased Property from Lessor for a purchase price equal to the
greater of the Fair Market Value Purchase Price or the Minimum Repurchase Price
of the Leased Property minus an amount equal to any damage suffered by Lessee
by reason of such default. In the event Lessee elects to purchase the Leased
Property, it shall deliver a notice thereof to Lessor specifying a Payment Date
occurring no less than 90 days subsequent to the date of such notice on which
it shall purchase the Leased Property, and the same shall be thereupon conveyed
in accordance with the provisions of Article XVII. Any sums owed Lessee by
Lessor hereunder shall bear interest at the Overdue Rate from the date due and
payable until the date paid.
30.2 Lessee's Right to Cure. Subject to the provisions of Section
30.1, if Lessor shall breach any covenant to be performed by it under this
Lease, Lessee, after giving notice to and demand upon Lessor in accordance with
Section 30.1, without waiving or releasing any obligation of Lessor hereunder,
and in addition to all other remedies available to Lessee hereunder and at law
or in equity, Lessee may (but shall be under no obligation at any time
thereafter to) make such payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all costs and expenses
(including reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand or set
off against the Rent. The rights of Lessee hereunder to cure and to secure
payment from Lessor in accordance with this Section 30.2 shall survive the
termination of this Lease.
ARTICLE XXXI
ARBITRATION
31.1 Controversies. Except with respect to the payment of Minimum Rent
hereunder, in case any controversy shall arise between the parties hereto as to
any of the requirements of this Lease or the performance thereof which
controversy the parties shall be unable to settle by agreement or as otherwise
provided herein, such controversy shall be determined by arbitration to be
initiated and conducted as provided in this Article XXXI.
31.2 Appointment of Arbitrators. The party or parties requesting
arbitration shall serve upon the other a written demand therefor specifying the
matter to be submitted to arbitration, and nominating an arbitrator who is a
member in good standing of the American Arbitration Association ("AAA"). Within
20 days after receipt of such written demand and notification, the other party
shall, in writing, nominate a person who is a member in good standing with AAA
and
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the two arbitrators so designated shall, within ten days thereafter, select a
third arbitrator who is a person who is a member in good standing with AAA and
give immediate written notice of such selection to the parties and shall fix in
said notice a time and place for the first meeting of the arbitrators, which
meeting shall be held as soon as conveniently possible after the selection of
all arbitrators, at which time and place the parties to the controversy may
appear and be heard.
31.3 Third Arbitrator. In case the notified party or parties shall
fail to make a selection upon notice as aforesaid, or in case the first two
arbitrators selected shall fail to agree upon a third arbitrator within ten
days after their selection, then such arbitrator or arbitrators may, upon
application made by either of the parties to the controversy, after 20 days'
written notice thereof to the other party or parties have a third arbitrator
appointed by any judge of any United States court of record having jurisdiction
in the state in which the Leased Property is located or, if such office shall
not then exist, by a judge holding an office most nearly corresponding thereto.
31.4 Arbitration Procedure. Said arbitrators shall give each to the
parties not less than ten days' written notice of the time and place of each
meeting at which the parties or any of them may appear and be heard and after
hearing the parties in regard to the matter in dispute and taking such other
testimony and making such other examinations and investigations as justice
shall require and as the arbitrators may deem necessary, they shall decide the
questions submitted to them in accordance with the rules of AAA. The decision
of said arbitrators in writing signed by a majority of them shall be final and
binding upon the parties to such controversy. In rendering such decisions and
award, the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Lease.
31.5 Expenses. The expenses of such arbitration shall be divided
between Lessor and Lessee unless otherwise specified in the decision of the
arbitrators. Each party in interest shall pay the fees and expenses of its own
counsel.
ARTICLE XXXII
FINANCING OF THE LEASED PROPERTY
Lessor agrees that it will not grant or create any mortgage deed of
trust, lien encumbrance or other title retention agreement upon the Leased
Property to secure any indebtedness of Lessor (an "Encumbrance"), unless each
holder of such an Encumbrance agrees (a) to give Lessee the same notice, if
any, given to Lessor of any default or acceleration of any obligation
underlying any such Encumbrance or any sale in foreclosure of such Encumbrance,
(b) to permit Lessee to appear with its representatives and to bid at any
public foreclosure sale with respect to any such Encumbrance, (c) agrees to
release the Leased Property from the Encumbrance upon the exercise by Lessee of
a right to purchase contained in this Lease and the payment by Lessee of the
applicable purchase price, and (d) enters into an agreement with Lessee
containing the provisions described in Article XXXIII of this Lease. Lessee
agrees to execute and deliver to Lessor or the
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holder of an Encumbrance any written agreement required by this Article within
ten days of written request thereof by Lessor or the holder of an Encumbrance.
ARTICLE XXXIII
ATTORNMENT AND NON-DISTURBANCE
At the request from time to time by one or more holders of an
Encumbrance that may hereafter be placed upon the Leased Property or any part
thereof, and any and all renewals, replacements, modifications, consolidations,
spreaders and extensions thereof, Lessee will subordinate this Lease and all of
Lessee's rights and estate hereunder to each such Encumbrance and will attorn
to and recognize such holder (or the purchaser at any foreclosure sale or any
sale under a power of sale contained in any such Encumbrance or a holder by a
deed in lieu of foreclosure, as the case may be) as Lessor under this Lease for
the balance of the Term then remaining, subject to all of the terms and
provisions of this Lease; provided that each such institutional holder
simultaneously with or prior to recording any such Encumbrance executes and
delivers a written agreement in recordable form (a) consenting to this Lease,
and agreeing that, notwithstanding any such other lease, mortgage, deed of
trust, right, title or interest, or any default, expiration, termination,
foreclosure, sale, entry or other act or omission under, pursuant to or
affecting any of the foregoing, Lessee shall not be disturbed in peaceful
enjoyment of the Leased Property nor shall this Lease be terminated or canceled
at any time, except in the event Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein; (b) agreeing
that it will be bound by all the terms of this Lease, perform and observe all
of Lessor's obligations set forth herein; and (c) agreeing that all proceeds of
the casualty insurance described in Article XIII of this Lease and all Awards
described in Article XIV will be made available to Lessor for restoration of
the Leased Property as and to the extent required by this Lease, subject only
to reasonable regulation regarding the manner of disbursement and application
thereof. Lessee agrees to execute and deliver to Lessor or the holder of an
Encumbrance any written agreement required by this Article within ten days of
written request thereof by Lessor or the holder of an Encumbrance. Lessee
agrees to execute at the request from time to time of Lessor or an
institutional investor a certificate setting forth any defaults of Lessor
hereunder and the dates through which Rent has been paid and such other matters
as may be reasonably requested.
ARTICLE XXXIV
EXTENDED TERMS
If no Event of Default shall have occurred and be continuing, Lessee
is hereby granted the right to extend the Term of this Lease for three (3)
consecutive five (5) year periods ("Extended Term") for a maximum possible Term
of twenty-six (26) years, by giving written notice to Lessor of each such
extension at least 180 days, but not more than 270 days, prior to the
expiration of the then-current Term; subject, however, to the provisions of
Section 13.7
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hereof. Lessor agrees to use its best efforts to provide Lessee with prior
written notice at least 210 days prior to the expiration of the then-current
Term. Lessee may not exercise its option for more than one Extended Term at a
time. During each Extended Term, all of the terms and conditions of this Lease
shall continue in full force and effect, except that the Minimum Rent for and
during each of the Extended Terms shall be the greater of (i) the Fair Market
Rental Value on the first day of such Extended Term or (ii) the Minimum Rent in
effect immediately prior to the first day of such Extended Term. In any event,
the Minimum Rent shall continue to be increased throughout the Extended Terms
in accordance with the provisions of Section 2.1(b) hereof.
ARTICLE XXXV
MISCELLANEOUS
35.1 NO WAIVER. No failure by Lessor or Lessee 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 the Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such term. To the extent permitted by law, no
waiver of any breach shall affect or alter this Lease, which shall continue in
full force and effect with respect to any other then existing or subsequent
breach.
35.2 REMEDIES CUMULATIVE. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease 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 Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
35.3 SURRENDER. No surrender to Lessor of this Lease or of the Leased
Property or any part thereof, or of any interest therein, shall be valid or
effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
35.4 NO MERGER OF TITLE. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or (b) such leasehold estate and the fee estate in the
Leased Property.
35.5 TRANSFERS BY LESSOR. If Lessor or any successor owner of the
Leased Property shall convey the Leased Property in accordance with the terms
hereof, other than as security for a
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debt, the grantee or transferee of the Leased Property shall expressly assume
all obligations of Lessor hereunder arising or accruing from and after the date
of such conveyance or transfer, and shall be reasonably capable of performing
the obligations of Lessor hereunder and Lessor or such successor owner as the
case may be, shall thereupon be released from all future liabilities and
obligations of Lessor under this Lease 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.
35.6 GENERAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee and Lessor
against the other arising out of or relating to this Lease and arising prior to
any date of termination of this Lease shall survive such termination. If any
term or provision of this Lease or any application thereof shall be invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby. If any late charges provided
for in any provision of this Lease are based upon a rate in excess of the
maximum rate permitted by applicable law, the parties agree that such charges
shall be fixed at the maximum permissible rate. Neither this Lease nor any
provision hereof may be changed, waived, discharged or terminated except by an
instrument in writing and in recordable form signed by Lessor and Lessee. All
the terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. The
headings in this Lease are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. This Lease shall be governed by
and construed in accordance with the laws of Alabama, but not including its
conflict of laws rules. This Lease may be executed in one or more counterparts,
each of which shall be an original but, when taken together, shall constitute
but one document.
35.7 MEMORANDUM OF LEASE. Lessor and Lessee shall, promptly upon the
request of either, enter into a short form memorandum of this Lease in form
suitable for recording under the laws of the state in which the Leased Property
is located in which reference to this Lease, and all options contained herein,
shall be made. Recordation shall be at Lessee's expense.
35.8 TRANSFER OF LICENSES. Upon the expiration or earlier termination
of the Term, Lessee shall take all action necessary to effect or useful in
effecting the transfer to Lessor or Lessor's nominee of all licenses, operating
permits and other governmental authorizations and all service contracts which
may be necessary or useful in the operation of the Facility and which relate
exclusively to the Facility which have not previously been transferred or
assigned to Lessor.
35.9 DEPOSIT ACCOUNT. All deposit accounts established pursuant to
this Lease shall either be in Lessee's name or in Lessor's name as and for the
benefit of Lessee, at Lessee's option. Lessee shall be entitled to receive all
interest on such accounts and to select investments in money market accounts or
certificates of deposit up to a two (2) month maturity, so long as no Event of
Default exists. Lessor shall have an assignment of such accounts as collateral
for Lessee's obligations hereunder. Upon termination of the Lease without any
Event of Default
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then existing or these being amounts owed to Lessor, Lessee shall be entitled
to receive the balance of funds in such accounts.
35.10 LEASE TERMINATION. Upon any termination or expiration of this
Lease Agreement for any reason (other than the exercise by Lessee of a purchase
option provided for herein), the Lessee shall peacably quit and surrender to
Lessor the Leased Property and the right to receive all rental and other income
of and from the same. Upon such surrender, Lessee shall fully cooperate with
Lessor or Lessor's designee to enable Lessor or Lessor's designee to obtain all
such licenses, permits, certifications, and any other such items necessary to
operate the Leased Property as a personal care facility and, to the extent
applicable, qualify for third-party payor programs, such as Medicare or
Medicaid.
35.11 FACILITY ADDITION. The Lessee shall construct a 13 unit, 20 bed
addition at the Facility, and Lessor shall, from time to time, advance funds
for such addition in amounts not to exceed $425,000 in the aggregate. Such
funds shall be advanced in accordance with a line item cost budget ("Cost
Budget") satisfactory to Lessor. Lessor will not be obligated to advance any
funds without first having been provided the following:
(a) Any proposed change in the Cost Budget, which must be satisfactory
to Lessor.
(b) AIA draw request forms properly executed with certification by the
Lessee, Lessee's architect and general contractor stating that such draw
requests are for reimbursement of actual costs incurred for the completion of
the project and in line with the Cost Budget supplied by the Lessee.
(c) For costs not included within the general construction contract,
invoices or other evidence to Lessor confirming that such costs have ben
incurred.
(d) Title insurance date down endorsements, and if requested by
Lessor, lien waivers from the general contractor for all preceding draws, or as
to items not covered by the construction contract, lien waivers from the
persons responsible for the work for which an advance is being requested.
ARTICLE XXXVI
GLOSSARY OF TERMS
36.1 For purposes of this Lease, except as otherwise expressly
provided or unless the context otherwise requires, (a) the terms defined in
this Article XXXVI have the meanings assigned to them in this Article XXXVI and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as at the time applicable, (c) all
references in this Lease to designated "Articles", "Sections" and other
subdivisions are to the designated Articles,
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Sections and other subdivisions of this Lease, and (d) the words "herein",
"hereof" and "hereunder" and other words of similar import refer to this Lease
as a whole and not to any particular Article, Section or other subdivision, (e)
the word "including" shall mean including without limitation," and (f) all
consents required of Lessor hereunder shall be in Lessor's sole and absolute
discretion, unless otherwise specifically set forth herein. For purposes of
this Lease, the following terms shall have the meanings indicated:
"AAA" means the American Arbitration Association.
"Acceptable Financial Institution" means AmSouth Bank, Colonial Bank,
SouthTrust Bank or First Commercial Bank, each in Birmingham, Alabama, or such
other financial institution as may be acceptable to Lessor.
"Additional Charges" has the meaning set forth in Section 2.3 hereof
together with all other items specifically included as "Additional Charges" in
this Agreement.
"Adjustment Date" has the meaning set forth in Section 2.1 (b) hereof.
"Affiliate", when used with respect to Lessee, means any Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with Lessee. For the purposes of this definition, "control", as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests.
"Agent" has the meaning set forth in Article XXXII hereof.
"Applicable Period" means, except as described in Section 2.5, the
immediately preceding twelve (12) months.
"Assigned Documents" has the meaning set forth in Article XXXII
hereof.
"Award" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday, and
Friday which is not a day on which national banks in the City of Birmingham,
Alabama are closed.
"Capital Additions" means one or more new buildings or one or more
additional structures annexed to any portion of any of the Leased 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 or the rebuilding of the
existing Leased Improvements or any portion thereof not normal, ordinary or
recurring to maintain the Leased Property, excluding, however, any construction
governed by the provisions of Article XIII.
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"Capital Addition Cost" means the cost of any Capital Additions
proposed to be made by Lessee whether paid for by Lessee or Lessor. Such cost
shall include and be limited to (a) the cost of construction of the Capital
Additions, including site preparation and improvement, materials, labor
supervision and certain related design, engineering and architectural services
and the cost of any fixtures construction financing and miscellaneous items
approved in writing by Lessor, (b) if agreed to by Lessor in writing in
advance, the cost of any land contiguous to the Leased Property purchased for
the purpose of placing thereon the Capital Additions 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 Additions
during construction, (d) the cost of title insurance, (e) reasonable fees and
expenses of legal counsel and accountants, (f) filing, registration and
recording taxes and fees, (g) documentary stamp taxes, if any (h) environmental
assessments and boundary surveys and (i) all reasonable costs and expenses of
Lessor and any Lending Institution which has committed to finance the Capital
Additions, including (A) the reasonable fees and expenses of their respective
legal counsel (B) all printing expenses, (C) the amount of any filing,
registration and recording taxes and fees (D) documentary stamp taxes, if any
(E) title insurance charges appraisal fees, if any, (F) rating agency fees, if
any, (G) commitment fees, if any, charged by any Lending Institution advancing
or offering to advance any portion of the financing for such Capital Additions,
(H) a development fee not exceeding five percent (5%) of total Capital
Additions Cost.
"Cash Adjustment" has the meaning set forth in Section 20.l(d).
"Charge" has the meaning set forth in Article XI hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement Date" has the meaning set forth in Article I.
"Condemnation" means the transfer of all or any part of the Leased
Property as a result of (i) the exercise of any governmental power, whether by
legal proceedings or otherwise, by a Condemnor or (ii) a voluntary sale or
transfer by Lessor to any Condemnor, either under threat of Condemnation or
while legal proceedings for Condemnation are pending.
"Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
"Consolidated Financial Statements" means for any fiscal year or other
accounting period for Lessee and its respective consolidated Affiliates,
audited statements of earnings and retained earnings and of changes in
financial position for such period and for the period from the beginning of the
respective fiscal year of Lessee to the end of such period and the related
balance
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sheet as at the end of such period, together with the notes thereto, all in
reasonable detail and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year of Lessee,
and prepared in accordance with generally accepted accounting principles
consistently applied, except as noted.
"Consumer Price Index" or "CPI" means the Consumer Price Index for All
Urban Consumers for the U S. City Average for all Items (1982-1984=100) as
published by the United States Department of Labor, Bureau of Labor Statistics.
If the manner in which the Consumer Price Index is determined by the Bureau of
Labor Statistics shall be substantially revised (including a change in the base
index year), an adjustment shall be made by Lessor in such revised index which
would produce results equivalent, as nearly as possible, to those which would
have been obtained if the Consumer Price Index had not been so revised. If the
Consumer Price Index shall become unavailable to the public because publication
is discontinued or otherwise, or if equivalent data is not readily available to
enable Lessor to make the adjustment referred to in the preceding sentence,
Lessor will substitute therefor a comparable index based upon changes in the
cost of living or purchasing power of the consumer dollar published by any
other governmental agency, or if no such index shall be available, then a
comparable index published by a major bank or other financial institution or by
a university or a recognized financial publication.
"Credit Enhancements" means all cash collateral, security deposits,
security interests, letters of credit, pledges, prepaid rent or other sums,
deposits or interests held by Lessee, if any, to secure obligations with
respect to the Leased Property, the Tenant Leases or the Tenants.
"Current Yield" means as of any date the annual Minimum Rent, as
adjusted from time-to-time pursuant to the terms of this Lease, divided by the
sum of (i) the purchase price as set forth in the Purchase and Sale Agreement
plus (ii) all Capital Additions Costs paid for or financed by Lessor which have
not been repaid by Lessee.
"Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
"Encumbrance" has the meaning set forth in Article XXXII.
"Event of Default" has the meaning set forth in Section 15.1.
"Extended Term" has the meaning set forth in Section XXXIV.
"Facilities" means, collectively, the following facilities: Kingston
Manor Personal Care and Retirement Center in Kingston, Pa., Mid-Valley Manor in
Peckville, Pa., Blakely Pine Health Care Center in Blakely, Pa., Kingston
Health Care Center in Kingston, Pa., West Side Manor Personal Care and
Retirement Center in Wyoming, Pa., Old Forge Manor Personal Care and Retirement
Center in Old Forge, Pa., and Bloomsburg Manor Personal Care and Retirement
Center in Bloomsburg, Pa.
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"Facility" means the ________ square foot building to be operated on
the Leased Property.
"Facility Mortgage" has the meaning set forth in Section 12.1.
"Facility Mortgagee" has the meaning set forth in Section 12.1.
"Fair Market Added Value" means the Fair Market Value (as hereinafter
defined) of the Leased Property (including all Capital Additions) less the Fair
Market Value of the Leased Property determined as if no Capital Additions paid
for by Lessee without financing by Lessor had been constructed.
"Fair Market Rental Value" means the fair market rental value of the
Leased Property or any Substitute Property, (a) assuming the same is
unencumbered by this Lease, (b) determined in accordance with the appraisal
procedures set forth in Article XXVIII or in such other manner as shall be
mutually acceptable to Lessor and Lessee, and (c) not taking into account any
reduction in value resulting from an indebtedness to which the Leased Property
or Substitute Property may be subject.
"Fair Market Value" means the fair market value of the Leased Property
or any Substitute Property, including all Capital Additions, (a) assuming the
same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article XXVIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee, and (c) not taking into
account any reduction in value resulting from any indebtedness to which the
Leased Property or such Substitute Property is subject or which encumbrance
Lessee or Lessor is otherwise required to remove pursuant to any provision of
this Lease or agrees to remove at or prior to the closing of the transaction as
to which such Fair Market Value determination is being made. The positive or
negative effect on the value of the Leased Property or Substitute Property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any Encumbrance on the
Leased Property or any Substitute Property, as the case may be, which is not so
required or agreed to be removed shall be taken into account in determining
such Fair Market Value.
"Fair Market Value Purchase Price" means the Fair Market Value less
the Fair Market Added Value.
"Fiscal Year" means the 12-month period from January 1 to December 31.
"Fixtures" has the meaning set forth in Article I.
"Full Replacement Cost" has the meaning set forth in Section 12.1.
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"Guarantor" has the meaning set forth in Section 2.6.
"Guaranty" has the meaning set forth in Section 2.6.
"Hazardous Materials" means any substance, including asbestos or any
substance containing asbestos, the group of organic compounds known as
polychlorinated biphenyls, flammable explosives, radioactive materials, medical
waste, chemicals, pollutants, effluents, contaminants, emissions or any other
related materials and items included in the definition of hazardous or toxic
wastes, materials or substances under any Hazardous Materials Law.
"Hazardous Materials Law" means any law, regulation or ordinance
relating to environmental conditions, medical waste and industrial hygiene,
including the Resource Conservation and Recovery Act of 1976 ("RCRA") the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), the Hazardous Materials Transportation Act, the Federal Water
Pollution Control Act the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, the Atomic Energy Act and
all similar federal, state and local environmental statutes and ordinances,
whether heretofore or hereafter enacted or effective and all regulations,
orders, or decrees heretofore or hereafter promulgated thereunder.
"Impositions" means, collectively, all taxes relating to the Leased
Property, including all ad valorem, sales and use, gross receipts, action,
privilege, rent (with respect to the Tenant Leases) or similar taxes,
assessments (including all assessments for public improvements or benefits,
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 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 the Leased Property and/or the Rent (including
all interest and penalties thereon due to any failure in payment by Lessee),
which at any time prior to, during or in respect of the Term hereof may be
assessed or imposed on or in respect of or be a lien upon (a) Lessor or
Lessor's interest in the Leased Property, (b) the Rent, the 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, sales from, or
activity conducted on, or in connection with, the Leased Property or the Tenant
Leases or use of the Leased Property or any part thereof; provided that nothing
contained in this Lease shall be construed to require Lessee to pay (1) any tax
based on net income (whether denominated as a franchise or capital stock or
other tax) imposed on Lessor, (2) any transfer or net revenue tax of Lessor,
(3) any tax imposed with respect to the sale, exchange or other disposition by
Lessor of any portion of the Leased Property or the proceeds thereof, or (4)
except as expressly provided elsewhere in this Lease, any principal or interest
on any Encumbrance on the Leased Property, except to the extent that any tax,
assessment, tax levy or charge which Lessee is obligated to pay pursuant to
this definition
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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 (1), (2) or (3) is levied, assessed or imposed expressly in lieu
thereof.
"Initial Term" has the meaning set forth in Article I.
"Insurance Requirements" means all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"Land" has the meaning set forth in Article I.
"Lease" means this Lease.
"Leases" means, collectively, this Lease and those certain leases of
even date herewith with respect to the Facilities and between Lessor, as the
lessor and the following entities as lessees thereunder: BCC at Blakely, Inc.,
BCC at Bloomsburg, Inc., BCC at Kingston I, Inc., BCC at Kingston II, Inc., BCC
at Mid-Valley, Inc., BCC at Old Forge, Inc., and BCC at West View, Inc.
"Lease Amendment" has the meaning set forth in Section 9.3(b)(iv).
"Lease Assignment" means that certain Assignment of Rents and Leases,
substantially in the form attached hereto as Exhibit D, to be dated on or about
the date hereof executed by Lessee to Lessor, pursuant to the terms of which
Lessee assigns to Lessor each of the Tenant Leases and Credit Enhancements, if
any, as security for the obligations of Lessee under this Lease, and any other
obligations of Lessee, or any Affiliate of Lessee to Lessor.
"Leased Improvements" and "Leased Property" have the meanings set
forth in Article I.
"Legal Requirements" means all federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Property or the
construction, use or alteration thereof, whether now or hereafter enacted and
in force, including any which may (a) require repairs, modifications or
alterations of or to the Leased Property, or (b) in any way adversely affect
the use and enjoyment thereof, and all permits, licenses, authorizations and
regulations relating thereto, and all covenants, agreements, actions and
encumbrances contained in any instruments, either of record or known to Lessee
(other than encumbrances created by Lessor without the consent of Lessee), at
any time in force affecting the Leased Property.
"Lending Institution" means 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 plan, college or university, or real estate
investment company including any corporation qualified to be treated for
federal tax purposes as a real estate investment trust having a net worth of at
least $50,000,000.
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"Lessee" means _______________________, a Delaware corporation, its
successors and assigns.
"Lessor" means CAPSTONE CAPITAL OF PENNSYLVANIA, INC., a Pennsylvania
corporation, and its successors and assigns.
"Minimum Rent" has the meaning set forth in Section 2.1(a).
"Minimum Repurchase Price" means the greater of (i) the Fair Market
Value of the Leased Property at the time of repurchase hereunder by Lessee or
(ii) the purchase price paid by Lessor for the Leased Property pursuant to the
Purchase and Sale Agreement (and in the case of a substitution pursuant to
Article XX, as adjusted pursuant to Section 20.1(f)) as such amount is
increased at the rate of three percent compounded annually for each year (to be
prorated for partial years) between the Commencement Date and the date of
repurchase by Lessee, plus the sum of all Capital Addition Costs relating to
the Leased Property paid for or financed by Lessor which as of the date of
repurchase of the Leased Property have not been repaid by Lessee, less the net
amount (after deduction of all reasonable legal fees and other costs and
expenses, including expert witness fees, incurred by Lessor in connection with
obtaining any such award or proceeds) of all Awards received by Lessor from
Condemnation of the Leased Property.
"Officer's Certificate" means a certificate of Lessee signed by the
Chairman of the Board of Directors, the President, any Vice President or
another officer authorized to so sign by the Board of Directors or By-Laws of
Lessee, or any other person whose power and authority to act has been
authorized by delegation in writing by any of the persons holding the foregoing
offices.
"Ordinary Course of Business" means the ordinary course of business
for Lessee consistent with past custom and practice (including quantity and
frequency).
"Overdue Rate" means as of any date, a rate per annum equal to the
Prime Rate as of such date, plus two percent, but in no event greater than the
maximum rate then permitted under applicable law.
"Payment Date" means any due date for the payment of the installments
of Minimum Rent under this Lease.
"Permitted Exceptions" has the meaning set forth in Article I hereof.
"Permitted Liens" means (i) liens described on Exhibit E attached
hereto, (ii) pledges or deposits made to secure payments of worker's
compensation insurance (or to participate in any fund in connection with
worker's compensation insurance), unemployment insurance, pensions or social
security programs, (iii) liens imposed by mandatory provisions of law such as
for
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materialmen, mechanics, warehousemen and other like liens arising in the
Ordinary Course of Business, securing indebtedness whose payment is not yet due
and payable, (iv) liens for taxes, assessments and governmental charges or
levies if the same are not yet due and payable or if the same are being
contested in good faith and as to which adequate cash reserves have been
provided, (v) liens arising from good faith deposits in connection with
tenders, leases, real estate bids or contracts (other than contracts involving
the borrowing of money), pledges or deposits to secure public or statutory
obligations and deposits to secure (or in lieu of) surety, stay, appeal or
customs bonds and deposits to secure the payment of taxes, assessments, duties
or other similar charges, (vi) liens to secure purchase money indebtedness, so
long as the indebtedness incurred to purchase the new asset is secured only by
such asset, or (vii) encumbrances consisting of zoning restrictions, easements
or other restrictions on the use of real property; provided that such items do
not impair the use of such property for the purposes intended, none of which is
violated by existing or proposed structures or land use.
"Person" means a natural person, corporation, partnership, trust,
association, limited liability company or other entity.
"Personal Property" means all machinery, equipment, furniture,
furnishings. computers, signage, trade fixtures or other personal property and
consumable inventory and supplies used or useful in the operation of the Leased
Property for its Primary Intended Use, together with all replacements and
substitutions therefor, except for any portion of the Leased Property, all as
more specifically set forth on Exhibit F attached hereto.
"Primary Intended Use" has the meaning set forth in Section 6.2(a).
"Prime Rate" means the annual rate reported by The Wall Street
Journal, Eastern Edition (or, if The Wall Street Journal shall no longer be
published or shall cease to report such rates, then a publication or journal
generally acceptable in the financial industry as authoritative evidence of
prevailing commercial lending rates) from time to time as being the prevailing
prime rate (or, if more than one such rate shall be published in any given
edition, the arithmetic mean of such rates). The prime rate is an index rate
used by The Wall Street Journal to report prevailing lending rates and may not
necessarily be its most favorable lending rate available. Any change in the
Prime Rate hereunder shall take effect on the effective date of such change in
the prime rate as reported by The Wall Street Journal, without notice to Lessee
or any other action by Lessor. Interest shall be computed on the basis that
each year contains 360 days, by multiplying the principal amount by the per
annum rate set forth above, dividing the product so obtained by 360, and
multiplying the quotient thereof by the actual number of days elapsed.
"Purchase and Sale Agreement" means the agreement dated on or about
December 27,1996, between _______________ as "Seller", and Lessor as
"Purchaser" relating to the acquisition by Lessor of the Leased Property.
"Rent" means, collectively, the Minimum Rent and the Additional
Charges.
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"Request" has the meaning set forth in Section 9.3(a).
"Substitution Date" has the meaning set forth in Section 20.1.
"Substitute Properties" has the meaning set forth in Section 20.1.
"Taking" means a taking or voluntary conveyance during the Term hereof
of all or part of the Leased Property, or any interest therein or right
accruing thereto or use thereof, as the result of, or in settlement of any
Condemnation or other eminent domain proceeding affecting the Leased Property
whether or not the same shall have actually been commenced.
"Tenant" means the lessees or tenants under the Tenant Leases, if any.
"Tenant Leases" means all residency agreements and similar rental
agreements (written or verbal, now or hereafter in effect), if any, that grant
a possessory interest in and to any individual unit in the Improvements, and
all Credit Enhancements, if any, held in connection therewith.
"Term" means the Initial Term and any Extended Term as to which Lessee
has exercised its options to extend contained in Article XXXIV hereof unless
earlier terminated pursuant to the provisions hereof.
"Unavoidable Delays" means delays due to strikes, lockouts, inability
to procure materials after the exercise of reasonable efforts, power failure,
acts of God, governmental restrictions, enemy action, civil commotion, fire,
unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, provided that lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to
perform any obligations of such other party under this Lease.
"Unsuitable for Its Primary Intended Use" as used anywhere in this
Lease, shall mean that, by reason of damage or destruction, or a partial
Taking, in the good faith judgment of Lessee, reasonably exercised, the
Facility cannot be profitably operated for its Primary Intended Use, taking
into account, among other relevant factors, the number of usable suites and
number and diversity of Tenants affected by such damage or destruction or
partial Taking.
58
<PAGE> 59
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and their respective corporate seals to be hereunto affixed and attested by
their respective officers thereunto duly authorized as of the date first
written above.
LESSOR:
LESSEE:
59
<PAGE> 60
SCHEDULE TO EXHIBIT 10.21 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
LEASE AGREEMENT
<TABLE>
<CAPTION>
PROJECT PARTIES FACILITY DATE ANNUAL RENT
------- ------- -------- ---- -----------
<S> <C> <C> <C> <C>
Bloomsburg, PA Capstone Capital Bloomsburg Manor Personal Care 1/31/97 $348,800.00
Corporation of and Retirement Center
Pennsylvania, Inc. (Lessor)
and BCC at Bloomsburg, Inc.
(Lessee)
Blakely, PA Capstone Capital Blakely-Pine Health Care Center 1/31/97 $248,800.00
Corporation of
Pennsylvania, Inc. (Lessor)
and BCC at Blakely, Inc.
(Lessee)
Kingston I, PA Capstone Capital Kingston Manor Personal Care 1/31/97 $347,400.00
Corporation of and Retirement Center
Pennsylvania, Inc. (Lessor)
and BCC at Kingston I, Inc.
(Lessee)
Kingston II, PA Capstone Capital Kingston Health Care Center 1/31/97 $424,500.00
Corporation of
Pennsylvania, Inc. (Lessor)
and BCC at Kingston II,
Inc. (Lessee)
Mid-Valley, PA Capstone Capital Mid-Valley Manor Personal Care 1/31/97 $329,200.00
Corporation of and Retirement Center
Pennsylvania, Inc. (Lessor)
and BCC at Mid-Valley, Inc.
(Lessee)
Old Forge, PA Capstone Capital Old Forge Manor Personal Care 1/31/97 $228,600.00
Corporation of and Retirement Center
Pennsylvania, Inc. (Lessor)
and BCC at Old Forge, Inc.
(Lessee)
West View, PA Capstone Capital West Side Manor Personal Care 1/31/97 $237,700.00
Corporation of and Retirement Center
Pennsylvania, Inc. (Lessor)
and BCC at West View, Inc.
(Lessee)
Harrisburg, PA Capstone Capital Outlook Pointe at Harrisburg 3/28/97 Pursuant to
Corporation of formula in Lease
Pennsylvania, Inc. (Lessor)
and BCC at Harrisburg, Inc.
(Lessee)
</TABLE>
<PAGE> 61
<TABLE>
<S> <C> <C> <C> <C>
Greensboro, NC Capstone Capital Outlook Pointe at Greensboro 3/28/97 Same as
Corporation (Lessor) and Harrisburg Lease
BCC at Greensboro, Inc.
(Lessee)
Ravenna, OH Capstone Capital Outlook Pointe at Ravenna 3/28/97 Same as
Corporation (Lessor) and Harrisburg Lease
BCC at Ravenna, Inc.
(Lessee)
Nevada, MO (2 Capstone Capital Joe Clark Residential Care Home 5/15/97 $133.375.00
Leases) Corporation (Lessor) and 1501 E. Ashland Street
BCC at Missouri, Inc. Nevada, MO
(Lessee)
Butler, MO Capstone Capital Joe Clark Residential Care Home 5/15/97 $133,375.00
Corporation (Lessor) and 300 S. Delaware Street
BCC at Missouri, Inc. Butler, MO
(Lessee)
Lamar, MO Capstone Capital Joe Clark Residential Care Home 8/18/97 $133,375.00
Corporation (Lessor) and 3 Southwest First Lane
BCC at Lamar, Inc. (Lessee) Lamar, MO
Roanoke, VA ALCO II, L.L.C. (Lessor) Outlook Pointe at Roanoke 6/30/97 Pursuant to
and BCC at Roanoke (Lessee) formula in Lease
Harrisonburg, VA ALCO I, L.L.C. (Lessor) Outlook Pointe at Harrisonburg 6/30/97 Same as Roanoke
and BCC at Harrisonburg, Lease
Inc. (Lessee)
Danville, VA ALCO III, L.L.C. (Lessor) Outlook Pointe at Danville 9/3/97 Same as Roanoke
and BCC at Danville, Inc. Lease
(Lessee)
</TABLE>
<PAGE> 1
EXHIBIT 10.22
FORM OF
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT, made as of _________________
________________ by and between _______________________ ("Lessee") and its
successors and assigns ("Lessor").
R E C I T A L S:
A. Lessee desires to enter into a lease agreement (the "Lease" and
together with any other documents executed in connection therewith, the "Lease
Documents") with respect to a facility known as ______________________________
_________________ (the "Facility"), located at certain real property more
particularly described in Exhibit A hereto (the real property and improvements
now or hereafter existing thereat are referred to herein as the "Property").
B. As a condition precedent to Lessor entering into the Lease, Lessor
requires a security interest in all of Lessee's right, title, and interest in
and to the Collateral hereinafter defined.
NOW, THEREFORE, in consideration of the recitals, Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Lessee and Lessor hereby covenant and agree as herein
provided.
1. DEFINITIONS. For the purposes of this Assignment and Security
Agreement (referred to herein as the "Assignment" or the "Agreement"), the
following defined terms shall have the following meanings:
"ACCOUNTS" means any rights of Lessee arising from the operation of
the Facility to payment for goods sold or leased or for services rendered, not
evidenced by an Instrument, including, without limitation, (i) all accounts
arising from the operation of the Facility and (ii) all rights to payment (if
any) from Medicare or Medicaid programs or similar state or federal programs,
boards, bureaus or agencies and rights to payments from patients or private
insurers, arising from the operation of the Facility. Accounts shall include
the proceeds thereof (whether cash or noncash, moveable or immoveable, tangible
or intangible) received from the sale, exchange, transfer, collection or other
disposition or substitution thereof.
"ACCRUED RENTS" means all rights of Lessee, as lessor or sublessor,
to payment arising when rent is earned under leases for retail space or other
space in the Facility (including, without limitation, rights to payment earned
under written leases for space in the Facility for the operation of ongoing
retail businesses such as barbershops, beauty shops, medical offices,
pharmacies and specialty shops).
<PAGE> 2
"COLLATERAL" means Accounts, Accrued Rents, General Intangibles,
Instruments, Money, and, to the extent assignable, Permits and Reimbursement
Contracts, whether now owned or hereafter at any time acquired by Lessee and
wherever located, and includes all replacements, additions, accessions,
substitutions, proceeds (including without limitation, proceeds of insurance)
and products relating thereto; provided, however, that with respect to any
items which are leased and not owned by Lessee, the term "Collateral" includes
the leasehold interest only of Lessee together with any options to purchase any
of said items and any additional or greater rights with respect to such items
which Lessee may hereafter acquire.
"EVENT OF DEFAULT" means any Event of Default as defined in the
Lease.
"GENERAL INTANGIBLES" means all intangible personal property of
Lessee arising out of or connected with the Facility (other than Accounts,
Accrued Rents, Instruments, Money and Permits).
"INSTRUMENTS" means all instruments, chattel paper, documents or
other writings obtained by Lessee from or in connection with the operation of
the Facility (including, without limitation, all ledger sheets, computer
records and printouts, data bases, programs, books of account and files of
Lessee relating thereto).
"LEASE DEFAULT" means a default under the Lease which is not timely
cured within applicable cure periods, if any.
"LEASE OBLIGATIONS" means the aggregate of all amounts owing from
time to time under the Lease and all expenses, charges and other amounts from
time to time owing under this Agreement or the Lease, and all covenants,
agreements and other obligations from time to time owing to, or for the benefit
of, Lessor pursuant to the Lease.
"MONEY" means all monies, cash, rights to deposit or savings
accounts or other items of legal tender obtained from or for use in connection
with the operation of the Facility.
"PERMITS" means all licenses, permits and certificates obtained by
or in the name of Lessee in connection with the operation, use or occupancy of
the Facility, including, without limitation, business licenses, state health
department licenses, food service licenses, licenses to conduct business,
certificates of need and all such other permits, licenses and rights, obtained
by or in the name of Lessee from any governmental, quasi-governmental or
private Person whatsoever concerning operation, use or occupancy.
"PERSON" means any person, firm, corporation, partnership trust or
other entity.
"REIMBURSEMENT CONTRACTS" means all third party reimbursement
contracts for the Facility which are now or hereafter in effect with respect to
patients qualifying for
2
<PAGE> 3
coverage under the same, including Medicare, Medicaid, and any successor
program or other similar reimbursement program and private insurance
agreements.
Singular terms shall include the plural forms and vice versa, as
applicable, of the terms defined.
Terms contained in this Agreement shall, unless otherwise defined
herein or unless the context otherwise indicates, have the meanings, if any,
assigned to them by the Uniform Commercial Code in effect in the State of
Alabama.
All references to other documents or instruments shall be deemed to
refer to such documents or instruments as they may hereafter be extended,
renewed, modified, or amended and all replacements and substitutions therefor,
except that any amendments to the Lease without Lessor's prior written consent
will be void.
2. SECURITY INTEREST. Lessee hereby grants to Lessor a security
interest in the Collateral in order to secure payment and performance of the
Lease Obligations. Until the occurrence of an Event of Default, however, Lessee
shall have the right to collect all proceeds of the Collateral and to take
other action with respect to the Collateral, subject to the provisions of this
Assignment.
3. COLLATERAL SECURITY. Upon the payment of the Lease Obligations and
such payment becoming final and no longer subject to refund or rescission under
bankruptcy or other applicable law, the security interest in the Collateral
created by Section 1, and all rights herein granted to Lessor, shall be
released and all the estate, right, title, interest, claim and demand of Lessor
in and to the Collateral shall revert to Lessee, and Lessor shall at the
request of Lessee deliver to Lessee an instrument cancelling this Assignment
and terminating the security interest in the Collateral created by this
Assignment, but until such time the same shall remain in full force and effect.
4. TITLE. Lessee will defend the Collateral against all claims and
demands of all entities at any time claiming the Collateral, or any portion
thereof or interest therein.
5. FURTHER ACTIONS. Lessee will, at the request of Lessor (i) join
with Lessor in executing one or more financing statements or other documents
necessary or appropriate to evidence or secure the Lease Obligations, or
perfect the security interest in the Collateral created by this Assignment, in
form and content satisfactory to Lessor; (ii) mark any chattel paper to reflect
Lessor's interest therein; and (iii) take any other action or execute any other
instrument deemed necessary or appropriate in the judgment of Lessor to perfect
or continue the perfection of the security interest of Lessor in the Collateral
and to protect the Collateral against the rights, claims or interests of all
other entities.
6. NO ENCUMBRANCES. Except for any lease or grant of purchase money
security interests in new items of tangible personal property having an
aggregate cost during the Lease term of an amount not to exceed $25,000, Lessee
will not, without the express
3
<PAGE> 4
prior written approval of Lessor, in any way encumber, or hypothecate, or
create or permit to exist any lien, security interest or encumbrance or other
interest in the Collateral except the security interest in favor of Lessor.
7. COLLECTION. Lessee will diligently, in accordance with good
business practices, pursue collection of all portions of the Collateral which
consist of obligations or indebtedness owed to Lessee by other Persons, and
Lessee will, in a timely manner, in accordance with good business practices,
file (and assign to Lessor) any liens available to protect the rights of Lessee
to payment of such obligations or indebtedness and will give all prior notices
thereof required by law.
8. RECORDS. Lessee will, upon request by Lessor at any time and from
time to time, deliver or make available to Lessor records and schedules
reflecting the accurate and complete status, condition and location of the
Collateral.
9. INFORMATION. Lessee will promptly advise Lessor by notice if Lessee
should change its principal place of business or chief executive office from
the address set forth in Section 15 hereof, which Lessee represents to be its
present principal place of business and chief executive office. Lessee will
advise Lessor of any information which may adversely affect the value of the
Collateral or the rights or remedies of Lessor with respect to the Collateral.
10. BOOKS AND RECORDS. Lessee will maintain complete and accurate
account books and records with respect to the operation of the Facility, which
books and records shall reflect the consistent application of generally
accepted accounting principles, and Lessee will make such books and records
available at reasonable times for inspection and copying by Lessor or its
agents.
11. REMEDIES. In addition to all other remedies available under the
Lease and as otherwise may be available at law or in equity, Lessor may, upon
the occurrence of an Event of Default, pursue any, all or any combination of
the remedies described in subsections 11(a) through 11(g):
(a) Exercise any and all of the rights and remedies for which
provision is made by the applicable Uniform Commercial Code, together
with the right to recover the reasonable attorneys' fees and legal
expenses incurred by Lessor in the enforcement of this Assignment or
in connection with any redemption of the Collateral, including fees
and expenses on appeal and in any bankruptcy proceedings.
(b) Require Lessee to assemble the Collateral, or any portion
thereof, and make such available at one or more places as Lessor may
designate, and to deliver possession of the Collateral to Lessor,
which shall have full right to enter upon any or all of the premises
and property of Lessee to exercise Lessor's rights hereunder.
4
<PAGE> 5
(c) Use, operate and control the Collateral to preserve the
Collateral or the value thereof.
(d) Enforce one or more remedies hereunder, successively or
concurrently, and such action shall not operate to estop or prevent
Lessor from pursuing any other or further remedy which Lessor may
have.
(e) In connection with any public or private sale under the
applicable Uniform Commercial Code, Lessor shall give Lessee ten (10)
business days' notice of the time and place of any public sale of the
Collateral or of the time after which any private sale or other
intended disposition thereof is to be made, which notice shall be
deemed to be reasonable notice of such sale or other disposition. Such
notice may be mailed to Lessee at the address and in the manner set
forth in Section 14.
(f) In the event Lessor recovers possession of all or any part of
the Collateral pursuant to a writ of possession or other judicial
process, whether prejudgment or otherwise, Lessor may thereafter
retain, sell or otherwise dispose of such Collateral in accordance
with this Assignment or the applicable Uniform Commercial Code, and
following such retention, sale or other disposition, Lessor may
voluntarily dismiss without prejudice the judicial action in which
such writ of possession or other judicial process was issued. Subject
to the provisions of applicable law, Lessee hereby consents to the
voluntary dismissal by Lessor of such judicial action, and Lessee
further consents to the exoneration of any bond which Lessor may have
filed in such action.
(g) Lessor may notify Lessee's account debtors with respect to
any Accounts to make payment directly to Lessor or to one or more
accounts as designated by Lessor (which in Lessor's judgment will in
the case of Medicare or Medicaid Accounts comply with any legal
requirements of Medicare or Medicaid), and Lessor is hereby authorized
by Lessee (and is appointed attorney-in-fact of Lessee) to sign and
endorse Lessee's name upon any such notice to account debtors and upon
any check, draft, money order or other form of payment of any Account,
and, after applying the same first to expenses of collection and
enforcement of the Accounts, including attorneys' fees, the Lessor may
apply the same to reduce the Lease Obligations in such order as Lessor
shall elect. Lessor shall not be liable for failure to collect or to
enforce any Accounts or for any action or omission on the part Lessor,
its officers, agents and employees in enforcing such Accounts.
12. WAIVER OF CERTAIN LAWS. Lessee agrees that in case of any Event of
Default, neither Lessee nor anyone claiming through or under Lessee will set
up, claim or seek to take advantage of any appraisement, valuation, stay,
extension, homestead, exemption or redemption laws now or hereafter in force,
or otherwise seek to prevent or hinder the enforcement of this Agreement, or
the final and absolute realization of Lessor upon the security interests
created by this Agreement, and Lessee, for Lessee and all who may at any time
claim through or under any Lessee, hereby waives to the full extent that Lessee
may
5
<PAGE> 6
lawfully do, the benefit of all such laws, and any and all right to have the
assets comprising the security intended to be created hereby (that is, the
Collateral) marshalled upon any exercise of the remedies provided herein.
13. RECORDING AND FILING. A UCC-1 financing statement may be filed
and/or recorded, and from time to time thereafter be refiled and/or rerecorded
at the option of Lessor, in the local and state filing offices in Pennsylvania
and other states where Lessor deems advisable in order to perfect or continue
the perfection of Lessor's interest in the Collateral or any part thereof, and
Lessee agrees to pay (or reimburse the Lessor if Lessor pays) the fees and
taxes for such filing or recording.
14. NOTICES. Each notice to Lessee required herein, or by applicable
law, shall be in writing and shall be deemed received (a) on the date
delivered, if sent by hand delivery (to the person or department if one is
specified below), (b) three (3) days following the date deposited in U. S.
mail, certified or registered, with return receipt requested, or (c) one (1)
day following the date deposited with Federal Express or other national
overnight carrier, and in each case addressed as follows:
If to Lessee:
Balanced Care Corporation
5021 Louise Drive - Suite 200
Mechanicsburg, Pennsylvania 17055
Attn: Robin Barber, Esq.
If to Lessor:
Capstone Capital of Pennsylvania
1000 Urban Center Parkway
Birmingham, Alabama 35242
Attn: Daryl D. McCombs
Any party may change its address to another single address by notice given as
herein provided, except any change of address notice must be actually received
in order to be effective.
15. [Intentionally Omitted]
16. WAIVER. No consent or waiver, express or implied, by any party to
this Agreement to or of any breach or default by any other party to this
Agreement in the performance by such other party of the obligations thereof
under this Agreement shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other party of the
same or any other obligations of such other party under this Agreement. Failure
on the part of any party to this Agreement to complain of any
6
<PAGE> 7
act or failure to act of any other party to this Agreement or to declare such
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of the rights thereof under this
Agreement.
17. SEVERABILITY, COMPLETE AGREEMENT. If any provision of this
Agreement or the application thereof to any Person or circumstance shall be
invalid or unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to any other Person or circumstance shall not be
affected thereby, and such provisions shall be enforced to the greatest extent
permitted by law. This Agreement and the Lease Documents, and the instruments
executed in connection herewith, constitute the full and complete agreement of
the parties and supersede all prior negotiations, correspondence, and memoranda
relating to the subject matter thereof.
18. AMENDMENT. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
19. HEADINGS; NUMBER AND GENDER. The headings of the sections,
paragraphs and subdivisions of this Agreement are for convenience of reference
only, are not to be considered a part hereof and shall not limit or otherwise
affect any of the terms hereof.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise but a single instrument.
21. BINDING AGREEMENT. The provisions of this Agreement shall apply
to, inure to the benefit of, and bind Lessee and Lessor and their respective
successors and assigns thereof.
22. INTERPRETATIONS. No provisions of this Agreement shall be
construed against or interpreted to the disadvantage of any party to this
Agreement by any court or other governmental or judicial authority by reason of
such party's having or being deemed to have structured or dictated such
provision.
23. RELATIONSHIP OF PARTIES. No express or implied term, provision or
condition of this Agreement, considered without reference to any other or
external agreement, shall or shall be deemed to constitute the parties of this
Agreement as partners or joint venturers.
24. COSTS AND EXPENSES. Lessee will bear all expenses (including legal
fees and expenses of Lessor's counsel and including fees and expenses on appeal
and in bankruptcy) in connection with any advice or other representation with
respect to this Agreement, or to collect the Lease Obligations, or any part
thereof, or to take any action with respect to any suit or proceeding relating
to this Agreement or the Collateral, either where Lessor is named as a party or
participates as a party, or to protect, collect, or liquidate any of the
Collateral
7
<PAGE> 8
for the Lease Obligations or to attempt to enforce any security interest or
lien granted to Lessor by the Lessee.
25. CONTROLLING LAW. The validity, interpretation, enforcement and
effect of this Agreement shall be governed by, and construed in accordance
with, the laws of the State of Alabama.
26. WAIVER OF JURY TRIAL. LESSEE HEREBY WAIVES ANY RIGHT THAT IT MAY
HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR
THE LEASE, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF LESSOR AND/OR LESSEE WITH RESPECT TO THE LEASE OR
IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF EITHER PARTY'S RIGHTS AND
REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP
OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. LESSEE
AGREES THAT LESSOR MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF LESSEE
IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF LESSOR TO
ENTER INTO THE LEASE, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN) BETWEEN
BORROWER, LESSEE AND LESSSORSHALL INSTEAD BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, Lessee and Lessor have cause this Agreement to be
properly executed as of the day and year first above written.
LESSEE:
8
<PAGE> 9
LESSOR:
By:
Its:
9
<PAGE> 10
SCHEDULE TO EXHIBIT 10.22 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
ASSIGNMENT AND SECURITY AGREEMENT
<TABLE>
<CAPTION>
PROJECT PARTIES FACILITY DATE
------- ------- -------- ----
<S> <C> <C> <C>
Bloomsburg, PA Capstone Capital of Pennsylvania, Inc. and Bloomsburg Manor Personal Care and 1/31/97
BCC at Bloomsburg, Inc. Retirement Center
Blakely, PA Capstone Capital of Pennsylvania, Inc. and Blakely-Pine Health Care Center 1/31/97
BCC at Blakely, Inc.
Kingston I, PA Capstone Capital of Pennsylvania, Inc. and Kingston Manor Personal Care and 1/31/97
BCC at Kingston I, Inc. Retirement Center
Kingston II, PA Capstone Capital of Pennsylvania, Inc. and Kingston Health Care Center 1/31/97
BCC at Kingston II, Inc.
Mid-Valley, PA Capstone Capital of Pennsylvania, Inc. and Mid-Valley Manor Personal Care and 1/31/97
BCC at Mid-Valley, Inc. Retirement Center
Old Forge, PA Capstone Capital of Pennsylvania, Inc. and Old Forge Manor Personal Care and 1/31/97
BCC at Old Forge, Inc. Retirement Center
West View, PA Capstone Capital of Pennsylvania, Inc. and West Side Manor Personal Care and 1/31/97
BCC at West View, Inc. Retirement Center
Nevada, MO (2 Capstone Capital Corporation and Joe Clark Residential Care Home 5/15/97
Agreements) BCC at Missouri, Inc. 1501 E. Ashland Street
Nevada, MO
Butler, MO Capstone Capital Corporation and Joe Clark Residential Care Home 5/15/97
BCC at Missouri, Inc. 300 S. Delaware Street
Butler, MO
Lamar, MO Capstone Capital Corporation and Joe Clark Residential Care Home 8/18/97
BCC at Lamar, Inc. 3 Southwest First Lane
Lamar, MO
Roanoke, VA ALCO II, L.L.C. and BCC at Roanoke, Inc. Outlook Pointe at Roanoke 6/30/97
Harrisonburg, VA ALCO I, L.L.C. and BCC at Harrisonburg, Outlook Pointe at Harrisonburg 6/30/97
Inc.
Danville, VA ALCO III, L.L.C. and BCC at Danville, Inc. Outlook Pointe at Danville 9/3/97
</TABLE>
<PAGE> 1
EXHIBIT 10.23
(________ )
FORM OF ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT ("Agreement") is made as of _______________
____________, by and between BALANCED CARE CORPORATION, a Delaware corporation
having a principal place of business at 5021 Louise Drive, Suite 200,
Mechanicsburg, Pennsylvania 17055 (the "Assignor") and CAPSTONE CAPITAL OF
PENNSYLVANIA, INC., a Pennsylvania corporation having a principal place of
business at 1000 Urban Center Drive, Suite 630, Birmingham, Alabama 35242 (the
"Assignee").
WHEREAS, the Assignor is the Purchaser and _________________________
_____________________________ is the Seller under that certain Asset Purchase
Agreement dated as of __________________ (the "Asset Purchase Agreement"):
capitalized terms used herein and not otherwise defined have the meanings
provided for therein; and
WHEREAS, the Assignor desires to assign all of its rights and certain
of its obligations under the Asset Purchase Agreement to the Assignee; and
WHEREAS, a condition to Assignee's agreement to accept an assignment of
Assignor's rights and certain of its obligations under the Asset Purchase
Agreement (the "Assignment") is the execution of a Lease Agreement of even date
herewith ("Lease Agreement") by and between Assignee, as lessor, and __________,
a Delaware corporation and a wholly owned subsidiary of Assignor ("BCC"), as
lessee, with respect to the Purchased Assets, together with all other documents
provided for or contemplated by the Lease Agreement, including, without
limitation, a guaranty agreement to be executed by Assignor in favor Assignee
with respect to all obligations of BCC under the Lease Agreement, all in form
and content satisfactory to Assignee; and
WHEREAS, Assignee's agreement to accept the Assignment is further
subject to those conditions, limitations and agreements of Assignor set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby act and
agree as follows:
1. (a) Except as provided in subsection (b) below, the Assignor hereby
assigns, sets over and transfers to the Assignee all of the Assignor's right,
title and interest as the Purchaser under the Asset Purchase Agreement,
including, without limitation, any Purchaser Indemnitee's right to
indemnification by Seller under the Asset Purchase Agreement. The Assignor
further relinquishes and conveys to Assignee all of Assignor's right, title and
interest in and to the Real Property Owned and equipment, machinery and other
tangible personal property ("Equipment").
<PAGE> 2
(b) Notwithstanding subsection (a) above, Assignor does not assign
to Assignee any of Assignor's rights under the Asset Purchase Agreement
relating to the Other Assets. For this purpose, the term "Other Assets" means
all intangible personal property conveyed pursuant to the Asset Purchase
Agreement, including, but not limited to, goodwill and the "going concern" of
the Business. In no event does the term "Other Assets" include any Real
Property Owned, Equipment or any intangible assets directly related thereto.
2. The Assignor represents and warrants to the Assignee that (a) the
Assignor has not made or executed any other assignment of any of its rights
under the Asset Purchase Agreement, (b) the Assignor has all requisite
corporate power and authority to execute, deliver and perform this Agreement,
(c) the Asset Purchase Agreement is in full force and effect and the Seller and
the Assignor have fully performed their respective obligations thereunder as of
this date, (d) a true and correct copy of the Asset Purchase Agreement has been
provided to the Assignee by the Assignor and (e) except as already obtained,
the execution and delivery of this Agreement by the Assignor and the
performance of its obligations hereunder do not require the consent, license,
permission, action or approval by any party, including, without limitation, the
Seller.
3. The Assignee's obligations under the Asset Purchase Agreement shall
be limited solely to (a) payment of the Purchase Price and (b) acceptance of
delivery of a deed to the Real Property Owned together with and any other
documents required to be delivered under the Asset Purchase Agreement on the
Closing Date. The Assignee shall not be responsible to Seller or to any other
party for the performance of any agreements, covenants, warranties, obligations
and liabilities of the Purchaser under the Asset Purchase Agreement, except as
specifically provided for herein.
4. Except as set forth in Section 3 above, the Assignor shall be
liable to the Seller for, and the Assignor covenants and agrees with the
Assignee that the Assignor will fulfill and perform, all of the Purchaser's
obligations under the Asset Purchase Agreement, including, without limitation,
the Purchaser's obligation to indemnify any Seller Indemnitee under the Asset
Purchase Agreement.
5. In addition to the parties to whom notice is to be given under
Section 15.5 of the Asset Purchase Agreement, any notice to be given or
received by the Purchaser shall also be given to the Assignee, as follows:
If to Assignee, to:
Capstone Capital of Pennsylvania, Inc.
1000 Urban Center Drive, Suite 630
Birmingham, Alabama 35242
Attn: Daryl D. McCombs
Tel: (205) 967-2092
Fax: (205) 967-9066
2
<PAGE> 3
With a required copy to:
Johnston, Barton, Proctor & Powell
2900 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203-2618
Attn: Haskins W. Jones, Esq.
Tel: (205) 458-9400
Fax: (205) 458-9500
6. This Agreement shall be binding upon and insure to the benefit of
the parties hereto and their respective successors and assigns.
7. This Agreement may be executed in one or more counterparts, all of
which shall constitute one and the same instrument. This Agreement is intended
to take effect as a sealed instrument and shall be construed in accordance with
the laws of the State of Alabama.
[SIGNATURES ON FOLLOWING PAGE]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as a sealed instrument as of the date and year first written above.
ASSIGNOR:
BALANCED CARE CORPORATION, a Delaware
Corporation
By:
-------------------------------
Name:
Title:
ASSIGNEE
CAPSTONE CAPITAL OF PENNSYLVANIA, INC.
a Pennsylvania Corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
4
<PAGE> 5
SCHEDULE TO EXHIBIT 10.23 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
ASSIGNMENT AGREEMENT
<TABLE>
<CAPTION>
PROJECT SELLER LOCATION DATE
------- ------ -------- ----
<S> <C> <C> <C>
Bloomsburg, PA Bloomsburg Manor Personal Care and Bloomsburg, PA 1/31/97
Retirement Center
Blakely, PA Blakely-Pine Health Care Center Peckville, PA 1/31/97
Kingston I, PA Kingston Manor Personal Care and Kingston, PA 1/31/97
Retirement Center
Kingston II, PA Kingston Health Care Center Kingston, PA 1/31/97
Mid-Valley, PA Mid-Valley Manor Personal Care and Peckville, PA 1/31/97
Retirement Center
Old Forge, PA Old Forge Manor Personal Care and Old Forge, PA 1/31/97
Retirement Center
West View, PA West Side Manor Personal Care and Wyoming, PA 1/31/97
Retirement Center
Missouri Barry G. Clark, Karen R. Clark and Nevada, MO (3 locations) 5/15/97
Heavenly Health Care, Inc. d/b/a Joe Clark
Residential Care Homes
Harrisburg, PA Joesph Pozoic and Helen J. Pozoic Dauphin County, PA 3/28/97
Ravenna, OH John P. Tobin, Jr. Portage County, OH 3/28/97
Greensboro, NC Sybil F. Lowdermilk, R.E. Lowdermilk, Jr. Guilford County, NC 3/28/97
and Bonnie F. Way
</TABLE>
<PAGE> 1
EXHIBIT 10.24
[__________]
FORM OF
ASSIGNMENT OF RENTS AND LEASES
THIS ASSIGNMENT made as of the ______________________, by ________
_______________ (the "Lessee") to Capstone Capital Corporation of Pennsylvania,
a Pennsylvania corporation (the "Lessor").
R E C I T A L S:
This Assignment is made as additional security for the payment of
amounts due or to become due from time to time by Lessee to Lessor in
connection with that certain Lease of even date herewith (the "Lease"), and as
additional security for the full and faithful performance by Lessee of all
obligations pursuant to the Lease and all other obligations pursuant to
documents now or hereafter executed by Lessee in connection with the Lease.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and as an
inducement to the Lessor to enter the Lease, Lessee does hereby sell, assign,
transfer and set over unto Lessor, its successors and assigns, (a) all of
Lessee's interest in and to all leases presently existing or hereafter made,
whether written or verbal, or any letting of, or agreement for the use or
occupancy of, any part of the property described in Exhibit A attached hereto,
and the improvements now or hereafter located thereon, including, without
limitation, all the rents, issues, and profits now due and which may hereafter
become due under or by virtue of said leases and agreements, and (b) all cash
collateral, security deposits, security interests, letters of credit, pledges,
prepaid rent or other sums, deposits or interests held by Lessee, if any, to
secure payment of the Lease obligations.
Lessee agrees that this Assignment shall cover all future leases,
whether written or verbal, or any letting of, or any agreement for the use or
occupancy of, any part of said property.
Except for any lease or grant of purchase money security interests in
new items of tangible personal property having an aggregate cost during the
Lease term of an amount not to exceed $25,000. Lessee further agrees that it
will not assign the rent or any part of the rent of said property, nor collect
rents under any leases or other agreements relating to use of any part of the
property, for a period further in advance than one (1) month without the
written consent of the Lessor, nor take any action that results in the creation
of any lien upon or against the property which is the subject of the Lease or
any lessee's interest therein.
<PAGE> 2
Lessee agrees that it has not and will not enter into any lease except
for Tenant Leases and except as may otherwise expressly permitted by the Lease.
Lessee further agrees that this Assignment is to remain in full force
and effect until such time as the Lease obligations are paid in full.
Although it is the intention of the parties that this instrument be a
present assignment, it is expressly understood and agreed by Lessee and Lessor
that said Lessee reserves, and is entitled to collect, said rents, income and
profit upon, but not more than one (1) month in advance of, their accrual under
the aforesaid leases, and to retain, use and enjoy the same unless and until
the occurrence of an Event of Default beyond any applicable cure period
pursuant to (and as defined in) the Lease, or until the violation of any term,
condition or agreement of this Assignment which is not cured within thirty (30)
days of written notice of such violation from Lessor to Lessee which shall be
given and deemed received when sent in the manner set forth in the Lease, each
of which shall constitute an "Event of Default" hereunder. Upon an Event of
Default beyond any applicable cure period, Lessee's privilege to collect the
rents shall automatically terminate.
Lessee does hereby authorize and empower Lessor to collect directly
from the lessees, upon demand, and any Event of Default hereunder, all of the
rents, issues and profits now due or which may hereafter become due under or by
virtue of any lease, whether written or verbal, or any letting of, or agreement
for the use or occupancy of, any part of said property and to take such action,
legal or equitable, as may be deemed necessary to enforce payment of such
rents, issues and profits. Lessee hereby authorizes and directs the lessees
under leases to pay to Lessor all rents and other sums as the same become due,
upon notice from Lessor that an Event of Default has occurred hereunder. Any
lessee making such payment to Lessor shall be under no obligation to inquire
into or determine the actual existence of any Event of Default claimed by
Lessor.
Any amount received or collected by Lessor by virtue of this
Assignment shall be applied for the following purposes, but not necessarily in
the order named, priority and application of such funds being within the sole
discretion of Lessor:
(1) to the payment of all necessary expenses for the
operation, protection and preservation of the property, including the
usual and customary fees for management services;
(2) to the payment of taxes and assessments levied and
assessed against the property as said taxes and assessments become due
and payable;
(3) to the payment of premiums due and payable on any
insurance policy related to the property;
(4) to the payment of Lease obligations; and
(5) the balance remaining after payment of the above shall be
paid to the Lessee.
2
<PAGE> 3
Lessee hereby agrees to indemnify Lessor for, and to save it harmless from, any
and all liability, loss or damage which Lessor might incur under said leases or
by virtue of this Assignment, as a result of any act, or failure to act, prior
to Lessor taking possession and from any and all claims and demands whatsoever
which may be asserted against Lessor thereunder or hereunder, and, without
limiting the generality of the foregoing, covenants that this Assignment shall
not operate (prior to Lessor taking possession) to place responsibility for the
control, care, management or repair of said property upon Lessor, nor the
carrying out of any of the terms and conditions of said leases; nor shall it
operate (prior to Lessor taking possession) to make Lessor responsible or
liable for any waste committed on the property by the tenants or any other
party, or for any negligence in the management, upkeep repair or control of
said property resulting in loss or injury or death to any tenant, licensee,
invitee, employee, stranger or other person.
The term "Lease" shall refer to such instrument as it may hereafter be
amended by Lessee and Lessor. This Assignment shall be binding upon the Lessee,
its successors and assigns, and shall inure to the benefit of Lessor, its
successors and assigns.
LESSEE WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE NOTE, THIS
ASSIGNMENT AND ANY OTHER LEASE DOCUMENTS. LESSEE CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF LESSOR OR LESSOR'S COUNSEL HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT LESSOR WOULD NOT, IN THE EVENT OF SUCH LITIGATION,
SEEK TO ENFORCE THIS WAIVER OF THE JURY TRIAL PROVISION. LESSEE ACKNOWLEDGES
THAT LESSOR HAS BEEN INDUCED TO MAKE THE LEASE SECURED HEREBY IN PART BY THE
PROVISIONS OF THIS WAIVER.
[SIGNATURES ON FOLLOWING PAGE]
3
<PAGE> 4
IN WITNESS WHEREOF, the Lessee has caused these presents to be
executed by its duly authorized officer as of the day and year first above
written.
----------------------------------
BY:
-------------------------------
ITS:
-------------------------------
4
<PAGE> 5
SCHEDULE TO EXHIBIT 10.24 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
ASSIGNMENT OF RENTS AND LEASES
<TABLE>
<CAPTION>
PROJECT PARTIES DATE
------- ------- ----
<S> <C> <C>
Bloomsburg, PA Capstone Capital of Pennsylvania, Inc. and BCC at Bloomsburg, Inc. 1/31/97
Blakely, PA Capstone Capital of Pennsylvania, Inc. and BCC at Blakely, Inc. 1/31/97
Kingston I, PA Capstone Capital of Pennsylvania, Inc. and BCC at Kingston I, Inc. 1/31/97
Kingston II, PA Capstone Capital of Pennsylvania, Inc. and BCC at Kingston II, Inc. 1/31/97
Mid-Valley, PA Capstone Capital of Pennsylvania, Inc. and BCC at Mid-Valley, Inc. 1/31/97
Old Forge, PA Capstone Capital of Pennsylvania, Inc. and BCC at Old Forge, Inc. 1/31/97
West View, PA Capstone Capital of Pennsylvania, Inc. and BCC at West View, Inc. 1/31/97
</TABLE>
<PAGE> 1
EXHIBIT 10.25
(_________)
FORM OF
GUARANTY OF PAYMENT AND PERFORMANCE
THIS GUARANTY OF PAYMENT AND PERFORMANCE ("this Guaranty") made as of
the _________________________, by BALANCED CARE CORPORATION, a Delaware
corporation, "Guarantor" in favor of CAPSTONE CAPITAL OF PENNSYLVANIA, INC., a
Pennsylvania corporation, its successors and assigns (the "Lessor").
R E C I T A L S:
Pursuant to a Lease Agreement of even date herewith (as the same may
hereafter be amended, the "Lease") between ______________________, (the
"Lessee"), and Lessor, Lessor has agreed to lease to Lessee certain real and
personal property and improvements comprising the _________________________
______________________________________________________ provided as one of the
conditions therefor Lessor requires that the Guarantor guarantee the Lease
Obligations (as defined hereunder), now existing or hereafter incurred, owing
to the Lessor pursuant to the Lease. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Lease.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and in
order to induce the Lessor to enter into the Lease, and as security for the
payment of all Rent and all other obligations of Lessee under the Lease
("Obligations"), including, but not limited to, the payment of all expenses,
charges and other amounts from time to time owing to Lessor pursuant to the
Lease the performance of all covenants, agreements and other obligations from
time to time owing to or for the benefit of Lessor pursuant to the Lease, the
Guarantor agrees and covenants with Lessor and represents and warrants to
Lessor as follows:
l. Guarantee of Lease Obligations. The Guarantor hereby
unconditionally guarantees to the Lessor (a) the due, regular, and punctual
payment and performance of the Obligations, including, but not limited to, (i)
the payment obligations of the Lease, and (ii) the indemnity obligations of the
Lease (which guaranty shall survive concurrently with such indemnity
obligations); (b) upon the failure of the Lessee timely to pay or perform any
of the Obligations, the payment of all reasonable costs and expenses incurred
by Lessor in paying or performing such Obligations (but Lessor shall not be
required to pay or perform such Obligations); and (c) all reasonable costs,
attorneys' fees, and expenses that may be incurred by the Lessor by reason of a
Default by the Lessee, including reasonable fees and expenses in any appellate
or bankruptcy proceedings.
<PAGE> 2
Upon any Event of Default pursuant to the Lease, the Guarantor
unconditionally promises to pay to the Lessor such amounts as are necessary to
cure the Event of Default.
This Guaranty is unconditional and the Guarantor agrees that the
Lessor, upon the occurrence of an Event of Default pursuant to the Lease, shall
not be required to assert any claim or cause of action against the Lessee
before asserting any claim or cause of action against the Guarantor under this
Guaranty. The Guarantor further agrees that the Lessor shall not be required to
pursue or foreclose on any collateral that it may receive from the Lessee or
others as security for any of the Lease Obligations before making a claim or
asserting a cause of action against the Guarantor under this Guaranty.
The failure of the Lessor to perfect its security interest in any of
the collateral as set forth in the Lease or any other collateral now or
hereafter securing all or any part of the Obligations shall not release the
Guarantor from its liabilities and obligations hereunder.
Notice of acceptance of this Guaranty and of any Default by the Lessee
is hereby waived by the Guarantor, except to the extent notice is otherwise
expressly required by the Lease. Presentment, protest, demand, and notice of
protest and demand, and notice of receipt of any and all collateral, and of the
exercise of possessory remedies or foreclosure on any and all collateral
received by the Lessor from the Lessee or the Guarantor are hereby waived. All
settlements, compromises, compositions, accounts stated, and agreed balances in
good faith between any primary or secondary obligors on any accounts received
as collateral shall be binding upon the Guarantor.
This Guaranty shall not be affected, modified, or impaired by the
voluntary or involuntary liquidation, dissolution, sale or other disposition of
all or substantially all of the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangements, composition with creditors or readjustment of, or
other similar proceedings affecting the Lessee or the Guarantor, or any of the
assets belonging to any of them, nor shall this Guaranty be affected, modified,
or impaired by the invalidity of the Lease.
Without notice to the Guarantor, without the consent of the Guarantor,
and without affecting or limiting the Guarantor's liability hereunder, the
Lessor may:
(a) grant the Lessee extensions of time for payment of the Obligations
or any part thereof;
(b) renew any of the Obligations or make further advances to Lessee;
2
<PAGE> 3
(c) grant the Lessee extensions of time for performance of agreements
or other indulgences;
(d) at any time release any or all of the collateral, or security
interest in any collateral, that now or hereafter secures any of the
Obligations;
(e) compromise, settle, release, or terminate any or all of the
obligations, covenants, or agreements of the Lessee under the Lease;
(f) at any time release any one or more other guarantors from their
guarantees of any of the Obligations; and
(g) with the Lessee's written consent modify or amend any obligations,
covenant, or agreement of the Lessee as set forth in the Lease (and such
amendments shall nevertheless be binding upon Guarantor)
This Guaranty shall continue to be effective, or be reinstated, as the
case may be, if at any time any whole or partial payment or performance of any
Obligation is or is sought to be rescinded or must otherwise be restored or
returned by the Lessor upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Lessee or Guarantor upon or as a result of
the appointment of a receiver, intervenor, or conservator of, or trustee or
similar officer for, the Lessee or guarantor of or for any substantial part of
its property, or otherwise, all as though such payments and performance had not
been made. This Guaranty shall not be affected in any way by the transfer or
other disposition of any of the collateral described in and granted to Lessor
pursuant to the Lease, whether by operation of law, or otherwise.
2. Representations and Warranties of the Guarantor. To induce the
Lessor to enter into the Lease, the Guarantor represents and warrants to the
Lessor as follows:
(a) Power to Incur Obligations. The Guarantor has full power and
unrestricted right to enter into this Guaranty and to incur the obligations
provided for herein and the execution and delivery of this Guaranty has been
authorized by all required corporate action.
(b) Conflicts. This Guaranty does not violate, conflict with or
constitute any default under any decree, judgment, or any other agreement or
instrument binding upon the Guarantor or the articles of incorporation or
bylaws of Guarantor.
(c) Pending Matters. No action or investigation is pending, or to
the best of Guarantor's knowledge, threatened before or by any state or federal
court or administrative agency which might result in any material adverse
change in the financial condition or operations
3
<PAGE> 4
or prospects of Guarantor. Guarantor is not in violation of any agreement, the
violation of which might reasonably be expected to have a materially adverse
effect on its business or assets, and Guarantor is not in violation of any
order, judgment, or decree of any state or federal court.
(d) Financial Statements Accurate. All financial statements
heretofore provided by the Guarantor are true and complete in all material
respects as of their respective dates and fairly present the financial
condition of the Guarantor, and there are no liabilities, direct or indirect,
fixed or contingent, as of the respective dates of such statements which are
not reflected therein or in the notes thereto or in a written certificate
delivered with such statements. The financial statements of the Guarantor are
prepared on a consistent basis from year to year. There has been no material
adverse change in the financial condition, operations, or prospects of
Guarantor since the dates of such statements except as fully disclosed in
writing with the delivery of such statements.
(e) No Defaults or Restrictions. There is no declared default under
any agreement or instrument that caused or would cause a material adverse
effect on the business, properties, and financial operations or condition of
Guarantor.
(f) Payment of Taxes. Guarantor has filed all federal, state, and
local tax returns which are required to be filed and has paid, or made adequate
provision for the payment of, all taxes which have or may become due pursuant
to said return or to assessments received by Guarantor.
(g) Disclosure. Neither the Guaranty nor any other document,
financial statement, credit information, certificate or statement required
herein to be furnished to Lessor by Guarantor in connection with the Guaranty
contains any untrue, incorrect or misleading statement of material fact. All
representations and warranties made herein or any certificate or other document
delivered to Lessor by or on behalf of Guarantor pursuant to or in connection
with this Guaranty shall be deemed to have been relied upon by Lessor
notwithstanding any investigation heretofore or hereafter made by Lessor or on
its behalf.
(h) Organization. Guarantor is a Delaware corporation duly
organized and validly existing and is duly qualified and in good standing in
each jurisdiction in which its business or assets makes its qualification
necessary.
(i) Stock Ownership. On the date hereof, the capital stock of
Guarantor is owned as set forth in Exhibit A.
3. Affirmative Covenants of the Guarantor. The Guarantor covenants and
agrees that so long as the Obligations are outstanding, it shall comply with
each of the following affirmative covenants:
4
<PAGE> 5
(a) Payment of Lease/Performance of Lease Obligations. Within five
(5) business days of Lessor's demand thereof, duly and punctually pay or cause
to be paid all Obligations in accordance with its terms.
(b) Payment of Taxes. Pay and discharge all taxes, assessments, and
governmental charges or levies imposed upon it, including, without limitation,
all current tax liabilities of all kinds, all required withholdings of income
taxes of employees, all required old age and unemployment contributions, and
all so-called provider taxes.
(c) Reporting Requirements. From time to time upon request, furnish
to Lessor such information regarding the business affairs, finances, and
conditions of the Guarantor and its respective properties in such detail as the
Lessor reasonably may request; will furnish to Lessor, as soon as available and
in any event furnish to Lessor such financial reports and statements as set
forth in the Lease Agreement.
(d) Payment of Indebtedness. Pay duly and punctually or cause to be
paid, all principal and interest of any indebtedness of Guarantor legally due
its creditors, comply with and perform all conditions terms and obligations of
the notes and other instruments evidencing such indebtedness and any mortgages,
deeds of trust, security agreements and other instruments evidencing security
for such indebtedness.
(e) Notice of Loss. Notify Lessor of any event causing a loss or
reduction in value of Guarantor's assets which has a material adverse effect on
Guarantor's net worth (as set forth in the Lease Agreement).
(f) Existence. Maintain its existence and, in each jurisdiction in
which its business or assets makes qualification necessary, its qualification
and good standing.
(g) Financial Covenants.
(a) Throughout the Term of the Lease, Guarantor shall maintain
the following:
(i) a ratio of consolidated current assets to consolidated
current liabilities equal to or greater than 1.0 to 1.0.;
(ii) a tangible net worth equal to or greater than $5,000,000,
unless otherwise approved (or waived) by Lessor, approval of which
shall not be unreasonably withheld (for purposes of this Section
3(g)(a)(ii), the line item identified as "Mandatorily Redeemable
Preferred B Stock" reflected on Guarantor's consolidated financial
statement shall be included in Guarantor's shareholder's equity).
5
<PAGE> 6
(iii) a Consolidated Cash Flow Coverage not less than 1.0 to
1.0.
"Consolidated Cash Flow Coverage" shall mean a ratio of (i) earnings
before interest, taxes, depreciation, amortization, rent and home office
expense minus an assumed five percent (5%) management fee to (ii) all interest
and rent payments.
(b) Comply with all other requirements and covenants to be
maintained and performed by Guarantor pursuant to the Lease.
4. Negative Covenant of the Guarantors. So long as any of the Lease
Obligations are outstanding, Guarantor shall not, without Lessor's prior
approval, which approval shall not be unreasonably be withheld:
(a) Changes in Accounting. Change its method of accounting to one
inconsistent with the method heretofore used by the Guarantor.
(b) Merger, Consolidation, Etc. Enter in any merger, consolidation
or similar transaction, or sell, assign, lease or otherwise dispose of (whether
in one transaction or in a series of transactions), all or substantially all of
its assets (whether now or hereafter acquired) such that, immediately after
giving effect to such merger, consolidation or sale, the survivor or purchaser
of the same has a consolidated net worth less than the consolidated net worth
of Guarantor immediately prior to such merger, consolidation or sale.
(c) Transfer of Stock. Permit the transfer of any of its capital
stock which would cause a change in control of Guarantor other than transfer in
connection with a registered public offering or transfer to family members or
transfer upon such shareholder's death.
5. Events of Default. Guarantor's violation of any covenant set forth
in paragraph 4 hereof, or Guarantor's failure to properly and timely perform or
observe any covenant or condition set forth in this Guaranty (other than that
in paragraph 4) which is not cured within any applicable cure period as set
forth herein or, if no cure period is specified therefor, is not cured within
thirty (30) days of Lessor's notice to Guarantor of such default, or the
falsity of any representation or warranty herein or in any financial statement,
certificate or other information heretofore or hereafter provided by Guarantor
to Lessor, shall constitute an "Event of Default" hereunder and under each of
the Lease Documents. The foregoing provision or any other provision requiring
or providing for notice or demand from Lessor is deemed eliminated if Lessor is
prevented from giving such notice or demand by bankruptcy or other applicable
law, and the Event of Default shall occur on the occurrence of such event or
condition if not cured within any applicable period measured from he occurrence
of such event or condition rather than from notice or demand.
6
<PAGE> 7
6. Subordination. Guarantor expressly subordinates its right to
payments of any indebtedness owing from Lessee to Guarantor, whether now
existing or arising at any time in the future (including, but not limited to,
rights to payment arising by virtue of any subrogation or indemnification upon
payment by Guarantor of amounts due from Lessee to Lessor), to the prior right
of Lessor to receive or require payment in full of the Obligations, until such
time as the Obligations are fully paid (and including accrued interest after
any petition under the Bankruptcy Code which post-petition interest Guarantor
agrees shall remain a claim that is prior and superior to any claim of
Guarantor notwithstanding any contrary practice, custom or ruling in
proceedings under the Bankruptcy Code generally) and such payments are final
and not subject to refund or rescission under bankruptcy or other applicable
law. Furthermore, upon the occurrence of an Event of Default under the Lease,
Guarantor agrees not to accept any payment or satisfaction of any kind of
indebtedness of Lessee to the Guarantor or any security for such indebtedness.
If Guarantor should receive any such payment, satisfaction or security for any
indebtedness of Lessee to the Guarantor, the Guarantor agrees to deliver the
same promptly to Lessor in the form received, endorsed, or assigned as may be
appropriate for application on account of, or as security for, the Obligations
and until so delivered, agrees to hold the same in trust for Lessor.
7. Successors and Assigns. This Guaranty shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, legal
representatives, successors, and assigns.
8. Severability. In the event that any provision hereof is deemed to
be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Guaranty shall be construed as
not containing such provisions and the invalidity of such provisions shall not
affect other provisions hereof which are otherwise lawful and valid and which
shall remain in full force and effect.
9. Notices. Any notice or other communication required or permitted to
be given pursuant to this Guaranty or by applicable law shall be in writing and
shall be deemed received (a) on the date delivered, if delivered in person or
department specified below, (b) three (3) days after depositing the same in the
U.S. Mail, certified or registered, with return receipt requested, or (c) one
(1) day following the date deposited with Federal Express or other national
overnight carrier, and in each case addressed as follows:
If to Guarantor:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, Pennsylvania 17055
Attention: Robin Barber, Esq.
7
<PAGE> 8
With a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
Attention: John C. Rodney, Esq.
If to the Lessor to:
Capstone Capital Corporation
1000 Urban Center Parkway
Birmingham, Alabama 35242
Attention: Daryl D. McCombs
With a copy to:
Haskins W. Jones, Esq.
Johnston, Barton, Proctor & Powell
2900 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203-2618
Any party may change its address to another single address by notice
given as herein provided, except that any change of address must be actually
received in order to be effective.
10. Waivers. The failure by the Lessor at any time or times hereafter
to require strict performance by the Guarantor of any of the provisions,
warranties, terms, and conditions contained herein or in any other agreement,
document, or instrument now or hereafter executed by Guarantor and delivered to
the Lessor shall not waive, affect, or diminish any right of the Lessor
hereafter to demand strict compliance or performance therewith and with respect
to any other provisions, warranties, terms, and conditions contained in such
agreements, documents, and instruments, and any waiver of any default shall not
waive or affect any other default, whether prior or subsequent thereto and
whether of the same or a different type. None of the warranties, conditions,
provisions, and terms contained in this Guaranty or in any agreement, document,
or instrument now or hereafter executed by Guarantor and delivered to the
Lessor shall be deemed to have been waived by any act or knowledge of the
Lessor, its agents, officers, or employees, but only by an instrument in
writing, signed by an officer of the Lessor, and directed to the Guarantor
specifying such waiver.
11. Expenses. If, at any time or times hereafter, the Lessor employs
counsel to advise or provide other representation with respect to this Guaranty
or any other agreement,
8
<PAGE> 9
document, or instrument heretofore, now, or hereafter executed by Guarantor and
delivered to the Lessor with respect to the Lessee or the Obligations, or to
commence, defend, or intervene, file a petition, complaint, answer, motion, or
any other pleading or take any other action in or with respect to any suit or
proceeding relating to this Guaranty or any other agreement, instrument, or
document heretofore, now, or hereafter executed by Guarantor and delivered to
the Lessor with respect to the Lessee or the Obligations, or to represent the
Lessor in any litigation with respect to the affairs of Guarantor or to enforce
any rights of the Lessor or obligations of Guarantor or any other person, firm,
or corporation that may be obligated to the Lessor by virtue of this Guaranty,
or any other agreement, document, or instrument heretofore or hereafter
delivered to the Lessor by or for the benefit of Guarantor with respect to the
Lessee or the Obligations, then in any such event, all of the reasonable
attorneys' fees actually incurred arising from such services, including fees in
any appellate or bankruptcy proceedings, and any other reasonable expenses,
costs,and charges relating to his Guaranty, the Lessee or the Obligations,
shall constitute additional obligation of the Guarantor payable on demand.
12. Singular and Plural. Singular terms shall include the plural
forms, and vice versa.
13. Entire Agreement; Counterparts. This Guaranty constitutes the
entire agreement and supersedes all prior agreements and understandings both
oral and written, between the parties with respect to the subject matter
hereof. This Agreement may be executed in counterparts which together shall
constitute one instrument. It shall not be necessary for all parties to sign
the same counterpart.
14. Applicable Law; Jurisdiction. THE VALIDITY, INTERPRETATION,
ENFORCEMENT, AND EFFECT OF THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF ALABAMA. THE LESSOR'S PRINCIPAL PLACE OF
BUSINESS IS LOCATED IN JEFFERSON COUNTY IN THE STATE OF ALABAMA, AND GUARANTOR
AGREES THAT THIS GUARANTY SHALL BE HELD BY LESSOR AT SUCH PRINCIPAL PLACE OF
BUSINESS, AND THE HOLDING OF THIS GUARANTY BY LESSOR THEREAT SHALL CONSTITUTE
SUFFICIENT MINIMUM CONTACTS OF GUARANTOR WITH JEFFERSON COUNTY AND THE STATE OF
ALABAMA FOR THE PURPOSE OF CONFERRING JURISDICTION UPON THE FEDERAL AND STATE
COURTS PRESIDING IN SUCH COUNTY AND STATE. THE GUARANTOR CONSENTS THAT ANY
LEGAL ACTION OR PROCEEDING ARISING HEREUNDER MAY BE BROUGHT IN THE CIRCUIT
COURT OF THE STATE OF ALABAMA, IN JEFFERSON COUNTY, ALABAMA OR THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA AND ASSENT AND
SUBMIT TO THE PERSONAL JURISDICTION OF ANY SUCH COURTS IN ANY SUCH ACTION OR
PROCEEDING. NOTHING HEREIN SHALL LIMIT THE JURISDICTION OF ANY OTHER COURT.
9
<PAGE> 10
15. Jury Trial Waiver. GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING OUT OF OR IN ANY WAY RELATED TO THIS GUARANTY OR THE LEASE, OR (B) IN
ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY
DEALINGS OF LESSOR AND/OR LESSEE AND GUARANTOR WITH RESPECT TO THE LEASE OR IN
CONNECTION WITH THIS GUARANTY OR THE EXERCISE OF ANY PARTY'S RIGHTS AND
REMEDIES UNDER THIS GUARANTY OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP
OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE,
GUARANTOR AGREES THAT LESSOR MAY FILE A COPY OF THIS GUARANTY WITH ANY COURT AS
WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF
GUARANTOR IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF
LESSOR TO MAKE THE LEASE, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN) BETWEEN
GUARANTOR AND LESSOR SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
day and year first above written.
BALANCED CARE CORPORATION
By:
-----------------------------------
Its:
-----------------------------------
10
<PAGE> 11
SCHEDULE TO EXHIBIT 10.25 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
GUARANTY OF PAYMENT AND PERFORMANCE
<TABLE>
<CAPTION>
PROJECT LESSEE FACILITY DATE
- ------- ------ -------- ----
<S> <C> <C> <C>
Bloomsburg, PA BCC at Bloomsburg, Inc. Bloomsburg Manor Personal Care and Retirement 1/31/97
Center
Blakely, PA BCC at Blakely, Inc. Blakely-Pine Health Care Center 1/31/97
Kingston I, PA BCC at Kingston I, Inc. Kingston Manor Personal Care and Retirement 1/31/97
Center
Kingston II, PA BCC at Kingston II, Inc. Kingston Health Care Center 1/31/97
Mid-Valley, PA BCC at Mid-Valley, Inc. Mid-Valley Manor Personal Care and Retirement 1/31/97
Center
Old Forge, PA BCC at Old Forge, Inc. Old Forge Manor Personal Care and Retirement 1/31/97
Center
West View, PA BCC at West View, Inc. West Side Manor Personal Care and Retirement 1/31/97
Center
Harrisburg, PA BCC at Harrisburg, Inc. Outlook Pointe at Harrisburg 3/28/97
Greensboro, NC BCC at Greensboro, Inc Outlook Pointe at Greensboro 3/28/97
Ravenna, OH BCC at Ravenna, Inc. Outlook Pointe at Ravenna 3/28/97
Nevada, MO (2 BCC at Missouri, Inc. Joe Clark Residential Care Home 5/15/97
Leases) 1501 E. Ashland Street
Nevada, MO
Butler, MO BCC at Missouri, Inc. Joe Clark Residential Care Home 5/15/97
300 S. Delaware Street
Butler, MO
Lamar, MO BCC at Lamar, Inc. Joe Clark Residential Care Home 8/18/97
3 Southwest First Lane
Lamar, MO
</TABLE>
<PAGE> 1
EXHIBIT 10.26
FORM OF GUARANTY OF OBLIGATIONS
PURSUANT TO LEASE AGREEMENT
The undersigned corporation (the "Guarantor"), corporate parent
company of ____________________, a Delaware corporation ("Lessee"), as a
material and necessary inducement to ALCO II, L.L.C., a North Carolina limited
liability company (the "Owner") to enter into that certain Lease Agreement
dated as of June 30, 1997 (as amended, the "Lease") between Owner, as landlord,
and Lessee, as tenant, with respect to the lease of a ____________ facility on
the real property in ______________, ________, as more particularly described
in Exhibit A (the "Property"), hereby represent, warrant, covenant and agree as
follows:
I. Guarantor hereby irrevocably, jointly and severally guarantees to
the Owner the prompt payment when due, whether by acceleration or otherwise, of
all rent and all other sums payable by Lessee under the Lease and the faithful
and prompt performance when due of each and every one of the terms, conditions
and covenants to be kept and performed by the Lessee under the Lease, and any
and all amendments, extensions and renewals of the Lease. In the event of the
failure of the Lessee to pay any such rent or other sums, or to render any
other performance required of the Lessee under the Lease, if and when due after
the expiration of any applicable cure period, the Guarantor shall upon
receiving notice of such failure from Lessee pay the rent and forthwith perform
all provisions of the Lease to be performed by the Lessee thereunder. Guarantor
further agrees to pay Owner, upon demand, all losses and reasonable costs and
expenses that are incurred by Owner in enforcing the Lease or this Guaranty.
2. Until all obligations of the Lessee under the Lease have been
satisfied and discharged in full, the Guarantor shall have no right of
subrogation and hereby waives any right to enforce any remedy which the Lessee
now has or may hereafter have against the Owner and any benefit of, any right
to participate in, any security now or hereafter held by the Owner with respect
to the Lease.
3. Notwithstanding any modification or discharge of the obligations
guaranteed hereby (or any part thereof) or any amendment, modification,
rearrangement, stay or cure of any of the Lessee's rights, remedies or recourse
under the Lease which may occur in any bankruptcy or reorganization case or
proceeding concerning the Lessee, whether permanent or temporary, and whether
or not assented to by the Lessee, the Guarantor hereby agrees that the
Guarantor shall be obligated under this Guaranty to pay and perform all of the
obligations guaranteed hereby in accordance with the respective terms of the
Lease and of this Guaranty in effect on the date hereof. The Guarantor
understands and acknowledges that, by virtue of this Guaranty, the Guarantor
has specifically assumed any and all risk of a bankruptcy, reorganization, or
other case or proceeding under any of the Debtor Relief Laws (as hereinafter
defined) with respect to the Lessee. The term "Debtor Relief Laws," as used in
this Guaranty, shall mean the Bankruptcy Code or any other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief law from time to time in effect which affects the rights of
creditors generally.
4. This Guaranty is a guaranty of payment and performance and not of
collecting. The obligations of the Guarantor hereunder are primary, direct and
independent of the obligations of the Lessee and, in the event of any default
by the Lessee under the Lease (beyond any period of cure provided therein), a
separate action may be brought and prosecuted against the Guarantor whether or
not the Lessee as joint therein or a separate action is brought against the
Lessee. The Owner may maintain
<PAGE> 2
successive actions for other defaults. The Owner's rights hereunder shall not
be exhausted by its exercise of any rights or remedies or by any such action or
by any number of successive actions until and unless all indebtedness and
obligations, the payment and performance of which are hereby guaranteed, have
been paid and fully performed.
5. The Guarantor shall pay to the Owner all reasonable attorneys' fees
and all costs and expenses which the Owner expends or incurs to the extent
allowed by applicable law in enforcing performance of any indebtedness or other
obligation hereby guaranteed or in enforcing this Guaranty against the
Guarantor, whether or not suit is filed, expressly including, but not limited
to all costs, reasonable attorneys' fees and expenses incurred by the Owner in
connection with any insolvency, bankruptcy, reorganization, arrangement or
other similar proceedings involving the Guarantor which in any way affects the
exercise by the Owner of its rights and remedies hereunder.
6. If any provision or portion thereof of this Guaranty is declared or
found by a court of competent jurisdiction to be unenforceable or null and
void, such provision or portion thereof shall be deemed stricken and severed
from this Guaranty, and the remaining provisions and portions thereof shall
continue in full force and effect.
7. This Guaranty shall be continuing guaranty and shall inure to the
benefit of the Owner, its successors and assigns, and any subsequent owners of
the Property who succeed to all or any portion of the Owner's obligations and
rights under the Lease, and shall bind the heirs, executors, administrators,
personal representatives, successors and assigns of the Guarantor; provided
that the Guarantor may not, without the Owner's prior written consent, assign
or transfer any of its powers, duties or obligations under this Guaranty. This
Guaranty may be assigned by the Owner with respect to all or any portion of the
indebtedness or obligations hereby guaranteed to any subsequent owners or
encumbrances of the Property, and when so assigned the Guarantor shall be
liable to the assignees under this Guaranty without in any manner affecting the
liability of the Guarantor hereunder with respect to any indebtedness or
obligations retained by the Owner.
8. Neither any provision of this Guaranty nor any right of either the
Owner or the Guarantor hereunder can be waived in whole or in part nor can the
Guarantor be released from the Guarantor's obligations hereunder except by a
writing duly executed by an authorized officer of the waiving or releasing
party.
9. When the context and construction so require, all words used in the
singular herein shall be deemed to have been used in the plural and the
masculine shall include the feminine and neuter and vice versa. The word
"person" as used herein shall include any individual, company, firm,
association, partnership, corporation, trust or other legal entity of any kind
whatsoever. The term "Owner" as used herein shall mean the party herein so
named and its successors including, but not limited to, a debtor in possession
under Chapter 11 of the Bankruptcy Code.
10. EXCEPT WHERE FEDERAL LAW IS APPLICABLE AND UNLESS OTHERWISE
EXPRESSLY PROVIDED HEREIN, THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA. The Guarantor hereby (a)
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts
2
<PAGE> 3
of the State of Alabama in any legal proceeding arising out of, or in
connection with, this Guaranty, the Lease and the obligations guaranteed hereby
as provided for by Alabama law; and (b) irrevocably consents to the service of
process upon the Guarantor by the mailing of copies thereof by certified mail,
return receipt requested, postage prepaid, to the Guarantor at 5021 Louise
Drive, Suite 200, Mechanicsburg, Pennsylvania 17055, Attention: Brian L. Barth,
Vice President, or such other address of which the Guarantor shall notify the
Owner in writing. Nothing herein shall affect the rights of the Owner to
commence legal proceedings or otherwise proceed against the Guarantor in any
jurisdiction or to service process in any manner permitted by applicable law,
and nothing herein shall constitute a general consent to jurisdiction or
service of process.
11. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
PERTAINING TO THE SUBJECT MATTER ADDRESSED HEREIN AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
3
<PAGE> 4
EXECUTED as of
-----------------.
BALANCED CARE CORPORATION
a Delaware corporation
By
--------------------------------
4
<PAGE> 5
SCHEDULE TO EXHIBIT 10.26 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
GUARANTY OF PAYMENT AND PERFORMANCE
<TABLE>
<CAPTION>
PROJECT LESSEE FACILITY DATE
------- ------ -------- ----
<S> <C> <C> <C>
Roanoke, VA BCC at Roanoke, Inc. Outlook Pointe at Roanoke 6/30/97
Harrisonburg, VA BCC at Harrisonburg, Inc. Outlook Pointe at Harrisonburg 6/30/97
Danville, VA BCC at Danville, Inc. Outlook Pointe at Danville 9/3/97
</TABLE>
<PAGE> 1
EXHIBIT 10.27
FORM OF INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement") made as of _____________
__________, by and among ("BCC"), and (" ").
RECITALS:
BCC and Guarantor have requested that purchase and lease to
BCC certain real property and improvements pursuant to a Lease Agreement
between BCC and of even date herewith (referred to herein, as the same
may hereafter be amended, as the "Lease Agreement"; capitalized terms not
otherwise defined herein shall have the meanings given in the Lease Agreement).
requires that, as a condition to entering into the Lease Agreement, BCC and
Guarantor jointly and severally indemnify against all violations of any
applicable Environmental Laws (as herein defined), relating to the property
which is the subject of the Lease, which property consists of the land more
particularly described in Exhibit A attached hereto and made a part hereof and
all buildings and improvements now or hereafter situated on such land
(collectively, the"Property"). BCC and Guarantor have therefore agreed to
execute this Agreement in order to induce to enter into the Lease
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing recitals,
and as an inducement to to enter into the Lease Agreement, BCC and
Guarantor do hereby jointly and severally agree with as follows:
1. As used herein, the term "Applicable Environmental Laws" shall mean
any applicable laws, rules or regulations pertaining to health or the
environment, or petroleum products, or radon radiation, or oil or hazardous
substances, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA") and the
Federal Emergency Planning and Community Right-To-Know Act of 1986.
2. BCC and Guarantor will jointly and severally indemnify and hold
harmless from and against, and reimburse for, any fines,
charges, liabilities, reasonable expenses, reasonable fees of environmental
professionals, and reasonable attorney's fees incurred by , in the
event any of the Property is hereafter determined to be in violation of any
Applicable Environmental Law (whether or not due to any fault of BCC or
Guarantor). Without limiting the foregoing, upon any written notice that such a
violation may exist, BCC and Guarantor shall upon 's request: (a)
cause to be conducted such reasonable investigations, tests or analyses of the
Property (such as, at a minimum, a Phase I environmental report and any
additional testing or remediation set forth
<PAGE> 2
in such report or by any Applicable Environmental Laws) by environmental
professionals mutually approved by and BCC and provide the
written results of such investigations, tests or analyses, and (b) prompt remedy
in accordance with Applicable Environmental Law, any violation that may exist,
and (c) report any reasonably alleged violation, to the extent required by law,
to any federal, state or local agency having jurisdiction over such matters. If
BCC and Guarantor fail to promptly comply with 's request, may, at its
option, do any of the foregoing, and BCC and Guarantor will promptly reimburse
for all reasonable costs and expenses incurred by . and
its agents shall have access to the Property for the purposes of conducting any
such investigations, tests or analyses.
3. This Agreement shall survive any termination of the Lease Agreement;
provided, however, BCC and Guarantor shall not indemnify with respect to any
violation which (a) are caused by 's misconduct or gross negligence or
(b) occur after BCC's vacation of the Property.
4. BCC and Guarantor jointly and severally agree to pay to
all charges, expenses, reasonable attorney's fees and costs incurred by in
connection with the 's enforcement of this Agreement, including
charges, expenses, reasonable attorney's fees and costs upon any appeal and in
any bankruptcy proceedings.
5. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, legal representatives,
successors and assigns.
6. In the event that any provision hereof is deemed to be invalid by
reason of the operation of any law or by reason of the interpretation placed
thereon by any court, this Agreement shall be construed as not containing such
provision and the invalidity of such provision shall not affect other
provisions which are otherwise lawful and valid and shall remain in full force
and effect.
7. This Agreement may be executed in counterparts which together shall
constitute one instrument. It shall not be necessary for all parties to sign the
same counterpart.
8. THE VALIDITY, INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF ALABAMA. THE 'S PRINCIPAL PLACE OF BUSINESS IS LOCATED IN
JEFFERSON COUNTY IN THE STATE OF ALABAMA, AND BCC AND GUARANTOR AGREE THAT THIS
AGREEMENT SHALL BE DELIVERED TO AND HELD BY AT SUCH PRINCIPAL PLACE
OF BUSINESS, AND THE HOLDING OF THIS AGREEMENT BY THEREAT SHALL
CONSTITUTE SUFFICIENT MINIMUM CONTACTS OF BCC AND GUARANTOR WITH JEFFERSON
COUNTY AND THE STATE OF ALABAMA FOR THE PURPOSE OF
2
<PAGE> 3
CONFERRING JURISDICTION UPON THE FEDERAL AND STATE COURTS PRESIDING IN SUCH
COUNTY AND STATE. BCC AND GUARANTOR CONSENT THAT ANY LEGAL ACTION OR PROCEEDING
ARISING HEREUNDER MAY BE BROUGHT IN THE CIRCUIT COURT OF THE STATE OF ALABAMA,
JEFFERSON COUNTY, OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT
OF ALABAMA AND ASSENT AND SUBMIT TO THE PERSONAL JURISDICTION OF ANY SUCH COURT
IN ANY ACTION OR PROCEEDING INVOLVING THIS AGREEMENT. NOTHING HEREIN SHALL
LIMIT THE JURISDICTION OF ANY OTHER COURT.
10. BCC AND GUARANTOR HEREBY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A
TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE LEASE,
OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO
ANY DEALINGS OF AND/OR BCC AND GUARANTOR WITH RESPECT TO THE LEASE
DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF EITHER PARTY'S
RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE
RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. BCC AND GUARANTOR AGREE THAT MAY FILE A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
BARGAINED AGREEMENT OF BCC AND GUARANTOR IRREVOCABLY TO WAIVE THEIR RIGHTS TO
TRIAL BY JURY AS AN INDUCEMENT OF TO MAKE THE LEASE, AND THAT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER
(WHETHER OR NOT MODIFIED HEREIN) BETWEEN BCC AND/OR GUARANTOR WITH SHALL INSTEAD
BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
[SIGNATURES ON FOLLOWING PAGE]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed as of the day and year first above written.
GUARANTOR:
BALANCED CARE CORPORATION
BY:
-----------------------------------
BRIAN L. BARTH, VICE PRESIDENT
BORROWER:
---------------------------------------
BY:
-----------------------------------
-----------------------------------
BY:
-----------------------------------
4
<PAGE> 5
SCHEDULE TO EXHIBIT 10.27 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
INDEMNITY AGREEMENT
<TABLE>
<CAPTION>
PROJECT PARTIES FACILITY DATE
------- ------- -------- ----
<S> <C> <C> <C>
Harrisburg, PA Capstone Capital Corporation of Outlook Pointe at Harrisburg 3/28/97
Pennsylvania, Inc. and BCC at
Harrisburg, Inc.
Greensboro, NC Capstone Capital Corporation and Outlook Pointe at Greensboro 3/28/97
BCC at Greensboro, Inc.
Ravenna, OH Capstone Capital Corporation and Outlook Pointe at Ravenna 3/28/97
BCC at Ravenna, Inc.
Nevada, MO (2 Capstone Capital Corporation and Joe Clark Residential Care Home 5/15/97
Agreements) BCC at Missouri, Inc. 1501 E. Ashland Street
Nevada, MO
Butler, MO Capstone Capital Corporation and Joe Clark Residential Care Home 5/15/97
BCC at Missouri, Inc. 300 S. Delaware Street
Butler, MO
Lamar, MO Capstone Capital Corporation and Joe Clark Residential Care Home 8/18/97
BCC at Lamar, Inc. 3 Southwest First Lane
Lamar, MO
Roanoke, VA ALCO II, L.L.C. and BCC at Outlook Pointe at Roanoke 6/30/97
Roanoke, Inc.
Harrisonburg, VA ALCO I, L.L.C. and BCC at Outlook Pointe at Harrisonburg 6/30/97
Harrisonburg, Inc.
Danville, VA ALCO III, L.L.C. and BCC at Outlook Pointe at Danville 9/3/97
Danville, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.28
FORM OF MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is made and entered into
as of , between ALCO II, L.L.C., a North Carolina limited
liability company, having its principal office at 46 Third Street, N.W.,
Hickory, North Carolina 28601 ("Owner"), and
, a Delaware corporation, having its principal office at 5021 Louise Drive,
Suite 200, Mechanicsburg, Pennsylvania 17055 ("Manager").
WITNESSETH
WHEREAS, Owner is the owner of an assisted living facility being
developed in , which facility, together with the equipment,
furnishings, and other tangible personal property that will be used in
connection therewith (the "Facility"), upon completion of development will be
doing business under a name mutually agreeable to Owner and Manager; and
WHEREAS, Manager is engaged in the ownership and operation of similar
facilities and is experienced in various phases of the management, operation
and ownership thereof; and
WHEREAS, Owner desires to engage Manager as an independent contractor
to manage the Facility for Owner's account during the term herein provided, and
Manager desires to accept such engagement, upon the terms and subject to the
conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound hereby, the parties agree
that the foregoing recitals are true and correct and constitute an integral
part of this Agreement, and the parties further agree as follows:
ARTICLE 1.
ENGAGEMENT OF MANAGER
1.1 ENGAGEMENT. During the term of this Agreement and subject to a
plan of operation for the Facility to be developed by Manager and approved by
Owner (the "Plan of Operation"), Owner grants to Manager the sole and exclusive
right, and engages Manager to supervise, manage, and operate the Facility in
the name and for the account of Owner upon the terms and conditions hereinafter
set forth. Owner is contracting herein for an end result, and does not intend
to provide any day-to-day supervision of Manager. Manager shall provide its own
management systems, which shall be considered proprietary material and will
remain the property of Manager. The Plan of Operation shall include the program
design (in accordance with the regulations of the state where the Facility is
located (the "State")) and define the capital expenditure and operating budgets
for the Facility, as agreed to by the parties. The Plan of Operation shall be
reviewed on a monthly basis and, if necessary, revised, upon the mutual
agreement of the parties.
1.2 ACCEPTANCE. Subject to the Plan of Operation, Manager accepts such
engagement and agrees that it will (a) faithfully and diligently perform its
duties and responsibilities hereunder; (b) use its best skills, efforts and
attention to supervise and direct the management and operation of the Facility
in an efficient manner, as an assisted living facility, in substantial
compliance with all applicable laws and in Owner's best interest; and (c)
consult with Owner and keep Owner advised of all major policy
<PAGE> 2
matters relating to the Facility. Subject to the foregoing and to the other
provisions of this Agreement, Manager, without the approval of the Owner
(unless such approval is herein specifically required), shall have the control
and discretion with regard to the operation and management of the Facility for
all customary purposes (including the exercise of its rights and performance of
its duties provided for in Article 3 hereof), and the right to determine
policies affecting the appearance, maintenance, standards of operation, quality
of service, and other matters reasonably relating to Manager's interest
hereunder, which affect the Facility or the operation thereof, and Owner shall
not attempt to assert management control over Facility or its employees during
the term of this Agreement.
ARTICLE 2.
TERM
The term of this Agreement shall be for a period commencing on the
date that a certificate of occupancy is issued for the Facility (the
"Commencement Date") and ending on the earlier to occur of (i) the date that is
two years after the Commencement Date or (ii) the Breakeven Date (as defined in
that certain Lease Agreement of even date herewith (the "Lease") between Owner
and BCC of Roanoke, Inc.), unless terminated earlier pursuant to Article 8 or
Section 11.2 hereof. This Agreement shall be automatically extended for
additional terms of one year each unless and until terminated pursuant to the
terms herein, or upon written notice by Manager of its intent not to extend 90
days prior to the end of the then term.
ARTICLE 3.
RIGHTS AND DUTIES OF THE MANAGER
During the term of this Agreement and in the course of its management
and operation of the Facility, subject to the Plan of Operation:
3.1 EMPLOYEES. Manager shall hire, train, promote, discharge, and
supervise the work of the Facility's executive director, department heads, and
all operating and service employees performing services in and about the
Facility. All of such employees shall be employees of Owner, except the
executive director who shall be an employee of Manager, and the aggregate
compensation, including fringe benefits with respect to such employees
(including the executive director) shall, within the agreed Operating Budget,
be charged to Owner as an expense of the operation of the Facility. Manager
shall comply with all applicable laws concerning employees, their compensation,
and any retirement or profit sharing plans, including payroll deductions and
tax reporting. The term "fringe benefits" as used herein shall include but not
be limited to the employer's contribution of FICA, unemployment compensation,
and other employment taxes, retirement plan contributions, worker's
compensation, group life, accident, and health insurance premiums, profit
sharing contributions, disability, and other similar benefits. All such
employees shall be covered by appropriate professional liability, workers'
compensation, unemployment and other liability insurance, including errors and
omission coverage, as approved by Manager and Owner. The cost of same shall be
charged to Owner as an additional expense of the operation of the Facility.
Manager shall provide Owner with evidence of any such insurance upon request
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3.2 LABOR CONTRACTS. Manager, if requested by Owner, will negotiate,
on Owner's behalf, with any labor union lawfully entitled to represent the
employees at the Facility, but any collective bargaining agreement or labor
contract resulting therefrom must first be approved by Owner, who shall be the
only person authorized to execute the same. All such negotiations conducted by
Manager shall be at Owner's expense and shall be subject to approval by Owner,
which approval shall not be unreasonably withheld.
3.3 CONCESSIONAIRES, ETC. Manager shall negotiate and consummate in
the name of the Owner contracts with concessionaires, licensees, tenants,
Residents and other intended users of the Facility. Any fees and expenses
incurred in connection therewith shall, within the agreed Operating Budget, be
charged to Owner as an expense of the operation of the Facility.
3.4 ANCILLARY SERVICES, UTILITIES, ETC. Manager shall, within the
agreed Operating Budget, enter into such contracts in the name of and at the
expense of Owner as may be deemed necessary or advisable for the furnishing of
all ancillary services, utilities, concessions, supplies and other services as
may be needed from time to time for the maintenance and operation of the
Facility. Manager is authorized to contract for or to provide ancillary
services, including, but not limited to, pharmacy (drug and IV), rehabilitation
and respiratory therapy services, and mobile diagnostic services, through
providers which may be affiliates of Manager, provided that such services are
rendered at levels of quality and pricing that are competitive with those
provided in the community.
3.5 PURCHASES. Manager shall be solely responsible to arrange for the
purchases of food, beverages, operating supplies, and other materials and
supplies in the name of and for the account, and at the expense of Owner,
within the agreed Operating Budget, as may be needed from time to time for the
maintenance and operation of the Facility.
3.6 REPAIRS. At all times during the term of this Agreement, Manager
shall, within the agreed Operating Budget, make or install or cause to be
installed at Owner's expense and in the name of the Owner any proper repairs,
replacements, and improvements in and to the Facility and the furnishings and
equipment in order to keep and maintain the same in good repair, working order
and condition, and outfitted and equipped for the proper operation thereof in
accordance with industry standards comparable to those prevailing in other
similar facilities, and all applicable state or local rules, regulations, or
ordinances. All maintenance and repair work undertaken by Manager shall be done
in a workmanlike manner, leaving the Facility free of liens for labor and
material to the extent funds are provided by Owner. Manager hereby grants to
Owner the right to inspect and access to the Facility at all reasonable times;
provided, however, that Owner shall have no duty to conduct any inspection.
3.7 LICENSES AND PERMITS. Manager shall apply for, and use its best
efforts to obtain and maintain in the name and at the expense of the Owner, all
licenses and permits required in connection with the management and operation
of the Facility. Owner agrees to cooperate with Manager in applying for,
obtaining and maintaining such licenses and permits.
3.8 INSURANCE. Manager shall apply for, obtain and maintain on behalf
of Owner, and at Owner's expense, at all times during the term of this
Agreement, the following insurance in such amounts and coverage as may be
appropriate and mutually agreed upon by Owner and Manager or as may be required
by any financing or lease arrangements of Owner, whichever is greater:
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(a) insurance on the Facility on a replacement cost basis (including
the equipment, furnishings and other tangible personal property used in
connection therewith) against loss and damage by fire and lightning with
coverage extended by means of an extended coverage endorsement to a fire
insurance policy so as to include loss or damage arising out of windstorm, and
hail, provided such insurance is reasonably available, and sprinkler damage, if
reasonably available;
(b) insurance on the Facility against loss or damage, including
business interruption insurance, for boilers and machinery, heating apparatus,
pressure vessels, and pressure pipes installed in the Facility;
(c) commercial primary and excess general liability, including
automobile liability (as needed), products liability bonds, professional and
other liability, and property damage insurance, insuring Owner and Manager
against loss or liability for damages or personal injury, death, or property
damage arising or resulting from the management, maintenance, operation and/or
use of the Facility;
(d) such workers' compensation and other similar insurance as may be
required by law or as may be required to insure Owner and Manager against loss
or the payment of damages for such liabilities as may be imposed by law;
(e) unemployment Compensation insurance through the appropriate state
agencies; and
(f) fidelity and honesty insurance.
Forthwith after the effective date of this Agreement, Manager shall
submit to Owner for its approval, which approval shall not be unreasonably
withheld, a proposal setting forth the kinds and amounts of insurance which
Manager intends to obtain, in connection with the operation of the Facility
(including, without limitation, insurance of the kinds and in the respective
amounts described in Paragraphs [a] through [f] of this section) and Owner
shall be deemed to have approved the proposal unless Owner has disapproved in
writing within ten days of submission of the proposal by Manager.
All insurance provided for under the foregoing provisions of this
Section shall be effected by policies issued by insurance companies of good
reputation, sound adequate financial responsibility, and properly licensed and
qualified to do business in the State and which are acceptable to any Secured
Parties (hereinafter defined).
All of the policies of insurance of the character described in
Paragraphs (a)-(b) of this Section shall be carried in the names of Owner,
Manager, the secured parties, if any, under any mortgage, deed of trust or
security instrument from time to time outstanding affecting the Facility (the
"Secured Parties"). Any losses payable under such policies of insurance shall
be payable to Owner, Manager, and such Secured Parties as their respective
interests may appear. Each of the policies of insurance referred to in
Paragraphs (c)-(f) of this Section shall insure Owner and Manager. Owner,
Manager and their respective officers, partners, directors, shareholders,
managers and employees shall, to the extent permissible, be named as additional
insureds under all such policies.
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3.9 GOVERNMENTAL REGULATION.
(a) Manager shall perform its duties hereunder to insure that the
Facility and the management thereof by Manager complies in all material
respects with all Federal, state and local laws, rules, orders, determination,
regulations and ordinances affecting or issued in connection with the Facility,
or the management thereof by Manager, including any laws and regulations
applicable to the Facility, and with the prior written consent of Owner,
Manager shall make arrangements for any alterations or repairs ordered or
required thereby, if not included in the Operating Budget.
(b) Manager shall immediately provide to Owner, as and when received
by Manager, all notices, reports or correspondence from governmental agencies
that assert deficiencies or charges against Facility or that otherwise relate
to the suspension, revocation, or any other action adverse to any approval,
authorization, certificate, determination, license or permit required or
necessary to own or operate the Facility. Manager may appeal any action taken
by any governmental agency against the Facility; provided, however, that Owner
shall adequately secure and protect Manager from loss, cost, damage or expense
by bond or other means reasonably satisfactory to Manager in order to contest
by proper legal proceedings the validity of any such statute, ordinance, law,
regulation or order, provided that any such contest shall not result in the
suspension of operations of the Facility and, provided, further, that Owner
shall have no obligation to secure and protect Manager from any loss, cost,
damage or expense that arise directly out of Manager's negligence, misconduct,
or breach of any of its obligations under this Agreement.
3.10 TAXES. Manager shall give notice to Owner of all taxes,
assessments, penalties, fines, and charges of every kind imposed upon the
Facility by any governmental authority within five days of receipt of
notification other than in the normal course of business, including interest
and penalties thereon, and shall cause such items to be paid when due if funds
are available, except that Manager shall not cause such payment to be made if
(i) same is in good faith being contested by the Owner at its sole expense and
without cost to Manager, (ii) enforcement thereof is stayed, and (iii) Owner
shall have given Manager written notice of such contest and authorized the
nonpayment thereof not less than ten days prior to the date on which such tax
assessment, penalty or charge is due and payable.
3.11 DEPOSIT AND DISBURSEMENT OF FUNDS. Upon the implementation of
this Agreement, Owner shall initiate an operating reserve fund (the "Reserve
Fund") in a financial institution and available to Manager as Owner's agent
hereunder in an amount to be agreed upon by the parties prior to the
Commencement Date. Such Reserve Fund shall be used by Manager to meet the
financial payments noted below until sufficient revenues are generated by
operation of the Facility to reasonably meet those financial obligations on a
monthly basis. Manager shall promptly deposit in a banking institution
acceptable to Owner, which is a member of the FDIC, in accounts in Manager's
name as agent for Owner, all Gross Revenues, as defined below, and moneys and
Facility income arising from the operation of the Facility, or otherwise
received by Manager for and on behalf of Owner ("Facility Funds"), which funds
shall be Owner's funds. No amounts deposited with Facility Funds shall in any
event be co- mingled with any other funds of Manager. Manager shall pay from
the Reserve Fund and/or, once sufficient Facility Funds are generated and
received to meet the monthly operating expenses of the Facility, Manager shall
pay from Facility Funds on behalf of and in the name of Owner, and in the
following order of priority, and in each case, in such amounts and at such
times as are required to be made in connection with:
(a) all costs and expenses arising out of the ownership, maintenance,
and operation of the Facility, including the reimbursable expenses of Manager
hereunder pursuant to Exhibit A attached hereto;
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(b) payment of rent under the Lease and the Facility Debt Service;
(c) Manager's Base Management Fee provided for in Article 5, below
(including any accrued and unpaid Base Management Fees for prior periods); and
(d) the balance of the Facility Funds shall be disbursed to Owner
within five days.
It is expressly acknowledged that financial responsibility for payment
of the costs and expenses noted above is that of the Owner. If the available
Facility Funds previously deposited by Manager, or the Reserve Fund are
insufficient in any month to pay all of the amounts described in Paragraphs (a)
- - (c), Owner shall promptly, upon the request of Manager, advance to Manager,
or pay into those accounts described above, for use by Manager on Owner's
behalf, any additional amounts necessary and sufficient to allow Manager to pay
all amounts due hereunder. Manager shall not be required to advance any sums on
Owner's behalf to meet any financial obligations of Owner pursuant to the
management of Facility. Owner's failure to promptly advance funds, or to
deposit any amounts in the Reserve Fund where required hereunder and where
written demand has been made by Manager, shall be considered a breach by Owner
of this Agreement.
As used herein, "Facility Debt Service" means scheduled payments of
the principal and interest with respect to:
(i) the indebtedness identified on Exhibit B attached hereto,
and
(ii) any additional indebtedness incurred by Owner for the
improvement, maintenance, or operation of the Facility.
"Facility Debt Service" does not include any amounts payable by reason
of involuntary prepayments or the acceleration of such indebtedness for any
reason.
3.12 STATEMENTS. Manager shall deliver or cause to be delivered to
Owner statements as follows:
(a) On or about the 30th day after the end of each calendar month
(except for the final month of the fiscal year as noted in 3.12(b) below), a
profit and loss statement and balance sheet statement (both prepared on an
accrual basis) showing the results of the operation of the Facility for the
preceding calendar month and the year to date, and having annexed thereto a
computation of the management fee (as determined under Article 5 hereof) for
such preceding month and the year to date.
(b) On or before 45 days after the close of each fiscal year during
the term of this Agreement, Manager will also deliver or cause to be delivered
to Owner a balance sheet and related statement of profit and loss showing the
assets employed in the operation of the Facility and the liabilities incurred
in connection therewith as of the end of the fiscal year, and the results of
the operations of the Facility during the preceding 12 months then ended, and
having annexed thereto (i) a copy of the Medicare and Medicaid cost report, if
any, prepared by Manager with respect to the Facility for such twelve-month
period, and (ii) a computation of the management fee for any such 12-month
period and payments made according to Section 3.11. All costs and expenses
incurred in
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connection with the preparation of any statements, schedules, computation, and
other reports required under this Section 3.12(b) shall be borne by Owner.
(c) Within 30 days of filing, copies of the 10-Q and 10-K of Manager
filed with the United States Securities and Exchange Commission, if any.
(d) Within 45 days after the end of each quarter, each of the
following, certified by the chief financial officer of Manager to be true and
correct:
(i) unaudited financial statements of the Manager prepared in
accordance with generally accepted accounting principles consistently
applied, which statements shall include a balance sheet and statement
of income and expenses for the quarter then ended;
(ii) if requested by Owner, within 15 days of the end of each
calendar month, an aged accounts receivable report of the Facility in
sufficient detail to show amounts due from each class of patient-mix
(i.e., private, Medicare (if any), Medicaid (if any) and V.A.) by the
account age classifications of 30 days, 60 days, 90 days, 120 days,
and over 120 days;
(iii) within 45 days after the end of each calendar quarter,
the quarterly financial statement and census data for the Facility,
properly completed and certified by Manager to be true and correct;
(iv) within ten days of filing or receipt all cost reports
required by any regulatory or licensing agency and any amendments
thereto filed with respect to the Facility and all responses and
statements of deficiencies (with plans of correction attached thereto,
if required, within the period prescribed by law);
(v) within ten days of receipt, copies of all licensure and
certification survey reports and statements of deficiencies (with
plans of correction attached thereto, if required, within the period
prescribed by law);
(vi) within ten days of receipt, a copy of the Medicaid rate
calculation worksheet (or the equivalent thereof), if any, issued by
the applicable Medicaid agency for the Facility;
(vii) upon Owner's request, evidence of payment of any
applicable provider bed taxes or similar taxes.
3.13 COMPLAINTS; INVESTIGATIONS; LEGAL ACTIONS. Manager shall receive,
consider, and handle any complaints of residents, guests or users of any of the
services of the Facility. Using reasonable judgment, Manager shall notify Owner
of all material written complaints regarding the quality of resident care or
operation of the Facility received by Manger. Manager shall comply with the
procedures and policies for reporting of adverse resident occurrences at the
Facility to the insurance company or to such other persons as Owner may
designate. Manager shall promptly notify Owner of any pending, threatened or
initiated investigation, by any governmental or administrative agency,
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regarding any aspect of operation of the Facility. Manager shall promptly
notify Owner if it is served with process in any legal action regarding any
aspect of its operation of the Facility. Manager shall institute, in its own
name or in the name of the Owner, at the expense of the Owner, appropriate
legal actions or proceedings to collect charges, rent, or other sums due the
Facility or to lawfully oust or dispossess Residents or other persons in
possession under (or lawfully cancel, modify or terminate) any lease, license,
or concession agreement for the breach thereof or default thereunder by the
Resident, licensee or concessionaire.
Unless otherwise directed by Owner, Manager shall take, at Owner's
expense, appropriate legal steps with respect to any alleged violation, or
adverse order, rule, or regulation affecting the Facility. Any counsel to be
engaged under this or the next preceding paragraph of this Section shall be
approved by Owner, which approval shall not be unreasonably withheld. Manager
shall promptly notify Owner of all such actions.
3.14 MANAGEMENT SERVICE. Manager shall use its best efforts to manage
and operate the Facility with a maximum of efficiency in a manner to achieve
optimal financial performance and productivity of personnel and in a quality
manner for the residents of the Facility commensurate with standards for
comparable facilities in the State, provided that this is done in a manner
consistent with good business practices.
3.15 DATA PROCESSING. Manager shall, directly or through an affiliate
or subcontractor (the cost of which shall, within the agreed Operating Budget,
be borne by Owner), provide the data processing required to maintain the
financial, payroll, and accounting records of the Facility.
3.16 INDEMNIFICATION. Except for Owner's obligations and liabilities
under Section 3.11, Manager shall at all times indemnify and hold harmless
Owner, its agents, representatives, partners, joint venturers, officers,
directors, and shareholders, from and against any and all claims, losses,
liabilities, actions, proceedings, and expenses (including reasonable
attorneys' fees and costs) arising out of Manager's management or operation of
the Facility; provided that the foregoing indemnity will not include Owner's
willful acts or negligence. The provisions of this Section 3.16 shall survive
the termination or expiration of this Agreement.
3.17 BOOKS AND RECORDS. Manager, on behalf of Owner, shall supervise
and direct the keeping of full and accurate books of account and such other
records reflecting the results of operation of the Facility in accordance with
sound business and accounting practices and as required by law.
3.18 OTHER DUTIES. Manager shall not take any action or inaction that
would constitute a default under any note, loan agreement, mortgage, trust
deed, lease or other agreement executed by Owner relating to the Facility.
Owner shall deliver to Manager a copy of each such agreement prior to execution
thereof.
3.19 SECURITY DEPOSITS. If required by state law, Manager shall
collect and disburse resident security deposits in accordance with the
applicable rental agreements and all other applicable state and federal laws
and regulations. Such deposits, if any, shall be deposited in a separate FDIC
insured trust account (maintained in compliance with applicable law) held in
the name of Owner. The balance of such account shall at all times equal or
exceed the liability therefor to all residents.
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3.20 OPERATING BUDGET. Subject to the Plan of Operation, Manager
shall, 60 days prior to the Commencement Date prepare a pro forma budget, and
about July 1 of each year thereafter, prepare an operating budget for that
year, based on the immediately prior year's operating experience (the
"Operating Budget"). The Operating Budget shall include, but not be limited to
estimated revenues and operating expenses for the ensuing year. If Owner
objects to the Operating Budget submitted by Manager, Owner shall provide
Manager with written notice of such objection, stating the reasons for such
objections, within 30 days after receipt. If Manager disagrees with Owner's
objections, Manager shall notify Owner of such disagreement within ten days
after Manager's receipt of Owner's objections. If the parties cannot resolve
any dispute within ten days thereafter, then the matter may be submitted to
arbitration pursuant to Article 10 hereof and the parties shall use the
Operating Budget for the previous period pending the resolution of such
arbitration proceeding. At the same time as the Operating Budget is submitted
to Owner, Manager shall submit, for Owner's approval, a narrative report of
Manager's major management goals and intended actions for the succeeding fiscal
year so as to enable Owner to evaluate Manager's intended conduct of the
affairs of the Facility during that period. Once the budget is mutually agreed
to by the parties, Manager shall use its best efforts to manage and operate the
Facility within the budget. However, Manager is not guaranteeing that Facility
shall make a profit at any time or that anticipated financial projections can
be met under this Agreement. All expenses shall be charged to the proper budget
account and no expense may be classified (or reclassified) for the purpose of
avoiding an excess in the annual budgeted amount of any accounting category.
The parties agree to confer from time to time with regard to the budget and to
adjust the budget as is reasonably necessary for the operation of the Facility.
Owner understands and agrees that there may be emergencies that arise from time
to time which might require immediate expenditures by Manager to assure the
continuous operation of the Facility which are not in the budget. Owner may
specify the format of the budget from time to time.
Manager shall, in addition, provide to Owner a capital improvements
budget (the "Capital Expenditures Budget") covering all anticipated capital
improvements and expenditures. The Capital Expenditures Budget is subject to
Owner's approval and the same procedures set forth above with respect to the
Operating Budget. Notwithstanding anything contained herein to the contrary.
Manager shall not incur any expense or capital expenditure in excess of $5,000
for any single item or $10,000 in any fiscal year above the approved budget
without Owner's specific written authorization; provided, however, Manager
shall have the authority to incur such expenses and capital expenditures
without Owner's prior approval if such expense or capital expenditure is
immediately necessary for the health or safety of the residents of the Facility
("Emergency Expenditures"). Manager shall promptly provide Owner with written
notice describing the cost and reason for any such Emergency Expenditure. Owner
shall promptly review Manager's request for authorization of expenses and
capital expenditures in excess of the aforesaid limits which are not Emergency
Expenditures.
3.21 FEES AND CHARGES. Subject to approval of Owner, Manager shall
establish, maintain, revise and administer the overall charge structure of the
Facility, including, without limitation, monthly fees, rentals, or charges of
any kind, charges for ancillary services, any and all items sold at the
Facility and any other services provided at the Facility. Manager shall be
responsible for the timely billing and collection from residents or third party
payors of the amounts due and payable from residents for the services provided
by the Facility. Manager shall be responsible for making timely and complete
rate filings as required by law, and all posting or filing of notices, charges
and fees required by law.
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3.22 RESIDENT-MANAGEMENT RELATIONS. Manager will encourage and assist
residents of the Facility in forming and maintaining representative
organizations to promote their common interests and will maintain good-faith
communication with such organizations so that problems affecting the Facility
and its residents may be avoided or solved on the basis of mutual
self-interest.
3.23 CONSTRUCTION OF IMPROVEMENTS TO EXISTING FACILITY. Except as
otherwise provided herein, Manager shall not make or cause to be made any
alterations, additions, replacements or improvements on, in, about or to the
Facility without the prior written consent of Owner. The entire cost of
construction of any such new improvements to the existing facility and all
expenses connected therewith, shall be borne and paid by Owner exclusively.
Prior to the commencement of any such alterations, additions, replacements or
improvements, Manager shall submit to and obtain Owner's written approval of
the plans and specifications thereof. Manager agrees that such plans and
specifications shall require the contractor to post an adequate performance
bond.
Manager agrees to make and construct all such repairs, improvements
and installations in accordance with all laws, rules and regulations of
applicable governing bodies and agencies, to diligently complete such
construction once the same has commenced. All improvements constructed by
Manager upon the Facility shall, upon termination of this Agreement, belong to
Owner. Manager shall save and hold Owner harmless and the Facility harmless
from any and all liability of any kind on account of such work or improvement
while this Agreement remains in effect. Owner shall have the right at any time
to post the Facility with such notices as may be required to protect Owner's
interest in the Facility from mechanics' liens or other liens of a similar
nature. The failure to disapprove Manager's plans and specifications within 60
days after receipt thereof by Owner shall be automatically deemed disapproval
thereof.
3.24 USE OF THE FACILITY'S PROPERTY. Manager shall not utilize any
hazardous materials on the Facility's property except in accordance with
applicable legal requirements and will not permit any contamination which may
require remediation under applicable Hazardous Materials Law (as defined
herein). Manager shall not dispose of any hazardous materials or substance
within the sewage system of the Facility's property, and that it shall handle
all "red bag" wastes in accordance with applicable Hazardous Materials Laws.
"Hazardous Materials Law" shall mean any law, regulation, or ordinance relating
to environmental conditions, medical waste or industrial hygiene, including the
Resource Conservation Recovery Act of 1976 ("RCRA"), the Comprehensive
Environmental Response Compensation Liability Act of 1980 ("CERCLA"), as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Hazardous Materials Transportation Act, the Federal Water Pollution Control
Act, the Clean Air Act, the Clean Water Act, the Toxic Substance Control Act,
the Safe Drinking Water Act, the Atomic Energy Act and all similar federal,
state and local environmental statutes and ordinances, whether heretofore or
hereafter enacted or effected and all regulations, orders, or decrees
heretofore or hereafter promulgated thereunder.
3.25 ACCESS TO BOOKS, RECORDS AND DOCUMENTS. In the event the Facility
participates in the Medicare/Medicaid programs, for purposes of Section
1861(v)(1)(I) of the Social Security Act, as amended, and any written
regulation thereto, if the value or cost of services rendered by Manager to
Owner is $10,000 or more over a 12-month period, including without limitation
services rendered pursuant to this Agreement, Manager agrees as follows:
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(a) Until the expiration of four years after the furnishing of such
services, Manager shall, upon written request, make available to the Secretary
of the Department of Health and Human Services (the "Secretary"), the
Secretary's duly authorized representative, the Comptroller General, or the
Comptroller General's duly authorized representatives, such books, documents,
and records as may be necessary to certify the nature and extent of costs of
such services; and
(b) If any such services are performed by way of subcontract with
another organization and the value or cost of such subcontracted services is
$10,000 or more over a 12-month period, such subcontract shall contain and
Manager shall enforce a clause to the same effect as subsection (a) immediately
above. The availability of Manager's books, documents and records shall be
subject at all times to all applicable legal requirements, including without
limitation such criteria and procedures for seeking and obtaining access as may
be promulgated by the Secretary by regulation.
ARTICLE 4.
RIGHTS AND DUTIES OF OWNER
During the term of this Agreement:
4.1 RIGHT OF INSPECTION. Owner (or its representative) shall have the
right to enter upon any part of the Facility during regular business hours upon
reasonable advance notice to Manager for the purpose of examining or inspecting
same or examining or making copies or extracts of books and records of the
Facility, but this shall be done with as little disruption to the business of
the Facility as is practicable. However, the books and records of the Facility
shall not be removed from the Facility without the expressed written consent of
Manager. Owner acknowledges that some books and records will be maintained at
Manager's principal place of business, but that such books and records shall be
available for inspection by Owner or its representative. The parties will agree
in writing as to which books and records must be kept at the Facility.
Owner shall direct all inquiries regarding operations, procedures,
policies, employee relations, patient care, and all other matters concerning
the Facility to the Manager's divisional director of operations or other
officer of Manager as it may from time to time designate in a written notice to
Owner. Notwithstanding the foregoing, Owner shall retain the right to contact
the executive director regarding matters pertinent to the Facility.
4.2 COOPERATION WITH MANAGER. Subject to the provisions of Article 5
below, Owner shall cooperate with Manager in operating and supervising the
Facility and shall reimburse Manager for all funds reasonably expended or costs
and expenses reasonably incurred to which Manager is entitled to reimbursement
pursuant to Exhibit A of this Agreement and all out of pocket expenses paid or
incurred by Manager for the operation of the Facility, including reasonable and
necessary traveling expenses of executives of Manager, and all reasonable costs
and expenses of any business promotion or personnel training program of the
Facility, as reflected in the Operating Budget.
4.3 CAPITAL IMPROVEMENTS. Subject to the Capital Expenditures Budget,
Owner shall provide Manager by depositing into the reserve account or Facility
Funds such amount of funds as may be required from time to time to make all
necessary capital improvements to the Facility, in order to maintain and
continue standards of operation of the Facility as a retirement community and
assisted
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living care center. If Manager in its professional judgment determines that
additional capital improvement funds are required, Manager shall notify Owner
thereof in writing for Owner's consent which shall not be unreasonably
withheld. Upon such consent, Owner shall provide Manager with such increase in
capital improvement funds, by depositing the funds in the reserve account or
Facility Funds within 30 days thereafter.
4.4 INDEMNIFICATION. Owner shall at all times indemnify and hold
harmless Manager, its agents, representatives, partners, joint venturers,
officers, directors, and shareholders, from and against any and all claims,
losses, liabilities, actions, proceedings, and expenses (including reasonable
attorneys' fees and costs) arising out of Owner's operation of the Facility
prior to the Commencement Date and Owner's ownership of the Facility, including
without limitation, any of the foregoing arising out of Owner's breach of any
of the terms or conditions of the Loan Agreement of even date herewith (the
"Loan Agreement") between Owner and Capstone Capital Corporation. Such claims,
losses, liabilities, actions, proceedings and expenses are considered the
responsibility of Owner absent documentation of responsibility for such claims
by Manager. The provisions of this Section 4.4 shall survive the termination or
expiration of this Agreement.
ARTICLE 5.
COMPENSATION AND DISTRIBUTIONS
5.1 MANAGEMENT FEES. As full compensation for all of the services to
be rendered by Manager during the term of this Agreement (but not including
reimbursement for costs or expenses incurred by Manager on behalf of Owner or
the Facility hereunder),Owner shall pay to Manager at its principal office, or
at such other place as Manager may from time to time designate in writing, and
at the times herein after specified, a management fee equal to six percent of
Gross Revenues (as defined below) derived from the operation of the Facility on
a monthly basis determined on the accrual method of accounting. Such management
fee (the "Base Management Fee") shall be payable monthly from either the
Reserve Fund or the Facility Funds, as the case may be, upon delivery to Owner
of the monthly financial statement referred to in Section 3.12 (each such date
being hereinafter referred to as a "Payment Date") and shall be calculated
based upon the Facility's Gross Revenues during the preceding month as set
forth in such financial statements.
5.2 GROSS REVENUES. For the purposes of determining such management
fees, "Gross Revenues" for any period shall be determined on the basis of all
revenues and income of any kind derived, directly or indirectly, from the
operation of the Facility during such period (including rental or other payment
from concessionaires, licensees, Residents, and other users of the Facility,
but excluding therefrom all bequests, gifts, or similar donations) whether on a
cash basis or on credit, as determined in accordance with generally accepted
accounting principles consistently applied, excluding, however:
(a) federal, state, and municipal excise, sales, and use taxes
collected directly from residents as a part of the sales prices of any goods
and services;
(b) proceeds of any life insurance policies;
(c) gains arising from the sale or other disposition of capital
assets;
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(d) any reversal of any contingency or tax reserve;
(e) interest earned on sinking funds, Social Security Accounts, bonds
funds, etc. originally and specifically formed as a requirement of any bond
issue utilized to finance the Facility; and
(f) any refunds, contractual adjustments, income set-offs or bad debt
expense.
The proceeds of business interruption insurance or proceeds received
as a result of Medicare and Medicaid audits shall be included in Gross Revenues
from the Facility. However, funds required to be repaid as a result of Medicare
and Medicaid audits shall be deducted from Gross Revenues of the Facility.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF OWNER
Owner and shareholders of Owner represent and warrant to Manager as
follows:
6.1 ORGANIZATION AND STANDING OF OWNER. Owner is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of North Carolina and is qualified to do business in the Commonwealth
of Virginia. Copies of the Articles of Incorporation and By-Laws of Owner, and
all amendments thereof to date, have been, if requested, delivered to Manager
and are complete and correct. The Owner has the power and authority to own the
property and assets now owned by it and to conduct the business currently being
conducted by it.
6.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement, including all Schedules and Exhibits hereto, or any
of the other instruments and documents required or contemplated hereby and
thereby ("Transaction Documents") by Owner, nor the performance by Owner of the
transactions contemplated hereby and thereby, conflicts with, or constitutes a
breach of or a default or requires the consent of any third party under (i) the
Articles of Incorporation or By-Laws of Owner, or (ii) to the best of its
knowledge after due inquiry, any applicable law, rule, judgment, order, writ,
injunction, or decree of any court, currently in effect; or (iii) to the best
of its knowledge after due inquiry, any applicable rule or regulation of any
administrative agency or other governmental authority currently in effect; or
(iv) any agreement, indenture, contract or instrument to which Owner is now a
party or by which the assets of Owner are bound.
6.3 CONSENTS. Except as set forth in Schedule 6.3, no authorization,
consent, approval, license, exemption by, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection
with the execution, delivery and performance of this Agreement by the Owner.
6.4 LEGAL PROCEEDINGS. Other than as set forth on Schedule 6.4, there
are no claims, actions, suits or proceedings or arbitrations, either
administrative or judicial, pending or, to the knowledge of Owner, overtly
threatened against or affecting Owner, its affiliates or shareholders, or their
ability to consummate the transactions contemplated herein, at law or in equity
or otherwise, before or by any court or governmental agency or body, domestic
or foreign, or before an arbitrator of any kind.
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<PAGE> 14
6.5 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES, ETC.
During the two years prior to the date hereof, there has been no material
adverse change in the relationship between Owner and its employees, nor any
strike or material labor disturbance by such employees affecting Owner's
business and, to the knowledge of Owner, there is no indication that such a
change, strike or labor disturbance is likely. Except as set forth on Schedule
6.5, Owner's employees are not represented by any labor union or similar
organization and Owner has no reason to believe that there are pending or
threatened any activities, the purpose of which is to achieve such
representation, of all or some of Owner's employees. Except as set forth on
Schedule 6.5, Owner has no collective bargaining or other labor contracts,
employment contracts, pension, profit-sharing, retirement, insurance, bonus,
deferred compensation or other employee benefit plans, agreements or
arrangements with respect to Owner's employees. Owner is in material compliance
with the requirements prescribed by all federal, state and local statutes,
orders and governmental rules and regulations applicable to any of its employee
benefit plans, agreements and arrangements, including, without limitation, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
6.6 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 6.6,
since June 30, 1995, Owner has not:
(a) sold, assigned or transferred any of its assets or properties,
except in the ordinary course of business;
(b) mortgaged, pledged or subjected to any lien, pledge, mortgage,
security interest, conditional sales contract or other encumbrance of any
nature whatsoever, the Facility's assets;
(c) made or suffered any amendment or termination of any material
contract, commitment, instrument or agreement other than in the ordinary course
of business;
(d) failed to pay or discharge when due any liabilities, the failure
to pay or discharge which has caused or will cause any actual material damage
or give rise to the risk of a material loss to Owner;
(e) changed any of the accounting principles followed by them or the
methods of applying such principles;
(f) entered into any material transaction other than in the ordinary
course of business; or
(g) received any notice of any adverse determination made by any
licensing authority or reimbursement source which may reasonably be expected to
have a material adverse effect on the revenues or operations of the Facility.
Owner shall report to Manager, within five business days after receipt thereof,
any written notices that Owner or the Facility is not in compliance in any
material respect with any of the foregoing.
6.7 COMPLIANCE WITH LAWS. Except for notices of non-compliance as to
which Owner has taken corrective action acceptable to the applicable
governmental agency, and as set forth in Schedule 6.7, Owner has not within the
period of twelve months preceding the date of this Agreement, received
14
<PAGE> 15
any written notice that it fails to comply in any material respect with any
applicable federal, state, local or other governmental laws or ordinances, or
any applicable order, rule or regulation of any Federal, state, local or other
governmental agency having jurisdiction over Owner ("Governmental
Requirements"). Owner shall report to Manager, within five business days after
receipt thereof, any written notices that Owner is not in compliance in any
material respect with any of the foregoing.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF MANAGER
Manager represents and warrants to Owner as follows:
7.1 ORGANIZATION AND STANDING OF MANAGER. Manager is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in the Commonwealth of
Virginia. Copies of the Articles of Incorporation and By-Laws of Manager, and
all amendments thereof to date, have been, if requested, delivered to Owner and
are complete and correct. Manager has the power and authority to own the
property and assets now owned by it and to conduct the business currently being
conducted by it.
7.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement, including all Schedules and Exhibits hereto, or any
of the other instruments and documents required or contemplated hereby and
thereby by Manager, nor the performance by Manager of the transactions
contemplated hereby and thereby, conflicts with, or constitutes a breach of or
a default or requires the consent of any third party under (i) the Articles of
Incorporation or By-Laws of Manager, or (ii) to the best of its knowledge after
due inquiry, any applicable law, rule, judgment, order, writ, injunction, or
decree of any court, currently in effect; or (iii) to the best of its knowledge
after due inquiry, any applicable rule or regulation of any administrative
agency or other governmental authority currently in effect; or (iv) any
agreement, indenture, contract or instrument to which Manager is now a party or
by which the assets of Manager are bound.
7.3 CONSENTS. Except as set forth in Schedule 7.3, no authorization,
consent, approval, license, exemption by, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection
with the execution, delivery and performance of this Agreement by the Manager.
7.4 LEGAL PROCEEDINGS. Other than as set forth on Schedule 7.4, there
are no claims, actions, suits or proceedings or arbitrations, either
administrative or judicial, pending or, to the knowledge of Manager, overtly
threatened against or affecting Manager, its affiliates or shareholders, or
their ability to consummate the transactions contemplated herein, at law or in
equity or otherwise, before or by any court or governmental agency or body,
domestic or foreign, or before an arbitrator of any kind.
7.5 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES, ETC.
During the two years prior to the date hereof, there has been no material
adverse change in the relationship between Manager and its employees, nor any
strike or material labor disturbance by such employees affecting Manager's
business and, to the knowledge of Manager, there is no indication that such a
change, strike or labor disturbance is likely. Except as set forth on Schedule
7.5, Manager's
15
<PAGE> 16
employees are not represented by any labor union or similar organization and
Manager has no reason to believe that there are pending or threatened any
activities, the purpose of which is to achieve such representation, of all or
some of Manager's employees. Except as set forth on Schedule 7.5, Manager has
no collective bargaining or other labor contracts, employment contracts,
pension, profit-sharing, retirement, insurance, bonus, deferred compensation or
other employee benefit plans, agreements or arrangements with respect to
Manager's employees. Manager is in material compliance with the requirements
prescribed by all federal, state and local statutes, orders and governmental
rules and regulations applicable to any of its employee benefit plans,
agreements and arrangements, including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
7.6 COMPLIANCE WITH LAWS. Except for notices of non-compliance as to
which Manager has taken corrective action acceptable to the applicable
governmental agency, and as set forth in Schedule 7.5, Manager has not within
the period of 12 months preceding the date of this Agreement, received any
written notice that it fails to comply in any material respect with any
applicable federal, state, local or other governmental laws or ordinances, or
any applicable order, rule or regulation of any Federal, state, local or other
governmental agency having jurisdiction over Manager. Manager shall report to
Owner, within five business days after receipt thereof, any written notices
that Manager is not in compliance in any material respect with any of the
foregoing.
ARTICLE 8.
TERMINATION RIGHTS
This Agreement may be terminated and, except as to liabilities or
claims of either party hereto which have accrued prior to the effective date of
termination, the obligations of the parties with respect to this Agreement may
be terminated only upon the occurrence of any of the following events:
8.1 TERMINATION BY OWNER. If at any time or from time to time during
the term of this Agreement any of the following events shall occur and not be
remedied within the applicable period of time herein specified, namely:
(a) Manager applies for or consents to the appointment of a receiver,
trustee, or liquidator of Manager of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy proceeding, makes a general assignment with creditors or takes
advantage of any insolvency law, or if an order, judgment or decree is entered
by any court of competent jurisdiction, on the application of a creditor,
adjudicating Manager as bankrupt or insolvent or approving a petition seeking
reorganization of Manager or appointing a receiver, trustee, or liquidator of
Manager or of all or a substantial part of its assets, and such order, judgment
or decree continues unstayed and in effect for any period of 90 consecutive
days;
(b) Manager shall fail to keep, observe, or perform any material
covenant, agreement, term or provision of this Agreement to be kept, observed,
or performed by Manager; or Manager's failure to substantially comply with
state and local regulations concerning the development and operating of similar
facilities, and such material default or failure to substantially comply with
state and local regulations shall continue unabated for a period of 60 days
after written notice thereof by Owner to Manager;
(c) The license or licenses required for the operation of the Facility
are at any time suspended, terminated, or revoked for any reason due to acts of
commission or omission of Manager; or
16
<PAGE> 17
(d) The Facility or any portion thereof is damaged or destroyed by
fire or other casualty and (i) Owner fails to undertake to repair, restore,
rebuild, or replace any such damage or destruction within 60 days after such
fire or other casualty, or fails to complete such work diligently, and (ii)
Owner fails to permit Manager to undertake to repair, restore, rebuild, or
replace any such damage or destruction within 60 days after such fire or
casualty;
then in case of any such event and upon the expiration of the period of grace
applicable thereto, except for an event under Sections 8.1(c) or 8.1(d) there
being no grace period, this Agreement shall terminate at Owner's option and
upon ten days written notice to Manager; provided, however, that if an event
under Sections 8.1(c) or 8.1(d) occurs, this Agreement shall terminate
immediately upon notice to Manager.
8.2 TERMINATION BY MANAGER. If at any time or from time to time during
the term of this Agreement any of the following events shall occur and not be
timely cured:
(a) Owner fails to keep, observe, or perform any material covenant,
agreement, term or provision of this Agreement or the Loan Agreement (or any
other financing arrangements with respect to the Facility) to be kept,
observed, or performed by Owner, and such default continues for a period of 60
days after written notice thereof by Manager to Owner;
(b) The Facility or any portion thereof is damaged or destroyed by
fire or other casualty and (i) Owner fails to undertake to repair, restore,
rebuilt, or replace any such damage or destruction within 60 days after such
fire or other casualty, or fails to complete such work diligently, and (ii)
Owner fails to permit Manager to undertake to repair, restore, rebuilt, or
replace any such damage or destruction within 60 days after such fire or
casualty;
(c) Owner applies for or consents to the appointment of a receiver,
trustee, or liquidator of Owner or of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or admits in writing its inability to
pay its debts as they become due, makes a general assignment for the benefit of
creditors, files a petition or any answer seeking reorganization or arrangement
with creditors or to take advantage of any insolvency law, or if an order,
judgment or decree is entered by a court of competent jurisdiction, on the
application of a creditor, adjudicating Owner bankrupt or appointing a
receiver, trustee, or liquidator of Owner or with respect to all or a
substantial part of the assets of Owner, and such order, judgment or decree
continues unstayed and in effect for any period of 90 consecutive days;
(d) Any license, lease or sub-lease necessary for the operation of the
Facility is suspended, terminated, or revoked and such suspension, termination,
or revocation continues unstayed and in effect for a period of 60 consecutive
days; or
then in case of any such event and upon the expiration of the period of grace
applicable thereto, this Agreement shall terminate at Manager's option and upon
ten days written notice to Owner.
8.3 SURVIVING RIGHTS UPON TERMINATION. If either party exercises its
option to terminate pursuant to this Article 8, each party shall forthwith, but
in no event later than ten days after the
17
<PAGE> 18
termination date of this Agreement, account for and pay to the other all sums
due and owing pursuant to the terms of this Agreement. All other rights and
obligations of the parties under this Agreement shall terminate, except the
obligations of the parties for damages caused by a breach of this Agreement, a
duty of a party required under applicable law or regulation, or the
indemnification provisions contained in this Agreement or as expressly stated
herein.
ARTICLE 9.
CONDEMNATION
If the whole of the Facility is taken or condemned in any eminent
domain, condemnation, compulsory acquisition, or like proceeding, by a
competent authority for any public or quasi-public use or purpose, or if a
portion thereof is taken or condemned so as to make the balance of the Facility
unsuitable for its primary intended use, then this Agreement shall terminate on
the date on which the Owner is required to surrender possession of the
Facility. Manager shall continue to supervise and direct the management of the
Facility until such time as Owner is required to surrender possession of the
Facility by reason of such taking or condemnation.
If only a part of the Facility is taken or condemned and the taking or
condemnation of such part does not make the balance unsuitable for its primary
intended use, this Agreement shall not terminate.
In the event that the parties are unable, within a period of 30 days
after controversy arising between them, to agree upon the apportionment of any
award or are otherwise in dispute as to any matter arising under this Article,
any such dispute shall be resolved by arbitration in accordance with the
provisions of Article 11 below, and the costs thereof or incurred therein shall
be borne or apportioned and paid as determined by said arbitration.
ARTICLE 10.
ARBITRATION
If any controversy should arise between the parties relating to this
Agreement, involving any matter, either party may serve upon the other a
written notice stating that such party desires to have the controversy
determined by a single arbitrator. If the parties cannot agree within 15 days
from the service of such notice as to the selection of such arbitrator, an
arbitrator shall be selected or designated by the American Arbitration
Association upon written request of either party hereto. Arbitration of such
controversy, disagreement, or dispute shall be conducted in accordance with the
rules then in force of the American Arbitration Association, and the decision
and award of the arbitrator so selected shall be binding upon Owner and
Manager. The arbitration will be held in the city and state where the Facility
is located. Notwithstanding the foregoing, if a dispute arises between the
parties to this Agreement that also involves or is related to a third party or
parties not bound to arbitration under this Agreement, then, unless both
parties to this Agreement agree to proceed in arbitration, that dispute or any
other related disputes shall not be subject to this arbitration provision.
Both parties, however, shall make a good faith effort to resolve any
controversy, which effort shall continue for a period of 30 days prior to any
demand for arbitration. Unless otherwise specified in the decision of the
arbitrators, the prevailing party shall be reimbursed by the non-prevailing
party
18
<PAGE> 19
for any reasonable out-of-pocket expenses (including travel expenses and
reasonable attorney's fees and expenses) incurred as a result of its
participation in any such arbitration and the non-prevailing party will pay all
other costs associated with such proceedings.
If the issue to be arbitrated is Manager's alleged breach of this
Agreement, and as a result thereof Owner has the right to terminate this
Agreement, Manager shall continue to manage the Facility hereunder pending the
outcome of such arbitration, provided Manager posts bond for any money damages
in dispute.
ARTICLE 11.
SUCCESSORS AND ASSIGNS
11.1 ASSIGNMENTS BY MANAGER. Manager, without the consent of Owner,
shall have the right to assign this Agreement to a wholly or majority owned
subsidiary, provided that Manager shall not hereby be released from its
obligations hereunder and no event of default then exists under Section 8.1
hereof.
Except as otherwise permitted herein, Manager shall have no right to
assign this Agreement.
11.2 SALE, ASSIGNMENT, OR SUBLEASE BY OWNER. Any sale, sub-lease, or
assignment by Owner with respect to the Facility, other than to Manager or one
of its affiliates, shall be expressly subject to the terms and provisions of
this Agreement and shall not relieve Owner of its liability or obligations
hereunder. Owner shall cause any purchaser, assignee, or sublessee to deliver
to Manager written acknowledgment of its agreement to perform hereunder
including the payment of the management fee described herein.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
12.1 NOTICES. Any notice or other communication by either party to the
other shall be in writing and shall be deemed to have been duly given upon the
date delivered if delivered personally, or upon the date received if mailed
postage prepaid, registered, or certified mail, addressed as follows:
Owner: ALCO II, L.L.C.
46 Third Street N.W.
Hickory, North Carolina 28601
Attention: Mr. Charles E. Trefzger
Telephone: (704) 322-5535
Telecopy: (704) 322-3897
With a copy to:
Sirote & Permutt, P.C.
2222 Arlington Avenue
Birmingham, Alabama 35205
Attention: Mr. Thomas A. Ansley
Telephone: (205) 930-5300
Telecopy: (205) 930-5301
19
<PAGE> 20
Manager: BCC DEVELOPMENT AND MANAGEMENT CO.
5021 Louise Drive, Suite 200
Mechanicsburg, Pennsylvania 17055
Attention: Robin Barber, Esq.
Telephone: (717) 796-6135
Telecopy: (717) 796-6150
With a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
Attention: John C. Rodney, Esq.
Telephone: (412) 355-6750
Telecopy: (412) 355-6501
or to such other address, and to the attention of such other person or officer
as either party may designate in writing by notice.
12.2 NO PARTNERSHIP OR JOINT VENTURE. Nothing contained in the
Agreement shall constitute or be construed to be or create a partnership or
joint venture between Owner, its successors, or assigns on the one part and
Manager, its successors, or assigns on the other part.
12.3 MODIFICATIONS AND CHANGES. This Agreement cannot be changed or
modified except by written agreement of the parties.
12.4 UNDERSTANDING AND AGREEMENTS. This Agreement constitutes the
entire understanding and agreement between the parties with respect to
Manager's operation and management of the Facility, and supersede any and all
understandings or agreements, whether written or oral, concerning any matters
described herein. No subsequent agreements or understandings between the
parties concerning any matter herein can after the terms of this Agreement
except by written agreement of the parties.
12.5 HEADINGS. The article and paragraph headings contained herein are
for convenience of reference only and are not intended to define, limit, or
describe the scope of intent of any provision of this Agreement.
12.6 APPROVAL OR CONSENT. Whenever under any provisions of this
Agreement, the approval or disapproval of either party is required, notice of
such approval or disapproval shall be promptly given and any requested approval
shall not be unreasonably withheld. Whenever, under any provision of this
Agreement, the approval or disapproval of Owner is required, such approval or
disapproval may be given by the person or any one of the persons, as the case
may be, designated in a notification signed by or on behalf of Owner. For all
purposes under this Agreement, Manager may rely upon the latest such
notification received by it, notwithstanding any knowledge to the contrary.
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<PAGE> 21
12.7 GOVERNING. This Agreement shall be deemed to have been made and
shall be construed and interpreted in accordance with the laws of the State.
12.8 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable or invalid for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties to the
extent possible. In any event, all other provisions of this Agreement shall be
deemed valid and enforceable to the fullest extent.
12.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
12.10 THIRD-PARTY RIGHTS. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the parties to this
Agreement and the Lender any legal or equitable rights or remedy or claim under
or with respect to this Agreement or any provision of this Agreement. The
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and the Lender and their
successors and assigns. Lender is an intended third-party beneficiary of this
Agreement.
End of Page 21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement effective as of the day and year first above written.
Owner:
ALCO II, L.L.C.
By
-----------------------------
Charles E. Trefzger
Managing Member
Manager:
BCC DEVELOPMENT AND MANAGEMENT CO.
By
-----------------------------
Brian L. Barth
Vice President
22
<PAGE> 23
SCHEDULE TO EXHIBIT 10.28 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
MANAGEMENT AGREEMENT
<TABLE>
<CAPTION>
PROJECT/FACILITY LOCATION OWNER DATE
- ------------------------- ----- ----
<S> <C> <C>
Roanoke, VA ALCO II, L.L.C. 6/30/97
Harrisonburg, VA ALCO I, L.L.C. 6/30/97
Danville, VA ALCO III, L.L.C. 9/3/97
</TABLE>
<PAGE> 1
EXHIBIT 10.29
FORM OF ASSIGNMENT AND PLEDGE OF DEPOSIT ACCOUNT
(Lease Reserve Fund)
THIS ASSIGNMENT AND PLEDGE OF DEPOSIT ACCOUNT, dated as of June 30,
1997, from ALCO II, L.L.C., a North Carolina limited liability company
("Borrower") and ____________________, a Delaware corporation ("Lessee" and,
together with Borrower, "Assignor") in favor of CAPSTONE CAPITAL CORPORATION, a
Maryland corporation ("Lender").
RECITALS
A. In order to secure the commencement of the payment of rent under
that certain Lease Agreement of even date herewith (the "Lease") between
Borrower, as lessor, and Lessee, as lessee, Borrower requires the establishment
and maintenance of a deposit account to serve as a lease commencement reserve
fund in connection with the Lease and further requires the assignment and
pledge of such account to Borrower as security for the aggregate of all of
Lessee's obligations under the Lease (collectively, the "Lease Obligations").
B. Borrower has requested a loan from the Lender in the principal
amount of $_________ (the "Loan"). The Loan will be evidenced by, among other
things, a Building and Term Loan Agreement between Lender and Borrower (as the
same may hereafter be amended, the "Loan Agreement").
C. As a condition to making the Loan, Lender requires the
establishment and maintenance of a deposit account to serve as a lease
commencement reserve fund in connection with the Loan and further requires the
assignment and pledge of such account to Lender as security for the aggregate
of all principal and interest owing from time to time pursuant to the Loan and
all expenses, charges and other amounts from time to time owing pursuant to the
Loan Agreement and each of the Loan Documents (as defined in the Loan
Agreement) executed in connection with the Loan, and all covenants, agreements,
and other obligations from time to time owing to, or for the benefit of, Lender
pursuant to the Loan Documents (collectively, the "Loan Obligations").
NOW, THEREFORE, the parties agree as follows:
1. ESTABLISHMENT OF RESERVE FUNDS. Lessee will deposit with Colonial
Bank in Birmingham, Alabama, pursuant to the terms of the Lease and the Loan
Agreement certain funds provided as a lease commencement reserve fund and
thereafter a reserve fund for the Lease Obligations (which funds, together with
interest from time to time earned thereon and together with such other moneys
as may subsequently be deposited in the lease commencement reserve fund or the
reserve fund for the Lease Obligations for the benefit of the Borrower pursuant
to the Lease and for the benefit of Lender pursuant to the Loan Agreement, are
herein referred to as the "Reserve Funds").
2. INVESTMENT OF RESERVE FUNDS. The Reserve Funds shall be invested
and reinvested from time to time in any deposit account with a federally
insured financial institution selected by Lender having a maturity acceptable
to Lender (but not in excess of the maturity of the Loan unless permitted by
Lender in Lender's sole discretion). If upon any Event of Default or upon any
other event for which this Assignment or the Loan Agreement permits withdrawal
of Reserve Funds, Lender causes to be withdrawn and paid to Lender all or any
part of the Reserve Funds, upon such withdrawal Assignor acknowledges that a
substantial penalty and loss of interest otherwise accrued may be imposed upon
Assignor as a result of such withdrawal prior to maturity of the investment.
All such investments
<PAGE> 2
or accounts (whether one or more) are herein referenced to as the "Deposit
Account." All interest which shall accrue on the Deposit Account shall remain
in the Deposit Account to be disbursed to Lessee semi-annually (or less
frequently as provided in the terms of any investment selected by Lessee with a
maturity in excess of six (6) months) provided that there is no outstanding
Default or Event of Default pursuant to the Loan Agreement. The Reserve Funds
may be commingled at Lender's option with other reserves held in connection
with the Loans pursuant to the Loan Agreement, but in such event the Reserve
Funds and interest thereon will remain subject to the first priority assignment
in favor of Lender, and Lender will maintain accurate records of the amount of
Reserve Funds and the amount of any other funds in such Deposit Account.
3. GRANT OF SECURITY INTEREST. In order to secure the Loan
Obligations, Assignor hereby assigns, sells, transfers, pledges, sets over and
delivers to the Lender and grants Lender a security interest in the Reserve
Funds then held on deposit with the Lender (or such financial institution) in
the Deposit Account, including all accrued interest thereon which from time to
time has not been disbursed to Assignor, together with all certificates or
other writings now or hereafter issued by the Lender (or such financial
institution) as evidence thereof.
4. PAYMENT UPON DEFAULT. Upon the occurrence of any Event of Default
pursuant to the Loan Agreement, the Lender may, and is hereby authorized, in
Lender's sole discretion, to pay to Lender all or any portion of the Reserve
Funds (including any interest which has accrued thereon and has not yet been
disbursed to Assignor) and Lender may then apply such Reserve Funds in full or
partial payment of the Loan Obligations then owing to Lender, whether or not
then due, in such order, manner, and extent as the Lender may elect, including
but not limited to the performance of any of the Borrower's covenants under the
Loan Documents. Should Lender elect to withdraw any declaration of an Event of
Default, then upon request of the Lender, Borrower will replenish any funds
applied by Lender to the Loan Obligations from the Deposit Account.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants that the Borrower has full power and authority to pledge the Reserve
Funds in the Deposit Account to the Lender, and that the Deposit Account is
free and clear of all liens and encumbrances of any nature whatsoever (other
than the assignment, pledge and security interest created hereby), and Borrower
will not further encumber the Deposit Account without Lender's prior written
consent.
6. TERMINATION OF ASSIGNMENT. This is a continuing pledge and
assignment, and this Assignment shall remain in full force and effect until
such time as the Borrower pays in full all Loan Obligations, at which time this
Assignment shall become null and void; otherwise, it shall remain in full force
and effect until proper release thereof is made in writing by the Lender.
7. NO WAIVERS OR RELEASES BY LENDER TO AFFECT ASSIGNMENT. The Lender
may take or release any other security and may release any party primarily or
secondarily liable for any obligations hereby secured, and may grant
extensions, renewals, or indulgences of such obligations, or any of them, all
without releasing or in any way affecting this Assignment. Lender may proceed
under this Assignment without Lender first resorting to any other collateral or
making demand on any other party liable on the obligations hereby secured.
8. SEVERABILITY. The provisions of this Assignment are severable;
inapplicability or unenforceability of any provision shall not limit or impair
the operation or validity of any other provisions of this Assignment.
2
<PAGE> 3
9. SUCCESSORS AND ASSIGNS. This Assignment and all representations and
warranties, powers, and rights contained herein shall bind the successors and
assigns of the Borrower, Lessee and Lender and shall inure to the benefit of
their successors and assigns.
10. NOTICES. All notices and other communications provided for
hereunder shall be given at the addresses of the Borrower, Lessee and Lender as
set forth in the Lease and the Loan Agreement and shall be deemed received in
accordance with the provisions set forth in the Loan Agreement.
11. TAX IDENTIFICATION NUMBER. Borrower's federal tax identification
number is 582223470, and all interest accruing from time to time on the Deposit
Account will be reported under such number to the Internal Revenue Service, and
disbursements to Borrower will be subject to any withholding requirements,
notwithstanding anything to the contrary herein.
12. FURTHER ASSURANCES. Borrower will, at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or
that the Lender may reasonably request in order (i) to perfect and protect the
security interest created or purported to be created hereby; (ii) to enable the
Lender to exercise and enforce its rights and remedies hereunder in respect of
the Reserve Funds.
13. CONTROLLING LAW. THE VALIDITY, INTERPRETATION, ENFORCEMENT AND
EFFECT OF THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF ALABAMA. THE LENDER'S PRINCIPAL PLACES OF
BUSINESS ARE LOCATED IN JEFFERSON COUNTY IN THE STATE OF ALABAMA, AND THE
BORROWER AGREES THAT THIS ASSIGNMENT SHALL BE HELD BY LENDER AT ITS PRINCIPAL
PLACE OF BUSINESS, AND THE HOLDING OF THIS ASSIGNMENT BY LENDER THEREAT SHALL
CONSTITUTE SUFFICIENT MINIMUM CONTACTS OF BORROWER WITH JEFFERSON COUNTY AND
THE STATE OF ALABAMA FOR THE PURPOSE OF CONFERRING JURISDICTION UPON THE
FEDERAL AND STATE COURTS PRESIDING IN SUCH COUNTY AND STATE. THE BORROWER
CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING ARISING HEREUNDER MAY BE BROUGHT
IN THE CIRCUIT COURT OF THE STATE OF ALABAMA, JEFFERSON COUNTY, ALABAMA OR THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA AND ASSENTS
AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY SUCH COURT IN ANY ACTION OR
PROCEEDING INVOLVING THIS ASSIGNMENT. NOTHING HEREIN SHALL LIMIT THE
JURISDICTION OF ANY OTHER COURT.
14. WAIVER OF JURY TRIAL. THE BORROWER HEREBY WAIVES ANY RIGHT THAT IT
MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION
OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS ASSIGNMENT
OR THE LOAN, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF LENDER WITH BORROWER WITH RESPECT TO THE LOAN
DOCUMENTS OR IN CONNECTION WITH THIS ASSIGNMENT OR THE EXERCISE OF EITHER
PARTY'S RIGHTS AND REMEDIES LENDER THIS ASSIGNMENT OR OTHERWISE, OR THE CONDUCT
OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE. THE BORROWER AGREES THAT LENDER MAY FILE A COPY OF THIS
ASSIGNMENT WITH
3
<PAGE> 4
ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED-FOR
AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN
INDUCEMENT OF LENDER TO MAKE THE LOAN, AND THAT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED
HEREIN BETWEEN BORROWER WITH LENDER SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the parties have caused this Assignment to be
executed as of the day and year first above written.
END OF PAGE
SIGNATURE PAGES FOLLOW
4
<PAGE> 5
LENDER:
CAPSTONE CAPITAL CORPORATION
By
------------------------------
Its
-----------------------------
5
<PAGE> 6
BORROWER:
ALCO II, L.L.C.
By
------------------------------
Charles E. Trefzger
Managing Member
6
<PAGE> 7
---------------------
By
-------------------------------
Brian L. Barth
Vice President
7
<PAGE> 8
SCHEDULE TO EXHIBIT 10.29 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
ASSIGNMENT AND PLEDGE OF DEPOSIT ACCOUNT
<TABLE>
<CAPTION>
PROJECT PARTIES AMOUNT DATE
- ------- ------- ------ ----
<S> <C> <C> <C>
Roanoke, VA ALCO II, L.L.C. (Borrower) and BCC at Roanoke, Inc. $4,845.00 6/30/97
(Lessee)
Harrisonburg, VA ALCO I, L.L.C. (Borrower) and BCC at Harrisonburg, $4,845.00 6/30/97
Inc. (Lessee)
Danville, VA ALCO III, L.L.C. (Borrower) and BCC at Danville, $4,580.00 9/3/97
Inc. (Lessee)
</TABLE>
<PAGE> 1
EXHIBIT 10.30
===============================================================================
L E A S E
HCPI TRUST
Lessor
AND
BCC AT MT. ROYAL PINES, INC.
Lessee
Dated as of March 21, 1996
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I....................................................................................................... 1
1. Leased Property; Term......................................................................... 1
ARTICLE II...................................................................................................... 2
2. Definitions................................................................................... 2
ARTICLE III..................................................................................................... 11
3.1 Rent.......................................................................................... 11
3.2 Quarterly Calculation and Payment of Additional Rent; Annual Reconciliation................... 13
3.3 Confirmation of Additional Rent............................................................... 14
3.4 Additional Charges............................................................................ 15
3.5 Late Payment of Rent.......................................................................... 15
3.6 Net Lease..................................................................................... 15
ARTICLE IV...................................................................................................... 15
4.1 Impositions................................................................................... 15
4.2 Utilities..................................................................................... 17
4.3 Insurance..................................................................................... 17
4.4 Impound Account............................................................................... 17
4.5 Tax Service................................................................................... 17
ARTICLE V....................................................................................................... 17
5. No Termination, Abatement, etc................................................................ 17
ARTICLE VI...................................................................................................... 18
6.1 Ownership of the Leased Property.............................................................. 18
6.2 Personal Property............................................................................. 18
6.3 Transfer of Personal Property and Capital Additions to Lessor................................. 18
ARTICLE VII..................................................................................................... 19
7.1 Condition of the Leased Property.............................................................. 19
7.2 Use of the Leased Property.................................................................... 19
7.3 Lessor to Grant Easements, etc................................................................ 20
7.4 Preservation of Gross Revenues................................................................ 20
ARTICLE VIII.................................................................................................... 21
8. Compliance with Legal and Insurance Requirements, Instruments, etc............................ 21
ARTICLE IX...................................................................................................... 22
9.1 Maintenance and Repair........................................................................ 22
9.2 Encroachments, Restrictions, Mineral Leases, etc.............................................. 23
9.3 Capital Repairs to be Performed by Lessee..................................................... 24
ARTICLE X....................................................................................................... 24
10. Construction of Capital Additions to the Leased Property...................................... 24
ARTICLE XI...................................................................................................... 24
11. Liens......................................................................................... 24
ARTICLE XII..................................................................................................... 25
12. Permitted Contests............................................................................ 25
ARTICLE XIII.................................................................................................... 26
13.1 General Insurance Requirements................................................................ 26
13.2 Replacement Cost.............................................................................. 27
13.3 Additional Insurance.......................................................................... 27
13.4 Waiver of Subrogation......................................................................... 27
13.5 Policy Requirements........................................................................... 27
13.6 Increase in Limits............................................................................ 28
13.7 Blanket Policies and Policies Covering Multiple Locations..................................... 28
13.8 No Separate Insurance......................................................................... 28
ARTICLE XIV..................................................................................................... 29
14.1 Insurance Proceeds............................................................................ 29
14.2 Insured Casualty.............................................................................. 29
14.3 Uninsured Casualty............................................................................ 30
14.4 No Abatement of Rent; Construction of Lease................................................... 30
14.5 Waiver........................................................................................ 31
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XV...................................................................................................... 31
15. Condemnation.................................................................................. 31
15.1 Total Taking.................................................................................. 31
15.2 Partial Taking................................................................................ 31
15.3 Restoration................................................................................... 31
15.4 Award-Distribution............................................................................ 31
15.5 Temporary Taking.............................................................................. 31
ARTICLE XVI..................................................................................................... 32
16.1 Events of Default............................................................................. 32
16.2 Certain Remedies.............................................................................. 34
16.3 Damages....................................................................................... 34
16.4 Receiver...................................................................................... 36
16.5 Lessee's Obligation to Purchase............................................................... 36
16.6 Waiver........................................................................................ 36
16.7 Application of Funds.......................................................................... 36
16.8 Facility Operating Deficiencies............................................................... 36
ARTICLE XVII.................................................................................................... 38
17. Lessor's Right to Cure Lessee's Default....................................................... 38
ARTICLE XVIII................................................................................................... 39
18. Purchase of the Leased Property............................................................... 39
ARTICLE XIX..................................................................................................... 39
19. Renewal Terms................................................................................. 39
ARTICLE XX...................................................................................................... 40
20. Holding Over.................................................................................. 40
ARTICLE XXI INTENTIONALLY OMITTED............................................................................... 40
ARTICLE XXII.................................................................................................... 40
22. Risk of Loss.................................................................................. 40
ARTICLE XXIII................................................................................................... 40
23. General Indemnification....................................................................... 40
ARTICLE XXIV.................................................................................................... 41
24. Subletting and Assignment..................................................................... 41
24.1 Prohibition................................................................................... 41
24.2 Consent....................................................................................... 42
24.3 Costs......................................................................................... 43
24.4 No Release of Lessee's Obligations............................................................ 43
24.5 Assignment of Lessee's Rights Against Sublessee............................................... 43
24.6 Special Transactions.......................................................................... 44
24.6.1 Assignment to Affiliate....................................................................... 44
24.6.2 Public Offering............................................................................... 44
24.6.3 Other Transfers of Stock or Assets to Third Parties........................................... 45
24.7 REIT Protection............................................................................... 45
24.8 Transfers In Bankruptcy....................................................................... 45
ARTICLE XXV..................................................................................................... 46
25. Officer's Certificates and Financial Statements............................................... 46
25.1 Officer's Certificate......................................................................... 46
25.2 Statements.................................................................................... 46
25.3 Charges....................................................................................... 48
ARTICLE XXVI.................................................................................................... 48
26. Lessor's Right to Inspect and Show the Leased Property........................................ 48
</TABLE>
ii
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<TABLE>
<S> <C>
ARTICLE XXVII................................................................................................... 48
27. No Waiver..................................................................................... 48
ARTICLE XXVIII.................................................................................................. 48
28. Remedies Cumulative........................................................................... 48
ARTICLE XXIX.................................................................................................... 49
29. Acceptance of Surrender....................................................................... 49
ARTICLE XXX..................................................................................................... 49
30. No Merger..................................................................................... 49
ARTICLE XXXI.................................................................................................... 49
31. Conveyance by Lessor.......................................................................... 49
ARTICLE XXXII................................................................................................... 49
32. Quiet Enjoyment............................................................................... 49
ARTICLE XXXIII.................................................................................................. 50
33. Notices....................................................................................... 50
ARTICLE XXXIV................................................................................................... 51
34. Appraiser..................................................................................... 51
ARTICLE XXXV INTENTIONALLY OMITTED.............................................................................. 51
ARTICLE XXXVI................................................................................................... 51
36.1 Lessor May Grant Liens........................................................................ 51
36.2 Attornment.................................................................................... 52
36.3 Breach by Lessor.............................................................................. 52
ARTICLE XXXVII.................................................................................................. 52
37.1 Hazardous Substances.......................................................................... 52
37.2 Notices....................................................................................... 52
37.3 Remediation................................................................................... 53
37.4 Indemnity..................................................................................... 53
37.5 Environmental Inspection...................................................................... 54
ARTICLE XXXVIII................................................................................................. 54
38. Memorandum of Lease........................................................................... 54
ARTICLE XXXIX................................................................................................... 54
39. Sale of Assets................................................................................ 54
ARTICLE XL INTENTIONALLY OMITTED................................................................................ 55
ARTICLE XLI..................................................................................................... 55
41. Authority..................................................................................... 55
ARTICLE XLII.................................................................................................... 55
42. Attorneys' Fees............................................................................... 55
ARTICLE XLIII................................................................................................... 56
43. Brokers....................................................................................... 56
ARTICLE XLIV.................................................................................................... 56
44.1 Miscellaneous................................................................................. 56
44.1.1 Survival...................................................................................... 56
44.1.2 Severability.................................................................................. 56
44.1.3 Non-Recourse.................................................................................. 56
44.1.4 Licenses...................................................................................... 56
44.1.5 Successors and Assigns........................................................................ 57
44.1.6 Termination Date.............................................................................. 57
44.1.7 Governing Law................................................................................. 58
44.1.8 Waiver of Trial by Jury....................................................................... 59
44.1.9 Lessee Counterclaim and Equitable Remedies.................................................... 59
44.1.10 Entire Agreement.............................................................................. 60
44.1.11 Headings...................................................................................... 60
44.1.12 Counterparts.................................................................................. 60
44.1.13 Joint and Several............................................................................. 60
</TABLE>
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<TABLE>
<S> <C>
44.1.14 Interpretation................................................................................ 60
44.1.15 Time of Essence............................................................................... 60
44.1.16 Further Assurances............................................................................ 60
Exhibits
Exhibit A Legal Description of the Land
Exhibit B List of Lessor's Personal Property
Exhibit C-1 Form of Amendment (Commencement Date and Treasury Rates)
Exhibit C-2 Form of Amendment (Minimum Rent)
Exhibit D Summary of Capital Renovation Project
</TABLE>
iv
<PAGE> 6
LEASE
THIS LEASE ("Lease") is dated as of the 21st day of March,
1996, and is between HCPI TRUST, a Maryland real estate investment trust
("Lessor") and BCC AT MT. ROYAL PINES, INC., a Delaware corporation ("Lessee").
ARTICLE I
1. Leased Property; Term.
Upon and subject to the terms and conditions hereinafter set
forth, Lessor leases to Lessee and Lessee leases from Lessor all of Lessor's
rights and interest in and to the following (collectively the "Leased
Property"):
(a) the real property described in Exhibit A
attached hereto (collectively, the "Land");
(b) all buildings, structures, Fixtures and other
improvements of every kind now or hereafter located on the Land
including, alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (on-site and off-site to the extent Lessor has
obtained any interest in the same), parking areas and roadways
appurtenant to such buildings and structures and Capital Additions
funded by Lessor (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating
to the Land and the Leased Improvements (collectively, the "Related
Rights"); and
(d) all equipment, machinery, fixtures, and other
items of real and/or personal property, including all components
thereof, now and hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Leased
Improvements, including 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, apparatus, sprinkler
systems, fire and theft protection equipment, and built-in oxygen and
vacuum systems, all of which, to the greatest extent permitted by law,
are hereby deemed to constitute real estate, together with all
replacements, modifications, alterations and additions thereto
(collectively, the "Fixtures"); and
(e) the machinery, equipment, furniture and other
personal property described on Exhibit B attached hereto, together
with all replacements and substitutes therefor (collectively,
"Lessor's Personal Property").
SUBJECT, HOWEVER, to the easements, encumbrances, covenants,
conditions and restrictions and other matters which affect the Leased Property
as of the date hereof or the
1
<PAGE> 7
Commencement Date or created thereafter as permitted hereunder to have and to
hold for (1) a fixed term (the "Fixed Term") commencing on the Commencement
Date, as defined below, and ending at 11:59 p.m. Los Angeles time on the
expiration of the fifteenth (15th) Lease Year, and (2) the Extended Terms
provided for in Article XIX unless this Lease is earlier terminated as
hereinafter provided. Promptly after the Commencement Date, the parties shall
execute an amendment to this Lease in substantially the form attached hereto as
Exhibit C-1 to confirm certain matters; notwithstanding the foregoing, the
failure of Lessee to so execute and deliver such amendment shall not affect
Lessor's determination of any such matters.
ARTICLE II
2. Definitions. For all purposes of this Lease, except as
otherwise expressly provided or unless the context otherwise requires, (i) the
terms defined in this Article 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 have the meanings assigned to them in
accordance with GAAP as at the time applicable; (iii) all references in this
Lease to designated "Articles," "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of this Lease; (iv) the
word "including" shall have the same meaning as the phrase "including, without
limitation," and other similar phrases; and (v) the words "herein," "hereof"
and "hereunder" and other similar words refer to this Lease as a whole and not
to any particular Article, Section or other subdivision:
Additional Charges: As defined in Article III.
Additional Rent: As defined in Article III.
Affiliate: Any Person which, directly or indirectly, controls
or is controlled by or is under common control with any other Person. For
purposes of this definition, "control" (including the correlative meanings of
the terms "controlled by" and "under com mon control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, through the ownership of voting securities, partnership interests
or other equity interests. When used with respect to any corporation, the term
"Affiliate" shall also include any Person which owns, directly or indirectly,
fifty percent (50%) or more of any class of security of such corporation.
Appraiser: As defined in Article XXXIV.
Award: All compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
Bankruptcy Code: The United Stated Bankruptcy Code (11 U.S.C.
Section 101 et seq.), and any successor statute or legislation thereto.
2
<PAGE> 8
Base Gross Revenues: (i) For the Fixed Term, the Gross
Revenues for the second Lease Year of the Fixed Term and (ii) for each Extended
Term, the Gross Revenues for the first Lease Year of such Extended Term.
Base Period: The period commencing on that date which is
eighteen (18) months prior to the date any appraisal of the Facility is made
pursuant to the provisions of Article XXXIV and ending on the date which is six
(6) months prior to the date any such appraisal of the Facility is made.
BLS: Bureau of Labor Statistics, U.S. Department of Labor.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York are authorized, or obligated, by law or executive order, to close.
Capital Additions: One or more new buildings, or one or more
additional structures annexed to any portion of any of the Leased Improvements,
or the material expansion of existing improvements, which are constructed on
any parcel or portion of the Land, during the Term, including construction of a
new wing or new story, or the renovation of existing improvements on the Leased
Property in order to provide a functionally new facility needed to provide
services not previously offered. The Capital Renovation Project shall be
treated for all purposes of this Lease as a "Capital Addition," and all amounts
advanced to Lessee, or otherwise expended by Lessor with respect thereto shall
be treated as Capital Additions Costs funded by Lessor.
Capital Addition Costs: The costs of any Capital Addition
made to the Leased Property whether paid for by Lessee or Lessor, including (i)
all permit fees and other costs imposed by any governmental authority, the cost
of site preparation, the cost of construction including materials and labor,
the cost of supervision and related design, engineering and architectural
services, the cost of any fixtures, and if and to the extent approved by
Lessor, the cost of construction financing; (ii) fees paid to obtain necessary
licenses and certificates; (iii) if and to the extent approved by Lessor in
writing and in advance, the cost of any land contiguous to the Leased Property
which is to become a part of the Leased Property purchased for the purpose of
placing thereon the Capital Addition or any portion thereof or for providing
means of access thereto, or parking facilities therefor, including the cost of
surveying the same; (iv) the cost of insurance, real estate taxes, water and
sewage charges and other carrying charges for such Capital Addition during
construction; (v) the cost of title insurance; (vi) reasonable fees and
expenses of legal counsel; (vii) filing, registration and recording taxes and
fees; (viii) documentary stamp and similar taxes; and (ix) all reasonable costs
and expenses of Lessor and any Person which has committed to finance the
Capital Addition, including (a) the reasonable fees and expenses of their
respective legal counsel; (b) printing expenses; (c) filing, registration and
recording taxes and fees; (d) documentary stamp and similar taxes; (e) title
insurance charges and appraisal fees; (f) rating agency fees; and (g)
commitment fees charged by any Person advancing or offering to advance any
portion of the financing for such Capital Addition.
3
<PAGE> 9
Cash Flow: The net income from the Facility, determined on
the basis of GAAP applied on a consistent basis, plus the sum of (i)
depreciation and amortization expense; (ii) Rent and other expenses payable
hereunder, excluding, however, Impositions; plus (iii) management fees; less
the sum of (y) a management fee allowance of five percent (5%) of Gross
Revenues for the corresponding period plus (z) an annual, cumulative Two
Hundred Dollar ($200) per bed reserve, pro-rated for the corresponding period.
Capital Renovation Project: As defined in Section 9.3.
Cash Flow Coverage: For any period, calculated as of the last
day of the period, the ratio of Cash Flow attributable to such period to total
Rent payable for such period under the Lease.
Closing Date: As defined in the Contract of Acquisition.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: The Closing Date.
Commercial Occupancy Arrangement: Any commercial (as opposed
to resident or patient) subletting, licensing, or other arrangement with third
parties relating to the possession or use of any portion of the Leased Property
and all Capital Additions.
Commercial Occupant: Any Person under a Commercial Occupancy
Arrangement.
Condemnation: The exercise of any governmental power, whether
by legal proceedings or otherwise, by a Condemnor or a voluntary sale or
transfer by Lessor to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending.
Condemnor: Any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
Consolidated Financials: For any fiscal year or other
accounting period for Lessee and its consolidated Subsidiaries, statements of
earnings and retained earnings and of changes in financial position for such
period and for the period from the beginning of the respective fiscal year to
the end of such period and the related balance sheet as at the end of such
period, together with the notes thereto, 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.
Consolidated Net Worth: At any time, the sum of the following
for Lessee and its consolidated Subsidiaries, on a consolidated basis
determined in accordance with GAAP:
4
<PAGE> 10
(i) the amount of capital or stated capital (after
deducting the cost of any shares held in its treasury), plus
(ii) the amount of capital surplus and retained
earnings (or, in the case of a capital surplus or retained earnings
deficit, minus the amount of such deficit), minus
(iii) the sum of the following (without duplication
of deductions in respect of items already deducted in arriving at
surplus and retained earnings): (a) unamortized debt discount and
expense; and (b) any write-up in book value of assets resulting from a
revaluation thereof subsequent to the most recent Consolidated
Financials prior to the date hereof, excluding, however, any (i) net
write-up in value of foreign currency in accordance with GAAP and (ii)
write-up resulting from a change in methods of accounting for
inventory.
Contract of Acquisition: The agreement of even date herewith
by and among Lessor and Lessee relative to the acquisition by Lessor of the
Leased Property.
Date of Taking: The date the Condemnor has the right to
possession of the property being condemned.
Environmental Costs: As defined in Article XXXVI.
Environmental Laws: Environmental Laws shall mean any and all
federal, state, municipal and local laws, statutes, ordinances, rules,
regulations, guidances, policies, orders, decrees, judgments, whether statutory
or common law, as amended from time to time, now or hereafter in effect, or
promulgated, pertaining to the environment, public health and safety and
industrial hygiene, including the use, generation, manufacture, production,
storage, release, discharge, disposal, handling, treatment, removal,
decontamination, clean-up, transportation or regulation of any Hazardous
Substance, including the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act, the Federal
Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and the
Occupational Safety and Health Act.
Event of Default: As defined in Article XVI.
Extended Term(s): As defined in Article XIX.
Facility: The 40-unit, assisted living facility being
operated on the Leased Property.
Facility Mortgage: As defined in Article XIII.
Facility Mortgagee: As defined in Article XIII.
5
<PAGE> 11
Facility Operating Deficiency: A deficiency in the conduct of
the operation of the Facility which, in the reasonable determination of Lessor,
if not corrected within a reasonable time, would have the likely effect of
jeopardizing the Facility's licensure or certification under government
reimbursement programs, to the extent applicable.
Fair Market Rental: The fair market rental value of the
Leased Property, or applicable portion thereof, based upon the Fair Market
Value, including any periodic increases therein, determined in accordance with
the appraisal procedures set forth in Articles XXXIV.
Fair Market Value: The fair market value of the Leased
Property, and all Capital Additions, determined in accordance with the
appraisal procedures set forth in Article XXXIV. Fair Market Value shall be the
higher value obtained by assuming that the Leased Property is unencumbered by
this Lease or encumbered by this Lease. Further, in determining Fair Market
Value the positive or negative effect on the value of the Leased Property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any encumbrance which will
not be removed at or prior to the date as of which such Fair Market Value
determination is being made shall be taken into account. The Leased Property
shall be valued at its highest and best use which shall be presumed to be as a
fully-permitted Facility operated in accordance with the provisions of this
Lease. Fair market value of the Leased Property shall not include "going
concern" or "business enterprise" value attributable to factors other than the
highest and best use of the Leased Property. In addition, except as provided in
Section 16.9, the following specific matters shall be factored in or out, as
appropriate, in determining Fair Market Value:
(i) The negative value of (a) any deferred maintenance or
other items of repair or replacement of the Leased Property, (b) any
then current or prior licensure or certification violations and/or
admissions holds and (c) any other breach or failure of Lessee to
perform or observe its obligations hereunder shall not be taken into
account; rather, the Leased Property, and every part thereof, shall be
deemed to be in the condition required by this Lease (i.e., good order
and repair) and Lessee shall at all times be deemed to have operated
the Facility in compliance with and to have performed all obligations
of the Lessee under this Lease.
(ii) The occupancy level of the Facility shall be deemed to
be the greater of (a) the occupancy level as of the date any appraisal
of the Facility is performed in accordance with the provisions of
Article XXXIV and (b) the average occupancy during the Base Period.
(iii) If the Facility's Primary Intended Use includes a mixed
use, then either (a) the resident mix, patient mix, case mix, and/or
diagnostic related group or acuity mix, as applicable, as of the date
any appraisal of the Facility is performed in accordance with the
provisions of Article XXXIV or (b) the average of such mix during the
Base Period, whichever produces the highest positive value, shall be
taken into account.
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Fixed Term: As defined in Article I.
Fixtures: As defined in Article I.
GAAP: Generally accepted accounting principles.
Guarantor: Balanced Care Corporation, a Delaware corporation.
Guaranty: The Guaranty of even date herewith executed by
Guarantor.
Gross Revenues: All revenues received or receivable from or
by reason of the operation of the Facility or any other use of the Leased
Property, Lessee's Personal Property and all Capital Additions including all
revenues received or receivable for the use of or otherwise attributable to
units, rooms, beds and other facilities provided, meals served, services
performed (including ancillary services), space or facilities subleased or
goods sold on or from the Leased Property and all Capital Additions; provided,
however, that Gross Revenues shall not include:
(i) non-operating revenues such as interest income or income
from the sale of assets not sold in the ordinary course of business;
(ii) federal, state or local excise taxes and any tax based
upon or measured by such revenues which is added to or made a part of
the amount billed to the patient or other recipient of such services
or goods, whether included in the billing or stated separately;
(iii) uncollected or uncollectible credit accounts and other
bad debts in accordance with GAAP relating to health care accounting;
provided, however, that if Lessee recovers any amount on account of an
item deducted pursuant to this clause, the amount so recovered shall
be included in Gross Revenues for the month of such receipt; and
(iv) security deposits paid to Lessee by residents or
patients of the Facility until applied by Lessee against amounts owing
or payable by such residents or to patients.
Gross Revenues for each Lease Year shall include all cost report
settlement amounts received in or payable during such Lease Year in accordance
with GAAP relating to health care accounting, regardless of the year that such
settlement amounts are applicable to; provided, however, that to the extent
settlement amounts are applicable to years, or portions thereof, prior to the
Commencement Date, such settlement amounts shall not be included in Gross
Revenues for the Lease Year in which such settlement amounts are received or
paid. Gross Revenues shall also include the Gross Revenues of any Commercial
Occupant, i.e., the Gross Revenues generated from the operations conducted on
or from such subleased, licensed
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or other used portion shall be included directly in the Gross Revenues;
provided, however, that notwithstanding anything else herein to the contrary,
the rent received or receivable by Lessee from or under such Commercial
Occupancy Arrangement shall be excluded from Gross Revenues for such purpose.
Handling: As defined in Article XXXVII.
Hazardous Substances: Collectively, any petroleum, petroleum
product or byproduct or any substance, material or waste regulated or listed
pursuant to any Environmental Law.
HCPI: Health Care Property Investors, Inc., a Maryland
corporation.
Impositions: Collectively, all taxes, including capital
stock, franchise and other state taxes of Lessor (or, if Lessor is not HCPI, of
HCPI as a result of its investment in Lessor), ad valorem, sales, use, single
business, gross receipts, transaction privilege, rent or similar taxes;
assessments including assessments for public improvements or benefits, whether
or not commenced or completed prior to the date hereof and whether or not to be
completed within the Term; ground rents; water, sewer and other utility levies
and charges; excise tax levies; fees including 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 the Leased Property and/or the
Rent and all interest and penalties thereon attributable to any failure in
payment by Lessee which at any time prior to, during or in respect of the Term
hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Lessor or Lessor's interest in the Leased Property, (ii) the Leased Property or
any part thereof or any rent therefrom or any estate, right, title or interest
therein, or (iii) any occupancy, operation, use or possession of, or sales from
or activity conducted on or in connection with the Leased Property or the
leasing or use of the Leased Property or any part thereof; provided, however,
that nothing contained in this Lease shall be construed to require Lessee to
pay (a) any tax based on net income (whether denominated as a franchise or
capital stock or other tax) imposed on Lessor or any other Person, (b) any
transfer, or net revenue tax of Lessor or any other Person except Lessee and
its successors, (c) any tax imposed with respect to the sale, exchange or other
disposition by Lessor of any Leased Property or the proceeds thereof, or (d)
except as expressly provided elsewhere in this Lease, any principal or interest
on any indebtedness on the Leased Property for which Lessor is the obligor,
except to the extent that any tax, assess ment, tax levy or charge, which is
otherwise included in this definition, and a tax, assessment, tax levy or
charge set forth in clause (a) or (b) is levied, assessed or imposed in lieu
thereof or as a substitute therefor.
Incremental Gross Revenues: The positive amount, if any, by
which the Gross Revenues for the current Lease Year exceeds the Base Gross
Revenues. The Incremental Gross Revenues for any partial Lease Year shall be
the positive amount, if any, by which the Gross Revenues for such partial Lease
Year exceeds the Base Gross Revenues for the corresponding period of the
applicable Lease Year in which Base Gross Revenues is determined.
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Insurance Requirements: The terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy
and of any insurance board, association, organization or company necessary for
the maintenance of any such policy.
Intangible Property: All accounts, proceeds of accounts,
rents, profits, income or revenues derived from the use of rooms or other space
within the Leased Property or the providing of services in or from the Leased
Property; documents, chattel paper, instruments, contract rights, deposit
accounts, general intangibles, causes of action, now owned or hereafter
acquired by Lessee (including any right to any refund of any Impositions)
arising from or in connection with Lessee's operation or use of the Leased
Property; all licenses and permits now owned or hereinafter acquired by Lessee,
which are necessary or desirable for Lessee's use of the Leased Property for
its Primary Intended Use, including, if applicable, any certificate of need or
similar certificate; the right to use any trade name or other name associated
with the Facility; and any and all third-party provider agreements (including
Medicare and Medicaid).
Land: As defined in Article I.
Lease: As defined in the preamble.
Lease Year: Each period of twelve (12) full calendar months
from and after the Commencement Date, unless the Commencement Date is a day
other than the first (1st) day of a calendar month, in which case the first
Lease Year shall be the period commencing on the Commencement Date and ending
on the last day of the eleventh (11th) month following the month in which the
Commencement Date occurs and each subsequent Lease Year shall be each period of
twelve (12) full calendar months after the last day of the prior Lease Year;
provided, however, that the last Lease Year during the Term may be a period of
less than twelve (12) full calendar months and shall end on the last day of the
Term.
Leased Improvements; Leased Property: Each as defined in
Article I.
Leasehold FMV: As defined in Article XXIV.
Legal Requirements: All federal, state, county, municipal and
other governmental statutes, laws (including common law and Environmental
Laws), rules, policies, guidance, codes, orders, regulations, ordinances,
permits, licenses, covenants, conditions, restrictions, judgments, decrees and
injunctions affecting either the Leased Property, Lessee's Personal Property
and all Capital Additions or the construction, use or alteration thereof,
whether now or hereafter enacted and in force, including any which may (i)
require repairs, modifications or alterations in or to the Leased Property,
Lessee's Personal Property and all Capital Additions, (ii) in any way adversely
affect the use and enjoyment thereof, or (iii) regulate the transport,
handling, use, storage or disposal or require the cleanup or other treatment of
any Hazardous Substance.
Lessee: As defined in the preamble.
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Lessee's Personal Property: The Personal Property other than
Lessor's Personal Property.
Lessor: As defined in the preamble.
Lessor's Personal Property: As defined in Article I.
Minimum Rent: As defined in Article III.
Minimum Repurchase Price: The Purchase Price plus any Capital
Addition Costs funded by Lessor.
Officer's Certificate: A certificate of Lessee signed by an
officer authorized to so sign by its board of directors or by-laws.
Overdue Rate: On any date, a rate equal to 2% above the Prime
Rate, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of the
installments of Minimum Rent, Additional Rent or any other sums payable under
this Lease.
Person: Any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other form of
entity.
Personal Property: All machinery, furniture and equipment,
including phone systems and computers, trade fixtures, inventory, supplies and
other personal property used or useful in the use of the Leased Property for
its Primary Intended Use, other than Fixtures.
Primary Intended Use: Personal care and assisted living
facility (including assisted living for Alzheimer's patients/residents) and
such other uses necessary or incidental to such use.
Prime Rate: On any date, a rate equal to the annual rate on
such date announced by the Bank of New York to be its prime, base or reference
rate for 90-day unsecured loans to its corporate borrowers of the highest
credit standing but in no event greater than the maximum rate then permitted
under applicable law. If the Bank of New York discontinues its use of such
prime, base or reference rate or ceases to exist, Lessor shall designate the
prime, base or reference rate of another state or federally chartered bank
based in New York to be used for the purpose of calculating the Prime Rate
hereunder.
Purchase Price: As defined in the Contract of Acquisition.
Purchase Price Adjustment Date: As defined in the Contract of
Acquisition.
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Quarter: During each Lease Year, the first three (3) calendar
month period commencing on the first (1st) day of such Lease Year and each
subsequent three (3) calendar month period within such Lease Year; provided,
however, that the last Quarter during the Term may be a period of less than
three (3) calendar months and shall end on the last day of the Term.
Rent: Collectively, the Minimum Rent, Additional Rent and
Additional Charges.
SEC: Securities and Exchange Commission.
State: The Commonwealth of Pennsylvania.
Subsidiaries: Corporations or partnerships, each of which
Lessee owns, directly or indirectly, more than 50% of the voting stock or
partnership interest, or in which Lessee owns 50% of the voting stock and has a
voting majority.
Term: Collectively, the Fixed Term and any Extended Term(s),
as the context may require, unless earlier terminated.
Transfer Consideration: As defined in Article XXIV.
Unavoidable Delays: Delays due to strike, lockout, inability
to procure materials, power failure, act of God, governmental restriction,
enemy action, civil commotion, fire, unavoidable casualty or other cause beyond
the control of the party responsible for performing an obligation hereunder;
provided, however, that a lack of funds shall not be deemed a cause beyond the
control of either party hereto.
Unsuitable for Its Primary Intended Use: A state or condition
of the Facility such that by reason of damage or destruction or Condemnation,
in the good faith, reasonable judgment of Lessor, the Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use.
ARTICLE III
3.1 Rent. Lessee will pay to Lessor in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, without offset or deduction, the amounts set forth
hereinafter as Minimum Rent and Additional Rent during the Term. Payments of
Minimum Rent shall be made on the first day of each calendar month by either a
prearranged payment deposit through the Electronic Automated Clearing House
Network ("ACH") initiated by Lessee to Lessor's account at an ACH member bank
or by wire transfer to Lessor's account as Lessor may designate from time to
time. Payments of Additional Rent shall be made at Lessor's address set forth
in Article XXXIII or at such other place or to such other Person as Lessor from
time to time may designate in writing.
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3.1.1 Minimum Rent.
(i) Subject to an upward adjustment(s) with respect to
Capital Renovation Project funded by Lessor as described below, for the period
from the Commencement Date through the expiration of the first Lease Year,
Lessee shall pay to Lessor "Minimum Rent" monthly, in advance on or before the
first day of each calendar month, an amount equal to $19,975.00. In addition to
any increase pursuant to clause (ii) below, such monthly Minimum Rent shall be
increased from time to time on the date of any payment by Lessor with respect
to the Capital Renovation Project provided for in Section 9.3 by one-twelfth
(1/12th) of the product of (y) the amount of the particular payment, times (z)
Three and Seventy-Five Hundredths Percent (3.75%) above the ten-year U.S.
Treasury Note Rate, published in the Wall Street Journal three (3) Business
Days prior to the date of such payment by Lessor and quoting the rate for the
immediately prior Business Day. The first monthly payment of Minimum Rent shall
be payable on the Commencement Date (prorated as to any partial calendar month
of the beginning of the Term). Monthly Minimum Rent payable for months during
which a change in the Minimum Rent occurs by reason of any payments made by
Lessor on account of the Capital Renovation Project, by reason of any Capital
Additions funded by Lessor or otherwise as provided herein, shall be prorated
based upon the number of days for which the adjusted rental amounts apply. From
time to time at Lessor's reasonable request, Lessor and Lessee shall enter into
an amendment to this Lease in substantially the form attached hereto as Exhibit
C-2 to reflect the Minimum Rent payable hereunder. Notwithstanding the
foregoing, the failure of Lessee to so execute and delivery such amendment
shall not affect the determination of such matters.
(ii) As of the expiration of the first Lease Year, the annual
Minimum Rent then in effect shall be increased by an amount equal to the
product of (i) Thirty One Hundredths Percent (.30%) times (ii) the Minimum
Repurchase Price as of such date.
(iii) If the rate in (y) below is greater than the rate in
(x) below, then as of the expiration of the tenth (10th) Lease Year, the annual
Minimum Rent then in effect shall be increased by an amount equal to the
product of (i) the difference between (x) the 5-year U.S. Treasury Note rate,
published in the Wall Street Journal, three (3) Business Days prior to the
Commencement Date and quoting the rate as of the immediately prior Business
Day, and (y) the 5-year U.S. Treasury Note rate, published in the Wall Street
Journal, three (3) Business Days prior to expiration of the tenth (10th) Lease
Year and quoting the rate as of the immediately prior Business Day, times (ii)
the Minimum Repurchase Price as of such date.
In no event shall the Minimum Rent after any such adjustment
pursuant to this clause (iii) be less than One Hundred Percent (100%) nor more
than One Hundred Three Percent (103%) of the Minimum Rent in effect immediately
prior to such adjustment (without taking into account any increase in Minimum
Rent resulting from any payments made by Lessor on account of a Capital
Renovation Project). If either the 5-Year or 10-Year U.S. Treasury Note rate is
discontinued prior to that date which is three (3) Business
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Days prior to the applicable adjustment date, then such calculation shall be
made instead by reference to a substitute rate selected by Lessor that is
comparable to the 5-Year or 10-Year U.S. Treasury Note rate, as applicable, and
such substitute rate shall be compared to the 5-Year or 10-Year U.S. Treasury
Note, as applicable, published in the Wall Street Journal, three (3) Business
Days prior to the Commencement Date or adjustment date, as applicable, and
quoting the rate as of the immediately prior Business Day. Similarly, if the
Wall Street Journal is discontinued, a substitute publication selected by
Lessor shall be used.
3.1.2 Additional Rent. In addition to the Minimum Rent,
Lessee shall, commencing with the first Quarter of the third Lease Year of the
Fixed Term and continuing through the expiration of the Fixed Term, pay to
Lessor annual "Additional Rent" in the amount of Twenty Percent (20%) of
Incremental Gross Revenues. Beginning in the fourth Lease Year of the Fixed
Term and in each Lease Year thereafter during the Fixed Term, Additional Rent
shall be at least equal to the highest annual Additional Rent attributable to
any prior Lease Year during the Fixed Term. During each Extended Term, if any,
Lessee shall, commencing with the first Quarter of the second Lease Year of
such Extended Term and continuing through the expiration of such Extended Term,
pay to Lessor annual "Additional Rent" in the amount of Twenty Percent (20%) of
Incremental Gross Revenues. Beginning in the third Lease Year and in each Lease
Year thereafter during each such Extended Term, Additional Rent shall be at
least equal to the highest annual Additional Rent attributable to any prior
Lease Year during the applicable Extended Term.
3.2 Quarterly Calculation and Payment of Additional Rent;
Annual Reconciliation.
3.2.1 Lessee shall calculate and pay Additional Rent
quarterly, in arrears, for the portion of the entire Lease Year, on a
cumulative basis, up to the end of the Quarter then most recently ended, less
the Additional Rent already paid and attributable to such Lease Year. If at the
time any calculation on account of Additional Rent is to be made the applicable
Gross Revenues are not yet available, Lessee shall use its best estimate of the
applicable Gross Revenues. Each quarterly payment of Additional Rent shall be
delivered to Lessor, together with an Officer's Certificate setting forth the
calculation thereof, on or before the last Business Day of the calendar month
immediately following the end of the corresponding Quarter.
3.2.2 Within sixty (60) days after the end of each Lease
Year, Lessee shall deliver to Lessor an Officer's Certificate setting forth the
Gross Revenues for such Lease Year. As soon as practicable following receipt by
Lessor of such Certificate, Lessor shall determine the Additional Rent for such
Lease Year and give Lessee notice of the same together with the calculations
upon which the Additional Rent was based. If such Additional Rent exceeds the
sum of the quarterly payments of Additional Rent previously paid by Lessee with
respect to such Lease Year, Lessee shall forthwith pay such deficiency to
Lessor. If such Additional Rent for such Lease Year is less than the amount
previously paid by Lessee with respect thereto, Lessor shall, at Lessee's
option, either (i) remit to Lessee its check in an amount equal to such
difference, or (ii) credit such difference against the quarterly payments of
Additional Rent next coming due.
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3.2.3 Any difference between the annual Additional Rent for
any Lease Year as shown in said Officer's Certificate and the total amount of
quarterly payments for such Lease Year previously paid by Lessee, whether in
favor of Lessor or Lessee, shall bear interest at a rate equal to the rate
payable on 90-day U.S. Treasury Bills as of the last Business Day of such Lease
Year until the amount of such difference shall be paid or otherwise discharged.
3.2.4 If the expiration or earlier termination of the Term is
a day other than the last day of a Lease Year, then the amount of the last
quarterly installment of Additional Rent shall be paid pro rata on the basis of
the actual number of days in such Lease Year.
3.2.5 As soon as practicable after the expiration or earlier
termination of the Term, a final reconciliation of Additional Rent shall be
made taking into account, among other relevant adjustments, any unresolved
contractual allowances which relate to Gross Revenues accrued prior to such
expiration or termination; provided that if the final reconciliation has not
been made within six (6) months of such expiration or termination, then a final
reconciliation shall be made at that time based on all available relevant
information, including Lessee's good faith best estimate of the amount of any
unresolved contractual allowances.
3.3 Confirmation of Additional Rent. Lessee shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices and in accordance with GAAP
which will accurately record all Gross Revenues and Lessee 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 Gross
Revenues for such Lease Year. Lessor, at its own expense except as provided
hereinbelow, shall have the right from time to time by its accountants or
representatives, to review and/or audit the information set forth in the
Officer's Certificate referred to in Section 3.2 and in connection with such
review and/or audit to examine Lessee's records with respect thereto (including
supporting data and sales tax returns) subject to any prohibitions or
limitations on disclosure of any such data under applicable law or regulations
including any duly enacted "Patients' Bill of Rights" or similar legislation,
or as may be necessary to preserve the confidentiality of the Facility-patient
relationship and the physician-patient privilege. If any such review and/or
audit discloses a deficiency in the payment of Additional Rent, Lessee shall
forthwith pay to Lessor the amount of the deficiency together with interest
thereon at the Overdue Rate compounded monthly from the date when said payment
should have been made to the date of payment thereof. If any such review and/or
audit discloses that the Gross Revenues actually received by Lessee for any
Lease Year exceed those reported by Lessee by more than two percent (2%),
Lessee shall pay the costs of such review and/or audit. Any proprietary
information obtained by Lessor pursuant to such review and/or audit shall be
treated as confidential, except that such information may be used, subject to
appropriate confidentiality safeguards, in any litigation or arbitration
proceedings between the parties and except further that Lessor may disclose
such information to prospective lenders or purchasers.
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3.4 Additional Charges. In addition to the Minimum Rent and
Additional Rent, (i) Lessee shall also pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions which
Lessee assumes or agrees to pay under this Lease; and (ii) in the event of any
failure on the part of Lessee to pay any of those items referred to in clause
(i) above, Lessee shall also promptly pay and discharge every fine, penalty,
interest and cost which may be added for non-payment or late payment of such
items (the items referred to in clauses (i) and (ii) above being referred to
herein collectively as the "Additional Charges").
3.5 Late Payment of Rent. Lessee hereby acknowledges that
late payment by Lessee to Lessor of Rent will cause Lessor to incur costs not
contemplated hereunder, the exact amount of which is presently anticipated to
be extremely difficult to ascertain. Such costs may include processing and
accounting charges and late charges which may be imposed on Lessor by the terms
of any loan agreement and other expenses of a similar or dissimilar nature.
Accordingly, if any installment of Rent other than Additional Charges payable
to a Person other than Lessor shall not be paid within five (5) Business Days
after its due date, Lessee will pay Lessor on demand a late charge equal to the
lesser of (i) five percent (5%) of the amount of such installment or (ii) the
maximum amount permitted by law. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Lessor will incur
by reason of late payment by Lessee. The parties further agree that such late
charge is Rent and not interest and such assessment does not constitute a
lender or borrower/creditor relationship between Lessor and Lessee. In
addition, the amount unpaid, including any late charges, shall bear interest at
the Overdue Rate compounded monthly from the due date of such installment to
the date of payment thereof, and Lessee shall pay such interest to Lessor on
demand. The payment of such late charge or such interest shall not constitute
waiver of, nor excuse or cure, any default under this Lease, nor prevent Lessor
from exercising any other rights and remedies available to Lessor.
3.6 Net Lease. This Lease is and is intended to be what is
commonly referred to as a "net, net, net" or "triple net" lease. The Rent shall
be paid absolutely net to Lessor, so that this Lease shall yield to Lessor the
full amount of the installments of Minimum Rent, Additional Rent and Additional
Charges throughout the Term.
ARTICLE IV
4.1 Impositions.
4.1.1 Subject to Article XII relating to permitted contests,
Lessee shall pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment. Lessee shall make such
payments directly to the taxing authorities where feasible, and promptly
furnish to Lessor copies of official receipts or other satisfactory proof
evidencing such payments. Lessee's obligation to pay Impositions shall be
absolutely
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fixed upon the date such Impositions become a lien upon the Leased Property or
any part thereof. If any 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, Lessee may pay the same, and any accrued
interest on the unpaid balance of such Imposition, in installments as the same
respectively become due and before any fine, penalty, premium, further interest
or cost may be added thereto.
4.1.2 Lessor shall prepare and file all tax returns and
reports as may be required by Legal Requirements with respect to Lessor's net
income, gross receipts, franchise taxes and taxes on its capital stock, and
Lessee shall prepare and file all other tax returns and reports as may be
required by Legal Requirements.
4.1.3 Any refund due from any taxing authority in respect of
any Imposition paid by Lessee shall be paid over to or retained by Lessee if no
Event of Default shall have occurred hereunder and be continuing. Any other
refund shall be paid over to or retained by Lessor.
4.1.4 Lessor and Lessee shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made
with respect to the Leased Property as may be necessary to prepare any required
returns and reports. If any property covered by this Lease is classified as
personal property for tax purposes, Lessee shall file all personal property tax
returns in such jurisdictions where it must legally so file. Lessor, to the
extent it possesses the same, and Lessee, to the extent it possesses the same,
shall provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Lessor is legally required to file personal property tax
returns and to the extent practicable, Lessee shall be provided with copies of
assessment notices indicating a value in excess of the reported value in
sufficient time for Lessee to file a protest.
4.1.5 Lessee may, upon notice to Lessor, at Lessee's option
and at Lessee's sole cost and expense, protest, appeal, or institute such other
proceedings as Lessee may deem appropriate to effect a reduction of real estate
or personal property assessments and Lessor, at Lessee's expense as aforesaid,
shall reasonably cooperate with Lessee in such protest, appeal, or other action
but at no cost or expense to Lessor. Billings for reimbursement by Lessee to
Lessor of personal property or real property taxes shall be accompanied by
copies of a bill therefor and payments thereof which identify the personal
property or real property with respect to which such payments are made.
4.1.6 Lessor shall give prompt notice to Lessee of all
Impositions payable by Lessee hereunder of which Lessor has knowledge, but
Lessor's failure to give any such notice shall in no way diminish Lessee's
obligations hereunder to pay such Impositions.
4.1.7 Impositions imposed in respect of the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Lessor
and Lessee, whether or not such Imposition is imposed before or after such
termination.
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4.2 Utilities. Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in the
Leased Property and all Capital Additions thereto. Lessee shall also pay or
reimburse Lessor for all costs and expenses of any kind whatsoever which at any
time with respect to the Term hereof may be imposed against Lessor by reason of
any of the covenants, conditions and/or restrictions affecting the Leased
Property or any portion thereof, or with respect to easements, licenses or
other rights over, across or with respect to any adjacent or other property
which benefits the Leased Property, including any and all costs and expenses
associated with any utility, drainage and parking easements.
4.3 Insurance. Lessee shall pay or cause to be paid all
premiums for the insurance coverage required to be maintained by Lessee
hereunder.
4.4 Impound Account. Lessor may, at its option to be
exercised by thirty (30) days' written notice to Lessee, at any time after the
occurrence of a late payment of any Impositions or premiums for insurance
coverage required to be maintained by Lessee hereunder, require Lessee to
deposit, at the time of any payment of Minimum Rent, an amount equal to
one-twelfth of Lessee's estimated annual taxes, of every kind and nature,
required pursuant to Section 4.1 plus one-twelfth of Lessee's estimated annual
insurance premiums required pursuant to Section 4.3 into an impound account as
directed by Lessor. Such amounts shall be applied to the payment of the
obligations in respect of which said amounts were deposited in such order of
priority as Lessor shall determine, on or before the respective dates on which
the same or any of them would become delinquent. The cost of administering such
impound account shall be paid by Lessee. Nothing in this Section 4.4 shall be
deemed to affect any right or remedy of Lessor hereunder.
4.5 Tax Service. In the event that Lessee shall at any time
during the Term fail to pay any Impositions as and when due hereunder (whether
or not the same constitutes an Event of Default), then Lessee shall, at its
sole cost and expense, upon written request by Lessor cause to be furnished to
Lessor a tax reporting service, to be designated by Lessor, covering the Leased
Property.
ARTICLE V
5. No Termination, Abatement, etc. Except as otherwise
specifically provided in this Lease, Lessee shall remain bound by this Lease in
accordance with its terms and shall not seek or be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent. The
respective obligations of Lessor and Lessee shall not be affected by reason of
(i) any damage to or destruction of the Leased Property or any portion thereof
from whatever cause or any Condemnation of the Leased Property or any portion
thereof; (ii) the lawful or unlawful prohibition of, or restriction upon,
Lessee's use of the Leased Property, or any portion thereof, the interference
with such use by any Person or by reason of eviction by paramount title; (iii)
any claim that Lessee has or might have against Lessor by reason of any default
or breach of any warranty by Lessor hereunder or under any other agreement
between Lessor and Lessee or to which Lessor and Lessee are parties; (iv) any
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bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any assignee
or transferee of Lessor; or (v) for any other cause, whether similar or
dissimilar to any of the foregoing, other than a discharge of Lessee from any
such obligations as a matter of law. Lessee hereby specifically waives all
rights arising from any occurrence whatsoever which may now or hereafter be
conferred upon it by law (a) to modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof; or (b) which may
entitle Lessee to any abatement, reduction, suspension or deferment of the Rent
or other sums payable by Lessee hereunder, except as otherwise specifically
provided in this Lease. The obligations of Lessor and Lessee hereunder shall be
separate and independent covenants and agreements and the Rent and all other
sums payable by Lessee hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this Lease or by termination of this Lease other than by
reason of an Event of Default.
ARTICLE VI
6.1 Ownership of the Leased Property. Lessee acknowledges
that the Leased Property is the property of Lessor and that Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease. Lessee shall, at its expense, restore the Leased
Property to the condition required by Section 9.1.4.
6.2 Personal Property. During the Term, Lessee shall, as
necessary and 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 Lessee's
Personal Property and replacements thereof which shall be the property of and
owned by Lessee. Except as provided in Sections 6.3 and 16.10, Lessor shall
have no rights to Lessee's Personal Property. Lessee shall provide and maintain
during the entire Term all Personal Property necessary in order to operate the
Facility in compliance with all licensure and certification requirements, all
Legal Requirements and all Insurance Requirements and otherwise in accordance
with customary practice in the industry for the Primary Intended Use.
6.3 Transfer of Personal Property and Capital Additions to
Lessor. Upon the expiration or earlier termination of this Lease, all Capital
Additions not owned by Lessor and Lessee's Personal Property shall become the
property of Lessor, free of any encumbrance and Lessee shall execute all
documents and take any actions reasonably necessary to evidence such ownership
and discharge any encumbrance.
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges
receipt and delivery of possession of the Leased Property and that Lessee has
examined and otherwise has knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair, free from Hazardous Substances not in compliance with
Legal Requirements, and satisfactory for its purposes hereunder. Regardless,
however, of any examination or inspection made by Lessee and whether or not any
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patent or latent defect or condition was revealed or discovered thereby, Lessee
is leasing the Leased Property "as is" in its present condition. Lessee waives
any claim or action against Lessor in respect of the condition of the Leased
Property including any defects or adverse conditions not discovered or
otherwise known by Lessee as of the date hereof. LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE NATURE OR QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE,
IT BEING AGREED THAT ALL SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY
BY LESSEE INCLUDING ALL RESPONSIBILITY AND LIABILITY FOR ANY ENVIRONMENTAL
REMEDIATION AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS.
7.2 Use of the Leased Property.
7.2.1 Lessee covenants that it will obtain and maintain all
authorization and approvals needed to use and operate the Leased Property and
the Facility for the Primary Intended Use and any other use conducted on the
Leased Property as may be permitted from time to time hereunder in accordance
with Legal Requirements including applicable licenses, provider agreements,
permits, and Medicare and/or Medicaid certification.
7.2.2 Lessee shall use or cause to be used the Leased
Property and the improvements thereon for its Primary Intended Use. Lessee
shall not use the Leased Property or any portion thereof or any Capital
Addition thereto for any other use without the prior written consent of Lessor,
which consent Lessor may withhold in its sole discretion.
7.2.3 Lessee shall operate continuously the Leased Property
and all Capital Additions thereto in accordance with its Primary Intended Use.
Lessee shall devote the entire Facility and all Capital Additions thereto to
the Primary Intended Use, except for areas reasonably required for office or
storage space uses incidental to the Primary Intended Use. Lessee shall not
modify the services offered or take any other action (e.g., removing patients
or residents from the Facility or directing patients or residents, or
prospective patients or residents, to another Facility) which would materially
reduce Gross Revenues. Lessee shall at all times maintain an adequate staff
for the service of its residents and/or patients, in each case assuming an
occupancy level for the Facility which is not less than the average occupancy
level for similar facilities in the State. Lessee shall employ its best
judgement, efforts and abilities to operate the Facility in such a manner so as
to maximize Gross Revenues and to enhance the reputation and attractiveness of
the Facility, in each case within the limits and bounds of all Legal
Requirements.
7.2.4 Lessee shall conduct its business at the Facility in
conformity with the customary standards of patient or resident care practice
provided in similar facilities in the State.
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7.2.5 Lessee shall not commit or suffer to be committed any
waste on the Leased Property or any Capital Addition thereto or cause or permit
any nuisance thereon.
7.2.6 Lessee shall neither suffer nor permit the Leased
Property or any portion thereof or any Capital Addition thereto, or Lessee's
Personal Property, to be used in such a manner as (i) might reasonably tend to
impair Lessor's title thereto or to any portion thereof or (ii) may make
possible a claim of adverse use or possession, or an implied dedication of the
Leased Property or any portion thereof or any Capital Addition thereto.
7.2.7 For purposes of computing Incremental Gross Revenues
for any Lease Year or other period during which Lessee is in breach or
violation of any of the covenants set forth in Sections 7.2.1 through 7.2.4,
Lessee's Gross Revenues for such Lease Year or other period shall be deemed to
be the greater of Lessee's Gross Revenues for (i) such Lease Year or other
period, or (ii) 110% of the highest Gross Revenues for any prior Lease Year or
any corresponding period of any prior Lease Year, as applicable, as determined
by Lessor.
7.3 Lessor to Grant Easements, etc. Lessor shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense, but subject to the approval
of Lessor, which approval shall not be unreasonably withheld or delayed (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Leased Property; (iii) dedicate or transfer unimproved portions
of the Leased Property for road, highway or other public purposes; (iv) execute
petitions to have the Leased Property annexed to any municipal corporation or
utility district; (v) execute amendments to any covenants, conditions and
restrictions affecting the Leased Property; and (vi) execute and deliver to any
Person any instrument appropriate to confirm or effect such grants, releases,
dedications and transfers to the extent of its interest in the Leased Property,
but only upon delivery to Lessor of an Officer's Certificate stating that such
grant release, dedication, transfer, petition or amendment is not detrimental
to the proper conduct of the business of Lessee on the Leased Property and does
not materially reduce the value of the Leased Property.
7.4 Preservation of Gross Revenues. Lessee acknowledges that
a fair return to Lessor on its investment in the Leased Property is dependent,
in part, on the concentration on the Leased Property during the Term of the
skilled nursing home business of Lessee and its Affiliates in the geographical
area of the Leased Property. Lessee further acknowledges that diversion of
residents and/or patients, as applicable, from the Facility to other facilities
or institutions owned, operated or managed, whether directly or indirectly, by
Lessee or its Affiliates will have a material adverse impact on the value and
utility of the Leased Property. Accordingly, Lessor and Lessee agree as
follows:
7.4.1 During the Term and for a period of one (1) year
thereafter, neither Lessee nor any of its Affiliates, directly or indirectly,
shall operate, own, manage or have any interest in or otherwise participate in
or receive revenues from any other facility or
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institution providing services or similar goods to those provided in connection
with the Facility and the Primary Intended Use, within a five (5) mile radius
outward from the outside boundary of the Leased Property. All distances shall
be measured on a straight line rather than on a driving distance basis. In the
event that any portion of such other facility or institution is located within
such restricted area the entire facility or institution shall be deemed located
within such restricted area. Without limiting Lessor's remedies, if Lessee
should violate the covenant contained in this Section during the Term of this
Lease, Lessor may, at its option, include the Gross Revenues of such other
facility or institution in the Gross Revenues from the Leased Property for the
purpose of computing Incremental Gross Revenues hereunder. If Lessor so elects,
all the provisions of Article III hereof shall be applicable to all records
pertaining to such facility or institution.
7.4.2 Except as required for medically appropriate reasons,
prior to and after the expiration or earlier termination of this Lease, Lessee
shall not recommend or solicit the removal or transfer of any resident or
patient from the Leased Property to any other facility or institution (i) in
which Lessee or any Affiliate of Lessee, directly or indirectly has any
interest or (ii) which otherwise materially affects Gross Revenues from the
Facility.
ARTICLE VIII
8. Compliance with Legal and Insurance Requirements,
Instruments, etc. Subject to Article XII regarding permitted contests, Lessee,
at its expense, shall promptly (i) comply with all Legal Requirements and
Insurance Requirements regarding the use, operation, maintenance, repair and
restoration of the Leased Property, Lessee's Personal Property and all Capital
Additions whether or not compliance therewith may require structural changes in
any of the Leased Improvements or Capital Additions thereto or interfere with
the use and enjoyment of the Leased Property and (ii) procure, maintain and
comply with all licenses, certificates of need, provider agreements and other
authorizations required for the use of the Leased Property, Lessee's Personal
Property and all Capital Additions for the Primary Intended Use and any other
use of the Leased Property, Lessee's Personal Property and all Capital
Additions then being made, and for the proper erection, installation, operation
and maintenance of the Leased Property, Lessee's Personal Property and all
Capital Additions. Lessor may, but shall not be obligated to, upon prior
written notice to Lessee (except in an emergency, where prior notice shall not
be required) enter upon the Leased Property and all Capital Additions thereto
and take such actions and incur such costs and expenses to effect such
compliance as it deems reasonably advisable to protect its interest in the
Leased Property and Capital Additions thereto, and Lessee shall reimburse
Lessor for all costs and expenses incurred by Lessor in connection with such
actions. Lessee covenants and agrees that the Leased Property, Lessee's
Personal Property and all Capital Additions shall not be used for any unlawful
purpose.
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ARTICLE IX
9.1 Maintenance and Repair
9.1.1 Lessee, at its expense, shall maintain the Leased
Property, and every portion thereof, Lessee's Personal Property and all Capital
Additions, and all private roadways, sidewalks and curbs appurtenant to the
Leased Property, and which are under Lessee's control in good order and repair
whether or not the need for such repairs occurs as a result of Lessee's use,
any prior use, the elements or the age of the Leased Property, Lessee's
Personal Property and all Capital Additions, and, except as otherwise expressly
provided in Article XIV with reasonable promptness, make all necessary and
appropriate repairs thereto of every kind and nature, including those necessary
to comply with changes in any Legal Requirements, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the Commencement Date.
All repairs shall be at least equivalent in quality to the original work.
Lessee will not take or omit to take any action the taking or omission of which
might materially impair the value or the usefulness of the Leased Property or
any part thereof or any Capital Addition thereto for its Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to
(i) build or rebuild any improvements on the Leased Property; (ii) make any
repairs, replacements, alterations, restorations or renewals of any nature to
the Leased Property, whether ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto; or (iii) maintain the Leased Property in any way. Lessee
hereby waives, to the extent permitted by law, the right to make repairs at the
expense of Lessor pursuant to any law in effect at the time of the execution of
this Lease or hereafter enacted.
9.1.3 Nothing contained in this Lease and no action or
inaction by Lessor shall be construed as (i) constituting the consent or
request of Lessor, expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Leased
Property or any part thereof or any Capital Addition thereto; or (ii) giving
Lessee any right, power or permission to contract for or permit the performance
of any labor or services or the furnishing of any materials or other property
in such fashion as would permit the making of any claim against Lessor in
respect thereof or to make any agreement that may create, or in any way be the
basis for, any right, title, interest, lien, claim or other encumbrance upon
the estate of Lessor in the Leased Property, or any portion thereof or any
Capital Addition thereto.
9.1.4 Unless Lessor shall convey any of the Leased Property
to Lessee pursuant to the provisions of this Lease, Lessee shall, upon the
expiration or earlier termination of the Term, vacate and surrender the Leased
Property, Lessee's Personal Property and all Capital Additions to Lessor in the
condition in which the Leased Property was originally received from Lessor and
Lessee's Personal Property and Capital Additions were originally introduced to
the Facility, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear.
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9.2 Encroachments, Restrictions, Mineral Leases, etc. If any
of the Leased Improvements or Capital Additions shall, at any time, encroach
upon any property, street or right-of-way, or shall violate any restrictive
covenant or other agreement affecting the Leased Property, or any part thereof
or any Capital Addition thereto, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, or the use of
the Leased Property or any Capital Addition thereto is impaired, limited or
interfered with by reason of the exercise of the right of surface entry or any
other provision of a lease or reservation of any oil, gas, water or other
minerals, then promptly upon the request of Lessor or any Person affected by
any such encroachment, violation or impairment, Lessee, at its sole cost and
expense, but subject to its right to contest the existence of any such
encroachment, violation or impairment, shall protect, indemnify, save harmless
and defend Lessor from and against all losses, liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including
reasonable attorneys', consultants' and experts' fees and expenses) based on or
arising by reason of any such encroachment, violation or impairment. In the
event of an adverse final determination with respect to any such encroachment,
violation or impairment, Lessee shall either (i) 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
Lessor or Lessee; or (ii) make such changes in the Leased Improvements and any
Capital Addition thereto, and take such other actions, as Lessee in the good
faith exercise of its judgment deems reasonably practicable, to remove such
encroachment or to end such violation or impairment, including, if necessary,
the alteration of any of the Leased Improvements or any Capital Addition
thereto, and in any event take all such actions as may be necessary in order to
be able to continue the operation of the Leased Improvements and any Capital
Addition thereto for the Primary Intended Use substantially in the manner and
to the extent the Leased Improvements and Capital Additions were operated prior
to the assertion of such encroachment, violation or impairment. Lessee's
obligations under this Section 9.2 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 and, to the extent the recovery thereof is not necessary to
compensate Lessor for any damages incurred by any such encroachment, violation
or impairment, Lessee shall either be entitled to (i) a credit for any sums
recovered by Lessor under any such policy of title or other insurance or (ii)
to proceed against any such insurer in the name of Lessor and retain any
amounts received by Lessee in the name of Lessor under any such policy of title
or other insurance on account of such encroachment, violation or impairment.
9.3 Capital Repairs to be Performed by Lessee. Lessee shall,
on or before March 31, 1997, make certain repairs to the Facility based on the
recommendations of Barge, Waggoner, Sumner and Cannon, Inc. as described in the
Building Condition Evaluation Report dated January 19, 1996, and agreed upon by
Lessee and Lessor, which agreed upon improvements and repairs are summarized on
Exhibit D attached hereto (the "Capital Renovation Project"). Provided no Event
of Default exists and no event has occurred or conditions exist which with
notice or lapse of time or both would constitute an Event of Default, Lessor
has agreed to fund one-half (1/2) of the out-of-pocket costs and expenses
incurred by Lessee in completing such Capital Renovation Project; provided,
however, that in no event shall the amount to be funded by Lessor hereunder
exceed the sum of $75,000. Any costs in excess of those which Lessor has agreed
to fund shall be the sole responsibility of
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Lessee. Such funding by Lessor shall be advanced to Lessee upon completion of
the entire Capital Renovation Project and Lessor's receipt of the following:
(a) Any information, certificates, licenses, permits or other
documents requested by Lessor which are necessary to confirm that Lessee is
able to use the Facility upon completion of the Capital Renovation Project in
accordance with its Primary Intended Use, including all required federal, state
or local government licenses and approvals;
(b) An Officer's Certificate and, if requested, a certificate
from Lessee's Architect or contractor, setting forth in reasonable detail the
actual out-of-pocket costs incurred by Lessee in connection with such Capital
Renovation Project;
(c) Endorsements to any then existing policy of title
insurance covering the Leased Property or commitments thereof satisfactory in
form and substance to Lessor (i) updating the same without any additional
exceptions except as may be approved by Lessor and (ii) increasing the coverage
thereof by an amount equal to the amounts advanced to Lessee hereunder with
respect to the Capital Renovation Project; and
(d) Such other billing statements, invoices, certificates,
endorsements, opinions, site assessments, surveys, resolutions, ratifications,
lien releases and waivers and other instruments and information that may be
reasonably required by Lessor.
ARTICLE X
10. Construction of Capital Additions to the Leased Property.
Without the prior written consent of Lessor which consent may be withheld or
granted by Lessor in its sole and absolute discretion, Lessee shall make no
Capital Additions on or structural alterations to the Leased Property and shall
not enlarge or reduce the size of the Facility.
ARTICLE XI
11. Liens. Subject to the provisions of Article XII relating
to permitted contests, Lessee will not directly or indirectly create or allow
to remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
Capital Addition thereto or any attachment, levy, claim or encumbrance in
respect of the Rent, excluding, however, (i) this Lease; (ii) the matters that
existed as of the Commencement Date; (iii) restrictions, liens and other
encumbrances which are consented to in writing by Lessor, or any easements
granted pursuant to the provisions of Section 7.3; (iv) liens for Impositions
which Lessee is not required to pay hereunder; (v) subleases permitted by
Article XXIV; (vi) liens for Impositions not yet delinquent; (vii) liens of
mechanics, laborers, materialmen, suppliers or vendors for amounts not yet due;
and (viii) any liens which are the responsibility of Lessor pursuant to the
provisions of Article XXXVI.
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ARTICLE XII
12. Permitted Contests. Lessee, upon prior written notice to
Lessor, on its own or in Lessor's name, at Lessee's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any licensure or
certification decision, Imposition, Legal Requirement, Insurance Requirement,
lien, attachment, levy, encumbrance, charge or claim; provided, however, that
(i) in the case of an unpaid Imposition, lien, attachment, levy, encumbrance,
charge or claim, the commencement and continuation of such proceedings shall
suspend the collection thereof from Lessor and from the Leased Property or any
Capital Addition thereto; (ii) neither the Leased Property or any Capital
Addition thereto, the Rent therefrom nor any part or interest in either thereof
would be in any danger of being sold, forfeited, attached or lost pending the
outcome of such proceedings; (iii) in the case of a Legal Requirement, neither
Lessor nor Lessee would be in any danger of civil or criminal liability for
failure to comply therewith pending the outcome of such proceedings; (iv) if
any such contest shall involve a sum of money or potential loss in excess of
Fifty Thousand Dollars ($50,000), Lessee shall, unless waived in writing by
Lessor, deliver to Lessor and its counsel an opinion of legal counsel
reasonably acceptable to Lessor to the effect set forth in clauses (i), (ii)
and (iii) above, to the extent applicable; (v) in the case of a Legal
Requirement, Imposition, lien, encumbrance or charge, Lessee shall give such
reasonable security as may be required by Lessor to insure ultimate payment of
the same and to prevent any sale or forfeiture of the Leased Property or any
Capital Addition thereto or the Rent by reason of such non-payment or
noncompliance; (vi) in the case of an Insurance Requirement, the coverage
required by Article XIII shall be maintained; and (vii) if such contest be
finally resolved against Lessor or Lessee, Lessee shall promptly pay the amount
required to be paid, together with all interest and penalties accrued thereon,
or comply with the applicable Legal Requirement or Insurance Requirement.
Lessor, at Lessee's expense, shall execute and deliver to Lessee such
authorizations and other documents as may reasonably be required in any such
contest, and, if reasonably requested by Lessee or if Lessor so desires, Lessor
shall join as a party therein. The provisions of this Article XII shall not be
construed to permit Lessee to contest the payment of Rent or any other amount
payable by Lessee to Lessor hereunder. Lessee shall indemnify, defend, protect
and save Lessor harmless from and against any liability, cost or expense of any
kind that may be imposed upon Lessor in connection with any such contest and
any loss resulting therefrom.
ARTICLE XIII
13.1 General Insurance Requirements. During the Term, Lessee
shall at all times keep the Leased Property, and all property located in or on
the Leased Property, including Capital Additions, the Fixtures and the Personal
Property, insured with the kinds and amounts of insurance described below. This
insurance shall be written by companies authorized to do insurance business in
the State in which the Leased Property is located. All liability type policies
must name Lessor as an "additional insured." All property, loss of rental and
business interruption type policies shall name Lessor as "loss payee." Losses
shall be payable to Lessor and/or Lessee as provided in Article XIV. In
addition, the policies, as appropriate, shall name as an "additional insured"
or "loss payee" the holder of any mortgage, deed of trust or other security
agreement ("Facility Mortgagee") securing any indebtedness or any other
Encumbrance placed on the Leased Property in accordance with the provisions of
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Article XXXVI ("Facility Mortgage") by way of a standard form of mortgagee's
loss payable endorsement. Any loss adjustment shall require the written consent
of Lessor, Lessee, and each Facility Mortgagee; provided, however, that
Lessor's consent shall not be required to adjust any loss, the amount in
controversy of which is less than $10,000.00, so long as Lessee provides prior
written notice to Lessor of Lessee's intent to make such loss adjustment.
Evidence of insurance shall be deposited with Lessor and, if requested, with
any Facility Mortgagee(s). If any provision of any Facility Mortgage requires
deposits of insurance to be made with such Facility Mortgagee, Lessee shall
either pay to Lessor monthly the amounts required and Lessor shall transfer
such amounts to each Facility Mortgagee, or, pursuant to written direction by
Lessor, Lessee shall make such deposits directly with such Facility Mortgagee.
The policies shall insure against the following risks:
13.1.1 Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils commonly known as special form perils,
earthquake (including earth movement), sinkhole and windstorm in an amount not
less than the insurable value on a replacement cost basis (as defined below in
Section 13.2) and including a building ordinance coverage endorsement;
13.1.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus, now or hereafter installed in the Facility, in
such limits with respect to any one accident as may be reasonably requested by
Lessor from time to time;
13.1.3 Flood (when the Leased Property is located in whole or
in part within a designated 100-year flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in the area;
13.1.4 Loss of rental value in an amount not less than twelve
(12) months' Rent payable hereunder or business interruption in an amount not
less than twelve (12) months of income and normal operating expenses including
payroll and Rent payable hereunder with an endorsement extending the period of
indemnity by at least ninety (90) days (Building Ordinance - Increased Period
of Restoration Endorsement) necessitated by the occurrence of any of the
hazards described in Sections 13.1.1, 13.1.2 or 13.1.3;
13.1.5 Claims for bodily injury or property damage under a
policy of commercial general liability insurance with amounts not less than One
Million and No/100 Dollars ($1,000,000.00) combined single limit and Three
Million No/100 Dollars ($3,000,000.00) in the annual aggregate; and
13.1.6 Medical professional liability with amounts not less
than One Million Dollars ($1,000,000) combined single limit and Three Million
Dollars ($3,000,000) in the annual aggregate.
13.2 Replacement Cost. The term "replacement cost" shall mean
the actual replacement cost of the insured property from time to time with new
materials and workmanship of like kind and quality. If either party believes
that the replacement cost has increased or decreased at any time during the
Term, it shall have the right to have such
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replacement cost redetermined by an impartial national insurance company
reasonably acceptable to both parties (the "impartial appraiser"). The party
desiring to have the replacement cost so redetermined shall forthwith, on
receipt of such determination by the impartial appraiser, give written notice
thereof to the other party hereto. The determination of the impartial appraiser
shall be final and binding on the parties hereto, and Lessee shall forthwith
increase or decrease the amount of the insurance carried pursuant to this
Article to the amount so determined by the impartial appraiser. Each party
shall pay one-half (1/2) of the fee, if any, of the impartial appraiser. If
Lessee has made improvements to the Leased Property, Lessor may at Lessee's
expense have the replacement cost redetermined at any time after such
improvements are made, regardless of when the replacement cost was last
determined.
13.3 Additional Insurance. In addition to the insurance
described above, Lessee shall maintain such additional insurance as may be
reasonably required from time to time by any Facility Mortgagee and shall
further at all times maintain adequate workers' compensation coverage and any
other coverage required by Legal Requirements for all Persons employed by
Lessee on the Leased Property and any Capital Addition thereto in accordance
with Legal Requirements.
13.4 Waiver of Subrogation. All insurance policies carried by
either party covering the Leased Property and any Capital Addition thereto and
Lessee's Personal Property including contents, fire and casualty insurance,
shall expressly waive any right of subrogation on the part of the insurer
against the other party. Each party waives any claims it has against the other
party to the extent such claim is covered by insurance.
13.5 Policy Requirements. All of the policies of insurance
referred to in this Article shall be written in form satisfactory to Lessor and
by insurance companies with a policyholder rating of "A" and a financial rating
of "X" in the most recent version of Best's Key Rating Guide. Lessee shall pay
all of the premiums therefor, and deliver such policies or certificates thereof
to Lessor prior to their effective date (and with respect to any renewal
policy, at least ten (10) days prior to the expiration of the existing policy),
and in the event of the failure of Lessee either to effect such insurance in
the names herein called for or to pay the premiums therefor, or to deliver such
policies or certificates thereof to Lessor, at the times required, Lessor shall
be entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, in which event the cost thereof, together with interest
thereon at the Overdue Rate, shall be repayable to Lessor upon demand therefor.
Each insurer shall agree, by endorsement on the policy or policies issued by
it, or by independent instrument furnished to Lessor, that it will give to
Lessor not less than ten (10) days' written notice before the policy or
policies in question shall be altered, allowed to expire or cancelled. Each
policy shall have a deductible or deductibles, if any, which are no greater
than those normally maintained for similar facilities in the State.
13.6 Increase in Limits. If either party shall at any time
believe the limits of the insurance required hereunder to be either excessive
or insufficient, the parties shall endeavor to agree in writing on the proper
and reasonable limits for such insurance to be
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carried and such insurance shall thereafter be carried with the limits thus
agreed on until further change pursuant to the provisions of this Section. If
the parties shall be unable to agree thereon, the proper and reasonable limits
for such insurance to be carried shall be determined by an impartial third
party reasonably selected by Lessor, who shall take into account the limits for
insurance typically maintained by operator of facilities similar to the
Facility in the State. Nothing herein shall permit the amount of insurance to
be reduced below the amount or amounts required by any of the Facility
Mortgagee.
13.7 Blanket Policies and Policies Covering Multiple
Locations. Notwithstanding anything to the contrary contained in this Article,
Lessee's obligations to carry the casualty insurance provided for herein may be
brought within the coverage of a blanket policy or policies of insurance
carried and maintained by Lessee; provided, however, that the coverage afforded
Lessor will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all other requirements of
this Lease by reason of the use of such blanket policy of insurance, and
provided further that the requirements of this Article XIII are otherwise
satisfied. For any liability policies covering facilities in addition to the
Leased Property, Lessor may require excess limits as Lessor reasonably
determines.
13.8 No Separate Insurance. Lessee shall not, on Lessee's own
initiative or pursuant to the request or requirement of any third party, (i)
take out separate insurance concurrent in form or contributing in the event of
loss with that required in this Article to be furnished by, or which may
reasonably be required to be furnished by, Lessee or (ii) increase the amounts
of any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance, including in all cases Lessor and all Facility Mortgagees,
are included therein as additional insured and the loss is payable under such
insurance in the same manner as losses are payable under this Lease. Lessee
shall immediately notify Lessor of the taking out of any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance by securing an additional policy or additional policies.
ARTICLE XIV
14.1 Insurance Proceeds. All proceeds payable by reason of
any loss or damage to the Leased Property, or any portion thereof, under any
policy of insurance required to be carried hereunder shall be paid to Lessor
and made available by Lessor to Lessee from time to time for the reasonable
costs of reconstruction or repair, as the case may be, of any damage to or
destruction of the Leased Property, or any portion thereof. Any excess proceeds
of insurance remaining after the completion of the restoration or
reconstruction of the Leased Property (or in the event neither Lessor nor
Lessee is required or elects to repair and restore, all such insurance
proceeds) shall be retained by Lessor except as otherwise specifically provided
below in this Article XIV. All salvage resulting from any risk covered by
insurance shall belong to Lessor.
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14.2 Insured Casualty.
14.2.1 If the Leased Property is damaged or destroyed from a
risk covered by insurance carried by Lessee such that the Facility thereby is
rendered Unsuitable for its Primary Intended Use, Lessee shall either (i)
restore the Leased Property to substantially the same condition as existed
immediately before such damage or destruction, or (ii) offer to acquire the
Leased Property from Lessor for a purchase price equal to the greater of (y)
the Minimum Repurchase Price or (z) the Fair Market Value immediately prior to
such damage or destruction. If Lessor does not accept Lessee's offer to so
purchase the Leased Property, Lessee may either withdraw such offer and proceed
to restore the Leased Property to substantially the same condition as existed
immediately before such damage or destruction or terminate the Lease in which
event Lessor shall be entitled to retain the insurance proceeds. Upon any such
early termination of this Lease, the provisions of Section 44.6 shall apply.
14.2.2 If the Leased Property is damaged from a risk covered
by insurance carried by Lessee, but the Facility is not thereby rendered
Unsuitable for its Primary Intended Use, Lessee shall restore the Leased
Property to substantially the same condition as existed immediately before such
damage. Such damage shall not terminate this Lease; provided, however, that if
Lessee cannot within a reasonable time after diligent efforts obtain the
necessary government approvals needed to restore and operate the Facility for
its Primary Intended Use, Lessee may offer to purchase the Leased Property for
a purchase price equal to the greater of (y) the Minimum Repurchase Price or
(z) the Fair Market Value immediately prior to such damage. If Lessee shall
make such offer and Lessor does not accept the same, Lessee may either withdraw
such offer and proceed to restore the Leased Property to substantially the same
condition as existed immediately before such damage or destruction, or
terminate the Lease, in which event Lessor shall be entitled to retain the
insurance proceeds. Upon any such early termination of this Lease, the
provisions of Section 44.6 shall apply.
14.2.3 If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessor from the insurance required to be carried
hereunder, Lessee shall contribute any excess amounts needed to restore the
Facility. Such difference shall be paid by Lessee to Lessor together with any
other insurance proceeds, for application to the cost of repair and restoration
and disbursement to Lessee in accordance with the provisions of Section 14.1.
14.2.4 If Lessor accepts Lessee's offer to purchase the
Leased Property pursuant to either of Section 14.2.1 or 14.2.2, as applicable,
this Lease shall terminate as to the Leased Property upon payment of the
purchase price and Lessor shall remit to Lessee all insurance proceeds
pertaining to the Leased Property then held by Lessor.
14.3 Uninsured Casualty.
14.3.1 If the Leased Property is damaged or destroyed from a
risk not covered by insurance carried by Lessee, such that the Facility is
thereby rendered Unsuitable for its Primary Intended Use, Lessee shall either
(i) restore the Leased Property to substantially the same condition as existed
immediately prior to such damage or destruction, or (ii) offer to
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acquire the Leased Property from Lessor for a purchase price equal to the
greater of (y) the Minimum Repurchase Price or (z) the Fair Market Value
immediately prior to such damage or destruction. If Lessor does not accept
Lessee's offer to so purchase the Leased Property, which Lessor shall have the
right to accept or reject in its sole and absolute discretion, Lessee shall
immediately proceed to restore the Leased Property to substantially the same
condition as existed immediately prior to such damage or destruction.
14.3.2 If the Leased Property is damaged from a risk not
covered by insurance carried by Lessee, but the Facility is not thereby
rendered Unsuitable for its Primary Intended Use, Lessee shall restore the
Leased Property to substantially the same condition that existed before such
damage. Such damage shall not terminate this Lease; provided, however, that if
Lessee cannot within a reasonable time after diligent efforts obtain the
necessary government approvals needed to restore and operate the Facility for
its Primary Intended Use, Lessee may offer to purchase the Leased Property for
a purchase price equal to the greater of (y) the Minimum Repurchase Price or
(z) the Fair Market Value immediately prior to such damage. If Lessor does not
accept Lessee's offer to so purchase the Leased Property, which Lessor shall
have the right to accept or reject in its sole and absolute discretion, Lessee
shall immediately proceed to restore the Leased Property to substantially the
same condition that existed immediately before such damage or destruction.
14.3.3 If Lessor accepts Lessee's offer to purchase the
Leased Property pursuant to either of Sections 14.3.1 or 14.3.2, as applicable,
this Lease shall terminate as to the Leased Property upon payment of the
applicable purchase price.
14.4 No Abatement of Rent; Construction of Lease. This Lease
shall remain in full force and effect and Lessee's obligation to pay the Rent
and all other charges required by this Lease shall remain unabated during the
period required for adjusting insurance, satisfying Legal Requirements, or
conducting repair and restoration, except to the extent Lessor receives
proceeds from the insurance required to be carried by Section 13.1.4 hereof in
an amount sufficient to satisfy Lessee's Rent obligations. In addition, if the
Term of the Lease shall expire prior to Lessee's completion of any repair
and/or restoration obligations pursuant to this Article XIV, the provisions of
Article XX shall apply.
14.5 Waiver. Lessee waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Leased Property.
ARTICLE XV
15. Condemnation.
15.1 Total Taking. If the Leased Property is totally and
permanently taken by Condemnation, this Lease shall terminate as of the day
before the Date of Taking.
15.2 Partial Taking. If a portion of the Leased Property is
taken by Condemnation, this Lease shall remain in effect if the Facility is not
thereby rendered
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Unsuitable for Its Primary Intended Use, but if the Facility is thereby
rendered Unsuitable for its Primary Intended Use, this Lease shall terminate as
of the day before the Date of Taking. If (a) this Lease remains in effect after
such Condemnation, (b) such Condemnation does not include a de minimis portion
of the Leased Property (e.g., other than for a street widening or easement) and
(c) such Condemnation materially and adversely affects Lessee's use of the
Leased Property for its Primary Intended Use, but does not thereby render the
Facility Unsuitable for its Primary Intended Use, Lessor and Lessee shall in
good faith attempt to agree upon a reduction of the Minimum Rent to an extent
that is fair, just and equitable, taking into consideration, among other
relevant factors, the reduction in useable square feet of the building on the
Leased Property and the amount of the Award received by Lessor.
15.3 Restoration. If there is a partial taking of the Leased
Property and this Lease remains in full force and effect pursuant to Section
15.2, Lessor shall make available to Lessee the portion of the Award necessary
and specifically identified for restoration of the Leased Property and Lessee
shall accomplish all necessary restoration whether or not the amount provided
by the condemnor for restoration is sufficient.
15.4 Award-Distribution. The entire Award shall belong to and
be paid to Lessor, except that, subject to the rights of the Facility
Mortgagees, Lessee shall be entitled to receive from the Award, if and to the
extent such Award specifically includes such item, lost profits value and
moving expenses and a sum attributable to the value, if any, of Lessee's
leasehold interest under this Lease; provided, however, that in any event
Lessor shall receive from the Award, subject to the rights of the Facility
Mortgagees, no less than the greater of the Fair Market Value prior to the
institution of the Condemnation or the Minimum Repurchase Price.
15.5 Temporary Taking. The taking of the Leased Property, or
any part thereof, shall constitute a taking by Condemnation only when the use
and occupancy by the taking authority has continued for longer than 180
consecutive days. During any shorter period, which shall be a temporary taking,
all the provisions of this Lease shall remain in full force and effect and the
Award allocable to the term of the taking shall be paid to Lessee.
ARTICLE XVI
16.1 Events of Default. Any one or more of the following
shall constitute an "Event of Default":
(a) a default shall occur under any other lease or
other agreement or instrument, including the Contract of Acquisition, with or
in favor of Lessor or any Affiliate of Lessor and made by or with Lessee or any
Affiliate of Lessee where the default is not cured within any applicable grace
period set forth therein;
(b) Lessee shall fail to pay any installment of Rent
when the same becomes due and payable and such failure is not cured by Lessee
within a period of seven (7) days after receipt (or deemed receipt) by Lessee
of notice thereof from Lessor; provided, however, that such notice shall be in
lieu of and not in addition to any notice required under applicable law;
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(c) if Lessee shall fail to observe or perform any
other term, covenant or condition of this Lease and such failure is not cured
by Lessee within thirty (30) days after receipt (or deemed receipt) by Lessee
of notice thereof from Lessor, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall not
be deemed to be an Event of Default if Lessee proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof;
provided, however, that such notice shall be in lieu of and not in addition to
any notice required under applicable law;
(d) Lessee or any Guarantor shall:
(i) admit in writing its inability to pay its
debts generally as they become due,
(ii) file a petition in bankruptcy or a petition
to take advantage of any insolvency act,
(iii) make an assignment for the benefit of its
creditors,
(iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its Property, or
(v) file a petition or answer seeking
reorganization or arrangement under the Federal bankruptcy laws or any
other applicable law or statute of the United States of America or any
state thereof;
(e) Lessee or any Guarantor shall be adjudicated as
bankrupt or a court of competent jurisdiction shall enter an order or decree
appointing, without the consent of Lessee, a receiver of Lessee or of the whole
or substantially all of its property, or approving a petition filed against it
seeking reorganization or arrangement of Lessee under the Federal bankruptcy
laws or any other applicable law or statute of the United States of America or
any state thereof, and such judgment, order or decree shall not be vacated or
set aside or stayed within sixty (60) days from the date of the entry thereof;
(f) except as otherwise permitted pursuant to
Article XXIV, Lessee or any Guarantor shall be liquidated or dissolved, or
shall begin proceedings toward such liquidation or dissolution, or shall, in
any manner, permit the sale or divestiture of substantially all its assets;
(g) except as expressly permitted pursuant to
Article XII hereof, the estate or interest of Lessee in the Leased Property or
any part thereof shall be levied upon or attached in any proceeding and the
same shall not be stayed, vacated or discharged within
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the later of ninety (90) days after commencement thereof or thirty (30) days
after receipt (or deemed receipt) by Lessee of notice thereof from Lessor;
provided, however, that such notice shall be in lieu of and not in addition to
any notice required under applicable law;
(h) except as a result of damage, destruction or
Condemnation, Lessee voluntarily ceases operations on the Leased Property for a
period in excess of thirty (30) days;
(i) any of the representations or warranties made by
Lessee or any Guarantor in the Contract of Acquisition, the Guaranty or
otherwise proves to be untrue when made in any material respect which
materially and adversely affects Lessor;
(j) the Facility's applicable license or third-party
provider reimbursement agreements material to the Facility's operation for its
Primary Intended Use are at any time terminated or revoked or suspended for
more than twenty (20) days;
(k) any local, state or federal agency having
jurisdiction over the operation of the Facility removes ten percent (10%) or
more of the patients or residents located in the Facility;
(l) except for medically appropriate reasons, Lessee
voluntarily transfers ten (10) or more patients or residents located in the
Facility (i) to any other facility in which Lessee or any Affiliate of Lessee,
directly or indirectly, has any interest or (ii) which otherwise materially
affects Gross Revenues from the Facility;
(m) if applicable, Lessee fails to give notice to
Lessor not later than ten (10) days after Lessee's receipt thereof of any Class
A or equivalent fine notice from any governmental authority or officer acting
on behalf thereof relating to the Facility;
(n) Lessee fails to notify Lessor within three (3)
days after receipt of any notice from any governmental agency terminating or
suspending or threatening termination or suspension, of any material license or
certification relating to the Facility;
(o) Lessee fails to give notice to Lessor not later
than ten (10) days after any notice, claim or demand from any governmental
authority or any officer acting on behalf thereof, of any violation of any law,
order, ordinance, rule or regulation with respect to the operation of the
Facility which would have a material adverse effect on the operations of the
Facility or its licensure;
(p) Lessee fails to cure or abate any Class A or
equivalent violation occurring during the Term that is claimed by any
governmental authority, or any officer acting on behalf thereof, of any law,
order, ordinance, rule or regulation pertaining to the operation of the
Facility, and within the time permitted by such authority for such cure or
abatement;
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(q) if applicable, any proceedings are instituted
against Lessee by any governmental authority which are reasonably likely to
result in (i) the revocation of any license granted to Lessee for the operation
of the Facility, (ii) the decertification of the Facility from participation in
the Medicare or Medicaid reimbursement program, or (iii) the issuance of a stop
placement order against Lessee;
(r) any default and acceleration of any indebtedness
of Lessee or Guarantor in excess of $100,000.00 has occurred; and
(s) any default shall occur under the Guaranty.
16.2 Certain Remedies. If an Event of Default shall have
occurred, Lessor may terminate this Lease by giving Lessee notice of such
termination and the Term shall terminate and all rights of Lessee under this
Lease shall cease. Lessor shall have all rights at law and in equity available
to Lessor as a result of any Event of Default. Lessee shall pay as Additional
Charges all costs and expenses incurred by or on behalf of Lessor, including
reasonable attorneys' fees and expenses, as a result of any Event of Default
hereunder. If an Event of Default shall have occurred and be continuing,
whether or not this Lease has been terminated pursuant to Section 16.1, Lessee
shall, to the extent permitted by law, if required by Lessor so to do,
immediately surrender to Lessor possession of the Leased Property and any
Capital Additions thereto and quit the same and Lessor may enter upon and
repossess the Leased Property and any Capital Addition thereto by reasonable
force, summary proceedings, ejectment or otherwise, and may remove Lessee and
all other Persons and any of Lessee's Personal Property from the Leased
Property and any Capital Addition thereto, subject to rights, if any, of
residents or patients and to any Legal Requirements.
16.3 Damages. (a) The termination of this Lease; (b) the
repossession of the Leased Property and any Capital Addition thereto; (c) the
failure of Lessor, notwithstanding reasonable good faith efforts, to relet the
Leased Property; (d) the reletting of all or any portion of the Leased
Property; or (e) the failure or inability of Lessor to collect or receive any
rentals due upon any such reletting, shall not relieve Lessee of its
liabilities and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. If any such termination occurs, Lessee
shall forthwith pay to Lessor all Rent due and payable with respect to the
Leased Property to and including the date of such termination. Thereafter:
Lessee shall forthwith pay to Lessor, at Lessor's option, as
and for liquidated and agreed current damages for Lessee's
Default, either:
(i) the sum of:
(A) the worth at the time of award of the unpaid
Rent which had been earned at the time of termination,
(B) the worth at the time of award of the amount by
which the unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that
Lessee proves could have been reasonably avoided,
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(C) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of
award exceeds the amount of such rental loss that Lessee proves could
be reasonably avoided, plus
(D) any other amount necessary to compensate Lessor
for all the detriment proximately caused by Lessee's failure to
perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom.
As used in clauses (i) and (ii) above, the "worth at the time of
award" shall be computed by allowing interest at the Overdue Rate. As
used in clause (iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus two
percent (2%). For purposes of determining the worth at the time of the
award, Additional Rent that would have been payable for the remainder
of the Term shall be deemed to be the greater of (y) the same as the
Additional Rent for the then current Lease Year or, if not
determinable, the immediately preceding Lease Year; and (z) such other
amount as Lessor shall demonstrate could reasonably have been earned.
or (ii)
without termination of Lessee's right to possession of the Leased
Property, each installment of said Rent and other sums payable by
Lessee to Lessor under the Lease as the same becomes due and payable,
together with interest at the Overdue Rate from the date when due
until paid, and Lessor may enforce, by action or otherwise, any other
term or covenant of this Lease.
16.4 Receiver. Upon the occurrence of an Event of Default,
and upon commencement of proceedings to enforce the rights of Lessor hereunder,
Lessor shall be entitled, as a matter of right, to the appointment of a
receiver or receivers acceptable to Lessor of the Leased Property and any
Capital Addition thereto of the revenues, earnings, income, products and
profits thereof, pending the outcome of such proceedings, with such powers as
the court making such appointment shall confer, subject, however, to rights, if
any, of residents or patients and to any Legal Requirements.
16.5 Lessee's Obligation to Purchase. If an Event of Default
shall have occurred, Lessor may require Lessee to purchase the Leased Property
on the first Minimum Rent Payment Date occurring not less than thirty (30) days
after the date specified in a notice from Lessor, which notice may be included
in any notice of termination of this Lease given to Lessee pursuant to Section
16.2 or by separate written notice given by Lessor to Lessee at any time
thereafter, requiring such purchase for an amount equal to the greater of (i)
the Fair Market Value, or (ii) the Minimum Repurchase Price, plus, in either
event, all Rent then due and payable (excluding the installment of Minimum Rent
due on the purchase date). If Lessor exercises such right, Lessor shall convey
the Leased Property to Lessee on the date fixed
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therefor in accordance with the provisions of Article XVIII upon receipt of the
purchase price therefor and this Lease shall thereupon terminate. Any purchase
by Lessee of the Leased Property pursuant to this Section shall be in lieu of
the damages specified in Section 16.3.
16.6 Waiver. If Lessor initiates judicial proceedings or if
this Lease is terminated by Lessor pursuant to this Article, Lessee waives, to
the extent permitted by ap plicable law, (i) any right of redemption, re-entry
or repossession; and (ii) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
16.7 Application of Funds. Any payments received by Lessor
under any of the provisions of this Lease during the existence or continuance
of any Event of Default which are made to Lessor rather than Lessee due to the
existence of an Event of Default shall be applied to Lessee's obligations in
the order which Lessor may determine or as may be prescribed by the laws of the
State.
16.8 Facility Operating Deficiencies. On notice or request
therefor by Lessor to Lessee, upon the occurrence of a Facility Operating
Deficiency specified with particularity in Lessor's notice, and for a period
equal to the greater of six (6) months or the time necessary fully to remedy
the Facility Operating Deficiency, Lessee shall engage the services of a
management consultant, unaffiliated with Lessee and approved by Lessor, to
review the management of the Facility and make recommendations to remedy the
Facility Operating Deficiency(ies). Such management consultant shall prepare a
written report of its findings and recommendations, and Lessee shall cause the
same to be delivered to Lessor for approval.
The management consultant shall have complete access to the
Facility, its records, offices and facilities, in order that it may carry out
its duties and make its recommendations. If Lessee shall fail to designate a
management consultant acceptable to Lessor within five (5) days after receipt
of the notice of request therefor, Lessor may designate such management
consultant by further notice to Lessee. Lessee shall be responsible for payment
of all fees and expenses reasonably charged and incurred by the management
consultant in carrying out its duties. Promptly following Lessor's and Lessee's
receipt of such management consultant's written report and recommendations, the
parties shall hold a telephone conference or meeting to discuss the contents of
such report and such recommendations for purposes of reaching mutual agreement
as to which recommendations Lessee shall implement. In the event that the
parties are unable to mutually agree on such recommendations, Lessor's sole,
but reasonable decision shall be final and binding. Promptly following the
parties agreement on such recommendation, or Lessor's decision, as the case may
be, Lessee shall implement the applicable recommendations in a diligent manner.
16.9 Lessor's Right of Appraisal. Without limiting any other
right or remedy of Lessor hereunder, upon the expiration or earlier termination
of this Lease, and whether or not Lessor has ever formally declared an Event of
Default, Lessor shall have the right to conduct an appraisal of the Leased
Property in accordance with the provisions of Article XXXIV in order to
determine its Fair Market Value. If Lessor so elects, the Appraiser shall (i)
appraise the Leased Property in accordance with the provisions of Article XXXIV
and the
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definition of Fair Market Value set forth in Article I and (ii) appraise the
Leased Property in accordance with clause (i) but with the following
adjustments:
(a) The negative value of (1) any deferred
maintenance or other items of repair or replacement of the Leased
Property, (2) any then current or prior licensure or certification
violations and/or admission holds and (3) any other breach or failure
of Lessee to perform or observe its obligations under this Lease
during the Term shall be taken into account and deducted from the Fair
Market Value determined in accordance with this clause (ii).
(b) The actual occupancy level and the actual
residence mix, patient mix, case mix, or diagnostic related group or
acuity mix, as applicable, of the Facility as of the date of
termination shall each be considered and any positive or negative
value attributable thereto shall be taken into account and either
deducted from or added to the Fair Market Value determined in
accordance with this clause (ii).
In the event the Fair Market Value of the Leased Property determined pursuant
to clause (ii) is less than the Fair Market Value determined pursuant to clause
(i), then the difference between the two, together with the costs and expenses
incurred by Lessor for the Appraiser, shall be paid by Lessee to Lessor upon
demand as an Additional Charge hereunder and shall be treated by Lessor and
Lessee as the payment of additional rent for federal income tax purposes. The
obligation of Lessee to pay such amount, if any, shall survive the expiration
or earlier termination of this Lease.
16.10 Lessor's Security Interest. The parties intend that if
this Lease is terminated due to an Event of Default under this Lease, Lessor
will control Lessee's Personal Property and the Intangible Property so that
Lessor or its designee or nominee can operate or re-let the Leased Property
intact for its Primary Intended Use. Accordingly, to implement such intention,
and for the purpose of securing the payment and performance obligations of
Lessee hereunder, Lessor and Lessee agree as follows:
16.10.1 Lessee, as debtor, hereby grants to Lessor, as
secured party, a security interest and an express contractual lien upon all of
Lessee's right, title and interest in and to Lessee's Personal Property and in
and to the Intangible Property and any and all products, rents, proceeds and
profits thereof in which Lessee now owns or hereafter acquires an interest or
right, including any leased Lessee's Personal Property. This Lease constitutes
a security agreement covering all such Lessee's Personal Property and the
Intangible Property. The security interest granted to Lessor with respect to
Lessee's Personal Property in this Section 16.10 is intended by Lessor and
Lessee to be subordinate to any security interest granted in connection with
the financing or leasing of all or any portion of the Lessee's Personal
Property so long as the lessor or financier of such Lessee's Personal Property
agrees to give Lessor written notice of any default by Lessee under the terms
of such lease or financing arrangement, to give Lessor a reasonable time
following such notice to cure any such default and consents to Lessor's written
assumption of such lease or financing arrangement upon Lessor's curing of any
such defaults. This security agreement and the security interest created
herein shall survive the expiration or earlier termination of this Lease.
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16.10.2 If required by Lessor at any time during the Term,
Lessee shall execute and deliver to Lessor, in form reasonably satisfactory to
Lessor, additional security agreements, financing statements, fixture filings
and such other documents as Lessor may reasonably require to perfect or
continue the perfection of Lessor's security interest in Lessee's Personal
Property and the Intangible Property and any and all products and proceeds
thereof now owned or hereinafter acquired by Lessee. In the event Lessee fails
to execute any financing statement or other documents for the perfection or
continuation of Lessor's security interest, Lessee hereby appoints Lessor as
its true and lawful attorney-in-fact to execute any such documents on its
behalf, which power of attorney shall be irrevocable and is deemed to be
coupled with an interest.
16.10.3 Upon the occurrence of an Event of Default, Lessor
shall be entitled to exercise any and all rights or remedies available to a
secured party under the Uniform Commercial Code, or available to a lessor under
the laws of the State, with respect to Lessee's Personal Property and the
Intangible Property, including the right to sell the same at public or private
sale.
ARTICLE XVII
17. Lessor's Right to Cure Lessee's Default. If Lessee shall
fail to make any payment or to perform any act required to be made or performed
hereunder as and when required, Lessor, without waiving or releasing any
obligation or default, may, but shall be under no obligation to, make such
payment or perform such act for the account and at the expense of Lessee, and
may, to the extent permitted by law, enter upon the Leased Property and any
Capital Addition thereto for such purpose and take all such action thereon as,
in Lessor's opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Lessee. All sums so paid by Lessor and all costs
and expenses, including reasonable attorneys' fees and expenses, so incurred,
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid by Lessee to
Lessor on demand.
ARTICLE XVIII
18. Purchase of the Leased Property. If Lessee purchases the
Leased Property from Lessor, Lessor shall, upon receipt from Lessee of the
applicable purchase price, together with full payment of any unpaid Rent due
and payable with respect to any period ending on or before the date of the
purchase, deliver to Lessee an appropriate deed or other conveyance conveying
the entire interest of Lessor in and to the Leased Property to Lessee free and
clear of all encumbrances other than (i) those that Lessee has agreed hereunder
to pay or discharge; (ii) those mortgage liens, if any, which Lessee has agreed
in writing to accept and to take title subject to; (iii) those liens and
encumbrances which were in effect on the date of conveyance of the Leased
Property to Lessor; and (iv) any other encumbrances permitted hereunder to be
imposed on the Leased Property which are assumable at no cost to Lessee or
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to which Lessee may take subject without cost to Lessee. The difference between
the applicable purchase price and the total of the encumbrances assumed or
taken subject to shall be paid to Lessor or as Lessor may direct in immediately
available funds. All expenses of such conveyance, including the cost of title
insurance, attorneys' fees incurred by Lessor in connection with such
conveyance and release, transfer taxes and recording and escrow fees, shall be
paid by Lessee.
ARTICLE XIX
19. Renewal Terms. Provided that no Event of Default, or
event which, with notice or lapse of time or both, would constitute an Event of
Default, has occurred and is continuing, either at the date of exercise or upon
the commencement of an Extended Term (as hereunder defined), then Lessee shall
have the right to renew this Lease for two (2), ten (10) year renewal terms
(each, an "Extended Term), upon (i) giving written notice to Lessor of such
renewal not less than nine (9) months and not more than fifteen (15) months
prior to the expiration of the then current Term and (ii) delivering to Lessor
concurrent with such notice a reaffirmation of the Guaranty executed by
Guarantor stating, in substance, that Guarantor's obligations under the
Guaranty shall extend to this Lease, as extended by the Extended Term. During
each Extended Term, all of the terms and conditions of this Lease shall
continue in full force and effect except that the annual Minimum Rent for and
during such Extended Term shall be the greater of (a) the then current annual
Fair Market Rental for the Leased Property and (b) One Hundred Two and Five
Tenths Percent (102.5%) of the sum of the annual Minimum Rent and Additional
Rent payable for the last Lease Year of the immediately preceding Term.
Notwithstanding anything to the contrary in this Section
19.1, Lessor, in its sole discretion, may waive the condition to Lessee's right
to renew this Lease that no Event of Default, or event which, with notice or
lapse of time or both, would constitute an Event of Default, have occurred or
be continuing, and the same may not be used by Lessee as a means to negate the
effectiveness of Lessee's exercise of its renewal right for such Extended Term.
ARTICLE XX
20. Holding Over. If Lessee shall for any reason remain in
possession of the Leased Property after the expiration or earlier termination
of the Term, such possession shall be as a month-to-month tenant during which
time Lessee shall pay as Minimum Rent each month twice the sum of (i) monthly
Minimum Rent applicable to the prior Lease Year, plus (ii) one-twelfth of the
aggregate Additional Rent payable applicable to the prior Lease Year, together
with all Additional Charges and all other sums payable by Lessee pursuant to
this Lease. During such period of month-to-month tenancy, Lessee shall be
obligated to perform and observe all of the terms, covenants and conditions of
this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to month-to-month tenancies, to continue its occupancy and
use of the Leased Property. Nothing contained herein shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.
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ARTICLE XXI
[INTENTIONALLY OMITTED]
ARTICLE XXII
22. Risk of Loss. The risk of loss or of decrease in the enjoyment
and beneficial use of the Leased Property as a consequence of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than by Lessor and Persons claiming from, through or under Lessor) is
assumed by Lessee, and no such event shall entitle Lessee to any abatement of
Rent.
ARTICLE XXIII
23. General Indemnification. In addition to the other
indemnities contained herein, and notwithstanding the existence of any
insurance carried by or for the benefit of Lessor or Lessee, and without regard
to the policy limits of any such insurance, Lessee shall protect, indemnify,
save harmless and defend Lessor from and against all liabilities, obligations,
claims, damages penalties, causes of action, costs and expenses, including
reasonable attorneys', consultants' and experts' fees and expenses, imposed
upon or incurred by or asserted against Lessor by reason of: (i) any accident,
injury to or death of Persons or loss of or damage to property occurring on or
about the Leased Property or adjoining sidewalks; (ii) any use, misuse,
non-use, condition, maintenance or repair by Lessee of the Leased Property;
(iii) any failure on the part of Lessee to perform or comply with any of the
terms of this Lease; (iv) the non-performance of any of the terms and
provisions of any and all existing and future subleases of the Leased Property
to be performed by any party there under; (v) any claim for malpractice,
negligence or misconduct committed by any Person on or working from the Leased
Property; and (vi) the violation of any Legal Requirement. Any amounts which
become payable by Lessee under this Article shall be paid within ten (10) days
after liability therefor is determined by litigation or otherwise, and if not
timely paid shall bear interest at the Overdue Rate from the date of such
determination to the date of payment. Lessee, at its sole cost and expense,
shall contest, resist and defend any such claim, action or proceeding asserted
or instituted against Lessor or may compromise or otherwise dispose of the same
as Lessee sees fit; provided, however, that any legal counsel selected by
Lessee to defend Lessor shall be reasonably satisfactory to Lessor. All
indemnification covenants are intended to apply to losses, damages, injuries,
claims, etc. incurred directly by the indemnified parties and their property,
as well as by the indemnifying party or third party, and their property. For
purposes of this Article XXIII, any acts or omissions of Lessee, or by
employees, agents, assignees, contractors, subcontractors or others acting for
or on behalf of Lessee (whether or not they are negligent, intentional, willful
or unlawful), shall be strictly attributable to Lessee. It is understood and
agreed that payment shall not be a condition precedent to enforcement of the
foregoing indemnification obligations.
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ARTICLE XXIV
24. Subletting and Assignment.
24.1 Prohibition. Lessee shall not, without Lessor's prior
written consent, which may be withheld in Lessor's sole and absolute
discretion, voluntarily or by operation of law assign (which term includes any
sale, encumbering, pledge or other transfer or hypothecation) this Lease,
master sublet all or any part of the Leased Property or engage the services of
any Person for the management or operation of the Facility, or any portion
thereof. Lessee acknowledges that Lessor is relying upon the expertise of
Lessee in the operation of the Facility and that Lessor entered into this Lease
with the expectation that Lessee would remain in and operate the Facility
during the entire Term and for that reason Lessor retains sole and absolute
discretion in approving or disapproving any assignment, master sublease or
management arrangement. If Lessee is a corporation or partnership, any transfer
of its stock or partnership interests (or the stock or partnership interests of
the entity(ies) that controls Lessee) or any dissolution or merger or
consolidation of Lessee (or its controlling entity(ies)) with any other entity,
which results in a change in the control of Lessee (or its controlling
entity(ies)) from the Person or Persons owning a majority of its voting stock
or partnership interests immediately prior thereto, or the sale or other
transfer of all or substantially all of the assets of Lessee (or its
controlling entity(ies)), shall constitute an assignment of Lessee's interest
in this Lease within the meaning of this Article XXIV and the provisions
requiring consent contained herein shall apply. Any sublease of more than ten
percent (10%) of the Facility to any Person or its Affiliates, in one
transaction or in a series of transactions, shall be deemed to be a "master
sublease" hereunder. For any sublease transaction not requiring the consent of
Lessor hereunder (i.e., a sublease not constituting a master sublease), Lessee
shall, within ten (10) days of entering into any such sublease, notify Lessor
of the existence of such sublease and the identity of the sublessee and supply
Lessor with a copy of the sublease, any related documentation and any other
materials or information reasonably requested by Lessor.
24.2 Consent. If Lessee desires at any time to assign this
Lease, to master sublet the Facility or any portion thereof or engage the
services of any Person for the management or operation of the Facility, it
shall first notify Lessor of its desire to do so and shall submit in writing to
Lessor: (i) the name of the proposed master sublessee, assignee or manager;
(ii) the terms and provisions of the proposed master sublease, assignment or
management agreement; and (iii) such financial information as Lessor reasonably
may request concerning the proposed master sublessee, assignee or manager.
(a) Lessor may, as a condition to granting such
consent, require that the obligations of any sublessee, assignee, or manager
which is an Affiliate of another Person be guaranteed by its parent or
controlling Person and that any Guaranty of this Lease be reaffirmed by any
Guarantor notwithstanding such subletting, assignment or management
arrangement. Any sublease (including a sublease which does not constitute a
master lease) shall be expressly subject and subordinate to all applicable
terms and conditions of this Lease and provide that Lessor, at its option and
without any obligation to do so, may require any sublessee to attorn to Lessor,
in which event Lessor shall undertake the obligations of Lessee, as sublessor
under such sublease from the time of the exercise of such option to the
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termination of such sublease and in such case Lessor shall not be liable for
any prepaid rents or security deposit paid by such sublessee to Lessee or for
any other prior defaults of Lessee under such sublease. In the event that
Lessor shall not require such attornment with respect to any sublease, then
such sublease shall automatically terminate upon the expiration or earlier
termination of this Lease, including any early termination by mutual agreement
of Lessor and Lessee. Furthermore, any sublease, assignment or management
agreement shall expressly provide that the sublessee, assignee or manager shall
furnish Lessor with such financial and operational information and information
about the physical condition of the Facility, including the information
required by Section 25.2 herein, as Lessor may request from time to time.
(b) Lessor may, as a condition to its consent to any
such master subletting, require Lessee to pay to Lessor one hundred percent
(100%) of all Transfer Consideration (defined below). "Transfer Consideration"
shall mean the positive difference, if any, between the Fair Market Rental and
the Rent payable by Lessee determined on a monthly basis, prorating the Rent,
as appropriate, if less than all of the Facility is sublet. The difference for
each month shall be paid by Lessee to Lessor monthly when the Minimum Rent is
due.
(c) Lessor may, as a condition to its consent to any
assignment or management arrangement, require Lessee to pay to Lessor one
hundred percent (100%) of the gross fair market value of Lessee's leasehold
interest (the "Leasehold FMV"), determined by appraisal in accordance with the
appraisal procedures set forth in Article XXXIV, excluding any business value
in excess of real estate value.
(d) The consent by Lessor to any assignment, master
subletting or management arrangement shall not constitute a consent to any
subsequent assignment, master subletting or management arrangement by Lessee or
to any subsequent or successive assignment, master subletting or management
arrangement by the master sublessee, assignee or manager. Any purported or
attempted assignment, sublease, management agreement or other permission to use
the Facility contrary to the provisions of this Article shall be void and, at
the option of Lessor, shall terminate this Lease.
24.3 Costs. Lessee shall reimburse Lessor for Lessor's
reasonable costs and expenses incurred in conjunction with the processing and
documentation of any assignment, master subletting or management arrangement,
including attorneys', architects', engineers' or other consultants' fees
whether or not such master sublease, assignment or management agreement is
actually consummated.
24.4 No Release of Lessee's Obligations. No assignment,
subletting or management agreement shall relieve Lessee of its obligation to
pay the Rent and to perform all of the other obligations to be performed by
Lessee hereunder. The liability of Lessee named herein and any immediate and
remote successor in interest of Lessee (by assignment or otherwise), and the
due performance of the obligations of this Lease on Lessee's part to be
performed or observed, shall not in any way be discharged, released or impaired
by any (i) agreement which modifies any of the rights or obligations of the
parties under this Lease, (ii)
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stipulation which extends the time within which an obligation under this Lease
is to be performed, (iii) waiver of the performance of an obligation required
under this Lease, or (iv) failure to enforce any of the obligations set forth
in this Lease. If any assignee, sublessee or manager defaults in any
performance due hereunder, Lessor may proceed directly against the Lessee named
herein and/or any immediate and remote successor in interest of Lessee without
exhausting its remedies against such assignee, sublessee or manager.
24.5 Assignment of Lessee's Rights Against Sublessee. If
Lessor shall consent to a master subletting, then the written instrument of
consent, executed and acknowledged by Lessor, Lessee and sublessee, shall
contain a provision substantially similar to the following:
(i) Lessee and sublessee hereby agree that, if
sublessee shall be in default of any obligation of Lessee under the sublease,
which default also constitutes a default by Lessee under the Lease, then Lessor
shall be permitted to avail itself of all of the rights and remedies available
to Lessee in connection therewith.
(ii) Without limiting the generality of the
foregoing, Lessor shall be permitted (by assignment of a cause of action or
otherwise) to institute an action or proceeding against sublessee in the name
of Lessee in order to enforce Lessee's rights under the sublease, and also
shall be permitted to take all ancillary actions (e.g., serve default notices
and demands) in the name of Lessee as Lessor reasonably shall determine to be
necessary.
(iii) Lessee agrees to cooperate with Lessor, and to
execute such documents as shall be reasonably necessary, in connection with the
implementation of the foregoing rights of Lessor.
(iv) Lessee expressly acknowledges and agrees that
the exercise by Lessor of any of the foregoing rights and remedies shall not
constitute an election of remedies, and shall not in any way impair Lessor's
entitlement to pursue other rights and remedies directly against Lessee.
24.6 Special Transactions.
24.6.1 Assignment to Affiliate. Notwithstanding anything to
the contrary in Section 24.1, and subject to the provisions of Section 24.7
below, Lessor's consent shall not be required in connection with any assignment
of this Lease to an Affiliate of Lessee, so long as in connection therewith,
each of the following conditions is met:
(a) In connection with such assignment, there is no
change in the use of the Leased Property from the Primary Intended Use;
(b) Such Affiliate-assignee shall assume all of the
obligations of Lessee hereunder accruing subsequent to the effective date of
such assignment and by an instrument in writing in form and substance
reasonably satisfactory to Lessor. A copy of such executed assumption shall be
delivered to Lessor along with the notice specified in clause (d) below;
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(c) Neither the original Lessee nor Guarantor shall
be released from any of the obligations of the Lessee hereunder or the
Guarantor under the Guaranty, as applicable, whether occurring prior to or
after the effective date of such assignment;
(d) Within ten (10) days after the effectiveness of
such assignment, Lessee shall notify Lessor in writing of the occurrence of
such event, the effective date thereof, the facts placing the same within the
provisions of this Section 24.6.1 and any other change in the address for
billings and notices to Lessee pursuant to this Lease, accompanied by an
executed copy of the assumption required pursuant to this Lease.
24.6.2 Public Offering. Notwithstanding anything to the
contrary in Section 24.1, Lessor's consent shall not be required in connection
with any transfer of any stock of Lessee or any parent of Lessee as a result of
a public offering of Lessee's or its parent's stock which (a) constitutes a
bona fide public distribution of such stock pursuant to a firm commitment
underwriting registered under the Securities and Exchange Act of 1933 and (b)
results in such stock being listed for trading on the American Stock Exchange
or the New York Stock Exchange or authorized for quotation on the NASDAQ
National Market immediately upon the completion of such public offering.
24.6.3 Other Transfers of Stock or Assets to Third Parties.
Notwithstanding anything to the contrary in Section 24.1, and subject to the
provisions of Section 24.7 below, Lessee shall not unreasonably withhold its
consent to the assignment of this Lease (a) to the surviving corporation or
other Person in connection with a merger, consolidation or stock exchange to
which Lessee is a party or (b) to any person which acquires, in a single
transaction, all or substantially all of the assets or stock of Lessee. Without
limiting any of Lessor's rights hereunder, Lessor shall have the right to
require as a condition to giving such consent that the new controlling
Person(s) execute a guaranty for this Lease if (a) the Consolidated Net Worth
of Lessee or Guarantor will be diminished as a result of a transaction of the
type described in this Section 24.6.3.
24.7 REIT Protection. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not (i) sublet, assign or enter into a
management arrangement for the Leased Property on any basis such that the
rental or other amounts to be paid by the sublessee, assignee or manager
thereunder would be based, in whole or in part, on the income or profits
derived by the business activities of the sublessee, assignee or manager; (ii)
furnish or render any services to the sublessee, assignee or manager or manage
or operate the Leased Property so subleased, assigned or managed; (iii) sublet,
assign or enter into a management arrangement for the Leased Property to any
Person in which Lessee or Lessor owns an interest, directly or indirectly (by
applying constructive ownership rules set forth in Section 856(d)(5) of the
Code); or (iv) sublet, assign or enter into a management arrangement for the
Leased Property in any other manner which could cause any portion of the
amounts
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received by Lessor pursuant to this Lease or any sublease to 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 or which could cause any other
income of Lessor to fail to qualify as income described in Section 856(c)(2) of
the Code.
24.8 Transfers In Bankruptcy. In the event that this Lease is
assigned to any Person pursuant to the provisions of the Bankruptcy Code, all
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Lessor, shall be and remain the
exclusive property of Lessor and shall not constitute property of Lessee or of
the estate of Lessee within the meaning of the Bankruptcy Code. Any
consideration constituting Lessor's property pursuant to the immediately
preceding sentence and not paid or delivered to Lessor shall be held in trust
for the benefit of Lessor and be promptly paid or delivered to Lessor. For
purposes of this Section 24.7, the term "consideration" shall mean and included
money, services, property and any other thing of value such as payment of
costs, cancellation of indebtedness, discounts, rebates and the like. In the
event any such consideration is other than cash, the fair market value of such
consideration shall be paid or delivered to Lessor in cash.
ARTICLE XXV
25. Officer's Certificates and Financial Statements
25.1 Officer's Certificate. At any time and from time to time
upon Lessee's receipt of not less than twenty (20) days' prior written request
by Lessor, Lessee shall furnish to Lessor an Officer's Certificate certifying
(i) that this Lease is unmodified and in full force and effect, or that this
Lease is in full force and effect as modified and setting forth the
modifications; (ii) the dates to which the Rent has been paid; (iii) whether or
not, to the best knowledge of Lessee, Lessor is in default in the performance
of any covenant, agreement or condition contained in this Lease and, if so,
specifying each such default of which Lessee may have knowledge; and (iv)
responses to such other questions or statements of fact as Lessor, any ground
or underlying lessor, any purchaser or any current or prospective Facility
Mortgagee shall reasonably request. Lessee's failure to deliver such statement
within such time shall constitute an acknowledgement by Lessee that (x) this
Lease is unmodified and in full force and effect except as may be represented
to the contrary by Lessor; (y) Lessor is not in default in the performance of
any covenant, agreement or condition contained in this Lease; and (z) the other
matters set forth in such request, if any, are true and correct. Any such
certificate furnished pursuant to this Article may be relied upon by Lessor and
any current or prospective Facility Mortgagee, ground or underlying lessor or
purchaser of the Leased Property.
25.2 Statements. Lessee shall furnish the following
statements to Lessor:
(a) within 120 days after the end of each of
Lessee's and Guarantor's fiscal years, a copy of the audited
consolidated balance sheets of Lessee, its consolidated Subsidiaries
and Guarantor as of the end of such fiscal year, and related
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audited consolidated statements of income, changes in common stock and
other stockholders' equity and changes in the financial position of
Lessee, its consolidated Subsidiaries and Guarantor for such fiscal
year, prepared in accordance with GAAP applied on a basis consistently
maintained throughout the period involved, such consolidated financial
statements to be certified by nationally recognized certified public
accountants; provided, however, that if Lessee and its subsidiaries
(if any) are consolidated with Guarantor, then Lessee shall only be
required to furnish such audited consolidated balance sheets of
Guarantor together with related audited consolidated statements of
income, changes in common stock and other stockholders' equity and
changes in financial position of Guarantor;
(b) within 120 days after the end of each of
Lessee's and Guarantor's fiscal years, and together with the annual
audit report furnished in accordance with clause (a) above, an
Officer's Certificate stating that to the best of the signer's
knowledge and belief after making due inquiry, Lessee is not in
default in the performance or observance of any of the terms of this
Lease, or if Lessee shall be in default, specifying all such defaults,
the nature thereof, and the steps being taken to remedy the same;
(c) within thirty (30) days after the end of each
month for those months occurring from the Commencement Date to three
months after the first month in which the average Cash Flow Coverage
for the Facility equals or exceeds 1.3 for such month, all
consolidated financial reports Lessee produces for reporting purposes
and detailed statements of income and detailed operational statistics
regarding occupancy rates, patient and resident mix and patient and
resident rates by type for the Facility; and thereafter within sixty
(60) days after the end of each of Lessee's quarters, all quarterly
consolidated financial reports Lessee produces for reporting purposes
and detailed statements of income and detailed operational statistics
regarding occupancy rates, patient and resident mix and patient and
resident rates by type for the Facility;
(d) within 120 days after the end of each of
Lessee's fiscal years, a copy of each cost report filed with the
appropriate governmental agency for the Facility;
(e) within thirty (30) days after they are required
to be filed with the SEC, copies of any annual reports and of
information, documents and other reports, or copies of such portions
of any of the foregoing as the SEC may prescribe, which Lessee is
required to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934;
(f) immediately upon Lessee's receipt thereof,
copies of all written communications received by Lessee from any
regulatory agency relating to (i) surveys of the Facility for purposes
of licensure, Medicare and Medicaid certification and accreditation,
if applicable, and (ii) any proceeding, formal or informal, with
respect to cited deficiencies with respect to services and activities
provided and performed at the Facility, including patient and resident
care, patient and
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resident activities, patient and resident therapy, dietary, medical
records, drugs and medicines, supplies, housekeeping and maintenance,
or the condition of the Facility, and involving an actual or
threatened warning, imposition of a fine or a penalty, or suspension,
termination or revocation of the Facility's license to be operated in
accordance with its Primary Intended Use;
(g) within 120 days after the end of each fiscal
year of the financial institution issuing the letter of credit
required under Article XXI, a copy of the audited consolidated balance
sheets of such financial institution as of the end of such fiscal
year, and related unaudited consolidated statements of income, changes
in common stock and other stockholders equity and changes in the
financial position of such financial institution and its consolidated
subsidiaries for each such fiscal year, prepared in accordance with
generally accepted accounting principles applied on a basis
consistently maintained throughout the period involved, such
consolidated financial statements to be certified by nationally
recognized certified public accountants;
(h) immediately upon Lessee's receipt thereof,
copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to the Leased Property or
Lessee's use thereof; and
(i) with reasonable promptness, such other
information respecting the financial and operational condition and
affairs of Lessee and the Facility and the physical condition of the
Leased Property and any Capital Addition thereto as Lessor may
reasonably request, in the form of a questionnaire or otherwise, from
time to time.
25.3 Charges. Lessee acknowledges that the failure to furnish
Lessor with any of the certificates or statements required by this Article XXV
will cause Lessor to incur costs and expenses not contemplated hereunder, the
exact amount of which is presently anticipated to be extremely difficult to
ascertain. Accordingly, if Lessee fails to furnish Lessor with any of the
certificates or statements required by this Article XXV, Lessee shall pay to
Lessor upon demand $1,000 for each such failure as Additional Charges, which
shall be treated by Lessor and Lessee as the payment of additional rent for
federal income tax purposes. The parties agree that this charge represents a
fair and reasonable estimate of the costs that Lessor will incur by reason of
Lessee's failure to furnish Lessor with such certificates and statements.
ARTICLE XXVI
26. Lessor's Right to Inspect and Show the Leased Property.
Lessee shall permit Lessor and its authorized representatives to (i) inspect
the Leased Property and any Capital Addition thereto and (ii) exhibit the same
to prospective purchasers and lenders, and during the last twelve (12) months
of the Term, to prospective lessees or managers, in each instance during usual
business hours and subject to any reasonable security, health, safety or
confidentiality requirements of Lessee or any Legal Requirement or Insurance
Requirement.
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Lessee shall cooperate with Lessor in exhibiting the Leased Property and any
Capital Additions thereto to prospective purchasers, lenders, lessees and
managers.
ARTICLE XXVII
27. No Waiver. No failure by Lessor to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
hereunder and no acceptance of full or partial payment of Rent during the
continuance of any default or Event of Default shall constitute a waiver of any
such breach or of any such term. No waiver of any breach shall affect or alter
this Lease, which shall continue in full force and effect with respect to any
other then existing or subsequent breach.
ARTICLE XXVIII
28. Remedies Cumulative. Each legal, equitable or contractual
right, power and remedy of Lessor now or hereafter provided either in this
Lease 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 Lessor of any one or more of such rights, powers
and remedies shall not preclude the simultaneous or subsequent exercise by
Lessor of any or all of such other rights, powers and remedies.
ARTICLE XXIX
29. Acceptance of Surrender. No surrender to Lessor of this
Lease or of the Leased Property, or any part thereof or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing
by Lessor and no act by Lessor or any representative or agent of Lessor, other
than such a written acceptance by Lessor, shall constitute an acceptance of any
such surrender.
ARTICLE XXX
30. No Merger. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, (i) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (ii) the fee estate in the Leased Property.
ARTICLE XXXI
31. Conveyance by Lessor. If Lessor or any successor owner of
the Leased Property shall convey the Leased Property other than as security for
a debt, Lessor or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of the Lessor under this
Lease arising or accruing from and after the date of such conveyance or other
transfer so long as the transferee shall have assumed in writing all
obligations of the Lessor or successor owner hereunder arising or accruing from
and after the date of such conveyance.
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ARTICLE XXXII
32. Quiet Enjoyment. So long as Lessee shall pay the Rent as
the same becomes due and shall fully comply with all of the terms of this Lease
and fully perform its obligations hereunder, Lessee shall peaceably and quietly
have, hold and enjoy the Leased Property for the Term, free of any claim or
other action by Lessor or anyone claiming by, through or under Lessor, but
subject to all liens and encumbrances of record as of the date hereof, or the
Commencement Date or created thereafter as permitted hereunder or thereafter
consented to by Lessee. No failure by Lessor to comply with the foregoing
covenant shall give Lessee any right to cancel or terminate this Lease or
abate, reduce or make a deduction from or offset against the Rent or any other
sum payable under this Lease, or to fail to perform any other obligation of
Lessee hereunder. Notwithstanding the foregoing, Lessee shall have the right,
by separate and independent action to pursue any claim it may have against
Lessor as a result of a breach by Lessor of the covenant of quiet enjoyment
contained in this Article.
ARTICLE XXXIII
33. Notices. Any notice, consent, approval, demand or other
communication required or permitted to be given hereunder (a "notice") must be
in writing and may be served personally or by U.S. Mail. If served by U.S.
Mail, it shall be addressed as follows:
If to Lessor: Health Care Property Investors, Inc.
10990 Wilshire Boulevard
Suite 1200
Los Angeles, California 90024
Attn: Legal Department
Fax: (310) 444-7817
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attn: David H. Vena, Esq.
Fax: (213) 891-8763
If to Lessee: BCC at Mt. Pines, Inc.
3507 Market Street, Suite 202
Camp Hill, Pennsylvania 17011
Attn: Brad Hollinger, President
Fax: (717) 731-9179
with a copy to: Kirkpatrick & Lockhart
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: David H. Ehrenwerth, Esq.
Fax: (412) 355-6501
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Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return
receipt requested, postage prepaid and addressed as provided above, on the date
of receipt, refusal or non-delivery indicated on the return receipt. In
addition, either party may send notices by facsimile or by a nationally
recognized overnight courier service provides written proof of delivery (such
as U.P.S. or Federal Express). Any notice sent by facsimile shall be effective
upon confirmation of receipt in legible form, and any notice sent by a
nationally recognized overnight courier shall be effective on the date of
delivery to the party at its address specified above as set forth in the
courier's delivery receipt. Either party may, by notice to the other from time
to time in the manner herein provided, specify a different address for notice
purposes.
ARTICLE XXXIV
34. Appraiser. If it becomes necessary to determine the Fair
Market Value, Fair Market Rental or Leasehold FMV for any purpose of this
Lease, the same shall be determined by Valuation Counselors Group, Inc., or in
the event Valuation Counselors Group, Inc. no longer exists upon the date the
same is to be determined, any other nationally recognized appraisal firm, in
which one or more of the members, officers or principals of such firm are
members of the American Institute of Real Estate Appraisers (or any successor
organization thereto), as may be selected by Lessor (the "Appraiser"). Lessor
shall cause such Appraiser to determine the Fair Market Value, Fair Market
Rental or Leasehold FMV as of the relevant date (giving effect to the impact,
if any, of inflation from the date of the Appraiser's decision to the relevant
date) and the determination of such Appraiser shall be final and binding upon
the parties. If the Facility had reached stabilized operations prior to the
Commencement Date, to the extent consistent with sound appraisal practice as
then existing at the time of any such appraisal, an appraisal for Fair Market
Value shall be made on a basis consistent with the basis on which the Leased
Property was appraised for purposes of determining its fair market value at the
time the Leased Property was acquired by Lessor. This provision for
determination by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by
applicable law. Lessor and Lessee shall each pay one-half of the fees and
expenses of the Appraiser and one-half of all other cost and expenses incurred
in connection with such appraisal.
ARTICLE XXXV
[INTENTIONALLY OMITTED]
ARTICLE XXXVI
36.1 Lessor May Grant Liens. Without the consent of Lessee,
Lessor may, from time to time, directly or indirectly, create or otherwise
cause
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to exist any ground lease, mortgage, trust deed, lien, encumbrance or title
retention agreement (collectively, an "encumbrance") upon the Leased Property
and any Capital Addition thereto, or any portion thereof or interest therein.
This Lease is and at all times shall be subject and subordinate to any such
encumbrance which may now or hereafter affect the Leased Property and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative and no further instrument of subordination
shall be required; provided, however, that in confirmation of such
subordination, Lessee shall execute promptly any certificate or document that
Lessor or any ground or underlying lessor, mortgagee or beneficiary may request
for such purposes; provided further, however, that the subjection and
subordination of this Lease and Lessee's leasehold interest hereunder to any
encumbrance imposed after the Commencement Date shall be conditioned upon the
execution by the holder of such encumbrance and delivery to Lessee of a
nondisturbance and attornment agreement which provides, in substance, that so
long as no Event of Default has occurred and is continuing hereunder beyond any
applicable cure period, the holder of such encumbrance shall not disturb either
Lessee's leasehold interest or possession of the Leased Property in accordance
with the terms hereof. If, in connection with obtaining financing or
refinancing for the Leased Property, a Facility Mortgagee or prospective
Facility Mortgagee shall request reasonable modifications to this Lease as a
condition to such financing or refinancing, Lessee shall not withhold or delay
its consent thereto.
36.2 Attornment. If Lessor's interest in the Leased Property
is sold or conveyed upon the exercise of any remedy provided for in any
Facility Mortgage, or otherwise by operation of law: (i) at the new owner's
option, Lessee shall attorn to and recognize the new owner as Lessee's Lessor
under this Lease or enter into a new lease substantially in the form of this
Lease with the new owner, and Lessee shall take such actions to confirm the
foregoing within ten (10) days after request; and (ii) the new owner shall not
be (a) liable for any act or omission of Lessor under this Lease occurring
prior to such sale or conveyance, or (b) subject to any offset, abatement or
reduction of rent because of any default of Lessor under this Lease occurring
prior to such sale or conveyance.
36.3 Breach by Lessor. It shall be a breach of this Lease if
Lessor shall fail to observe or perform any term, covenant or condition of this
Lease on its part to be performed (if any) and such failure shall continue for
a period of thirty (30) days after notice thereof from Lessee, unless such
failure cannot with due diligence be cured within such 30- day period, in which
case such failure shall not constitute a breach of this Lease by Lessor if
Lessor, within such 30-day period commences to cure such alleged breach and
thereafter diligently prosecutes the same to completion. The time within which
Lessor shall be obligated to cure any such failure shall also be subject to an
extension of time due to the occurrence of any Unavoidable Delay.
ARTICLE XXXVII
37.1 Hazardous Substances. Lessee shall not allow any
Hazardous Substance to be located in, on, under or about the Leased Property or
incorporated in the
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Facility; provided, however, that Hazardous Substances may be brought, kept,
used or disposed of in, on or about the Leased Property in quantities and for
purposes similar to those brought, kept, used or disposed of in, on or about
similar facilities used for purposes similar to the Primary Intended Use and
which are brought, kept, used and disposed of in strict compliance with Legal
Requirements. Lessee shall not allow the Leased Property to be used as a waste
disposal site or, except as permitted in the immediately preceding sentence,
for the manufacturing, handling, storage, distribution or disposal of any
Hazardous Substance.
37.2 Notices. Lessee shall provide to Lessor promptly, and in
any event immediately upon Lessee's receipt thereof, a copy of any notice, or
notification with respect to, (i) any violation of a Legal Requirement relating
to Hazardous Substances located in, on, or under the Leased Property or any
adjacent property; (ii) any enforcement, cleanup, removal, or other
governmental or regulatory action instituted, completed or threatened with
respect to the Leased property; (iii) any claim made or threatened by any
Person against Lessee or the Leased Property relating to damage, contribution,
cost recovery, compensation, loss, or injury resulting from or claimed to
result from any Hazardous Substance; and (iv) any reports made to any federal,
state or local environmental agency arising out of or in connection with any
Hazardous Substance in, on, under or removed from the Leased Property,
including any complaints, notices, warnings or asserted violations in
connection therewith.
37.3 Remediation. If Lessee becomes aware of a violation of
any Legal Requirement relating to any Hazardous Substance in, on, under or
about the Leased Property or any adjacent property, or if Lessee, Lessor or the
Leased Property becomes subject to any order of any federal, state or local
agency to repair, close, detoxify, decontaminate or otherwise remediate the
Leased Property, Lessee shall immediately notify Lessor of such event and, at
its sole cost and expense, cure such violation or effect such repair, closure,
detoxification, decontamination or other remediation. If Lessee fails to
implement and diligently pursue any such cure, repair, closure, detoxification,
decontamination or other remediation, Lessor shall have the right, but not the
obligation, to carry out such action and to recover from Lessee all of Lessor's
costs and expenses incurred in connection therewith.
37.4 Indemnity. Lessee shall indemnify, defend, protect,
save, hold harmless, and reimburse Lessor for, from and against any and all
costs, losses (including, losses of use or economic benefit or diminution in
value), liabilities, damages, assessments, lawsuits, deficiencies, demands,
claims and expenses (collectively, "Environmental Costs") (whether or not
arising out of third-party claims and regardless of whether liability without
fault is imposed, or sought to be imposed, on Lessor) incurred in connection
with, arising out of, resulting from or incident to, directly or indirectly,
before or during the Term (i) the production, use, generation, storage,
treatment, transporting, disposal, discharge, release or other handling or
disposition of any Hazardous Substances from, in, on or about the Leased
Property (collectively, "Handling"), including the effects of such Handling of
any Hazardous Substances on any Person or property within or outside the
boundaries of the Leased Property, (ii) the presence of any Hazardous
Substances in, on, under or about the Leased Property and (iii) the violation
of any Legal Requirements (including Environmental Laws). "Environmental Costs"
include interest, costs of response, removal, remedial action, containment,
cleanup,
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investigation, design, engineering and construction, damages (including actual,
consequential and punitive damages) for personal injuries and for injury to,
destruction of or loss of property or natural resources, relocation or
replacement costs, penalties, fines, charges or expenses, attorney's fees,
expert fees, consultation fees, and court costs, and all amounts paid in
investigating, defending or settling any of the foregoing.
Without limiting the scope or generality of the foregoing,
Lessee expressly agrees to reimburse Lessor for any and all costs and expenses
incurred by Lessor:
(a) In investigating any and all matters relating to the
Handling of any Hazardous Substances, in, on, from, under or about the
Leased Property;
(b) In bringing the Leased Property into compliance with all
Legal Requirements; and
(c) Removing, treating, storing, transporting, cleaning-up
and/or disposing of any Hazardous Substances used, stored, generated,
released or disposed of in, on, from, under or about the Leased
Property or offsite.
If any claim is made hereunder, Lessee agrees to pay such
claim promptly, and in any event to pay such claim within sixty (60) calendar
days after receipt by Lessee of notice thereof. If any such claim is not so
paid and Lessor is ultimately found or agrees to be responsible therefore,
Lessee agrees also to pay interest on the amount paid from the date of the
first notice of such claim, at the Overdue Rate.
37.5 Environmental Inspection. Lessor shall have the right,
from time to time, and upon not less than five (5) days written notice to
Lessee, except in the case of an emergency in which event no notice shall be
required, to conduct an inspection of the Leased Property to determine the
existence or presence of Hazardous Substances on or about the Leased Property.
Lessor shall have the right to enter and inspect the Leased Property, conduct
any testing, sampling and analyses it deems necessary and shall have the right
to inspect materials brought into the Leased Property. Lessor may, in its
discretion, retain such experts to conduct the inspection, perform the tests
referred to herein, and to prepare a written report in connection therewith.
All costs and expenses incurred by Lessor under this Section shall be paid on
demand as Additional Charges by Lessee to Lessor. Failure to conduct an
environmental inspection or to detect unfavorable conditions if such inspection
is conducted shall in no fashion be intended as a release of any liability for
environmental conditions subsequently determined to be associated with or to
have occurred during Lessee's tenancy. Lessee shall remain liable for any
environmental condition related to or having occurred during its tenancy
regardless of when such conditions are discovered and regardless of whether or
not Lessor conducts an environmental inspection at the termination of the
Lease. The obligations set forth in this Article shall survive the expiration
or earlier termination of the Lease.
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ARTICLE XXXVIII
38. Memorandum of Lease. Lessor and Lessee shall, promptly
upon the request of either, enter into a short form memorandum of this Lease,
in form suitable for recording under the laws of the State. Lessee shall pay
all costs and expenses of recording any such memorandum and shall fully
cooperate with Lessor in removing from record any such memorandum upon the
expiration or earlier termination of the Term.
ARTICLE XXXIX
39. Sale of Assets. Notwithstanding any other provision of
this Lease, Lessor shall not be required to (i) sell or transfer the Leased
Property, or any portion thereof, which is a real estate asset as defined in
Section 856(c)(6)(B), or functionally equivalent successor provision, of the
Code, to Lessee if Lessor's counsel advises Lessor that such sale or transfer
may not be a sale of property described in Section 857(b)(6)(C), or
functionally equivalent successor provision, of the Code or (ii) sell or
transfer the Leased Property, or any portion thereof, to Lessee if Lessor's
counsel advises Lessor that such sale or transfer could result in an
unacceptable amount of gross income for purposes of the ninety five percent
(95%) gross income test contained in Section 856(c)(2), or functionally
equivalent successor provision, of the Code. If Lessee has the right or
obligation to purchase the property pursuant to the terms herein, and if Lessor
determines not to sell such property pursuant to the above sentence, then
Lessee shall purchase such property, upon and subject to all applicable terms
and conditions set forth in this Lease, including the provisions of Article
XXXV, at such time as the transaction, upon the advice of Lessor's counsel,
would be a sale of property (to the extent the Leased Property is a real estate
asset) described in Section 857(b)(6)(C), or functionally equivalent successor
provision, of the Code, and would not result in an unacceptable amount of gross
income for purposes of the ninety five percent (95%) gross income test
contained in Section 856(c)(2), or functionally equivalent successor provision
of the Code and until such time Lessee shall lease the Leased Property from
Lessor at the Fair Market Rental determined in accordance with Article XXXIV.
The provisions of this Article shall not be applicable if Lessor or a partner
of Lessor does not at the time of the Closing of the sale or transfer of the
Leased Property maintain status as a qualified real estate investment trust
under the Code.
ARTICLE XL
[INTENTIONALLY OMITTED]
ARTICLE XLI
41. Authority. If Lessee is a corporation, trust, or
partnership, Lessee, and each individual executing this Lease on behalf of
Lessee, represent and warrant that each is duly authorized to execute and
deliver this Lease on behalf of Lessee and shall within thirty (30) days after
execution of this Lease deliver to Lessor evidence of such authority reasonably
satisfactory to Lessor.
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ARTICLE XLII
42. Attorneys' Fees. If Lessor or Lessee brings an action or
other proceeding against the other to enforce any of the terms, covenants or
conditions hereof or any instrument executed pursuant to this Lease, or by
reason of any breach or default hereunder or thereunder, the party prevailing
in any such action or proceeding and any appeal thereupon shall be paid all of
its costs and reasonable attorneys' fees incurred therein. In addition to the
foregoing and other provisions of this Lease that specifically require Lessee
to reimburse, pay or indemnify against Lessor's attorneys' fees, Lessee shall
pay, as Additional Charges, all of Lessor's reasonable attorneys' fees incurred
in connection with the administration or enforcement of this Lease, including
attorneys' fees incurred in connection with the renewal of this Lease for any
Extended Term, the review of any letters of credit, the review, negotiation or
documentation of any subletting, assignment, or management arrangement or any
consent requested in connection therewith, and the collection of past due Rent.
ARTICLE XLIII
43. Brokers. Lessee warrants that it has not had any contact
or dealings with any Person or real estate broker which would give rise to the
payment of any fee or brokerage commission in connection with this Lease, and
Lessee shall indemnify, protect, hold harmless and defend Lessor from and
against any liability with respect to any fee or brokerage commission arising
out of any act or omission of Lessee. Lessor warrants that it has not had any
contact or dealings with any Person or real estate broker which would give rise
to the payment of any fee or brokerage commission in connection with this
Lease, and Lessor shall indemnify, protect, hold harmless and defend Lessee
from and against any liability with respect to any fee or brokerage commission
arising out of any act or omission of Lessor.
ARTICLE XLIV
44.1 Miscellaneous.
44.1.1 Survival. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities and indemnities
of, Lessee or Lessor arising prior to the expiration or earlier termination of
the Term shall survive such expiration or termination. In addition, all claims
against, and all liabilities and indemnities hereunder of Lessee shall continue
in full force and effect and in favor of the Lessor named herein and its
successors and assigns, notwithstanding any conveyance of the Leased Property
to Lessee.
44.1.2 Severability. If any term or provision of this Lease
or any application thereof shall be held invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
44.1.3 Non-Recourse. Lessee specifically agrees to look
solely to the Leased Property for recovery of any judgment from Lessor. It is
specifically agreed that no constituent partner in Lessor or officer, director
or employee of Lessor shall ever be personally liable for any such judgment or
for the payment of any monetary obligation to Lessee. The
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provision contained in the foregoing sentence is not intended to, and shall
not, limit any right that Lessee might otherwise have to obtain injunctive
relief against Lessor, or any action not involving the personal liability of
Lessor. Furthermore, except as otherwise expressly provided herein, in no
event shall Lessor ever be liable to Lessee for any indirect or consequential
damages suffered by Lessee from whatever cause.
44.1.4 Licenses. Upon the expiration or earlier termination
of the Term, Lessee shall use its best efforts to transfer to Lessor or
Lessor's nominee and shall cooperate with Lessor or Lessor's designee or
nominee in connection with the processing by Lessor or Lessor's designee or
nominee of any applications for all licenses, operating permits and other
governmental authorization, all contracts, including contracts with
governmental or quasi-governmental entities, business records, data, patient
and resident records, and patient and resident trust accounts, which may be
necessary or useful for the operation of the Facility; provided that the costs
and expenses of any such transfer or the processing of any such application
shall be paid by Lessor or Lessor's designee or nominee. Lessee shall not
commit any act or be remiss in the undertaking of any act that would jeopardize
the licensure or certification of the Facility, and Lessee shall comply with
all requests for an orderly transfer of the same upon the expiration or early
termination of the Term. In addition, upon request, Lessee shall promptly
deliver copies of all books and records relating to the Leased Property and its
operation to Lessor or Lessor's designee or nominee. Lessee shall indemnify,
defend, protect and hold harmless Lessor from and against any loss, damage,
cost or expense incurred by Lessor or Lessor's designee or nominee in
connection with the correction of any and all deficiencies of a physical nature
identified by any governmental authority responsible for licensing the Leased
Property in the course of any change of ownership inspection and audit.
44.1.5 Successors and Assigns. This Lease shall be binding
upon Lessor and its successors and assigns and, subject to the provisions of
Article XXIV, upon Lessee and its successors and assigns.
44.1.6 Termination Date. If this Lease is terminated by
Lessor or Lessee under any provision hereof, and upon the expiration of the
Term (collectively, the "termination date"), the following shall pertain:
(a) Lessee shall, subject to the rights, if any, of
patients and residents and any Legal Requirements, immediately vacate and
surrender the Leased Property, Lessee's Personal Property and all Capital
Additions to Lessor in the condition required by Section 9.1.4. Prior to such
vacation and surrender, Lessee shall remove any items which Lessee is permitted
or required to remove hereunder. Lessee shall, at Lessee's cost, repair any
damage to the Leased Property, Lessee's Personal Property and any Capital
Additions caused by such vacation and/or removal of any items which Lessee is
required or permitted hereunder to remove. Any items which Lessee is permitted
to remove but fails to remove prior to the surrender to Lessor of the Leased
Property, Lessee's Personal Property and any Capital Additions shall be deemed
abandoned by Lessee, and Lessor may retain or dispose of the same as Lessor
sees fit without claim by Lessee thereto or to any proceeds thereof. If Lessor
elects to remove and dispose of any such items abandoned by Lessee, the cost of
such removal and
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disposal shall be an Additional Charge payable by Lessee to Lessor upon demand.
Lessee shall pay all amounts payable by it through the termination date and any
costs charged pursuant to the immediately preceding sentence, each of the
parties shall bear their own costs and fees incurred (including all costs
incurred in performing their respective obligations hereunder) through the
termination date and from and after the termination date neither party shall
have any further obligations to the other, except for those obligations set
forth in this clause (i), those obligations hereunder which are intended to
survive the expiration or earlier termination of this Lease and those specific
obligations set forth in clause (ii) below.
(b) Notwithstanding the provisions of clause (i),
upon any such termination or expiration of this Lease, the following shall
pertain:
(i) Lessee agrees to defend, protect,
indemnify, defend and hold harmless Lessor from and against any and all claims,
costs, losses, expenses, damages, actions, and causes of action for which
Lessee is responsible under this Lease (including Lessee's indemnification
obligations under Articles XXIII and XXXVII) and which accrue or have accrued
on or before the termination date.
(ii) Lessee shall remain liable for the
cost of all utilities used in or at the Leased Property and any Capital
Additions through the termination date and accrued and unpaid, whether or not
then billed, as of the termination date until full payment thereof by Lessee.
Lessee shall obtain directly from the companies providing such services closing
statements for all services rendered through the termination date and shall
promptly pay the same. If any utility statement with respect to the Leased
Property and any Capital Additions includes charges for a period partially
prior to and partially subsequent to the termination date, such charges shall
be prorated as between Lessor and Lessee, with Lessee responsible for the
portion thereof (based upon a fraction the numerator of which is the number of
days of service on such statement through the termination date and the
denominator of which is the total number of days of service on such statement)
through the termination date and Lessor shall be responsible for the balance.
The party receiving any such statement which requires proration hereunder shall
promptly pay such statement and the other party shall, within ten (10) days
after receipt of a copy of such statement, remit to the party paying the
statement any amount for which such other party is responsible hereunder.
(iii) Lessee shall remain responsible for
any and all Impositions imposed against the Leased Property, the Personal
Property and any Capital Additions with a lien date prior to the termination
date (irrespective of the date of billing therefor) and for its pro rata share
of any Impositions imposed in respect of the tax-fiscal period during which the
Term terminates as provided in Section 4.1.7, and Lessee shall indemnify and
hold Lessor harmless with respect to any claims for such Impositions or
resulting from non-payment thereof.
(iv) Lessee shall (y) execute all documents
and take any actions reasonably necessary to (1) cause the transfer of all of
Lessee's Personal Property and any Capital Additions not owned by Lessor to
Lessor, in each case free of any
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encumbrance, as provided in Section 6.3 and (2) remove this Lease and/or any
memorandum hereof as a matter affecting title to the Leased Property as
provided in Article XXVIII and (z) comply with its covenants set forth in
Section 44.4.
(v) Lessee shall continue to observe the
covenants of Lessee set forth in Section 7.4.2.
(vi) Lessee shall remain responsible for
and shall promptly pay to Lessee any Additional Charge owned to Lessor pursuant
to Section 16.9.
44.1.7 Governing Law. THIS LEASE (AND ANY AGREEMENT FORMED
PURSUANT TO THE TERMS HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE (WITHOUT REGARD OF
PRINCIPLES OR CONFLICTS OF LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. Lessee and Lessor each hereby (i) irrevocably submit to the
jurisdiction of the State and federal courts of the State and consent to
service of process in any legal proceedings arising out of, or in connection
with, this Lease (or any agreement formed pursuant to the terms hereof), by any
means authorized by applicable law; (ii) irrevocably waive, to the fullest
extent permitted by law, any objection to which such party may now or
hereinafter have to the lying or to the laying of venue of any litigation
arising out of, in connection with, this Lease (or any agreement formed
pursuant to the terms hereof), brought in the State courts of Allegheny County,
of the State, or in the United States District Court for the district in which
such County is located; and (iii) irrevocably waive any claim in any litigation
brought in any such court that the same has been brought in an inconvenient
forum.
44.1.8 Waiver of Trial by Jury. EACH OF LESSOR AND LESSEE
ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT
TO ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES AND
THE STATE. EACH OF LESSOR AND LESSEE HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR (ii) IN ANY
MANNER CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF LESSOR AND
LESSEE WITH RESPECT TO THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE
TERMS HEREOF) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREINAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; EACH OF LESSOR AND LESSEE HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND THAT EITHER PARTY MAY
FILE A COPY OF THIS SECTION WITH ANY COURT AS CONCLUSIVE EVIDENCE OF THE
CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
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LESSOR'S INITIALS: _______
LESSEE'S INITIALS: _______
44.1.9 Lessee Counterclaim and Equitable Remedies. Lessee
hereby waives the right to interpose counterclaim in any summary proceeding
instituted by Lessor against Lessee or in any action instituted by Lessor for
unpaid Rent under this Lease. In the event that Lessee claims or asserts that
Lessor has violated or failed to perform a covenant of Lessor not to
unreasonably withhold or delay Lessor's consent or approval hereunder, or in
any case where Lessor's reasonableness in exercising its judgment is in issue,
Lessee's sole remedy shall be an action for specific performance, declaratory
judgment or injunction, and in no event shall Lessee be entitled to any
monetary damages for a breach of such covenant, and in no event shall Lessee
claim or assert any claims for monetary damages in any action or by way of
set-off defense or counterclaim, and Lessee hereby specifically waives the
right to any monetary damages or other remedies in connection with any such
claim or assertion.
44.1.10 Entire Agreement. This Lease, together with the other
Lessee Documents, as defined in the Contract of Acquisition, the Exhibits
hereto and thereto and such other documents as are contemplated hereunder or
thereunder, constitutes the entire agreement of the parties with respect to the
subject matter hereof, and may not be changed or modified except by an
agreement in writing signed by the parties. Lessor and Lessee hereby agree that
all prior or contemporaneous oral understandings, agreements or negotiations
relative to the leasing of the Leased Property are merged into and revoked by
this Lease.
44.1.11 Headings. All titles and headings to sections,
subsections, paragraphs or other divisions of this Lease are only for the
convenience of the parties and shall not be construed to have any effect or
meaning with respect to the other contents of such sections, subsections,
paragraphs or other divisions, such other content being controlling as to the
agreement among the parties hereto.
44.1.12 Counterparts. This Lease may be executed in any
number of counterparts, each of which shall be a valid and binding original,
but all of which together shall constitute one and the same instrument.
44.1.13 Joint and Several. If more than one Person is the
Lessee under this Lease, the liability of such Persons under this Lease shall
be joint and several.
44.1.14 Interpretation. Both Lessor and Lessee have been
represented by counsel and this Lease and every provision hereof has been
freely and fairly negotiated. Consequently, all provisions of this Lease shall
be interpreted according to their fair meaning and shall not be strictly
construed against any party.
44.1.15 Time of Essence. Time is of the essence of this Lease
and each provision hereof in which time of performance is established.
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44.1.16 Further Assurances. The parties agree to promptly
sign all documents reasonably requested to give effect to the provisions of
this Lease.
IN WITNESS WHEREOF, the parties have caused this Lease to be
executed and attested by their respective officers thereunto duly authorized.
HCPI TRUST, a Maryland real estate BCC AT MT. ROYAL PINES, INC., a
investment trust Delaware corporation
By: /s/ [illegible] By: /s/ Brian C. Barth
------------------------------ ------------------------------
Its: Vice President Its: Vice President
----------------------------- -----------------------------
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EXHIBIT 10.31
[Gettysburg, PA]
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("Amendment") is dated as of
March 31, 1997, by and between HCPI TRUST, a Maryland real estate investment
trust ("Lessor"), and BCC AT MT. ROYAL PINES, INC., a Delaware corporation
("Lessee").
RECITALS
A. Lessor and Lessee entered into a Lease dated as of March
21, 1996 (the "Lease"), covering a 40-unit assisted-living facility located on
certain Leased Property in the City of Allison Park, County of Allegheny,
Commonwealth of Pennsylvania, as more particularly described in the Lease.
B. Pursuant to Section 9.3 of the Lease, Lessee agreed to
complete a Capital Renovation Project with respect to the Leased Property on or
before March 31, 1997, and Lessor agreed to fund the lesser of (i) one-half
(1/2) of the out-of-pocket costs and expenses incurred by Lessee in completing
such Capital Renovation Project and (ii) $75,000.00 (the "Original Funding
Commitment"). As of the date hereof, with Lessor's knowledge and consent,
Lessee has not commenced the Capital Renovation Project and Lessee desires
additional time to complete the same. In addition, Lessee also desires (A) to
construct an approximately 7,885 square foot, 32-unit Capital Addition to the
Leased Property (the "32-Unit Capital Addition Project"), (B) to obtain
Lessor's consent to such 32-Unit Capital Addition Project and (C) to obtain
Lessor's agreement to fund (or accrue, as applicable) the lesser of ("Lessor's
Maximum Cost") (x) $1,395,597.00 and (y) the aggregate Project Costs (as
defined below) incurred or accrued in connection with the Capital Renovation
Project and the 32-Unit Capital Addition Project, notwithstanding the Original
Funding Commitment.
C. Lessor is willing to consent and agree to the matters set
forth in Recital B above, and to amend the Lease accordingly, but only upon the
terms and conditions set forth herein.
AGREEMENT
Capitalized terms not otherwise defined herein shall have the
meaning ascribed to them in the Lease. NOW THEREFORE, Lessor and Lessee hereby
agree as follows:
1. CONFIRMATION MATTERS. Notwithstanding anything to the
contrary in the Lease, as hereby amended, Lessor and Lessee hereby agree as
follows:
(a) The Commencement Date of the Lease was March 21, 1996.
(b) The Fixed Term of the Lease shall terminate on the last
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day of February, 2011.
(c) The first Lease Year for the Lease commenced on the
Closing Date and ended February 28, 1997.
(d) The first Quarter for which Additional Rent pursuant to
Section 3.1.2 of the Lease shall be due is the Quarter commencing March 1, 1998
and ending May 30, 1998 (i.e., the first Quarter of the third (3rd) Lease Year).
2. DEFINITIONS.
(a) NEW DEFINITIONS. For all purposes of the Lease, as
hereby amended, except as otherwise expressly provided in the Lease or this
Amendment or unless the context otherwise requires, the terms defined in this
subparagraph shall have the meanings assigned to them in this subparagraph and
shall be added to and be deemed part of Article II of the Lease.
Architect: An architect and/or engineer licensed in the
State and approved by Lessor. For purposes of the Capital Projects, the
following Architect is hereby approved by Lessor: By Design Consultants, Inc.,
5405 Jonestown Road, Suite 108, Harrisburg, PA 18112; Fax No. (717) 540-0002.
Capital Projects: Collectively, (i) the Capital Renovation
Project as defined and further described in Section 9.3 of the Lease and
Exhibit D to the Lease and (ii) the 32-Unit Capital Addition Project as defined
in Recital B above, in each case as more particularly depicted on and to be
constructed/performed in accordance with the Plans, including (A) the fixtures
referred to in and/or shown thereon, (B) to the extent not shown on the Plans,
additions to the parking facilities so as to provide sufficient parking spaces
to comply with all Legal Requirements and as otherwise necessary for the
operation of the Facility (including the 32-Unit Capital Addition Project) for
its Primary Intended Use, (iii) all Offsite Improvements and (iv) any and all
site preparation, landscaping and drainage works and all other improvements
necessary to comply with all Legal Requirements and/or for the operation of the
Facility (including the 32-Unit Capital Addition Project) for its Primary
Intended Use.
Capital Projects Lease Rate: On the Capital Projects Rent
Commencement Date, the "Capital Projects Lease Rate" shall be the ten-year U.S.
Treasury Note rate published in the Wall Street Journal three (3) Business Days
prior to the Capital Projects Rent Commencement Date and quoting the rate as of
the immediately prior Business Day, plus Three and Twenty-Five Hundredths
Percent (3.25%). With respect to each funding or accrual of any Projects Costs
by Lessor under this Amendment following the Capital Projects Rent Commencement
Date, the "Capital Projects Lease Rate" shall be the ten-year U.S. Treasury
Note rate published in the Wall Street Journal as of the date of each such
particular funding or accrual by Lessor of Project Costs, plus Three and
Twenty-Five Hundredths Percent (3.25%).
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If the ten-year U.S. Treasury Note rate is discontinued prior to four (4)
Business Days prior to the Capital Projects Rent Commencement Date or prior to
any such post-Capital Projects Rent Commencement Date funding or accrual of
Project Costs, then such calculation shall be made instead by reference to a
substitute rate selected by Lessor that is comparable with the ten-year U.S.
Treasury Note rate, and such substitute rate shall be compared to the ten-year
U.S. Treasury Note rate, published in the Wall Street Journal as of the date of
this Amendment. Similarly, if the Wall Street Journal is discontinued, a
substitute publication selected by Lessor shall be used.
Capital Projects Rent Commencement Date: The earliest of (i)
the Completion Date, (ii) the date the 32-Unit Capital Addition Project is
first opened for business for its Primary Intended Use and (iii) the Outside
Date.
Completion Date: The date on which the construction/
performance of the Capital Projects has been substantially completed such that
Lessor has received the following: (i) a certificate of substantial completion
from the Architect in the form attached hereto as Exhibit I, (ii) a certificate
of occupancy or its equivalent issued in accordance with all Legal Requirements
and by the appropriate Governmental Authority having jurisdiction over the
Leased Property which permits the occupancy of the improvements constructed as
part of the Capital Projects and (iii) all other licenses, authorizations and
permits, if any, required by any Governmental Authority for the use and
operation of the Capital Projects as part of the Facility for its Primary
Intended Use. For purposes of the Lease, as hereby amended, "substantially
completed" shall mean that the improvements being constructed/performed as part
of the Capital Projects and all other work which Lessee is obligated to perform
under the Lease, as hereby amended, with respect to the Capital Projects have
been completed in accordance with the Plans and the applicable provisions of the
Lease, as hereby amended, notwithstanding the fact that Punch-List Items remain
to be performed.
Construction Contracts: The contracts between Lessee and the
General Contractor, Lessee and the Architect and/or Lessee or any other
contractor (including subcontractors) relating to rendering of services or
furnishing of materials in connection with the construction/performance of the
Capital Projects, contracts between the General Contractor and any
subcontractor and contracts between any of the foregoing and any other Person
relating to rendering of services or furnishing of materials in connection with
construction/performance of the Capital Projects.
Construction Period Interest: An annual interest rate of Two
Percent (2%) over the Prime Rate applied to the disbursed/accrued portion of
Lessor's Maximum Costs, as computed each month (but in no event greater than
the maximum rate then permitted under applicable law). Construction Period
Interest shall accrue monthly in arrears based on a 360 day year.
General Contractor: A bondable general contractor licensed
in the State and
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approved by Lessor. For purposes of the Capital Projects, the following General
Contractor is hereby approved by Lessor: Westra Construction, Inc., 4206
Linglestown Road, Harrisburg, PA 17112; Fax No. (717) 657-0483.
Governmental Authority: The United States, the state,
county, city and political subdivisions in which the Leased Property is located
or which exercise jurisdiction over the Leased Property or the
construction/performance of the Capital Projects, and any court administrator,
agency, department, commission, board, bureau or instrumentality of any of them
which exercises jurisdiction over the Leased Property or the
construction/performance of the Capital Projects.
Lessee's Affidavit: A sworn affidavit of Lessee, in form and
substance satisfactory to Lessor, stating that to the best of Lessee's
knowledge, all labor and material bills of every kind and character incurred by
Lessee to the date of such affidavit in connection with the Capital Projects
have been paid in accordance with the payment provisions of the applicable
Construction Contracts except for the unpaid bills to be paid from the proceeds
of the current advance request, and that the builder's risk insurance described
in Paragraph 5(e)(iv) below contains sufficient coverage for the
construction/performance of the Capital Projects, including the value of
materials stored off the Leased Property.
Lessor's Maximum Cost: As defined in Recital B above (i.e,
$1,395,597.00).
Major Subcontractors: Subcontractors, materialmen and other
vendors with Construction Contracts in excess of Twenty-Five Thousand Dollars
($25,000.00).
Offsite Improvements: (i) Any streets, roads, walks, curbs and
the like (whether or not ultimately dedicated for public use and/or maintenance)
necessary to provide access to public roads, streets and highways, (ii) any
improvements and other works necessary or desirable for the provision of
utilities to the 32-Unit Capital Addition Project and/or the existing Facility
and (iii) any other improvements on property other than the Land that are (A)
required by Legal Requirements, (B) necessary for the construction/performance
of the Capital Projects in accordance with the Plans and the applicable
provisions of the Lease, as hereby amended, and/or (C) necessary for operation
of the Facility (including the 32-Unit Capital Addition Project) for its Primary
Intended Use.
Outside Date: October 1, 1997.
Plans: (i) The final plans and specifications for the
construction/performance of the Capital Projects prepared by the Architect and
approved by Lessor and (ii) all amendments, modifications and supplements
thereto which do not require the approval of Lessor or which have been approved
by Lessor subsequent to the approval of the plans and specifications described
in clause (i).
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Project Budget: The budget attached hereto as Exhibit E,
together with (i) the detailed estimate report prepared by the General
Contractor and attached to such Exhibit E as Schedule 1, which report provides
a detailed cost breakdown of the "Hard Construction Costs" line item shown on
Exhibit E and (ii) any other detailed budget information as Lessor may
reasonably request and approve from Lessee, including a further breakdown of
Hard Construction Costs to a level of detail that will allow Lessor to
determine the actual cost and percentage of completion of construction as of
the date of any Request for Advance.
Project Costs: All the costs and expenses incurred in
connection with (i) entering into this Amendment and all other documents or
instruments provided for herein; and (ii) the construction/performance of the
Capital Projects, as contemplated by the Project Budget, including the costs of
constructing/performing work depicted by the Plans and otherwise in accordance
with applicable provisions of the Lease, as hereby amended, costs for bonds,
costs and fees for surveys, costs for title work and premiums for title
insurance, environmental fees and expenses, architect fees, engineering costs,
Lessor's appraisal fees and Lessor's and Lessee's accounting fees, Lessee's and
Lessor's legal fees (including in-house legal costs), Construction Period
Interest, Two Percentage (2%) points of Lessor's Maximum Cost to be accrued as
a cost by Lessor, the cost of purchase and installation of all furniture,
fixtures and equipment and other Personal Property included as part of the
Capital Projects, all governmental licenses and fees, and the other fees and
allowances specified in Paragraph 5(d) below. Without limiting the foregoing,
Project Costs include all amounts funded, advanced or accrued by Lessor
pursuant to the Lease, as hereby amended, on account of the Capital Projects.
Punch List Items: Minor details of construction, mechanical
adjustments or decorations which remain to be completed following the
Completion Date and which do not (i) prevent the issuance of a certificate of
occupancy (or the local equivalent thereof) for the 32-Unit Capital Addition
Project and/or (ii) materially interfere with Lessee's use of the Facility
(including the 32-Unit Capital Addition Project) for its Primary Intended Use.
Remaining Funds: The unadvanced portion of Lessor's Maximum
Cost, if any.
Request for Advance: Certificates of Lessee and, to the
extent applicable, the Architect, in each case on the appropriate American
Institute of Architects ("AIA") form, including form G702 together with
attached AIA form G703 (or equivalent, which AIA form G703 or equivalent shall
be modified to include columns for the original estimate of scheduled values
for each line item, changes to the scheduled values for each line item and a
revised scheduled value for each line item after any such change) and/or such
other form(s) as Lessor may hereafter reasonably request which shall: (i) set
forth the parties to whom money is owed and the amount owed each; (ii) certify
among other things that such amounts represent payments due for services
actually rendered or materials actually acquired or furnished in connection
with the construction/performance of the Capital Projects; (iii) state that the
sum requested is Project Cost within the Project Budget for such item and that,
in the opinion of the Architect, to the extent applicable, and Lessee, the
Remaining Funds are sufficient to complete
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the Capital Projects pursuant to the Plans and to pay for all labor, material,
interest and other expenses in connection therewith; (iv) be accompanied by
copies of billing statements, fee schedules, documentation supporting all costs
to date, copies of all subcontracts not previously submitted and vouchers or
invoices from the parties named therein, in form reasonably satisfactory to
Lessor; (v) refer to an attached schedule, to be verified by the Architect prior
to the advance being requested, identifying in a manner reasonably satisfactory
to Lessor all materials not yet affixed or incorporated into the Capital
Projects but which have been covered by certificates submitted to date,
including the current certificate; (vi) contain a statement, to be verified by
the Architect prior to the advance being requested, that all such materials not
yet affixed or incorporated into the Capital Projects have been stored at the
Leased Property or at one or more other bonded locations approved by Lessor
identified therein (specifying the materials located at each location) under
adequate safeguards to minimize the possibility of loss, damage or commingling
with other materials or projects, and that builder's risk insurance coverage for
such materials stored off the Leased Property is not less than the full
insurable value of such materials then being stored off the Leased Property; and
(vii) be accompanied by appropriate waivers of lien rights (to the extent not
previously received and approved by Lessor) with respect to work and materials
for which funds have already been advanced pursuant to the Lease, as hereby
amended, or which was performed or were supplied prior to the date of this
Amendment, executed by the General Contractor and all contractors,
subcontractors, mechanics and materialmen no more than one month in arrears and
who have furnished labor or material to date and whose charges are or will be
greater than Five Thousand Dollars ($5,000.00) and, unless Lessee has provided a
statutory payment bond in accordance with applicable Legal Requirements by all
other contractors, subcontractors, mechanics and materialmen. Notwithstanding
anything set forth herein to the contrary, the Request for Advance for the first
advance of funds by Lessor hereunder and for each advance that is for an item on
the Project Budget that is not a hard cost shall mean such certificate with
respect thereto as Lessor may reasonably request.
Total Project Cost: The sum of all Project Costs funded or
accrued by Lessor pursuant to the Lease, as hereby amended, including any
amounts funded or accrued by Lessor hereunder following the Capital Projects
Rent Commencement Date; provided, however, nothing contained herein shall
obligate Lessor or be deemed to be Lessor's agreement to fund or accrue any
Project Costs in excess of Lessor's Maximum Cost.
(b) AMENDMENTS TO EXISTING DEFINITIONS IN LEASE.
(i) The definition of Base Gross Revenues appearing in
Article II of the Lease is hereby amended to read, in its entirety, as follows:
"Base Gross Revenues: (i) For the Fixed Term, the lesser of
(A) 96.5% of the Gross Revenues for the third Lease Year of
the Fixed Term and (B) $1,183,474.00 and (ii) for each
Extended Term, if either, the Gross Revenues for the first
Lease Year of such Extended Term."
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(ii) The last sentence in the definition of Capital
Additions appearing in Article II of the Lease is hereby amended to read, in its
entirety, as follows:
"The Capital Projects shall be treated for all purposes of
this Lease as a `Capital Addition,' and all Project Costs
advanced, funded or accrued by Lessor on account thereof or
with respect thereto shall be treated as "Capital Addition
Costs" paid for by Lessor."
(iii) Upon the Completion Date, the term "Facility" as
defined in Article II of the Lease shall mean and include the existing Facility
together with the Capital Projects.
(iv) For purposes of the Lease, as hereby amended,
"Lessor's Personal Property" as defined in Article I of the Lease shall include
all Personal Property paid for or funded by Lessor as part of the Capital
Projects. At the request of Lessor, Lessee shall prepare a schedule of all
Personal Property paid for or funded by Lessor as part of the Project Costs and
the same shall be initialed by each of Lessor and Lessee and attached to
Exhibit B to the Lease as Schedule 1, and will thereafter form a part of the
Lease. Failure of either Lessor or Lessee to prepare and/or initial such
Schedule 1 shall not affect the definition of or what Personal Property
constitutes Lessor's Personal Property in accordance with the provisions of this
clause (iv).
3. MINIMUM RENT. Effective as the expiration of the first
Lease Year of the Fixed Term (i.e., February 28, 1997), Section 3.1.1 of the
Lease shall be amended to read, in its entirety, as follows:
"3.1.1 Minimum Rent.
"(i) Subject to upward adjustments as provided in
clauses (ii) and (iii) below, for the period from March 1,
1997, through the expiration of the Fixed Term, Lessee shall
pay to Lessor as `Minimum Rent' monthly, in advance on or
before the first day of each calendar month, an amount equal
to $20,562.50. Minimum Rent payable for any partial calendar
month at the end of the Term of this Lease shall be prorated
based upon a 30-day month and a 360-day year.
"(ii) Effective as of the Capital Projects Rent
Commencement Date, the monthly Minimum Rent payable pursuant
to clause (i) above shall be increased by an amount equal to
one-twelfth (1/12) of the product of (A) the applicable
Capital Projects Lease Rate in effect on the Capital Projects
Rent Commencement Date, times (B) the Total Project Cost. Such
monthly Minimum Rent shall be further increased from time to
time on the date of funding or accrual of any Project Costs by
Lessor following the Capital Projects
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Rent Commencement Date by one-twelfth (1/12th) of the product
of (x) the amount of the particular payment, funding or
accrual by Lessor, times (y) the Capital Projects Lease Rate
applicable to such payment, funding or accrual. Monthly
Minimum Rent payable for any months during which such
increases are applicable shall be prorated based upon the
number of days for which the different rental amounts apply.
"(iii) If the rate in (y) below is greater than the
rate in (x) below, than as of the expiration of the tenth
(10th) Lease Year (i.e., February 28, 2006), the monthly
Minimum Rent then in effect shall be increased by an amount
equal to one-twelfth (1/12th) of the product of (A) the
positive difference between (x) 6.17% (i.e., the five-year
U.S. Treasury Note rate published in the Wall Street Journal
three (3) Business Days prior to the Commencement Date and
quoting the rate as of the immediately prior Business Day),
and (y) the five-year U.S. Treasury Note rate published in the
Wall Street Journal three (3) Business Days prior to the
expiration of the tenth (10th) Lease Year and quoting the rate
as of the immediately prior Business Day, times (B) the
Minimum Repurchase Price as of such date; provided, however,
that in no event shall the monthly Minimum Rent after any such
adjustment pursuant to this clause (iii) be less than One
Hundred Percent (100%) nor more than One Hundred Three Percent
(103%) of the monthly Minimum Rent in effect immediately prior
to such adjustment. If the five-year U.S. Treasury Note rate
is discontinued prior to four (4) Business Days prior to the
expiration of the tenth (10th) Lease Year, then such
calculation shall be made instead by reference to a substitute
rate selected by Lessor that is comparable with the five-year
U.S. Treasury Note rate, and such substitute rate shall be
compared to the five-year U.S. Treasury Note rate, published
in the Wall Street Journal as of the Commencement Date.
Similarly, if the Wall Street Journal is discontinued, a
substitute publication selected by Lessor shall be used.
"(iv) Following any changes in the monthly Minimum Rent
pursuant to this Lease, the parties shall execute an amendment
to this Lease in form similar to Exhibit C-2 attached hereto
(but with appropriate changes thereto) to confirm the monthly
Minimum Rent payable pursuant to this Section 3.1.1.
Notwithstanding the foregoing, the failure of Lessor to
prepare and/or the failure of Lessee to execute and deliver
any such amendment shall not affect Lessor's determination of
the monthly Minimum Rent payable under this Lease."
4. CAPITAL RENOVATION PROJECT. Section 9.3 of the Lease is
hereby amended to read, in its entirety, as follows:
"9.3 Capital Repairs to be Performed by Lessee. Lessee
shall, on or
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before the Outside Date, make certain repairs to the Facility
based on the recommendations of Barge, Waggoner, Sumner and
Cannon, Inc., as described in the Building Condition
Evaluation Report dated January 19, 1996, and agreed upon by
Lessee and Lessor, which agreed upon improvements and repairs
are summarized on Exhibit D attached hereto (the `Capital
Renovation Project')."
The performance and completion by Lessee of the Capital Renovation Project and
Lessor's agreement to fund or accrue the Project Costs associated therewith up
to Lessor's Maximum Cost shall be further governed by the provisions of
Paragraph 5 below.
5. CAPITAL PROJECTS; PERFORMANCE, COMPLETION AND FUNDING.
Without limiting any other obligation or liability of Lessee under the Lease
with respect to the Leased Property, the following shall apply with respect to
the Capital Projects and the construction/performance of the same:
(a) OBLIGATIONS OF LESSEE.
(i) CONSTRUCTION/PERFORMANCE OF CAPITAL PROJECTS.
Lessee shall be responsible to arrange, supervise, coordinate and carry out all
services necessary for the construction, performance and completion of the
Capital Projects in accordance with the Plans and the applicable provisions of
the Lease, as hereby amended, and Lessee undertakes and accepts such
responsibility with the understanding that all Project Costs up to Lessor's
Maximum Cost will be funded by Lessor to Lessee or its designee pursuant to, but
subject to the applicable terms of, the Lease, as hereby amended. Lessee shall
cause the Capital Projects to be completed substantially in accordance with the
Plans and the terms of the Construction Contracts, subject to the terms of the
Lease, as hereby amended, and for an amount not to exceed the Lessor's Maximum
Cost and the Completion Date to occur by the Outside Date. If and to the extent
total Project Costs exceed the Lessor's Maximum Cost, Lessee shall pay and shall
not be reimbursed for such excess. If and when total Project Costs exceed
Lessor's Maximum Cost, Lessee shall thereupon commence to pay to Lessor (rather
than accrue) interest on the sum of Lessor's Maximum Cost at an annual rate of
Two Percent (2%) over the Prime Rate (but in no event greater than the maximum
rate then permitted under applicable law) and continue to pay such interest
until the Capital Projects Rent Commencement Date. Said interest shall accrue on
a daily basis and be payable monthly in arrears based on a 360 day year, with
the first payment commencing on the last day of the month in which Lessor has
advanced to Lessee Lessor's Maximum Cost and thereafter shall continue on the
last day of each subsequent month until the Capital Projects Rent Commencement
Date. If total Project Costs do not exceed Lessor's Maximum Cost, Lessee shall
not be entitled to any portion of the difference between Lessor's Maximum Cost
and total Project Costs.
(ii) DUTIES AND RESPONSIBILITIES. The duties and
responsibilities of Lessee with respect to the Capital Projects shall
specifically include the following:
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(A) Subject to the other provisions of the Lease,
as hereby amended, to negotiate and enter into Construction Contracts and other
agreements necessary for construction/performance of the Capital Projects in
accordance with the Plans, which such contracts, by their terms, may be assigned
by Lessee to Lessor;
(B) To establish operating procedures and a
system of records and accounts suitable for record keeping during
construction/performance satisfactory to Lessor;
(C) To administer and monitor the performance
under all Construction Contracts and other agreements relating to the
construction/performance of the Capital Projects and the monthly reporting of
the status of estimated costs of completing the same in relation to the Project
Budget and other applicable budgets;
(D) To manage and coordinate contractors,
engineers, architects and other consultants and monitor their compliance with
their respective contracts or agreements;
(E) To do all things and take all actions
necessary for the provision of water, sewer, gas, electric, telephone, drainage
and other utility equipment, facilities and services required by Legal
Requirements and/or necessary for the operation of the Facility (including the
32-Unit Capital Addition Project) for its Primary Intended Use;
(F) To monitor and review and, when in the
judgment of Lessee it is in the best interest of Lessor, propose changes in the
Plans or in any budget relating to the construction/performance of the Capital
Projects;
(G) To review and make a recommendation to Lessor
with respect to payment of all applications for payment under the Construction
Contracts and other agreements relating to the construction/performance of the
Capital Projects and make payments of any and all bills, invoices or other
matters calling for payment by Lessee or Lessor or for the Lessor's account in
connection with the construction/performance of the Capital Projects;
(H) To perform all functions and duties of Lessee
or Lessor under the Construction Contracts and other contracts and agreements
related to the construction/performance of the Capital Projects;
(I) To make recommendations and render assistance
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for the development and administration of an effective labor relations program
for, and the avoidance of labor disputes during, the construction/performance of
the Capital Projects;
(J) To coordinate with the Architect and any
inspecting engineer employed by Lessor in the performance of periodic
inspections of the Leased Property in order to confirm that the materials
furnished and work performed are in accordance with the Plans and that the work
on the Capital Projects is progressing on schedule;
(K) To stop the work and cause the correction of
any defect in the materials or workmanship furnished by any contractor or of any
failure by any contractor to perform its obligations under its Construction
Contract and to immediately inform Lessor of any instances of faulty materials
and/or workmanship;
(L) To make available to Lessor, upon request,
the identities of and copies of contracts with all subcontractors and any other
Person supplying labor or materials for the construction/performance of the
Capital Projects; and
(M) To obtain all approvals necessary to
construct/perform the Capital Projects and to operate the Facility (including
the 32-Unit Capital Addition Project) for its Primary Intended Use.
(iii) PERFORMANCE OF DUTIES. Lessee agrees that,
subject to the performance by Lessor of its obligations under the Lease, as
hereby amended, Lessee shall act with prudence and diligence in performing its
duties and responsibilities under the Lease, as hereby amended, with respect to
the Capital Projects and in good faith in the best interests of Lessor.
(b) COMPLETION GUARANTEE.
(i) CONSTRUCTION AND COST GUARANTEE. Lessee
unconditionally guarantees to Lessor (A) the construction/performance of the
Capital Projects in accordance with the Plans and all covenants and obligations
of Lessee under the Lease, as hereby amended, by the Outside Date (subject only
to the performance by Lessor of its obligations under this Paragraph 5) and (B)
the payment without demand, and without right to reimbursement therefor, of all
development, construction and related costs of the Capital Projects incurred for
any reason whatsoever in excess of the Lessor's Maximum Cost.
(ii) FAILURE TO CONSTRUCT. If for any reason or under
any contingency the General Contractor shall default under a Construction
Contract, fail to commence, or abandon construction of, the Capital Projects, or
fail to complete the Capital
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Projects within the maximum construction time in accordance with the terms of
the Construction Contracts, then in any such event, without the need of any
demand by Lessor, Lessee shall assume all responsibility for and control over
the construction, performance and completion of the Capital Projects and shall
cause the Capital Projects to be fully completed in accordance with the Lease,
as hereby amended, on or before the Outside Date, other than Punch List Items.
If Lessee fails to complete the Capital Projects in accordance with the Plans
prior to the Outside Date other than the Punch List Items, Lessor, at Lessor's
option, shall have the right to complete the Capital Projects in accordance with
the Plans and expend such sums as Lessor reasonably deems proper in order so to
complete the Capital Projects. The amount of any and all expenditures made by
Lessor pursuant to this clause (ii) which, when combined with all Project Costs
previously funded by Lessor, are in excess of Lessor's Maximum Cost, shall be
immediately due and payable by Lessee to Lessor as an Additional Charge,
together with interest thereon from the date of such expenditure to the date
paid by Lessee at a daily rate equal to Two Percent (2%) above the Prime Rate
(but in no event greater than the maximum rate of interest then permitted by
law). Upon any assumption by Lessor of the obligation to complete the Capital
Projects as provided herein, Lessee shall forthwith surrender and deliver to
Lessor, or Lessor's designee, any funds which have been received from Lessor but
have not been disbursed by Lessee, and all records, plans, specifications,
permits and other governmental approvals, purchase agreements, contracts,
receipts for deposits, unpaid bills and all other records, papers and documents
in the possession of Lessee relating to the Capital Projects.
(iii) COMPLETION OF PUNCH LIST ITEMS. All Punch List
Items, other than those reasonably requiring more than thirty (30) days to
complete due to long scheduling or ordering time or other reasonable factors,
shall be completed within thirty (30) days after the Completion Date, but in no
event later than thirty (30) days after the Outside Date. Any Punch List Items
reasonably requiring more than thirty (30) days to complete shall be diligently
pursued and completed as promptly as practicable, but in no event later than
sixty (60) days after the Outside Date.
(c) COOPERATION BY LESSOR. Lessor shall cooperate with
Lessee as may be requested by Lessee in furtherance of the
construction/performance of the Capital Projects as specified in the Lease, as
hereby amended.
(d) FEES AND OTHER ACCRUALS TO LESSEE/LESSOR.
(i) PROJECT COORDINATION FEE. For performance by
Lessee of its obligations under this Amendment in connection with the Capital
Projects, Lessor shall pay to Lessee a project coordination fee equal to
$50,000.00. Such project coordination fee will be payable to Lessee Twenty-Five
Percent (25%) with the first advance of funds by Lessor to Lessee following the
date Lessee commences construction/performance of the Capital Projects,
Twenty-Five Percent (25%) with the advance of funds by Lessor under this
Amendment immediately following the date that Lessee achieves Fifty Percent
(50%)
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completion of the Capital Projects, and the balance shall be paid with the final
advance of funds by Lessor under this Amendment following the Completion Date.
For purposes of this clause (i), the phrase "commences construction/performance"
shall mean the date Lessee first commences physical site work in connection with
the construction/performance of the Capital Projects. Such project coordination
fee is included within Project Costs and is a line item on the Project Budget.
Notwithstanding the foregoing, in no event shall Lessee be entitled to receive
any portion of the project coordination fee if the payment of the same would
cause the total of all Project Costs funded or accrued by Lessor under this
Amendment to exceed Lessor's Maximum Cost.
(ii) CONSTRUCTION ADMINISTRATION FEE. Lessor shall
accrue in arrears from and after the date hereof until the Completion Date, a
monthly construction administration fee in the form of an allowance equal to One
Thousand Five Hundred Dollars ($1,500) per month for the costs associated with
the administration of the construction/performance of the Capital Projects and
the making of advances hereunder. Such allowance is included within the Project
Costs and is a line item on the Project Budget.
(iii) TWO (2) POINT FEE. On the date hereof Lessor
shall receive an allowance for points hereunder in an amount equal to Two
Percent (2%) of Lessor's Maximum Cost. Such amount is included within the
Project Costs and is a line item on the Project Budget.
(e) OTHER COVENANTS OF LESSEE.
(i) CONSTRUCTION/PERFORMANCE OF THE CAPITAL PROJECTS.
Construction/performance of Capital Projects will be prosecuted by Lessee in
accordance with the Plans in a good and workmanlike manner and in accordance
with sound building and engineering practices and all applicable Legal
Requirements. All materials, fixtures or articles used in the
construction/performance of the Capital Projects, or to be used in the
operation thereof shall be substantially in accordance with the Plans as
prepared by the Architect and approved by Lessor. Lessee shall ensure that no
asbestos or asbestos-containing materials or other Hazardous Substances will be
contained in the completed Capital Projects. Lessee will complete the
construction/performance of the Capital Projects substantially in accordance
with the Plans on or before the Outside Date, free and clear of liens or claims
for liens for material supplied and for labor or services performed in
connection with the construction of the Capital Projects (except for permitted
contests pursuant to Article XII of the Lease).
(ii) LEGAL REQUIREMENTS. Lessee will cause all Legal
Requirements and all restrictive covenants affecting the Leased Property to be
complied with promptly, and Lessor will be furnished, on demand, evidence of
such compliance.
(iii) CHANGE ORDERS, DEFECTS.
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(A) Lessee may, without obtaining the prior
written approval of Lessor, change the Plans, permit the Plans to be changed or
permit construction/performance of the Capital Projects other than in accordance
with the Plans; provided, however, that if (1) any such change would (w) change
the basic structure or character of the Facility (including the proposed 32-Unit
Capital Addition Project); (x) materially increase or decrease in any manner the
size of the 32-Unit Capital Addition Project, or any component thereof; (y)
materially change the appearance of the Facility (including the proposed 32-Unit
Capital Addition Project); or (z) materially change or reduce the quality of the
basic building systems, including the mechanical, electrical, sprinkler,
plumbing, life-safety, heating, air conditioning and ventilation systems within
the Facility (including the proposed 32-Unit Capital Addition Project), (2) any
single change in the Plans involves an amount in excess of Ten Thousand Dollars
($10,000.00), (3) any number of changes in the Plans involves in the aggregate
an amount not in excess of Thirty-Five Thousand Dollars ($35,000.00), or (4) any
such change in the Plans results in the Project Costs exceeding the Lessor's
Maximum Cost, then in any such event Lessee must obtain the prior written
approval of Lessor prior to implementing such change, which approval may be
given or withheld in the sole and absolute discretion of Lessor.
(B) Lessee will at its sole cost and expense and
not as part of the Project Costs correct or cause to be corrected any defect in
the Capital Projects or any departure from the Plans not approved by Lessor or
permitted herein without such approval or any encroachment by any part of the
Capital Projects or any other structures on or over any building lines,
easements, property lines or other restricted areas which any survey or
inspection reflects.
(iv) INSURANCE. To the extent not already maintained
by Lessee pursuant to Article XIII of the Lease, Lessee will at all times
maintain or cause to be maintained the following insurance during the
construction/performance of the Capital Projects (including through the date of
completion of the Punch List Items):
(A) Builder's risk insurance covering the
construction/performance of the Capital Projects, in a face amount of not less
than the full insurable value of the Capital Projects and materials supplied in
connection therewith, with appropriate provisions made to include coverage of
materials stored off the Leased Property in an amount not less than the full
insurable value of such materials stored off the Leased Property from time to
time.
(B) Liability insurance against claims for
personal injury, death or property damage suffered by members of the public or
others in or about the Leased Property or adjacent land used in connection with
the construction/performance of the Capital Projects or occurring by reason of
the maintenance, use or operation by Lessee, the General Contractor or any
subcontractor, agent or employee thereof of any plants, shops, machinery,
automobiles, trucks or
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other vehicles or other facilities on or in connection with the Leased Property
or the construction/performance of the Capital Projects, in an amount of at
least Three Million Dollars ($3,000,000).
(C) Workers' compensation and employer's
liability insurance as may be required by Lessor or similar insurance as may be
required under any Legal Requirement.
(D) Errors and omissions insurance by the
Architect in an amount at least equal to One Million Dollars ($1,000,000) which
can be applied to the construction/performance of the Capital Projects, covering
the entire period of design and construction/performance of the Capital Projects
and terminating upon the receipt of the certificate of occupancy issued by the
appropriate municipality.
All such insurance maintained or caused to be maintained by
Lessee pursuant to clauses (A), (B) and (D) of this clause (iv) shall name
Lessor as an additional insured. All insurance maintained or caused to be
maintained by Lessee pursuant to clause (A) of this clause (iv) shall name
Lessee, Lessor and the General Contractor, jointly, as loss payee. In addition,
all such insurance to be maintained or caused to be maintained by Lessee shall
otherwise, to the extent applicable, comply with the provisions of Article XIII
of the Lease.
(v) PERFORMANCE AND PAYMENT BOND. Lessee shall
procure or cause to be procured a performance and payment bond for the total
amount of the Hard Construction Costs (including labor and materials) set forth
in the Project Budget. The General Contractor's performance and payment bond
shall equal the amount by which (A) such Hard Construction Costs exceed (B) the
sum of the amounts of the Major Subcontractors' payment and performance bonds.
All performance and payment bonds shall name Lessor as an additional obligee and
be in form and substance and from an institution satisfactory to Lessor in its
sole discretion.
(vi) INDEMNIFICATION. Without limiting any other
indemnification obligation of Lessee under the Lease, and notwithstanding the
existence and without regard to the policy limits of any insurance required to
be maintained pursuant to Paragraph 5(e)(iv) above and notwithstanding the
existence and without regard to the amount of the bond required pursuant to
Paragraph 5(e)(v) above, Lessee shall protect, defend, indemnify and hold
harmless, Lessor from and against, and reimburse Lessor for, any and all
actions, causes of action, obligations, damages, penalties, suits, debts,
losses, costs, expenses, liabilities, claims or demands whatsoever, at law or in
equity (including reasonable attorneys' fees and expenses and Environmental
Costs) imposed on, incurred by or asserted against Lessor in connection with or
with respect to the construction/performance of the Capital Projects and any
loss in value of or title to the Leased Property resulting therefrom, including
arising from:
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(A) any misstatements or inaccuracies made by
or on behalf of Lessee contained within or other matters arising out of any
applications for building, foundation, grading or other permits and/or
authorizations necessary for the construction/performance of the Capital
Projects, including those required for the use and operation of the Facility for
its Primary Intended Use, whether filed or submitted to the applicable
Governmental Authority in the name of Lessor or Lessee; or
(B) any act or omission of Lessee, the
Architect, the General Contractor, or any other contractor, subcontractor or
supplier of materials or other Person in connection with the
construction/performance of the Capital Projects.
Lessee's liability under this clause (vi) shall be reduced by any and all
amounts recovered by Lessor under any insurance required to be maintained
pursuant to Paragraph 5(e)(iv) and/or under the bond required to be maintained
under Paragraph 5(e)(v). Furthermore, notwithstanding anything to the contrary
contained in this clause (vi), Lessee shall have no obligation to protect,
defend, indemnify or hold harmless, Lessor pursuant to this clause (vi) from
and against, or to reimburse Lessor for, any or all actions, causes of action,
obligations, damages, penalties, suits, debts, losses, costs, expenses,
liabilities, claims or demands whatsoever, at law or in equity (including
reasonable attorneys' fees and expenses and Environmental Costs) caused by
Lessor's gross negligence or willful misconduct.
(vii) LIENS ON MATERIALS. Lessee shall not at any
time during the performance of the work, make or cause to be made, or permit the
General Contractor or any other contractor to make, any contract for materials
or equipment of any kind or nature whatsoever to be incorporated in or to become
a part of the Leased Property, title to which is not good or which is subject to
any lien or title retention arrangement other than inchoate mechanic's liens.
Lessee will deliver to Lessor, on demand, true copies of any contracts, bills of
sale, statements, receipted vouchers, or agreements, under which Lessee claims
title to any materials, fixtures, or articles used in the
construction/performance of the Capital Projects.
(viii) STORAGE OF MATERIALS. Lessee will cause all
materials acquired or furnished in connection with the construction/performance
of the Capital Projects, but not affixed or incorporated into the Leased
Property, to be stored at the Leased Property or at bonded locations approved by
Lessor, in each case under adequate safeguards to minimize the possibility of
loss, theft, damage or commingling with other materials or projects. Lessee will
employ suitable means to protect from theft or vandalism the Leased Property and
all tools and building materials stored on the Leased Property.
(ix) INSPECTIONS. Without limiting any of Lessor's
rights under the Lease, at any time during regular business hours, Lessor and/or
its representatives will be permitted to enter upon the Leased Property and any
other location where materials for the Capital Projects are being stored to
inspect the same and all materials to be used in the construction/performance
thereof, and to examine all detailed plans and shop drawings which
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<PAGE> 17
are or may be kept at the construction site, provided that in so doing, Lessor
shall not unreasonably interfere with the construction/performance of the
Capital Projects. Upon request, Lessor will be furnished with reasonable
information regarding the construction/performance of the Capital Projects from
Lessee, Architect, General Contractor and any other contractors or
subcontractors.
(x) NOTICES. Lessee will furnish Lessor with a copy of
any (A) notice or claim made by any Governmental Authority pertaining to the
Leased Property, (B) any notice of any termination, late payment or other
material aspect of any Construction Contract involving more than Five Thousand
Dollars ($5,000.00), together with a copy of each such Construction Contract and
(C) any fire, casualty, notice of any condemnation or other event materially
affecting the Leased Property.
(xi) USE OF FUNDS, DEFICIENCY.
(A) Lessee shall expend all the proceeds of each
advance hereunder for Project Costs in amounts and for the purposes provided in
the Project Budget and for no other purpose whatsoever.
(B) Lessee will promptly advise Lessor if and
when (1) Project Costs shall exceed or appear likely to exceed the Lessor's
Maximum Cost or (2) Project Costs with respect to any particular item in the
Project Budget shall exceed or appear likely to exceed the amount specified for
any such item in the Project Budget, and shall give Lessor sufficiently detailed
information with respect thereto.
(C) If, in the sole good faith judgment of
Lessor, it appears at any time or from time to time that the Remaining Funds
will be insufficient to complete the construction/performance of the Capital
Projects substantially in accordance with the Plans on or before the Outside
Date, and to pay for all Project Costs incurred in connection with such
construction/performance, or if any other expenses are required for such
completion which were not scheduled in the Project Budget, Lessor may request
that Lessee demonstrate that the Remaining Funds are sufficient for such
completion and payment. If Lessee does not so demonstrate to Lessor's reasonable
satisfaction within five (5) Business Days of receipt of Lessor's request to do
so, then Lessee shall deposit with Lessor additional monies as shall, in the
reasonable good faith judgment of Lessor, when added to the Remaining Funds, be
sufficient to complete and/or pay for the construction/performance of the
Capital Projects. Such additional monies of Lessee shall be applied for payment
of costs prior to Lessor advancing any additional funds under the Lease, as
hereby amended, and Lessor shall have no obligation to advance any such
additional funds until the additional monies deposited with Lessor shall have
been so applied. Lessee, in demonstrating whether the Remaining Funds are
sufficient to complete the Capital Projects, may offset any savings caused by
the actual amount of expenses being less than budgeted against amounts of other
items for which actual costs were in excess of those budgeted.
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(xii) ASSIGNMENT OF CONSTRUCTION CONTRACTS. Upon the
first to occur of an Event of Default or the Completion Date, and at the request
of Lessor, Lessee shall assign to Lessor each Construction Contract to which
Lessee is a party utilizing an assignment instrument in form and substance
acceptable to Lessor and shall cause each other party to such Construction
Contract to consent to such assignment, if required by the terms thereof.
(xiii) DOCUMENTS AT COMPLETION. Without limiting any
other provision of this Amendment, from time to time as requested by Lessor and
as soon as practicable following the Completion Date, Lessee shall supply or
cause to be supplied to Lessor each of those documents and information described
on Exhibit J attached hereto with respect to the Capital Projects, as
applicable.
(f) ADDITIONAL EVENTS OF DEFAULT; REMEDIES.
(i) ADDITIONAL EVENTS OF DEFAULT. In addition to and
without limiting the "Events of Default" set forth in Section 16.1 of the Lease,
any one or more of the following shall also constitute an "Event of Default"
under the Lease, as hereby amended:
(A) Lessee fails to perform any of the obligations
to be performed by Lessee under this Amendment with respect to the Capital
Projects, and such failure is not cured within thirty (30) days after notice
thereof from Lessor or, if such failure cannot reasonably be cured within such
thirty (30) day period, such longer period as reasonably may be required to
remedy such default as long as Lessee has commenced such cure within such thirty
(30) day period, thereafter diligently prosecutes such cure and completes such
cure not later than sixty (60) days after notice from Lessor but in any event
prior to the Outside Date; or
(B) Lessee fails to satisfy any condition to an
advance under this Amendment for a period in excess of thirty (30) days, or, if
such failure cannot reasonably be cured within such thirty (30) day period, such
longer period as reasonably may be required to remedy such failure as long as
Lessee has commenced such cure within such thirty (30) day period, thereafter
diligently prosecutes such cure and completes such cure within sixty (60) days
but in any event prior to the Outside Date; or
(C) Lessee uses any monies advanced by Lessor
under this Amendment for any purpose other than as allowed or contemplated under
this Amendment; or
(D) Except as a result of a casualty, Condemnation
or other Unavoidable Delay, work on the Capital Projects ceases for thirty (30)
consecutive days for any reason; or
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(E) The Completion Date does not occur by the
Outside Date, free and clear of mechanics', materialmen's and other liens (other
than except for permitted contests pursuant to Article XII of the Lease); or
(F) Except for change orders allowed pursuant to
the provisions of this Amendment, Lessee modifies, amends or terminates any
Construction Contract without Lessor's written consent; or
(G) Any mechanics', materialmen's or other lien is
filed or asserted against the Leased Property, or any part thereof, or any suit
or other proceeding is instituted to enforce or foreclose such a lien (except
for permitted contests pursuant to Article XII of the Lease).
(g) ADVANCES OF FUNDS BY LESSOR.
(i) FUNDING. Subject to the satisfaction by Lessee
of the conditions set forth in Paragraph 5(h) below and the other provisions of
the Lease, as hereby amended, Lessor will advance to Lessee funds up to the
Lessor's Maximum Cost (less all costs, fees, allowances and charges of Lessor
which are included within Project Costs) for the purpose of paying or
reimbursing Lessee for the payment of the Project Costs.
(ii) LIMITATION OF FUNDING OBLIGATION. Lessor
shall not be obligated to advance to Lessee any sums (A) in excess of the
Lessor's Maximum Cost or for which a Request for Advance is received more than
thirty (30) days after the Outside Date, (B) when any of the conditions set
forth in Paragraph 5(h) have not been met or fulfilled.
(iii) ADVANCES OF FUNDS BY LESSOR. Draw requests
will be reviewed monthly and will be based on the pro rata share completion to
date of each construction line item listed in the Project Budget. All advances
of funds under this Amendment shall be made by Lessor in accordance with a
Request for Advance. Each Request for Advance shall be honored within ten (10)
Business Days of receipt of the same delivered in accordance with the Notice
provisions in the Lease and Paragraph 5(i)(v) below, together with the
information required therein, subject, however, to the limitations herein. In no
event shall Lessor be required to make any advance for a particular line item
which, when aggregated with prior advances, is in excess of the Project Budget
for such line item except to the extent amounts from contingency line items are
unused and/or to the extent savings, in Lessor's reasonable good faith
discretion, in other budget line items remain unused. Lessor shall issue checks
payable to, or otherwise advance funds to, Lessee, the payees designated in a
Request for Advance or jointly to Lessee and such payees, as Lessor shall
reasonably determine. Advances of funds to such payees or jointly to Lessee and
any such payee shall constitute an advance hereunder as though advanced directly
to Lessee.
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(iv) HOLDBACKS. Any advances for costs and
expenses of labor and materials connected with the construction/performance of
the Capital Projects shall be limited to Ninety Percent (90%) of such costs and
expenses and shall be made in accordance with the payment schedule of the
Construction Contract with the General Contractor. The final advance of proceeds
representing the Ten Percent (10%) retainage for any particular item will not be
made until the last to occur of (A) the Completion Date, (B) completion of all
Punch List Items and (C) the date Lessor receives (1) either (x) all final lien
releases and waivers provided for herein or (y) evidence and assurances
satisfactory to Lessor in its sole and absolute discretion (including a legal
opinion from counsel acceptable to Lessor) that the period during which any
liens may be perfected with respect to any work in accordance with Legal
Requirements has expired and that no such liens have been perfected and remain
unsatisfied, (2) an "As-Built" set of plans and specifications, (3) an ALTA
"As-Built" survey and (4) such other documents as Lessor may reasonably request.
In no event shall any portion of such retainage be paid if any mechanics' and/or
materialmen's liens or other encumbrances have been filed and remain on the
Leased Property (except for permitted contests pursuant to Article XII of the
Lease).
(h) CONDITIONS TO LESSOR OBLIGATIONS TO ADVANCE FUNDS.
Lessor shall not be obligated to make any advance of funds under this Amendment,
including the first advance, unless and until the following conditions shall
have been satisfied (with proof thereof in form and sufficiency as may be
reasonably requested by Lessor):
(i) APPROVALS/ENTITLEMENTS. To the extent not
theretofore received and approved by Lessor and to the extent of a material
change not permitted herein without approval, Lessor shall have received and
approved (A) the Plans; (B) all Construction Contracts with the General
Contractor, the Architect and any other subcontractor or material supplier that
may be requested by Lessor; and (C) all authorizations and permits required by
any Governmental Authority for the construction/performance of the Capital
Projects, including building and grading permits, a foundation letter (if
applicable) and such other authorizations and permits as are required for the
use and operation of the Facility (including the 32-Unit Capital Addition
Project) for its Primary Intended Use, which are presently procurable. In
addition, Lessor shall have received agreements from the Architect, the General
Contractor and each Major Subcontractor in the forms of Exhibits F, G and H
attached hereto, respectively.
(ii) UTILITIES AND ACCESS. Lessor shall have
received evidence satisfactory to Lessor that (A) all existing public utilities,
including telephone, water, sewage, electricity and gas are adequate for the
construction of the 32-Unit Capital Addition Project to the Facility and the use
thereof upon completion for its Primary Intended Use; and (B) all existing means
of ingress and egress, parking, access to public streets and drainage facilities
are adequate for 32-Unit Capital Addition Project to the Facility and the use
thereof upon completion for its Primary Intended.
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(iii) SOILS AND OTHER TESTS. Lessor shall have
received and approved test borings, engineering reports and such other site
analysis as Lessor may require, all of which must indicate that the soil is
adequate for the proposed construction/performance of the Capital Projects in
accordance with the Plans.
(iv) PROCEEDINGS. Lessor shall have reviewed and
approved all corporate proceedings to be taken by Lessee and Guarantor in
connection with the transactions contemplated under the Lease, as hereby
amended.
(v) INSURANCE. Lessor shall have received (A)
certificates with respect to, and copies of the policies of, the insurance
required to be carried by Lessee or other Persons pursuant to Paragraph 5(e)(iv)
above, together with evidence satisfactory to Lessor that the premiums therefor
have been paid in full, and (B) evidence satisfactory to Lessor of the insurance
required to be carried by the Architect and General Contractor also as set forth
in such Paragraph 5(e)(iv).
(vi) PAYMENT AND PERFORMANCE BOND(S). Lessor shall
have received the payment and performance bond(s) fulfilling the requirements
set forth in Paragraph 5(e)(v) above and shall have made arrangements, to the
extent applicable, for the recordation and/or filing of the same for recordation
in the Official Records in the County in which the Land is located, along with a
copy of the approved Construction Contract with the General Contractor.
(vii) OPINION OF COUNSEL. Lessor shall have
received an opinion or opinions of counsel to Lessee and Guarantor and each
incorporating any necessary opinions from local counsel to Lessee and Guarantor,
to the effect that:
(A) Each of Lessee and Guarantor is duly
organized, validly existing and in good standing in its state of
organization/formation and is qualified to do business in the
State; the execution and delivery of this Amendment and all other
documents to be executed by Lessee or Guarantor, as applicable,
hereunder have been duly authorized; and the Lease, as hereby
amended, and the Guaranty, as hereby reaffirmed, are valid and
binding instruments, enforceable against Lessee and Guarantor, as
applicable, in accordance with their respective terms;
(B) The execution and delivery of this
Amendment and all other documents to be executed and delivered by
Lessee or Guarantor hereunder and the consummation of the
transactions contemplated hereunder do not and will not constitute
an event of default under, or a violation of the
articles/certificate of incorporation or by-laws of Lessee or
Guarantor and or any Legal Requirement, contract or other
agreement by which Lessee or
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Guarantor is or may be bound, including Governmental Requirements
applicable to the construction/performance of the Capital Projects
or the use and operation of the Facility for its Primary Intended
Use upon completion of the 32-Unit Capital Addition Project;
(C) There are (1) no pending or, to the best
knowledge of such counsel, threatened, proceedings with respect to
or in any manner affecting Lessee, Guarantor or the Leased
Property or in which Lessee; or (2) to the best knowledge of such
counsel, present plans or studies by any Governmental Authority
which in any way challenge, affect or would challenge or affect in
a material and adverse manner such ownership, development or
leasing; and
(D) to the best knowledge of such
counsel, Lessee has received the grading, building and foundation
permits and any final approval of the Plans and any consents,
permits, licenses and other approvals or authorizations presently
required from Governmental Authorities or other third parties
which are necessary to construct/perform the Capital Projects. In
addition, the Capital Projects, if completed in accordance with
the Plans therefor, will comply with all applicable zoning
ordinances and the matters affecting title to the Leased Property.
(viii) APPRAISAL. If requested by Lessor,
Lessor shall have received and approved an appraisal of the Leased Property from
an appraisal firm and in form and substance satisfactory to Lessor indicating
that the value of the Leased Property upon completion of the Capital Projects
will exceed the Fair Market Value of the Leased Property immediately prior
thereto by an amount not less than Ninety-Five Percent (95%) of the total
Project Costs for the Capital Projects.
(ix) NO DEFAULT. No Event of Default shall
have occurred under the Lease, as hereby amended, and no event or condition
shall exist which, with notice and/or lapse of time, or both, would constitute
such an Event of Default under the Lease, as hereby amended.
(x) CONDEMNATION; CASUALTY. No Condemnation
shall be pending or threatened and no casualty shall have occurred, in either
case with respect to the Leased Property or any portion thereof.
(xi) OTHER DOCUMENTS AND ASSURANCES. Lessor
shall have received such other documents and assurances as Lessor shall have
reasonably requested, including any endorsements to Lessor existing policy of
title insurance updating the same without any additional exception except as may
be approved by Lessor and increasing the policy limit thereof to an amount equal
to the Project Costs funded or accrued by Lessor (less the amount thereof funded
by Lessor for furniture, fixtures and equipment as shown on the
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Project Budget).
(xii) REQUEST FOR ADVANCE. Lessor shall have
received and approved (A) a Request for Advance accompanied by all necessary
documents and certificates as set forth in the definition thereof; (B) a
Lessee's Affidavit; and (C) to the extent applicable, a certificate from the
Architect to the effect that in the Architect's opinion (1) the
construction/performance of the Capital Projects theretofore performed is in
accordance with the Plans and (2) the amount requested is appropriate in light
of the percentage of construction completed and amount of stored material.
(i) MISCELLANEOUS PROVISIONS APPLICABLE TO CAPITAL
PROJECTS.
(i) OWNERSHIP OF CAPITAL PROJECTS. At all
times all Capital Projects shall be owned entirely by Lessor subject to the
leasehold interest of Lessee under the Lease, as hereby amended, with respect to
the Capital Projects. Upon the request of Lessor, Lessee shall execute and/or
cause any Affiliate of Lessee to execute such documents as Lessor may reasonably
request evidencing and confirming Lessor's ownership of such Capital Projects.
(ii) ADVANCE NOT A WAIVER. No advance of funds
under this Amendment shall constitute a waiver of any of the conditions to
Lessor's obligation to make further advances nor, if Lessee is unable to satisfy
any such condition, shall any such advance have the effect of precluding Lessor
from thereafter declaring such inability to be an Event of Default under the
Lease, as hereby amended.
(iii) CONDITIONS FOR BENEFIT OF LESSOR. All
conditions to the obligations of Lessor hereunder are imposed solely for the
benefit of Lessor and no other Person shall have standing to require
satisfaction of such conditions.
(iv) COMPLIANCE RESPONSIBILITY.
Notwithstanding the review and approval by Lessor of the Plans or any other
matter, Lessor shall have no responsibility for compliance by the Leased
Property, the Capital Projects or the construction/performance of the Capital
Projects with Legal Requirements, sound architectural or engineering practices
or other matters.
(v) NOTICES. Any Notices with respect to
Request for Advances and/or change orders (only) shall be sent to Lessor in
accordance with the provisions for notices in the Lease, except that the same
shall be sent to the following address:
To Lessor: HCPI Trust
c/o Health Care Property Investors, Inc.
6610 West Central Avenue
Toledo, Ohio 43617
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Attn: Thomas J. Zarse,
Vice President-Development
Fax:(419) 841-9644
with a copy to: HCPI Trust
c/o Health Care Property Investors, Inc.
10990 Wilshire Boulevard, Suite 1200
Los Angeles, California 90024
Attn: Legal Department
Fax: (310) 444-7817
(vi) ATTORNEYS' FEES AND COSTS. Subject to
Lessor's funding obligations under this Amendment, Lessee shall pay to Lessor
all of Lessor's attorneys' fees and other costs and expenses expended or
incurred in connection with (A) amendments or other modifications to any of the
Construction Contracts or the Plans; and (B) any other matter related to the
construction/performance of the Capital Projects.
6. EXHIBIT C-1 TO LEASE. The parties acknowledge and agree
that this Amendment is being executed in lieu and stead of the form of
amendment attached to the Lease as Exhibit C-1, which the parties originally
intended to execute and deliver.
7. ACCESS TO RENT CALCULATION RECORDS. To the extent required
by applicable Legal Requirements, Lessor shall make available, upon request by
the Secretary of Health and Human Services or upon the request by the U.S.
Comptroller General, or any duly authorized representative of either of them,
such reasonable books and records of Lessor that were used by Lessor to
determine or otherwise support the calculation of Rent payable by Lessee under
the Lease, as hereby amended; provided, however, that: (a) Lessor shall only be
required to maintain the foregoing described books and records for a period of
four (4) years after the expiration of each Lease Year; and (b) Lessee shall
reimburse to Lessor upon demand, as an Additional Charge under the Lease, as
hereby amended, all reasonable costs of Lessor in responding to any such
request.
8. MISCELLANEOUS. Except as hereby amended, the Lease
shall remain in full force and effect. This Amendment may be executed in any
number of counterparts, all of which together shall constitute one and the same
instrument.
24
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Lease to be executed as of the day and year first above written.
"Lessor" "Lessee"
HCPI TRUST, a Maryland real estate BCC AT MT. ROYAL PINES, INC., a
investment trust Delaware corporation
By: [/s/ illegible] By: /s/ Brian L. Barth
------------------------------ ----------------------------
Its: Vice President Its: Vice President
----------------------------- ---------------------------
CONSENT AND AGREEMENT OF GUARANTOR
The undersigned "Guarantor" hereby consents to this First Amendment to
Lease and reaffirms to and agrees with Lessor that its obligations under the
Guaranty of Obligations dated as of March 21, 1996, remain in full force and
effect with respect to the Lease, as amended hereby.
"Guarantor"
BALANCED CARE CORPORATION, a
Delaware corporation
By: /s/ Robin C. Barber
------------------------------
Its: -----------------------------
25
<PAGE> 1
EXHIBIT 10.33
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 1st day of August, 1996, by and
between BALANCED CARE CORPORATION, a Delaware corporation with its principal
place of business at 5021 Louise Drive, Suite 200, Mechanicsburg, Pennsylvania
17055, on behalf of it and each of its subsidiaries (the "Company") and BRAD E.
HOLLINGER, an individual residing at 2850 Ford Farm Road, Mechanicsburg,
Pennsylvania 17055 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to retain the services of
Employee as Chairman of its Board of Directors and its Chief Executive Officer
for the benefit of itself and each of its subsidiaries throughout the term of
this Agreement, and Employee is willing to be employed by the Company in the
foregoing capacities for such period, upon the terms and conditions herein set
forth.
WHEREAS, the Company and the Employee are parties to an
Employment Agreement dated as of September 20, 1995 which is superseded in its
entirety by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and intending to be legally bound, the parties hereto hereby
agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee and
Employee hereby accepts employment by the Company subject to all the terms and
conditions hereafter set forth.
2. CAPACITY. Employee shall serve as a Chairman of the Board
and Chief Executive Officer of the Company and Chief Executive Officer and
President of each subsidiary of the Company, whether in existence at the time
this Agreement is executed or formed thereafter (each a "Subsidiary").
3. DUTIES. During the term of this Agreement, Employee shall
devote his business attention and best efforts to the performance of the duties
customarily performed by the Chairman of the Board and Chief Executive Officer
of the Company and, with respect to each Subsidiary, by the Chief Executive
Officer and President of such Subsidiary, together with such other duties, not
inconsistent with duties typically and customarily performed by the chairmen of
the board of directors and chief executive officers of comparable companies, as
the Employee may reasonably be requested to perform by the Board of Directors.
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<PAGE> 2
4. TERM OF EMPLOYMENT. Unless earlier terminated as hereafter
provided, this Agreement shall commence on August 1, 1996 and shall expire on
July 31, 2001, provided however, that upon expiration of such term, this
Agreement shall be extended from year to year without further action on the
part of the parties hereto, unless either party gives written notice of
termination to the other party at least ninety (90) days prior to the
expiration of the then current term.
5. TERMINATION.
(a) DEATH. The employment of Employee under this Agreement
shall immediately terminate upon the death of Employee and the Company
shall have no further obligation to the Employee except to the extent
of any employee benefit plans or practices of the Company or as
required by law.
(b) DISABILITY. In the event the Employee becomes "Disabled",
as defined below, the Company may elect to terminate the employment of
the Employee and make claim on his behalf with respect to an insurance
policy purchased as provided in Section 6(e). The Employee shall be
Disabled if the Employee is absent from his duties for medical reasons
for a period of six (6) months and, upon written notice from the Board
to return to his duties, he is unable to or fails to return.
(c) TERMINATION FOR CAUSE. The employment of Employee under
this Agreement shall terminate immediately if the Board of Directors
of the Company discharges Employee for Cause and the Company shall
have no further obligations to the Employee, except to the extent
required by law. For purposes of this subsection (c), "Cause" shall
mean termination for reason of the Employee's willful misconduct,
intentional and material failure to perform stated duties or
conviction of a felony. For purposes of this subsection (c), no act or
omission shall be regarded as intentionally or willfully done unless
done or omitted to be done by the Employee following receipt of
written notice from the Board advising the Employee the particular act
or omission would be regarded as an intentional or wilful act or
omission. No termination for Cause shall be effective unless and until
(i) there shall have been delivered to the Employee a copy of a
resolution duly adopted by a three quarters majority of the Board
stating that, in the good faith opinion of the Board, a particular act
or omission constitutes Cause under this Agreement, (ii) the Employee
is given a reasonable opportunity during the sixty (60) day period
commencing on delivery of such resolution to correct or cure the
particular act or omission complained of and (iii) the Employee is
given a reasonable opportunity, together with his counsel, to be heard
before the Board during the sixty (60) day period following delivery
of such resolution.
(d) VOLUNTARY RESIGNATION OR RETIREMENT. If the Employee
voluntarily resigns from employment or chooses to retire from active
service with the Company, the employment of the employee shall
terminate on the effective date of his resignation or retirement and
the Company shall have no further obligations to the Employee except
to the extent required by law.
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<PAGE> 3
(e) GOOD REASON. If the Employee resigns or retires for Good
Reason within a reasonable time following the occurrence of any one or
more of the events described below at subsections (i), (ii), (iii),
(iv), (v), (vii) or (viii) or within one year of the occurrence of the
event described in subsection (vi), each as defined below, his
employment under this Agreement shall terminate immediately and the
Company shall have the obligations set forth in Section 6(g) hereof.
For purpose of this Agreement, "Good Reason" shall mean, absent the
Employee's express written consent, the occurrence of one or more of
the following:
(i) removal of the Employee as Chairman of the Board
of Directors and/or Chief Executive Officer or as Chief
Executive Officer or President of any Subsidiary or failure
to renominate the Employee as a Director of the Company (by
reason other than death, Disability or Cause), or any other
material breach (which shall include, but shall not be
limited to, any termination or purported termination of the
Employee's employment by the Company for reasons other than
death, disability or cause) by the Company of its obligations
contained in this Agreement;
(ii) the assignment to the Employee of any duties
inconsistent with his position as Chairman of the Board of
Directors and/or Chief Executive Officer or as Chief
Executive Officer and President of any Subsidiary or as a
Director of the Company or a substantial diminution in the
nature or status of the Employee's duties and
responsibilities, provided, however, the Board's temporary
assignment to the Employee of supervision of the operations
of a subsidiary or a division, in addition to his other
duties under this Agreement, shall not be an event of Good
Reason under this subsection;
(iii) a reduction by the Company in the Employee's
annual base salary as in effect on the date hereof or as the
same may be increased from time to time, except for
proportional across-the-board salary reductions similarly
affecting all executive officers of the Company; provided,
however, that in no event shall the Employee's base salary be
reduced below the per year amount set forth in Section 6(a)
hereof without the Employee's express, written consent;
(iv) failure of the Company to continue in effect
and/or the Employee's participation in any compensation plan,
program or arrangement in which the Employee then
participates (whether existing at the date this agreement was
first or thereafter adopted) unless (i) an equitable
arrangement reasonably acceptable to the Employee and
embodied in an on-going plan, program or arrangement has been
made with respect to such plan or (ii) the failure to
continue a plan, program or arrangement or the Employee's
participation therein is pursuant to an action which equally
affects all executive officers of the Company;
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<PAGE> 4
(v) any material reduction by the Company of the
benefits enjoyed by the Employee under any of the life
insurance, medical, health-and-accident, disability or other
employee welfare benefit plans or programs, including
vacation days or corporate perquisites or arrangements as in
effect from time to time;
(vi) the occurrence of a Change in Control as defined
in Section 8 hereof;
(vii) the termination of the Employee's employment
with the Company for any reason other than Cause within the
one year period following the occurrence of a Change in
Control; or
(vii) the failure of the Company to secure the
specific, written consent of each and any successor to be
bound by the terms and conditions hereof.
6. COMPENSATION.
(a) CASH COMPENSATION. During the term of this Agreement or
any extension thereof, as compensation for services to the Company, the Company
shall pay to Employee a base salary, in semi-monthly installments, in the
respective amounts as follows:
a. for the period beginning August 1, 1996 and ending June 30,
1997, semi-monthly installments of $6,458.33;
b. for the period beginning July 1, 1997 and ending June 30,
1998, semi-monthly installments of $8,333.33;
c. for the period beginning July 1, 1998 and for the duration of
the term hereof, semi-monthly installments of $9,375.
The Board of Directors of the Company may, in its sole discretion from time to
time, increase the base compensation to be paid to Employee as provided in this
paragraph, or provide additional compensation to Employee, including but not
limited to the annual bonus provided for in Section 6(b) hereof, whether
permanently or for a limited time period, based upon the earnings or
performance of the Employee or otherwise in order to recognize and fairly
compensate Employee for the value of his services to the Company. In addition,
Employee shall be entitled to receive all fringe benefits provided to its
employees and officers by Company, including but not limited to insurance
benefits, which are appropriate for an employee or officer holding his office.
(b) ANNUAL BONUS. For each fiscal year of the Company during the term
of this Agreement, Employee shall be entitled to receive an annual bonus in an
amount not less than 75% of Employee's base salary, at the rate then in effect,
upon achievement of the level of pre-tax earnings (determined in accordance
with generally accepted accounting principles and after giving effect, to the
extent appropriate, to minority interests), as such level is approved by the
Board of Directors in the annual operating budget for a particular year. Each
fiscal year of the
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<PAGE> 5
Company shall represent a separate opportunity to receive a bonus and one fiscal
year's earnings shall not be cumulated with any other fiscal year's earnings for
this purpose. If the level of earnings actually achieved for a particular year
exceeds the level approved by the Board for that year, the Board, in its sole
discretion, may award the Employee additional bonus compensation for such year.
Such annual bonus shall be paid no later than seventy five (75) days after the
end of the fiscal year to which such bonus relates. If this Agreement is
terminated for reasons set forth in Sections 5(a), (b) or (d) other than at the
end of a fiscal year, Employee's bonus for the year of termination shall be
calculated and paid in the normal manner but pro-rated based upon the number of
days in such years prior to such termination; provided, however, that if the
termination is under Section 5(c) hereof, no bonus shall be paid for the year of
termination.
(c) STOCK OPTIONS. The Company hereby grants to the Employee the right
to purchase (the "Option"), at any time or from time to time hereafter, (i)
effective as of the date of this Agreement, up to 50,000 shares of the common
stock of the Company at a purchase price of $1.50 per share and (ii) effective
as of the June 30, 1997, up to 50,000 shares of the common stock of the
Company, in addition to the shares described in subsection (i), at a per share
purchase price equal to the fair market value of a share of common stock of the
Company on June 30, 1997. The Option granted hereunder shall be non-qualified
stock options. The Option shall be vested in accordance with the Balanced Care
Corporation 1996 Stock Incentive Plan (the "Option Plan") as approved by the
Company's Board of Directors. In the event this Agreement is terminated for
Good Reason, all options shall become fully vested and exercisable as of the
date of such termination and may then be exercised thereafter at any time or
from time to time, at the election of the Employee, within one year following
the termination of this Agreement. This grant of stock options may be further
documented, to the extent not inconsistent with the foregoing, under the Option
Plan.
(d) VACATION AND BENEFITS. Employee shall receive six (6) weeks per
year, such vacation to be taken when and as desired by the Employee. Any time
spent by the Employee at professional meetings, instructional causes and other
similar meetings so as to better enable the Employee to perform professional
services in the employ of the Company shall not be considered vacation time.
The Employee shall participate in any and all employee benefit and fringe
benefits plans of the Company to extent under the same terms and conditions
applicable to employees of the Company generally.
(e) DISABILITY PAYMENTS. Company shall purchase and pay for a
disability insurance policy paying disability benefits, in a monthly amount not
less than 80% of his base pay at the rate then in effect, to the Employee
commencing on the date he becomes Disabled as defined in Section 5(b) hereof
and continuing until the earliest of his attaining age 65, his becoming able to
return to gainful employment in any occupation reasonably consistent with his
education, training and experience or his death. Such policy may exclude
disablement resulting from automobile racing.
Any insurance policy purchased in connection with this subsection (e) must
contain provisions no less favorable tot he Employee than that the Employee's
Disability shall be considered continuing if he is unable because of injury or
sickness to perform the substantial and material
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<PAGE> 6
duties of the Employee's regular occupation, while under the regular care of a
licensed physician, and while not gainfully employed in any occupation
reasonably consistent with the Employee's education, training and experience.
(f) ADDITIONAL COMPENSATION. Nothing set forth in the foregoing shall
prevent the Board of Directors, from time to time, to provide such additional
compensation and/or pension and profit sharing or other benefits as the Board
of Directors of the Company shall deem appropriate.
(g) PAYMENT ON GOOD REASON TERMINATION. In the event the Employee
terminates his employment for Good Reason, he shall receive, in addition to the
vesting of the stock options as set forth in Section 6(c) above, a single cash
payment delivered within ten (10) business days following his termination of
employment in an amount equal to the sum of (i) the amount determined by
multiplying by three (3) the annual cash compensation of the Employee at the
rate then in effect under Section 6(a) hereof and (ii) the amount of the annual
bonus payable under Section 6(b) hereof for the year in which the termination
took place if the annual operating budget was achieved and the Employee was
employed for the full year. This single cash payment will be made in
recognition of the Employee's performance prior to termination of employment
and the obligations not to compete as set forth in Section 7 as applicable
after termination of employment. It is the intention of the parties that the
payment described in this subsection (f) shall have been approved by the
shareholders of the Company within the meaning of and in a manner consistent
with Section 280G(b)(5) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that the payments hereunder shall be exempt from the provisions of
Section 280G of the Code, provided, however, in the event that the payments
under this subsection (f) are not exempt under Section 280G of the Code, the
Company shall pay to the Employee an amount equal to the amount necessary to
pay any excise tax due with respect to this payment together with the amount
necessary to pay any additional federal, state and local income taxes due with
respect to such additional payment.
7. NON-COMPETITION.
(a) DEFINITIONS. The following definitions apply to this
paragraph 7.
(i) BUSINESS ACTIVITIES. The "Business Activities"
include managing, leasing or owning long-term care facilities
or assisted living centers, or managing, leasing or owning
subacute operations or facilities of nursing homes within a
ninety (90) mile radius of a Company facility.
(ii) COMPANY CUSTOMERS. The "Company Customers" are
(y) those persons or entities Employee or other Employee
personnel sold, solicited or service within the six (6)
months preceding the end of Employee's employment; and (z)
those persons or entities about which Employee had access to
proprietary information within six (6) months preceding the
end of Employee's employment.
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<PAGE> 7
(b) RESTRICTION ON UNFAIR COMPETITION. While employed by
Company and for two (2) years after Employee's employment ends, Employee agrees
not to do any of the following: (i) directly or indirectly own an interest in,
manage, or control a business engaged in the Business Activities; or (ii)
otherwise engage in the Business Activities in a fashion which completes with
the Company; or (iii) provide to a competitor of Company consulting service or
services as an employee, partner or owner, which services relate to the
Business Activities.
(c) RESTRICTION ON SOLICITATION. While employed by the
Company and for two (2) years after Employee's employment ends, Employee agrees
not to do any of the following: (i) directly or indirectly solicit or encourage
Company Customers to deal with Employee or any other person or entity other
than the Company in connection with the Company's Customer's requirements for
the Business Activities, or assist or aid any others to do so; or (ii) directly
or indirectly solicit or encourage other personnel subject to the provisions of
this paragraph 7 to engage in any of the activities restricted in this
Agreement; or (iii) directly or indirectly solicit for Employee's benefit or
the benefit of others the employment or services of any then-present employee
of Company.
(d) LISTED STOCK OWNERSHIP EXCEPTION. Nothing in this
paragraph 7 shall prevent Employee from acquiring as a passive investor up to
five percent (5 %) of the equity of a publicly traded, competing enterprise.
8. CHANGE OF CONTROL.
A "Change of Control" shall be deemed to have taken place if;
(i) any person, including a group but not excluding the Company or any current
stockholder of the Company who beneficially owns five percent (5%) or more of
the Company's outstanding shares, becomes the beneficial owner of shares of the
Company having twenty percent (20%) or more of the total number of votes that
may be cast for the election of directors; (ii) there occurs any cash tender or
exchange offer for shares of the Company, merger or other business combination,
sale of assets or contested election, or any combination of the foregoing
transaction, and as a result of or in connection with any such event persons
who were directors of Company before the event shall cease to constitute a
majority of the Board of Directors of the Company or any successor to Company.
As used herein, the terms "person" and "beneficial owner" have the same meaning
as such terms under Section 13(d) of the Securities Exchange Act of 1934 and
the rules and regulations thereunder.
9. ASSIGNMENT. This Agreement shall not be assignable by the
Employee; and shall be assignable by the Company only to a person, firm or
corporation which may become a successor in interest (by purchase, merger or
otherwise) to the Company with respect to the business or portion of the
business presently operated by it. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
assume and expressly agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place.
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<PAGE> 8
10. ENTIRE AGREEMENT. This writing represents the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and it may not be altered or amended except by an agreement in writing.
11. BINDING EFFECT. Subject to Section 9, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs, executors and administrators. This
Agreement is personal in nature and neither of the parties hereto shall,
without the consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder, except as provided in Paragraph 1l(b) above.
Without limiting the foregoing, the Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by
the laws of descent or distribution, and in the event of any attempted
assignment or transfer contrary to this Subsection 11 the Company shall have no
liability to pay any amount so attempted to be assigned or transferred. If any
provision of this Agreement shall be or become illegal or unenforceable in
whole or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and enforceable.
12. GOVERNING LAW. This Agreement has been negotiated
and executed within the Commonwealth of Pennsylvania, and the validity,
interpretation and enforcement of this Agreement shall be governed by the laws
of Pennsylvania without regard to its principles of conflicts of laws.
13. HEADINGS. The headings of paragraphs in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
BALANCED CARE CORPORATION
Attest:
By: /s/ David L. Goldsmith
_______________________________
__________________________________ Its: Chairman-Compensation Committee
______________________________
(Corporate Seal)
WITNESS /S/ Manuel A. Henriques /s/ Brad E. Hollinger
_______________________ ___________________________________
Employee
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<PAGE> 1
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of the 1st
day of May, 1996, by and between BALANCED CARE CORPORATION, a Delaware
corporation, with its principal executive offices at 5021 Louise Drive, Suite
200, Mechanicsburg, Pennsylvania 17055, (the "Company"), and WILLIAM T.
MCCARTHY, an individual residing at 386 Penn Road, Wynnewood, Pennsylvania
19096 (the "Executive").
WHEREAS, the Company wishes to employ the Executive as its
Chief Financial Officer and the Executive wishes to be employed by the Company
in such capacity, subject to the terms and conditions set forth in this
Agreement.
NOW THEREFORE, in consideration of the mutual promises
hereinafter set forth and intending to be legally bound hereby, the Company and
the Executive hereby agree as follows:
1. POSITION AND DUTIES.
(a) The Company hereby agrees to, and hereby does, employ
the Executive, for the term and under the terms and conditions set forth
herein, to render services to the Company in the capacity of Chief Financial
Officer of the Company ("CFO") and in connection therewith to perform such
duties as have been previously rendered by the CFO and such other or additional
duties not inconsistent with the position of CFO as may be reasonably assigned
from time to time by the Board of Directors of the Company (the "Board"), the
Chief Executive Officer and/or the President of the Company.
(b) The Executive hereby accepts employment as the CFO of
the Company and agrees to render the services to the Company and perform the
duties described in Section 1(a) faithfully and to the best of his ability and
to devote his full business time and efforts thereto. Notwithstanding the
foregoing, with the consent of the CEO, the Executive may devote a reasonable
amount of time and effort to industry, community and charitable organizations.
2. TERM.
The term of employment hereunder (the "Term") shall commence
as of May 1, 1996 (the "Effective Date") and shall continue, subject to such
earlier termination of the Term and the Executive's employment hereunder as is
provided in Section 5 hereof, on April 30, 1998. The Term of this Agreement
shall automatically renew for one year on the first anniversary date and each
anniversary date thereafter (each, an "Extension Date") unless one party
provides written notice to the other in a manner described in Section 7(b)
hereof not later than sixty (60) days prior to the then next Extension Date of
its intention not to renew the Term. The date upon
<PAGE> 2
which the Term hereof, as extended from time to time, shall expire is
hereinafter referred to as the "Expiration Date."
3. AGREEMENT TO HOLD CERTAIN MATTERS CONFIDENTIAL.
During his employment with the Company and for any subsequent
period with respect to which he is entitled to receive a severance benefit
under this Agreement;
(a) Confidentiality. The Executive shall keep secret and
confidential all matters of the Company or relating to the Company, its
operations and businesses which are not, as of the time immediately preceding
such disclosure, in the public domain and generally known by the public and the
Executive shall not disclose them to any party except with the express written
consent of the Company or if the failure to disclose such would result in the
imposition on the Executive of a fine, sentence or penalty for contempt of
court or an administrative agency with jurisdiction.
(b) Equitable Relief. Executive acknowledges and agrees that
any breach of this Section 3 will cause the Company irreparable injury and the
Company shall have no adequate remedy at law with respect to any such breach.
Executive agrees that the Company shall be entitled, in addition to any
remedies it may have under this Employment Agreement or at law, to injunctive
and other equitable relief to prevent or curtail any breach of the provisions
of this Section 3.
4. COMPENSATION AND BENEFITS.
The Company shall pay the Executive the following salary and
grant to him the following other benefits:
(a) Base Salary. The Company shall pay the Executive for the
Term a base salary, in equal installments in accordance with the Company's
payroll practices then applicable to executive officers, at the annual rate of
One Hundred Thousand Dollars ($100,000.00) ("Base Salary"); provided, however,
that effective January 1, 1997, the Board shall review the rate of Base Salary
and may, in its sole discretion (after considering the performance of the
Executive, the financial performance of the Company, compensation paid to
comparable officers by other companies in the industry and such other factors
as the Board may deem relevant) increase such rate for the remaining portion of
the Term.
(b) Annual Bonus. The Executive shall be eligible to for an
annual bonus of up to 40% of his base salary subject to such terms and
conditions as may be determined by the CEO and approved by the Board of
Directors of the Company.
(c) Stock Options. The Executive will participate in the
Company's Stock Option Plan (the "Option Plant") when the same is established
and becomes effective in accordance with a Stock Option Agreement in the
standard form adopted by the Company. The Executive shall be granted a
non-qualified stock option under the Option Plan to purchase up to,
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<PAGE> 3
to the extent then vested, 100,000 shares of the Company's common stock at a per
share exercise price of $1.50; such stock option shall become vested and
exercisable, subject to applicable securities laws, to the extent of 50,000
shares on the first anniversary of this Agreement if the Executive is then an
employee of the Company and to the extent of the full amount of the stock option
on the second anniversary of this Agreement if the Executive is then an employee
of the Company.
(d) Fringe Benefits. The Executive shall enjoy and benefit
under all fringe benefit plans, programs or arrangements sponsored by the
Company for employees generally or for executive officers in accordance with the
respective terms and conditions thereof.
(e) Reimbursement of Expenses. The Executive shall be entitled
to reimbursement of reasonable expenses incurred in connection with the
performance of his duties hereunder in accordance with the applicable policies
and procedures of the Company.
(f) Reimbursement of Temporary Living Expenses. The Executive
shall be entitled to $600 per month as reimbursement for temporary living
expenses for each month commencing January 1, 1997 and on the first business day
of each of the next twenty three (23) calendar months if on the first day of a
relevant month the Executive is then an employee of the Company.
(g) Reimbursement For Disability Insurance Premiums. The
Executive shall be entitled to reimbursement of disability insurance premiums he
pays to the American Institute of CPA's in the amount of $468 per year in 1996
and adjusted annually for inflation.
(i) Vacation. The Executive shall be entitled to a vacation of
four (4) weeks annually in accordance with the policies of the Company.
Notwithstanding the foregoing, the Company may, without breaching the terms of
this Agreement, (i) amend any employee benefit and/or fringe benefit plan in
which the Executive participates or any policy applicable to the Executive
relating to reimbursement of expenses, vacations or other terms and conditions
of employment generally applicable to all executive employees of the Company or
(ii) reduce the amount of base salary payable under this Agreement if, but only
if, such amendment or reduction is applicable to and proportionately affects
all executive employees of the Company.
5. TERMINATION OF EMPLOYMENT.
This Agreement, the Term hereof and the Executive's employment and right to
receive salary and other benefits (other than salary and other benefits accrued
through the termination date) in accordance with Section 4 (collectively, the
"Employment Rights") shall terminate on the earliest of the events described
below; provided, however, that upon a termination of Employment Rights, the
Stock Option Agreement shall remain in effect to the extent provided in such
agreement and shall remain enforceable in accordance with its terms. In the
event of any such
- 3 -
<PAGE> 4
termination, the Executive shall have the right to receive payments and other
benefits, if any ("Severance Rights"), as set forth below in this Section 5:
(a) On the Expiration Date. The Executive's Employment Rights
shall terminate on the then Expiration Date subject to the renewal and notice
provisions and the Executive shall not be entitled to receive any Severance
Rights after the expiration of the Term, as extended from time to time.
(b) Death or Disability. The Executive's Employment Rights
shall terminate upon his death or Disability (as defined in subsection (h)(III)
below) and the Executive shall have as Severance Rights the right to receive a
pro-rata portion of any bonus payment which may be accrued for the year in which
such death or Disability occurred. Nothing contained herein shall be deemed to
prevent the receipt by the Executive or his spouse or estate, as the case may
be, of any benefit payable to or with respect to such death or Disability under
any plan, program or arrangement then sponsored by the Company, if applicable.
(c) Voluntary Resignation by the Executive. The Executive's
Employment Rights shall terminate on the effective date of his voluntary
resignation and he shall not be entitled to receive any Severance Rights unless
such voluntary resignation is made after and as a consequence of a Change in
Control of the Company, as such term is defined below.
(d) Cause. The Company may terminate the Executive's
Employment Rights for Cause (as defined in subsection (h)(l) below) and the
Executive shall not be entitled to receive any Severance Rights.
(e) Breach of Agreement by Executive. If the Executive
materially breaches any provision of this Agreement or the ancillary agreements
attached as Exhibits hereto, the Company may terminate his Employment Rights
and the Executive shall not be entitled to receive any Severance Rights.
(f) Termination by the Company for Reasons Other Than Cause or
Upon a Breach of Agreement by the Company. If the Company breaches any provision
of this Agreement or the ancillary agreements attached as Exhibits hereto, the
Executive may terminate his Employment Rights and he shall be entitled to
receive as Severance Rights a lump sum cash payment equal to the Base Salary at
the rate then in effect for the period equal to one year.
(g) Termination Following a Change in Control. The Executive
shall be entitled to Severance Rights in the amount determined under subsection
(f) above if, within one year following a Change in Control, there occurs any of
the following events:
(I) any involuntary termination of the Executive except for
reasons relating to Cause or the Executive's material breach of this
Agreement;
- 4 -
<PAGE> 5
(II) any reduction in the Executive's title, responsibilities
(including reporting responsibilities) or authority, including as such
title, responsibilities or authority may be increased from time to
time;
(III) the assignment to the Executive of duties inconsistent
with the Executive's office on the date of a Change in Control or as
the same may be increased from time to time after a Change in Control;
(IV) any reassignment of the Executive to a location greater
than one hundred (100) miles from the principal executive offices of
the Company before the Change in Control;
(V) any reduction (including, after a Change in Control,
proportional reductions affecting all employees or executive
employees) in the Executive's annual base salary in effect on the date
of a Change in Control or as the same may be increased from time to
time after a Change in Control;
(VI) any failure (including, after a Change in Control,
proportional failures affecting all executive employees) to continue
the Executive's participation on substantially similar terms in any
incentive compensation or bonus plan in which the Executive
participated at the time of the Change in Control or any change or
amendment to any substantive provisions of any such plan which would
materially decrease the potential benefits to the Executive under any
of such plans;
(VII) any failure (including, after a Change in Control, a
proportional failure affecting all executive employees) to provide the
Executive with benefits at least as favorable as those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident or other employee plans in which the Executive
participated at the time of the Change in Control, unless such
reduction relates to a reduction in benefits applicable to all
employees generally; or
(VIII) any requirement that the Executive travel in
performance of his duties on behalf of the Company for a significantly
greater period of time during any year that was required of the
Executive during the year preceding the year in which the Change in
Control occurred.
(h) Definitions. As used in this Section 5, the following
terms shall have the meanings indicated:
(I) Cause, for purposes of, and for the duration of, this
Agreement, shall mean failure to materially perform stated duties where
such failure shall persist sixty (60) days after receipt by the
Executive of written notice of failure received from the Company;
Executive's conviction of any crime or offense involving money or other
property of the Company or which constitutes a felony; Executive's
performance of any act or his failure to act, for which if prosecuted
and convicted, a crime or offense involving money or
- 5 -
<PAGE> 6
property of the Company, or which would constitute a felony would have
occurred; any unauthorized disclosure by the Executive to any person,
firm or corporation other than the Company or its officers, directors
or employees, of any confidential information or trade secret of the
Company; any attempt by the Executive to secure any personal profit in
connection with the business of the Company; the engaging by the
Executive in any business other than the business of the Company which
unreasonably interferes with the performance of his duties hereunder;
or chronic alcoholism or drug addiction.
(II) Change in Control shall mean the occurrence of any the
following:
(A) There occurs a merger, consolidation or a sale, exchange,
transfer or other disposition of substantially all of the stock or
assets of the Company to another entity or other person unless (1)
such merger, consolidation reorganization, sale, exchange, transfer,
purchase or disposition is approved in advance by the Company's Board
of Directors and (2) stockholders who held at least a majority of the
voting power of the Company's outstanding securities immediately prior
to the consummation of any such transaction hold at least a majority
of the voting power of the outstanding securities of the legal entity
resulting from or existing after any such transaction and (3) a
majority of the members of the Board of Directors of the legal entity
resulting from or existing after any such transaction are former
members of the Board of Directors of the Company; or
(B) There occurs a contested proxy solicitation of the
Company's stockholders which results in the contesting party obtaining
the ability to elect fifty percent (50%) or more of the members of the
Board of Directors standing for election at any meeting of the
Company's stockholders.
(III) Disability shall mean the absence of the Executive from
the Executive's usual and customary duties with the Company on a
full-time basis for one hundred and twenty (120) consecutive days as a
result of incapacity due to mental or physical illness which a
physician selected by the Company determines in writing will prevent
the Executive from performing substantially all of his usual and
customary duties under this Agreement for a period of twelve (12)
consecutive months from the onset of such incapacity.
(i) Notice of Termination. Any notice of termination of
Employment Rights by either party hereto shall be in writing and delivered in
one of the methods set forth in Section 7(b) and shall set forth in reasonable
detail the reason for such termination and the effective date of such
termination which shall be no less than sixty (60) days following the date such
notice is delivered. No purported termination of Employment Rights shall be
effective unless preceded by a notice of termination as described in this
Section 5(i).
(j) Preservation of Rights. The Executive's right to receive
payments under this Agreement shall not decrease the amount of, or otherwise
adversely affect, any benefits payable to the Executive under any plan,
agreement or arrangement relating to employee benefits provided by the Company.
- 6 -
<PAGE> 7
6. SUCCESSORS.
(a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by
the Executive otherwise than by his will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law or otherwise.
7. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to its principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This Agreement
may not be amended, altered or modified except by a written agreement executed
by each of the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid, at the
address first above written or to such other address as either party shall have
furnished to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the addressee.
(c) If any provision of this Agreement shall be adjudged by
any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The failure of Executive or the Company to insist upon
strict compliance with any provision hereof or the failure to assert any right
the Executive or the Company may
- 7 -
<PAGE> 8
have hereunder shall not be deemed to be a waiver of such provision or right or
any other provision or right thereof by such party.
(f) This Agreement may be executed by the parties hereto in
two or more counterparts, each of which shall be deemed to be an original, but
all such counterparts shall constitute one and the same instrument.
(g) This Agreement and the ancillary agreements comprising
Exhibits A through C hereto contain the entire understanding of the Company and
the Executive with respect to the subject matter hereof and thereof.
(h) The headings of the sections and subsections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction or limit the scope or intent of any of the provisions of this
Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
ATTEST: BALANCE CARE CORPORATION
/s/ Robert J. Sutton By: /s/ Brad E. Hollinger
- ---------------------------------- -------------------------------
Secretary Title: CEO
WITNESS: EXECUTIVE:
/s/ Robin L. Barber /s/ William T. McCarthy
- ---------------------------------- ---------------------------------
William T. McCarthy
- 8 -
<PAGE> 1
EXHIBIT 10.35
EMPLOYMENT AGREEMENT
Agreement made as of this 20th day of September, 1995 by and between
Balanced Care Corporation (the "Employer") and Robert J. Sutton (the
"Employee").
W I T N E S S E T H:
WHERE AS BCC desires to retain the services and employment of
Employee for itself throughout the term of this Agreement, and Employee is
willing to be employed by BCC on a full-time basis for such period, upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound, the parties hereto hereby agree
as follows:
1. Employment. The Employer hereby employees Employee and
Employee hereby accepts employment by the Employer subject to all the terms and
conditions hereafter set forth.
2. Capacity. Employee shall serve as Sr. Vice President.
3. Duties. During the term of this Agreement, Employee shall
devote his full attention and best efforts to the performance of the customary
duties of those offices of the Employer to which he is elected by the Board of
Directors of the Employer.
4. Term of Employment. Unless earlier terminated as hereafter
provided, this Agreement shall commence on SEPTEMBER 1, 1995 and shall expire on
AUGUST 31, 1998, provided however, that upon expiration of such term, this
Agreement shall be extended from year to year without further action on the part
of the parties hereto, unless either party gives written notice of termination
to the other party at least ninety (90) days prior to the expiration of the then
current term.
5. Termination.
(a) Death. The employment of Employee under this agreement shall
immediately terminate upon the death of Employee.
(b) Disability. In the event that Employee, in the reasonable
opinion of the Board of Directors of the Employer acting in the best interest of
the Employer, is for any reason unable to perform the duties to be performed by
Employee hereunder for a period of 120 consecutive days, the Board of Directors
of the Employer shall have the option to terminate the employment of Employee
under this Agreement effective upon its giving written notice to Employee at any
time following the expiration of such 120-day period.
<PAGE> 2
(c) Termination for Cause. The employment of Employee under this
Agreement shall terminate immediately if the Board of Directors of the Employer
discharges Employee for cause. For purposes of this paragraph "Cause" shall
mean: (i) Employee's material failure to perform his duties hereunder, which
failure continues for sixty (60) days after Employee's receipt of written notice
of such failure by the Board of Directors of the Employer; (ii) Employee's
conviction of a felony involving moral turpitude; and (iii) Employee's gross
misconduct which shall have materially and adversely affected the Employer.
6. Compensation.
(a) Cash Compensation. During the term of this Agreement or any
extension thereof, as compensation for services to the Employer, Employer shall
pay to Employee a base salary of $80,000 per year in semi-monthly installments.
The Board of Directors of the Employer may, in its sole discretion from time to
time, increase the base compensation to be paid to Employee as provided in this
paragraph, or provide additional compensation to Employee, including but not
limited to the annual bonus provided for in Section 6 (b) hereof, whether
permanently or for a limited time period, based upon the earnings or performance
of the Employee or otherwise in order to recognize and fairly compensate
Employee for the value of his services to the Employer. In addition, Employee
shall be entitled to receive all fringe benefits provided to its employees and
officers by Employer, including but not limited to insurance benefits, which are
appropriate for an employee or officer holding his office.
(b) Annual Bonus. During the term of this Agreement, Employee
shall be entitled to receive a bonus with respect to each fiscal year of
Employer during the term of his employment in an amount not less than 40% of
Employee's base salary upon achievement of the annual operating budget as
approved by the Board of Directors of the Employer. Such annual bonus shall be
paid no later than ten (10) days after submission of the Employer's annual
audited financial statements to Board of Directors of the Employer. If this
Agreement is terminated other than at the end of a fiscal year, Employee's bonus
for the year of termination shall be calculated and paid in the normal manner
but pro-rated based upon the number of days in such years prior to such
termination; provided, however, that if the termination is under Section 5 (c)
hereof, no bonus shall be paid for the year of termination.
(c) Vacation. Employee shall receive four (4) weeks per year, such
vacation to be taken when and as desired by the Employee. Any time spent by the
Employee at professional meetings, instructional causes and other similar
meetings so as to better enable the Employee to perform professional services in
the employ of Employer shall not be considered vacation time.
(d) Other Compensation. From time to time, Employer may provide
such pension and profit sharing benefits as is Board of Directors of the
Employer shall authorize.
7. Non-Competition.
(a) Definitions. The following definitions apply to this
paragraph 7.
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<PAGE> 3
(i) Business Activities. The "Business Activities" include
managing, leasing or owning long-term care facilities or assisted
living centers, or managing, leasing or owning subacute operations or
facilities of nursing homes within a thirty (30) mile radius of an
Employer facility.
(ii) Employer Customers. The "Employer Customers" are (y)
those persons or entities Employee or other Employer personnel sold,
solicited or service within the six (6) months preceding the end of
Employee's employment; and (2) those persons or entities about which
Employee had access to proprietary information within six (6) months
preceding the end of Employee's employment.
(b) Restriction on Unfair Competition. While employed by Employer
and for one (1) year after Employee's employment ends, Employee agrees not to do
any of the following: (i) directly or indirectly own an interest in, manage, or
control a business engaged in the Business Activities; or (ii) otherwise engage
in the Business Activities in a fashion which completes with the Employer; or
(iii) provide to a competitor of Employer consulting service or services as an
employee, partner or owner, which services relate to the Business Activities.
(c) Restriction on Solicitation. While employed by Employer and
for one (1) year after Employee's employment ends, Employee agrees not to do any
of the following: (i) directly or indirectly solicit or encourage Employer
Customers to deal with Employee or any other person or entity other than the
Employer in connection with the Employer Customer's requirements for the
Business Activities, or assist or aid any others to do so; or (ii) directly or
indirectly solicit or encourage other personnel subject to the provisions of
this paragraph 7 to engage in any of the activities restricted in this
Agreement; or (iii) directly or indirectly solicit for Employee's benefit or the
benefit of others the employment or services of any then-present employee of
Employer.
(d) Listed Stock Ownership Exception. Nothing in this paragraph
7 shall prevent Employee from acquiring as a passive investor up to five
percent (5%) of the equity of a competing enterprise.
8. Change of Control.
(a) Payment Due. If prior to termination of this Agreement, there
should be a "Change of Control" as defined in Section (b) below, and thereafter
(a) Employee's services should be terminated for any reason other than
Employee's voluntary withdrawal, or (b) Employee voluntarily withdraws within
one (1) year of a Change of Control as a result of his good faith determination
that, as a result of such Change of Control Employee is no longer able to
perform his duties under this Agreement, Employer will, on or before Employee's
last day of providing service hereunder, pay to Employee in lieu of any other
rights to cash compensation he may have under this Agreement which have not
accrued to such date, a lump sum cash payment equal to his total cash
compensation under Sections 6 (a) and 6 (b) hereof for the proceeding three (3)
years.
- 3 -
<PAGE> 4
(b) Definition. "Change of Control" shall be deemed to have taken
place if; (i) any person, including a group but not excluding the Employer or
any current stockholder of the Employer who beneficially owns five percent (5%)
or more of the Employer's outstanding shares, becomes the beneficial owner of
shares of the Employer having twenty percent (20%) or more of the total number
of votes that may be cast for the election of directors; (ii) there occurs any
cash tender or exchange offer for shares of Employer, merger or other business
combination, sale of assets or contested election, or any combination of the
foregoing transaction, and as a result of or in connection with any such event
person who were directors of Employer before the event shall cease to constitute
a majority of the Board of Directors of the Employer or any successor to
Employer. As used herein, the terms "person" and "beneficial owner" have the
same meaning as such terms under Section 13 (d) of the Securities Exchange Act
of 1934 and the rules and regulations thereunder.
9. The Employee agrees that if Employee voluntarily terminates
this contract within one (1) year from the commencement date, Employee shall be
required to sell one hundred percent (100%) of the common shares of the Employer
then owned by the Employee to the Employer at fair market value. If Employee
voluntarily terminates this contract in year two (2) the Employee shall be
required to sell seventy-five percent (75%) of his shares to Employer at fair
market value and if the Employee voluntarily terminates his contract in year
three (3) Employee shall be required to sell fifty percent (50%) of his shares
to Employer at fair market value. It is further provided that Employee shall pay
$50,000 to John Brennan if the Employee voluntarily terminates his employment
within 24 months of commencement date. (This provision is effective only when
500,000 shares of the Employer's Class A preferred stock has been sold to John
Brennan at a price of not less than $2.00 per share.)
10. Assignment. This Agreement shall not be assignable by the
Employee; and shall be assignable to Employer only to a person, firm or
corporation which may become a successor in interest (by purchase, merger or
otherwise) to the Employer with respect to the business or a portion of the
business presently operated by it.
11. Entire Agreement. This writing represents the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and it may not be altered or amended except by an agreement in writing.
12. Binding Effect. Subject to Section 9, this Agreement shall be
binding upon and enure to the benefit of the parties hereto and their respective
successors, assigns, heirs, executors and administrators. If any provision of
this Agreement shall be or become illegal or unenforceable in whole or in part
for any reason whatsoever, the remaining provisions shall nevertheless be deemed
valid, binding and enforceable.
13. Governing Law. This Agreement has been negotiated and executed
within the Commonwealth of Pennsylvania, and the validity, interpretation and
enforcement of this Agreement shall be governed by the laws of Pennsylvania.
- 4 -
<PAGE> 5
14. Headings. The headings of paragraphs in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
BALANCED CARE CORPORATION
Attest:
By: /s/ Brad E. Hollinger
- ---------------------------- ------------------------------
(Corporate Seal)
WITNESS /s/ Pamela A. Fortney /s/ Robert J. Sutton
- ----------------------------- -----------------------------------
Employee (Seal)
- 5 -
<PAGE> 1
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
Agreement made as of this 20th day of September, 1995 by and between
Balanced Care Corporation (the "Employer") and Brian L. Barth (the "Employee").
W I T N E S S E T H:
WHEREAS BCC desires to retain the services and employment of Employee
for itself throughout the term of this Agreement, and Employee is willing to be
employed by BCC on a full-time basis for such period, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound, the parties hereto hereby agree
as follows:
1. Employment. The Employer hereby employees Employee and
Employee hereby accepts employment by the Employer subject to all the terms and
conditions hereafter set forth.
2. Capacity. Employee shall serve as Vice President Development.
3. Duties. During the term of this Agreement, Employee shall
devote his full attention and best efforts to the performance of the customary
duties of those offices of the Employer to which he is elected by the Board of
Directors of the Employer.
4. Term of Employment. Unless earlier terminated as hereafter
provided, this Agreement shall commence on SEPTEMBER 1, 1995 and shall expire on
AUGUST 31, 1998, provided however, that upon expiration of such term, this
Agreement shall be extended from year to year without further action on the part
of the parties hereto, unless either party gives written notice of termination
to the other party at least ninety (90) days prior to the expiration of the then
current term.
5. Termination.
(a) Death. The employment of Employee under this agreement shall
immediately terminate upon the death of Employee.
(b) Disability. In the event that Employee, in the reasonable opinion
of the Board of Directors of the Employer acting in the best interest of the
Employer, is for any reason unable to perform the duties to be performed by
Employee hereunder for a period of 120 consecutive days, the Board of Directors
of the Employer shall have the option to terminate the employment of Employee
under this Agreement effective upon its giving written notice to Employee at
any time following the expiration of such 120-day period.
(c) Termination for Cause. The employment of Employee under this
Agreement shall terminate immediately if the Board of Directors of the Employer
discharges Employee for cause.
<PAGE> 2
For purposes of this paragraph "Cause" shall mean: (i) Employee's material
failure to perform his duties hereunder, which failure continues for sixty (60)
days after Employee's receipt of written notice of such failure by the Board of
Directors of the Employer; (ii) Employee's conviction of a felony involving
moral turpitude; and (iii) Employee's gross misconduct which shall have
materially and adversely affected the Employer.
6. Compensation.
(a) Cash Compensation. During the term of this Agreement or any
extension thereof, as compensation for services to the Employer, Employer shall
pay to Employee a base salary of $70,000 per year in semi-monthly installments.
The Board of Directors of the Employer may, in its sole discretion from time to
time, increase the base compensation to be paid to Employee as provided in this
paragraph, or provide additional compensation to Employee, including but not
limited to the annual bonus provided for in Section 6 (b) hereof, whether
permanently or for a limited time period, based upon the earnings or performance
of the Employee or otherwise in order to recognize and fairly compensate
Employee for the value of his services to the Employer. In addition, Employee
shall be entitled to receive all fringe benefits provided to its employees and
officers by Employer, including but not limited to insurance benefits, which are
appropriate for an employee or officer holding his office.
(b) Annual Bonus. During the term of this Agreement, Employee
shall be entitled to receive a bonus with respect to each fiscal year of
Employer during the term of his employment in an amount not less than 35% of
Employee's base salary upon achievement of the annual operating budget as
approved by the Board of Directors of the Employer. Such annual bonus shall be
paid no later than ten (10) days after submission of the Employer's annual
audited financial statements to Board of Directors of the Employer. If this
Agreement is terminated other than at the end of a fiscal year, Employee's bonus
for the year of termination shall be calculated and paid in the normal manner
but pro-rated based upon the number of days in such years prior to such
termination; provided, however, that if the termination is under Section 5 (c)
hereof, no bonus shall be paid for the year of termination.
(c) Vacation. Employee shall receive four (4) weeks per year,
such vacation to be taken when and as desired by the Employee. Any time spent by
the Employee at professional meetings, instructional causes and other similar
meetings so as to better enable the Employee to perform professional services in
the employ of Employer shall not be considered vacation time.
(d) Other Compensation. From time to time, Employer may provide
such pension and profit sharing benefits as is Board of Directors of the
Employer shall authorize.
7. Non-Competition.
(a) Definitions. The following definitions apply to this
paragraph 7.
(i) Business Activities. The "Business Activities" include
managing, leasing or owning long-term care facilities or assisted
living centers, or managing, leasing or owning
- 2 -
<PAGE> 3
subacute operations or facilities of nursing homes within a thirty (30)
mile radius of an Employer facility.
(ii) Employer Customers. The "Employer Customers" are (y)
those persons or entities Employee or other Employer personnel sold,
solicited or service within the six (6) months preceding the end of
Employee's employment; and (z) those persons or entities about which
Employee had access to proprietary information within six (6) months
preceding the end of Employee's employment.
(b) Restriction on Unfair Competition. While employed by Employer
and for one (1) year after Employee's employment ends, Employee agrees not to do
any of the following: (i) directly or indirectly own an interest in, manage, or
control a business engaged in the Business Activities; or (ii) otherwise engage
in the Business Activities in a fashion which completes with the Employer; or
(iii) provide to a competitor of Employer consulting service or services as an
employee, partner or owner, which services relate to the Business Activities.
(c) Restriction on Solicitation. While employed by Employer and
for one (1) year after Employee's employment ends, Employee agrees not to do any
of the following: (i) directly or indirectly solicit or encourage Employer
Customers to deal with Employee or any other person or entity other than the
Employer in connection with the Employer Customer's requirements for the
Business Activities, or assist or aid any others to do so; or (ii) directly or
indirectly solicit or encourage other personnel subject to the provisions of
this paragraph 7 to engage in any of the activities restricted in this
Agreement; or (iii) directly or indirectly solicit for Employee's benefit or the
benefit of others the employment or services of any then-present employee of
Employer.
(d) Listed Stock Ownership Exception. Nothing in this paragraph
7 shall prevent Employee from acquiring as a passive investor up to five
percent (5%) of the equity of a competing enterprise.
8. Change of Control.
(a) Payment Due. If prior to termination of this Agreement, there
should be a "Change of Control" as defined in Section (b) below, and thereafter
(a) Employee's services should be terminated for any reason other than
Employee's voluntary withdrawal, or (b) Employee voluntarily withdraws within
one (1) year of a Change of Control as a result of his good faith determination
that, as a result of such Change of Control Employee is no longer able to
perform his duties under this Agreement, Employer will, on or before Employee's
last day of providing service hereunder, pay to Employee in lieu of any other
rights to cash compensation he may have under this Agreement which have not
accrued to such date, a lump sum cash payment equal to his total cash
compensation under Sections 6 (a) and 6 (b) hereof for the proceeding three (3)
years.
(b) Definition. "Change of Control" shall be deemed to have taken
place if; (i) any person, including a group but not excluding the Employer or
any current stockholder of the Employer who beneficially owns five percent (5%)
or more of the Employer's outstanding shares, becomes the beneficial owner of
shares of the Employer having twenty percent (20%) or more of
- 3 -
<PAGE> 4
the total number of votes that may be cast for the election of directors; (ii)
there occurs any cash tender or exchange offer for shares of Employer, merger or
other business combination, sale of assets or contested election, or any
combination of the foregoing transaction, and as a result of or in connection
with any such event person who were directors of Employer before the event shall
cease to constitute a majority of the Board of Directors of the Employer or any
successor to Employer. As used herein, the terms "person" and "beneficial owner"
have the same meaning as such terms under Section 13 (d) of the Securities
Exchange Act of 1934 and the rules and regulations thereunder.
9. The Employee agrees that if Employee voluntarily terminates
this contract within one (1) year from the commencement date, Employee shall be
required to sell one hundred percent (100%) of the common shares of the Employer
then owned by the Employee to the Employer at fair market value. If Employee
voluntarily terminates this contract in year two (2) the Employee shall be
required to sell seventy-five percent (75%) of his shares to Employer at fair
market value and if the Employee voluntarily terminates his contract in year
three (3) Employee shall be required to sell fifty percent (50%) of his shares
to Employer at fair market value. It is further provided that Employee shall pay
$50,000 to John Brennan if the Employee voluntarily terminates his employment
within 24 months of commencement date. (This provision is effective only when
500,000 shares of the Employer's Class A preferred stock has been sold to John
Brennan at a price of not less than $2.00 per share.)
10. Assignment. This Agreement shall not be assignable by the
Employee; and shall be assignable to Employer only to a person, firm or
corporation which may become a successor in interest (by purchase, merger or
otherwise) to the Employer with respect to the business or a portion of the
business presently operated by it.
11. Entire Agreement. This writing represents the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and it may not be altered or amended except by an agreement in writing.
12. Binding Effect. Subject to Section 9, this Agreement shall be
binding upon and enure to the benefit of the parties hereto and their
respective successors, assigns, heirs, executors and administrators. If any
provision of this Agreement shall be or become illegal or unenforceable in
whole or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and enforceable.
13. Governing Law. This Agreement has been negotiated and
executed within the Commonwealth of Pennsylvania, and the validity,
interpretation and enforcement of this Agreement shall be governed by the laws
of Pennsylvania.
14. Headings. The headings of paragraphs in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
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<PAGE> 5
Balanced Care Corporation
Attest:
By: /s/ Brad E. Hollinger
- ---------------------------------- -----------------------------
(Corporate Seal)
WITNESS /s/ Robert J. Sutton /s/ Brian L. Barth
- ---------------------------------- -----------------------------
Employee (Seal)
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<PAGE> 1
EXHIBIT 10.37
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the first
day of September, 1996, by and among Foster Health Care Group, Inc., a Missouri
corporation ("Employer"), JOHN D. FOSTER, an individual ("Employee"), and
Balanced Care Corporation, a Delaware corporation ("BCC").
WITNESSETH:
WHEREAS, pursuant to that certain Stock Purchase Agreement dated July
26, 1996 (the "Stock Purchase Agreement"), between Hawthorn Health Properties,
Inc. ("Hawthorn"), as buyer, and Seller (as defined in the Stock Purchase
Agreement), Hawthorn is the owner of the Companies (as defined in the Stock
Purchase Agreement); and
WHEREAS, Employee, certain other related sellers, BCC, National Care
Centers of Republic, Inc., and BCC at Republic Park Care Center, Inc., have
entered into a Merger Agreement (the "Republic Merger Agreement") dated as of
July 26, 1996; and
WHEREAS, Employee, certain other related sellers, BCC, National Care
Centers of Nevada, Inc., and BCC at Nevada Park Care Center, Inc., have entered
into a Merger Agreement (the "Nevada Merger Agreement") dated as of July 26,
1996; and
WHEREAS, the Republic Merger Agreement and Nevada Merger Agreement are
sometimes referred to below as the "Merger Agreements"; and
WHEREAS, it is a condition precedent to the closing under the Stock
Purchase Agreement and Merger Agreements that Employee enter into this
Employment Agreement and the parties wish to satisfy that condition; and
WHEREAS, pursuant to those certain Management Agreements of even date
herewith (collectively, the "Management Agreements") executed by and between
Employer and each of certain subsidiaries of BCC (the "BCC Subsidiaries"),
Employer has agreed to provide certain management services to the BCC
Subsidiaries for the management of the businesses previously operated by the
Combined Companies (as defined in the Stock Purchase Agreement); and
WHEREAS, in accordance with the Management Agreements, Employer
desires to retain the services and employment of Employee for itself throughout
the term of this Agreement, and Employee is willing to be employed by Employer
on a full-time basis for such period, upon the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
<PAGE> 2
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts employment by Employer, subject to the terms and conditions hereinafter
set forth.
2. CAPACITY. Employee shall serve in the capacity of President of
Employer.
3. DUTIES. During the term of this Agreement, Employee shall devote
his/her full attention and best efforts to the performance of the duties set
forth on Exhibit A attached hereto and incorporated herein by reference,
together with any other duties that may be specified by the Board of Directors
of Employer. In addition, Employee shall serve as an officer of Employer and as
a member of the Board of Directors of Employer without, in either case,
additional compensation.
4. TERM OF EMPLOYMENT. Unless earlier terminated as hereinafter
provided, this Agreement shall have an initial term of three years, commencing
on the date hereof. Unless Employer or Employee has given the other party
written notice of its intention not to renew this Agreement at least 180
calendar days prior to the end of the then existing term, this Agreement shall
be automatically renewed for successive two-year terms.
5. RELOCATION. During the term of this Agreement, Employer shall not
require Employee to relocate outside an area defined as any location within 15
miles of Springfield, Missouri, without Employee's prior written consent.
6. TERMINATION.
(a) BY EMPLOYEE.
(i) WITHOUT CAUSE. Employee shall have the option to
terminate his/her employment under this Agreement effective upon 180 calendar
days of the giving of written notice to Employer without cause.
(ii) TERMINATION FOR EMPLOYER CAUSE. The employment of
Employee under this Agreement may be terminated at the option of Employee for
"Employer Cause" as defined below effective within 30 calendar days of giving
written notice to Employer. For purposes of this Agreement, the term "Employer
Cause" shall mean (A) an event in which Employer or BCC shall consolidate with
or merge into any other entity or transfer substantially all of its assets,
but, in either case if, and only if, such consolidation, merger or transfer
results in the elimination of Employee's position, a material decrease in
Employee's compensation or duties hereunder, or if the successor in interest to
Employer and BCC shall fail or refuse to assume in writing the obligations of
Employer and BCC hereunder within ten days following such consolidation,
merger, or transfer, (B) Employer or BCC shall make a substantial change in
Employee's duties as specifically described on Exhibit A, and Employee shall
not give his/her written consent to such change, (C) Employer's or BCC's
material failure to perform Employer's or BCC's obligations hereunder (other
than payment of any amount of money), which failure continues and remains
uncured for 60 consecutive calendar days after Employee gives written notice of
such failure to Employer or BCC, (D) a material breach or failure to perform by
Hawthorn or BCC under the Stock Purchase Agreement or any Other Agreement (as
defined in
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<PAGE> 3
the Stock Purchase Agreement) to which Hawthorn or BCC is a party, (E) the
location of Employee's place of employment shall be moved outside the area
described in Section 5 above without Employee's prior written consent, (F)
Employer or BCC shall require that Employee take any action which amounts to a
violation of applicable law, rule, or regulation, or (G) Employer or BCC shall
fail to pay any amount which is due under this Agreement and such failure shall
continue for a period of thirty calendar days after notice from Employee to
Employer or BCC.
(b) BY EMPLOYER.
(i) DEATH. The employment of Employee under this Agreement
shall immediately terminate upon Employee's death.
(ii) DISABILITY. In the event that Employee, in the
reasonable opinion of the Board of Directors of Employer acting in the best
interest of Employer, is for any reason unable with reasonable accommodation
from the Employer to perform the duties to be performed by Employee hereunder
for a period of 120 consecutive calendar days, the Board of Directors of
Employer shall have the option to terminate the employment of Employee under
this Agreement effective upon the giving of written notice to Employee at any
time following the expiration of the 120 consecutive calendar day period.
(iii) WITHOUT CAUSE. In the reasonable opinion of the Board
of Directors of Employer acting in the best interest of Employer, the Board of
Directors shall have the option to terminate the employment of Employee under
this Agreement effective upon 90 calendar days of the giving of written notice
to Employee without cause.
(iv) TERMINATION FOR EMPLOYEE CAUSE. The employment of
Employee under this Agreement may be terminated immediately by Employer for
"Employee Cause." For purposes of this Agreement, the term "Employee Cause"
shall mean (A) Employee's material breach of Employee's fiduciary duty to
Employer, its subsidiaries or affiliates, and if such breach is of such a
nature that it can be cured, such failure continues and remains uncured for 60
consecutive calendar days after the Board of Directors of Employer gives
written notice of such failure to Employee, (B) Employee's material failure to
perform Employee's duties hereunder, which failure continues and remains
uncured for 60 consecutive calendar days after the Board of Directors of
Employer gives written notice of such failure to Employee, (C) Employee's
conviction of, or plea of guilty or nolo contendere to, a crime involving moral
turpitude or a crime providing for a term of imprisonment for seven days or
more, (D) Employee's gross misconduct that results in a material adverse effect
on Employer or BCC, or any of their respective subsidiaries or affiliates,
financially or otherwise, or (E) Employee's material breach or failure to
perform under the Stock Purchase Agreement or any Other Agreement (as defined
in the Stock Purchase Agreement) to which Employee is a party, including but
not limited to the Covenant Not to Compete.
7. EFFECTS OF TERMINATION. Except as may otherwise be provided in
Section 8(b):
(a) SECTIONS 6(a)(i), (b)(i) AND (b)(iv). If the employment of
Employee is terminated pursuant to Section 6(a)(i), Section 6(b)(i) or Section
6(b)(iv), Employee shall be
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<PAGE> 4
entitled to receive compensation, payable at the same intervals at which
compensation was previously paid, and benefits due under this Agreement up
through the date of termination.
(b) SECTION 6(b)(ii). If the employment of Employee is terminated
pursuant to Section 6(b)(ii), Employee shall be entitled to receive
compensation and benefits due under this Agreement for a period of 12 months
following the date of termination.
(c) SECTION 6(a)(ii) OR 6(b)(iii). If the employment of Employee is
terminated pursuant to Section 6(a)(ii) or 6(b)(iii), Employee shall be
entitled to compensation and benefits for a period equal to the remainder of
the current term of this Agreement.
(d) SECTION 6(a)(ii), 6(b)(ii), OR 6(b)(iii). Any payment of
compensation following termination of this Agreement pursuant to Section
6(a)(ii), 6(b)(ii), or 6(b)(iii) shall be payable in twelve equal monthly
installments following the date of termination in accordance with such section.
8. COMPENSATION.
(a) CASH. During the term of this Agreement or any renewal thereof,
as compensation for services to Employer, Employer shall pay to Employee a base
salary of $110,000 per year in semimonthly installments. The Board of Directors
of Employer may, in its sole and absolute discretion and from time to time,
increase the base salary to be paid to Employee as provided in this Section
8(a), or provide additional compensation to Employee, in addition to an annual
bonus as more specifically set forth in Section 8(b) hereof. Any such increases
in the base salary of Employee and any such additional compensation (other than
an annual bonus which shall be paid pursuant to the terms of Section 8(b)
below) shall be based equally upon (i) the performance of Employee and (ii) the
performance of the Combined Companies (as defined in Stock Purchase Agreement).
(b) ANNUAL BONUS. During the term of this Agreement or any renewal
thereof, Employee shall be entitled to receive an annual bonus during the term
of Employee's employment in an amount up to 40% of Employee's base salary as
provided in Section 8(a). The term "NOI" means annualized net income of the BCC
Subsidiaries before provision for income taxes plus (i) debt service and
interest expense, (ii) depreciation and amortization, and (iii) rental and
lease expense, except the annual rent related to the facility operated by Dixon
Management, Inc. The term "NOI" is further defined to exclude any intercompany
fees or charges, corporate overhead charges, management fees, home office fees
or similar charges which may be paid or incurred by any of the BCC Subsidiaries
to BCC. The term "Ancillary Revenue" means annualized revenue of the Combined
Companies for therapy services, medical supplies, and Medicare Part B therapy
billing. The first bonus shall be for the ten-month period ending on June 30,
1997. The first bonus shall be calculated based on (i) annualized NOI for such
period in the amount shown below and (ii) annualized Ancillary Revenue during
such period compared to Ancillary Revenue for the Combined Companies for the
last full fiscal year of each of the Combined Companies ended before the
Closing Date (as defined in the Stock Purchase Agreement). The bonus for the
period ending June 30, 1997, shall be calculated as follows:
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<PAGE> 5
<TABLE>
<CAPTION>
Bonus
Amount Criteria
------ --------
<S> <C>
15% $ 6,000,000 NOI
5% 6,200,000 NOI
5% 6,450,000 NOI
15% 10% increase in Ancillary Revenue
</TABLE>
The annual bonus pursuant to this Section 8(b) for later fiscal years shall be
calculated based upon criteria similar to those set out above. The parties
agree to negotiate in good faith to establish definitive criteria for bonuses
for subsequent years not later than thirty days in advance of the end of each
fiscal year. Such annual bonus shall be paid not later than ten days after BCC
shall receive the annual audited consolidated and consolidating financial
statements of BCC and its consolidated subsidiaries. If this Agreement is
terminated other than at the end of a fiscal year, Employee's annual bonus for
the year of termination shall be calculated and paid in the normal manner but
pro-rated based upon the number of days in such year prior to termination;
provided, however, that if Employee is terminated pursuant to Section 6(b)(iv)
hereof, no annual bonus shall be paid for the year of termination. BCC shall
pay (or cause to be paid) all bonuses payable to Employee hereunder from funds
provided by BCC.
(c) VACATION. Employee shall receive four weeks of vacation per
year in accordance with the terms and conditions of Employer's vacation policy.
Any time spent by Employee at professional meetings, instructional classes and
other similar meetings so as to better enable Employee to perform professional
services in the employ of Employer shall not be considered vacation time.
(d) FRINGE BENEFITS.
(i) FROM EMPLOYER. Employee shall be entitled to receive the
fringe benefits as set forth on Exhibit B attached hereto and incorporated
herein by reference. During the term of this Agreement, Employer will not
increase said benefits without the prior consent of BCC, which consent shall
not be unreasonably withheld.
(ii) FROM BCC. Upon assignment of this Agreement to BCC or
another party pursuant to Section 13, Employee shall receive the customary
fringe benefits provided to BCC's other officers and employees, which are
appropriate for an employee or officer holding a position similar to
Employee's. Employee acknowledges and agrees that upon assignment, the benefits
received by Employee as set forth on Exhibit B may be modified; provided,
however, BCC will use its reasonable efforts to prevent said benefits from
being materially diminished to the extent permitted under BCC's existing
benefit plans and policies and further provided that in no event shall the
health or dental insurance provided by BCC not meet the following criteria:
(1) Coverage shall be provided for Employee and
Employee's family without cost to Employee.
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<PAGE> 6
(2) Neither Employee nor any member of Employee's family
shall be required to undergo a physical examination in order to be qualified
for coverage under the health insurance plan.
(3) The health insurance plan shall not include any
exclusion for health conditions which existed at the time Employee and/or the
family members of Employee shall become qualified for participation in the
health insurance plan.
(e) BCC STOCK OPTION PLAN. During the term of this Agreement and
following assignment pursuant to Section 13, Employee shall be entitled to
participate in BCC's stock option plan and to be considered for grants
thereunder upon the same terms and conditions as BCC's other officers and
employees holding an office or position similar to Employee's office.
(f) EXPENSES. During the term of this Agreement, Employee shall be
entitled to reimbursement of his/her reasonable travel and entertainment
expenses provided to BCC's or Employer's other officers and employees, which
are appropriate to an employee or officer holding a position similar to
Employee's. During the term of this Agreement both prior to and after the
assignment pursuant to Section 13, BCC agrees to pay travel expenses incurred
by Employee in order to travel to the office of BCC or any other location
outside the State of Missouri to which BCC may request that Employee travel.
(g) COMPANY-PROVIDED AUTOMOBILE. During the term of this Agreement,
Employee shall be entitled to either (i) the personal use of the same
automobile which he/she operated prior to the date hereof (which includes fuel,
insurance, and maintenance) at no cost or (ii) a monthly car allowance of not
less than $750.00. Following assignment of this Agreement to BCC pursuant to
Section 13, Employee shall receive such monthly car allowance.
9. DISCLOSURE OF INFORMATION. Employee recognizes and acknowledges
that Employer, BCC and their respective subsidiaries and affiliates' trade
secrets and customer lists (including names, addresses and telephone numbers),
as they exist from time to time, and nonpublic information concerning services,
procedures, methods of operation, methods of delivery, ideas, trade secrets,
pricing and financial information (the "Proprietary Information") are valuable,
special and unique assets of Employer, BCC and their respective subsidiaries
and affiliates, access to and knowledge of which may be essential to the
performance of Employee's duties hereunder. In light of the highly competitive
nature of the industry in which Employer, BCC and their respective subsidiaries
and affiliates conduct their businesses, Employee further agrees, except as
otherwise provided in Section 10 below, that all Proprietary Information
heretofore or in the future obtained by Employee as a result of Employee's
association with Employer and/or BCC shall be considered confidential. In
recognition of this fact, Employee agrees, except as otherwise provided in
Section 10 below, that, so long as the Proprietary Information does not
otherwise become publicly available, Employee will not, during and after the
term of Employee's employment, disclose any of such Proprietary Information to
any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, directly or indirectly, except in connection with the
furtherance of the business of Employer, and Employee will not make use of any
Proprietary Information for Employee's own purposes or for the benefit
- 6 -
<PAGE> 7
of any other person or entity (except Employer, BCC and their respective
subsidiaries and affiliates) under any circumstances. Employee further agrees,
except as otherwise provided in Section 10 below, that on termination of
Employee's employment, Employee shall turn over to Employer and/or BCC, as
appropriate, all documents, papers, records, files, computer discs, drawings,
sketches, plans, specifications, manuals, models, equipment, machines, devices,
computer data or other written or graphic material which contain or are derived
from Proprietary Information. Employee agrees that Employee shall have no
proprietary interest in any work product used or developed by Employee and
arising out of Employee's employment with Employer, except as otherwise
provided below. The provisions contained in this Section 9 apply to information
of Employer, BCC and their respective subsidiaries and affiliates, which
information is analogous to the Proprietary Information. Notwithstanding any
provision in this Section 9 to the contrary, nothing herein shall prevent
Employee from making use of the policies, procedures, trade secrets, customer
lists, or other Proprietary Information of Employer in connection with any
business which Employee is specifically permitted to continue to operate under
the Covenant Not To Compete entered into between Employee, Hawthorn, and BCC
pursuant to the terms of the Stock Purchase Agreement and the Merger
Agreements. The obligations of Employee under this Section 9 shall expire two
years following the termination or expiration of the term of this Agreement.
10. INTERPRETATION. It is expressly understood and agreed that
although Employee considers the restrictions contained in Section 9 hereof
reasonable for the purpose of preserving for Employer and/or BCC's proprietary
rights, business value as a going concern and goodwill, if a final judicial
determination is made by a court having jurisdiction that the time or any other
restriction contained in Section 9 is an unenforceable restriction against
Employee, the provision containing such restriction shall not be rendered void
but shall be deemed amended to apply as to such maximum time and territory and
to such other extent as such court may judicially determine or indicate to be
reasonable.
11. REMEDIES.
(a) INDEMNIFICATION BY EMPLOYEE. Employee expressly agrees to
indemnify and hold harmless Employer, its subsidiaries and affiliates,
directors and officers from and with respect to any and all loss, damage,
expense or cost (including reasonable attorneys' fees and disbursements
attendant thereto) arising out of or in any way connected with Employee's
material breach of any covenant herein contained.
(b) INDEMNIFICATION BY EMPLOYER. Employer expressly agrees to
indemnify and hold harmless Employee and Employee's heirs and personal
representatives from and with respect to any and all loss, damage, expense or
cost (including reasonable attorneys' fees and disbursements attendant thereto)
arising out of or in any way connected with Employer's material breach of any
covenant herein contained.
(c) INJUNCTIVE RELIEF. Employee acknowledges and agrees that
Employer's remedy at law for a breach or threatened breach of any of the
provisions of Section 9 hereof would be inadequate and, in recognition of this
fact, in the event of a breach or threatened breach
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<PAGE> 8
by Employee of any of the provisions of Section 9 hereof it is agreed that, in
addition to its remedy at law, Employer shall be entitled to equitable relief
in the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
Employee acknowledges that the granting of a temporary injunction, temporary
restraining order or permanent injunction merely prohibiting the use of
Proprietary Information would not be an adequate remedy on breach or threatened
breach, and consequently agrees, on any such breach or threatened breach, to
the granting of injunctive relief prohibiting Employee's engaging in any
Business Activities other than as specifically provided for in this Agreement.
Nothing herein contained shall be construed as prohibiting Employer from
pursuing any other remedies available to it for such breach or threatened
breach.
12. NOTICES. All notices, requests, demands, directions and other
communications required or permitted under the provisions of this Agreement, or
otherwise with respect hereto, shall be in writing and shall be: (i) mailed by
first class registered or certified mail, return receipt requested, postage
prepaid, (ii) sent by next day business courier (such as Federal Express or the
like), (iii) personally delivered or (iv) transmitted by fax, telegram or telex
(with a hard copy to follow within 24 hours by first class registered or
certified mail, return receipt requested, postage prepaid, or by next day
business courier [such as Federal Express or the like], or by personal
delivery), as follows:
If to Employer, to:
Foster Health Care Group, Inc.
426 South Jefferson
Springfield, MO 65806-2351
Attn: John Foster
With a required copy to:
Balanced Care Corporation
3507 Market Street
Suite 202
Camp Hill, PA 17055
If to Employee, to:
Foster Health Care Group, Inc.
426 South Jefferson
Springfield, MO 65806-2351
Attn: John Foster
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<PAGE> 9
If to BCC, to:
Balanced Care Corporation
3507 Market Street
Suite 202
Camp Hill, PA 17055
or to such other address(es) or to the attention of such other person(s) and
officer(s) as the addressee of any such notice shall have previously furnished
to the sender in writing. Each notice or communication which shall be
transmitted in the manner described above, or which shall be delivered to a
telegraph company, shall be deemed sufficiently given, served, sent, or
received for all purposes at such time as it is sent to the addressee (with
return receipt, delivery receipt [or with respect to a telex the answer back,
or a fax the activity report] being deemed conclusive evidence of such mailing,
transmission or delivery), or at such time as delivery is refused by the
addressee on presentation.
13. ASSIGNMENT.
(a) BY EMPLOYEE. Employee acknowledges that the services to be
rendered by Employee hereunder are unique and personal; and, accordingly,
Employee may not assign any of Employee's rights or delegate any of Employee's
duties or obligations under this Agreement.
(b) BY EMPLOYER. Pursuant to the Foster Purchase Agreement (as
defined in the Stock Purchase Agreement), BCC has agreed to acquire
substantially all of the assets of Employer, including Employer's rights under
this Agreement, effective on the earlier of eighteen months following the
Effective Closing Date as defined in the Stock Purchase Agreement or on such
earlier date as the assets of Employer shall be transferred to BCC (the
"Employer Transfer Date"). BCC may also assign the right to acquire such assets
to an affiliate of BCC pursuant to the Foster Purchase Agreement. The parties
agree that unless BCC shall be relieved of its obligations pursuant to Section
13(e), BCC shall become obligated under either Section 13(c) or 13(d) below on
the Employer Transfer Date.
(c) ASSIGNMENT TO BCC. Effective on the Employer Transfer Date and
provided that BCC shall not have notified Employee in writing not later than
thirty days prior to the Employer Transfer Date that BCC wishes to reject the
following assignment, Employer hereby assigns, transfers, and sets over unto
BCC all of Employer's rights and obligations arising under this Agreement, to
have and to hold the same unto BCC, its successors, and assigns, from and after
the Employer Transfer Date, subject to the covenants, conditions, and
limitations contained in this Agreement. Effective on the Employer Transfer
Date and provided that BCC shall not have notified Employee in writing not
later than thirty days prior to the Employer Transfer Date that BCC wishes to
reject the foregoing assignment, BCC hereby accepts the assignment of this
Agreement from Employer and hereby assumes and agrees to perform each and every
one of the terms, conditions, and covenants of this Agreement to be performed
on the part of the Employer from and after the Employer Transfer Date.
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<PAGE> 10
(d) GUARANTY. The guaranty by BCC pursuant to this Section 13(d)
shall become effective upon the Employer Transfer Date unless (i) BCC shall be
relieved of its obligations pursuant to Section 13(e) below or (ii) unless the
assignment in Section 13(c) shall become effective. If the obligation of BCC to
guarantee the obligations of Employer shall become effective pursuant to the
foregoing sentence, BCC agrees as follows:
(i) In consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, BCC hereby absolutely and unconditionally guarantees the full and
timely performance, payment, and satisfaction of each and every representation,
warranty, term, condition, covenant, obligation, agreement, indemnity, and/or
obligation of Employer under this Agreement to be performed on or after the
Employer Transfer Date (the "Guarantee Obligations").
(ii) This is a guaranty of payment and not of collection.
This is a continuing, absolute and unconditional guarantee and it shall
continue in force until all Guarantee Obligations are fully satisfied. This
guaranty is absolute and is not affected by extensions granted to Employer, its
assigns or successors, nor by any acts or omissions whatsoever by BCC relative
to the Guarantee Obligations. Notice of the acceptance of this guaranty by
Employee is hereby waived by BCC.
(iii) Upon any default in the satisfaction of the Guarantee
Obligations covered by this guaranty, or any part thereof when due, Employee
may, if Employee so desires, proceed directly against BCC without first taking
any steps against Employer or any assigns or successors of Employer and without
any prior demand or notice. BCC agrees to pay all amounts due hereunder without
setoff or counterclaim.
(iv) The liability of BCC hereunder shall not be affected by:
(1) The renewal, extension, modification or termination
of this Agreement by lapse of time or otherwise (all of which are hereby
authorized by BCC) or a release or limitation of the liability of Employer in
any bankruptcy or insolvency proceeding.
(2) Any extension in the time for making any payment due
under this Agreement or acceptance of partial payment from Employer to any
person or entity.
(3) The failure during any period of time whatsoever of
Employee to attempt to collect any amount due or the revocation, termination,
release, or failure to pursue or enforce any of the Guarantee Obligations under
this Agreement or to exercise any remedy available under this Agreement in the
event of a default in the performance by Employer of the terms of this
Agreement.
(4) Employee's consent to any assignment(s) or
successive assignments of this Agreement or any assignment, purchase, like-kind
exchange, subletting, or successive subletting of any of the Combined
Companies.
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<PAGE> 11
(5) Any assignment or successive assignments of BCC's
interest under the Stock Purchase Agreements (whether absolute or as
collateral).
(v) BCC hereby expressly waives:
(1) Notice of acceptance of this guaranty.
(2) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in Section 13(d)(iv)
hereof.
(3) Any and all claims or defenses based upon lack of
diligence in:
(A) the collection of any amount the payment of
which is guaranteed hereby or any collection of any amount due hereunder; or
(B) the discharge, liquidation, or reorganization of
Employer in bankruptcy or the rejection of the Stock Purchase Agreement by a
trustee in bankruptcy.
(4) Any right to require Employee to proceed against any
Employer or any other person or entity.
(vi) All remedies of Employee hereunder shall be in addition
to, and exercisable consecutively or concurrently in any combination with, any
and all remedies available to Employee by operation of law or under the Stock
Purchase Agreement and Employee may exercise Employee's remedies hereunder
without the necessity for any suit or proceedings of any kind or nature against
Employer and without the necessity of any notice to Employer or BCC, or either
of them, of nonpayment, nonobservance, nonperformance or other default by
Seller under the Stock Purchase Agreement.
(vii) The obligations of Employer shall terminate on the date
the guaranty by BCC shall become effective.
(e) EXCEPTIONS. BCC shall be relieved of its obligations under
Section 13(c) and 13(d) if (i) there has been an event of default on the part
of Employee hereunder or under the Stock Purchase Agreement or any Other
Agreement and such condition shall have continued for a period of sixty
calendar days following notice of such condition in writing to Employee or (ii)
this Agreement has previously been terminated, except for a termination
pursuant to Section 6(a)(ii), 6(b)(ii), or 6(b)(iii).
14. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach hereunder. No waiver shall be
valid unless in writing and signed by the party granting such waiver.
- 11 -
<PAGE> 12
15. ENFORCEMENT; COSTS. If any of the parties hereto brings an action
at law or other proceeding against any other party to enforce any of the terms
or conditions hereof, or by reason of any breach or default hereunder, the
party prevailing in any such action or proceeding shall be paid all of its
costs and attorneys' fees by the non-prevailing party.
16. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and may not be waived,
changed, modified, extended or discharged orally but only by an agreement in
writing, signed by the party against whom enforcement of any such waiver,
change, modification, extension or discharge is sought.
17. COOPERATION. Employee agrees to use his/her best efforts to
maintain a good working relationship with the corporate offices and management
of Employer.
18. SURVIVAL. Any termination of this Agreement shall not affect the
provisions of Sections 9, 10, 11, or 13 hereof, which shall survive such
termination in accordance with their terms, except as otherwise provided
herein.
19. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, executors and administrators. If any provision of this
Agreement shall be or become illegal or unenforceable in whole or in part for
any reason whatsoever, the remaining provisions shall nevertheless be deemed
valid, binding and enforceable.
20. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Missouri, including its statutes of
limitations, but without regard to its conflict of laws provisions.
21. HEADINGS. The Section headings used in this Agreement are for the
convenience of reference only, and shall not control or affect the meaning or
construction, or limit the scope or intent, of any provisions of this
Agreement.
22. COUNTERPARTS. This Agreement may be executed in several
counterparts or with counterpart signature pages, each of which shall be deemed
an original, but such counterparts shall together constitute but one and the
same Agreement.
- 12 -
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
WITNESS/ATTEST: EMPLOYER:
FOSTER HEALTH CARE GROUP, INC.
/s/ J. Kaye Foster-Gibson By: /s/ Bill R. Foster, Sr.
_____________________________ ____________________________
Name: Bill R. Foster ,Sr.
Title: President
WITNESS/ATTEST: EMPLOYEE:
/s/ Gregory A. Smith /s/ John D. Foster
_____________________________ ________________________________
John D. Foster
WITNESS/ATTEST: BCC:
BALANCED CARE CORPORATION
/s/ Brad E. Hollinger By:/s/ Robin L. Barber
_____________________________ ________________________________
Name: Robin L. Barber
Title: Assistant Secretary
- 13 -
<PAGE> 1
EXHIBIT 10.38
ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT
(Employment Agreement)
THIS ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT (this
"Assignment") is made this 30th day of June, 1997, to be effective on and as of
July 1, 1997 (the "Effective Date"), among FOSTER HEALTH CARE GROUP, INC., a
Missouri corporation (the "Assignor"), BBC MANAGEMENT COMPANY AT MISSOURI,
INC., a Delaware corporation (the "Assignee") and JOHN FOSTER ("Employee").
W I T N E S S E T H:
WHEREAS, Assignor, as employer, and Employee, as employee,
entered into that certain Employment Agreement dated as of September 1, 1996
(the "Employment Agreement"), wherein Assignor retained the services and
employment of Employee as more specifically set forth in the Employment
Agreement; and
WHEREAS, pursuant to the terms of that certain Asset Purchase
Agreement dated August 31, 1996 (as amended by that certain Agreement of
Amendment of even date herewith, the "Asset Purchase Agreement"), entered into
between Assignor and Balanced Care Corporation, a Delaware corporation ("BCC"),
BCC or an affiliate of BCC agreed to acquire substantially all of the assets of
Assignor, including Assignor's rights and obligations under the Employment
Agreement; and
WHEREAS, pursuant to the terms of that certain Assignment and
Assumption Agreement dated of even date herewith (the "Assignment Agreement"),
entered into between BCC and Assignee, BCC elected to assign to Assignee, and
Assignee agreed to accept, all of BCC's right, title and interest in and to the
Asset Purchase Agreement, including Assignor's rights and obligations under the
Employment Agreement, on and as of the Effective Date; and
WHEREAS, as confirmation of the assignment to Assignee of
Assignor's rights and obligations under the Employment Agreement, Assignor and
Assignee have agreed to execute and deliver this Assignment.
NOW, THEREFORE, in consideration of these premises, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, intending to be legally bound, the parties hereto agree as
follows:
1. Recitals Incorporated.
The foregoing recitals constitute a material part of this
Assignment, and the same are expressly incorporated herein by reference.
<PAGE> 2
2. Assignment and Assumption
2.1 Assignment. Assignor hereby assigns, transfers and sets
over unto to Assignee, and Assignee hereby accepts from Assignor, all of
Assignor's right, title and interest in and to the Employment Agreement, to
have and to hold the same unto Assignee, its successors and assigns, from and
after the Effective Date.
2.2 Assumption. Assignor hereby delegates to Assignee, and
Assignee hereby assumes from Assignor, all of Assignor's obligations arising
under or in connection with the Employment Agreement from and after the
Effective Date, and Assignee further agrees to assume and perform each of the
terms, conditions and covenants of the Employment Agreement to be performed on
the part of assignor from and after the Effective Date, including, without
limitation, Assignor's obligation to pay Employee's compensation thereunder;
provided, however, notwithstanding the foregoing, Assignor shall retain, and
shall remain solely liable for, all obligations arising from any breach or
failure to perform by Assignor under the Employment Agreement prior to the
Effective Date, regardless of the date on which any claim is made.
3. Representations and Warranties of Assignor.
Assignor represents and warrants to and for the benefit of
Assignee, as follows:
3.1 Power and Authority. Assignor has all requisite power and
authority to execute, deliver and perform this Assignment and to assign,
transfer and delegate to Assignee all of Assignor's right title and interest
to, and obligations arising under or in connection with, the Employment
Agreement.
3.2 Authorization. The execution and delivery of this
Assignment have been duly authorized by all necessary action of Assignor and do
not require any additional consent or approval of any person or entity and do
not and will not violate any provision of the certificate of incorporation or
bylaws of Assignor.
3.3 Exclusive Property. All of Assignor's right, title, and
interest assigned to Assignee by Assignor hereunder are the exclusive property
of Assignor, and Assignor has not granted to any other person or entity any
rights or interests with respect thereto.
3.4 Employment Agreement.
3.4.1 Enforceability; Modification. The Employment
Agreement is in full force and effect, is valid and enforceable and has not
been altered, modified or amended in any manner whatsoever.
3.4.2 Performance. Assignor has performed and complied in
all material respects with all of the terms, conditions and covenants required
to be performed or complied with by Assignor under the Employment Agreement
prior to the Effective Date.
2
<PAGE> 3
3.4.3 Default. Neither Assignor nor, to the best of
Assignor's knowledge, Employee, is in default under any of the terms,
conditions or covenants of the Employment Agreement.
3.4.4 Termination by Assignor. There is no action or
other matter pending or threatened that would entitle Assignor to terminate the
Employment Agreement (either with or without cause) and Assignor has not waived
any such right.
3.4.5 Termination by Employee. To the best of Assignor's
knowledge, there is no action or other matter pending or threatened that would
entitle Employee to terminate the Employment Agreement (either with or without
cause) and, to the best of Assignor's knowledge, Employee has not waived any
such right.
3.4.6 Indemnification by Employee. There is no action or
other matter pending or threatened by Assignor against Employee that would
entitle Assignor to seek indemnification from Employee under the terms,
conditions and covenants of Section 11(a) of the Employment Agreement, and
Assignor has not waived any such right.
3.4.7 Indemnification by Assignor. There is no action or
other matter pending or, to the best of Assignor's knowledge, threatened,
against Assignor that would entitle Employee to seek indemnification from
Assignor under the terms, conditions and covenants of Section 11(b) of the
Employment Agreement and, to the best of Assignor's knowledge, Employee has not
waived any such right.
4. Representation and Warranties.
Assignee represents and warrants to and for the benefit of
Assignor, as follows:
4.1 Power and Authority. Assignee has all requisite power and
authority to execute, deliver and perform this Assignment and to accept and
assume the assignment, transfer and delegation by Assignor of all of its right,
title and interest to, and obligations arising under or in connection with, the
Employment Agreement.
4.2 Authorization. The execution and delivery of this
Assignment have been duly authorized by all necessary action of Assignee and do
not require any additional consent or approval of any person or entity and do
not and will not violate any provision of the certificate of incorporation or
bylaws of Assignee.
4.3 Performance. Assignee covenants and agrees to perform and
comply in all material respects with all of the terms, conditions and covenants
required to be performed or complied with by Assignor under the Employment
Agreement from and after Effective Date.
5. Release of Guaranty. In consideration of Assignee's acceptance of
the assignment and assumption hereunder, on and as of the Effective Date, the
terms, conditions and covenants of Section 13(d) of the Employment Agreement
shall become null and void and of no further
3
<PAGE> 4
force and effect, and BCC, its successors and assigns, shall be released from
any and all obligations thereunder.
6. Consent by Operator. Operator hereby consents to the
assignment and assumption contemplated hereunder.
7. Indemnification.
7.1 By Assignor. Notwithstanding this assignment and
assumption, Assignor agrees at all times from and after the Effective Date, to
defend, indemnify and hold harmless Assignee from any losses, damages, expenses
or deficiencies relating to or arising out of any breach or nonperformance of
the Employment Agreement by Assignor during the time period prior to the
Effective Date.
7.2 By Assignee. Notwithstanding this assignment and
assumption, Assignee agrees at all times from and after the Effective Date, to
defend, indemnify and hold harmless Assignor from any losses, damages, expenses
or deficiencies relating to or arising out of any breach or nonperformance of
the Employment Agreement by Assignee during the time period from and after the
Effective Date.
8. Miscellaneous.
8.1 Successors and Assigns. This Assignment shall be binding
on Assignor and Assignee, together with their respective successors and
assigns.
8.2 Headings. The headings and captions herein are for the
convenience of reference only and shall not be used in construing or
interpreting this Assignment or to otherwise limit or affect the meaning of any
provision hereof.
8.3 Governing Law. This Assignment shall be governed by and
construed in accordance with the laws of the State of Missouri, including its
statutes of limitation but without regard to its conflict of laws rules.
8.4 Counterparts. This Agreement may be executed in several
counterparts or with counterpart signature pages, each of which shall be deemed
an original, but such counterparts shall together constitute but one and the
same Agreement.
[THIS PORTION OF THE PAGE INTENTIONALLY LEFT BLANK]
[THE NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
4
<PAGE> 5
IN WITNESS WHEREOF, this Assignment has been executed by the
parties hereto as of the date and year first above written.
ATTEST: ASSIGNOR:
FOSTER HEALTH CARE GROUP,
a Missouri corporation
By: /s/ Robert A. Foster By: /s/ John Foster
--------------------- ----------------
Robert A. Foster, Secretary John Foster, President
ATTEST: ASSIGNEE:
BCC MANAGEMENT COMPANY AT
MISSOURI, INC., a Delaware corporation
By: /s/ Robin L. Barber By: /s/ Brad Hollinger
-------------------- ------------------
Robin L. Barber, Secretary Brad Hollinger, President
WITNESS: EMPLOYEE:
/s/ Gregory A. Smith /s/ John Foster
------------------------- ------------------------------
Gregory A. Smith John Foster
5
<PAGE> 1
EXHIBIT 10.39
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into
this 3rd day of October, 1996, by and between KENNETH F. BARBER, an individual
(the "Consultant"), and BALANCED CARE CORPORATION, a Delaware corporation
(together with any related, affiliated or subsidiary corporation, the
"Company").
WITNESSETH:
WHEREAS, the Company desires to engage the Consultant to provide
certain services to the Company, and the Consultant is willing to provide such
services to the Company; and
WHEREAS, because of the Consultant's existing knowledge of the plans,
operations, employees and customers of the Company, and the knowledge to be
obtained by the Consultant of the plans, operations, employees and customers of
the Company, it is important to the Company that the Consultant shall not
disclose any confidential or proprietary information of the Company during or
after the term of this Agreement; and
WHEREAS, the Consultant is willing to enter into this Agreement upon
the terms and conditions herein set forth.
NOW, THEREFORE, for the consideration set forth in this Agreement, and
intending to be legally bound hereby, the Consultant and the Company mutually
promise and agree as follows:
1. Consulting Duties, Term. The Company agrees to and does hereby
engage the Consultant in a consulting capacity as an independent contractor to
provide certain services, including but not limited to the services set forth on
Exhibit A attached hereto and incorporated herein, and the Consultant does
hereby agree to serve the Company in such capacity. Unless earlier terminated as
provided in Paragraph 4, this Agreement shall have an initial term of one (1)
year, commencing on November 1, 1996 and expiring on November 1, 1997. Unless
the Consultant or the Company has given the other party written notice of its
intention not to renew this Agreement at least ninety (90) calendar days prior
to the end of the then existing term, this Agreement shall be automatically
renewed for successive one year terms.
2. Time Required. The Consultant shall devote his best efforts
and such time as shall be reasonably necessary to perform the services pursuant
to this Agreement up to a maximum amount of twenty (20) hours per week, which
maximum amount may be adjusted from time to time upon the mutual consent of the
parties hereto.
<PAGE> 2
3. Compensation; Billing.
(a) On a monthly basis, the Consultant shall submit to the
Company an invoice, in form and content acceptable to the Company, on
or before the fifth (5th) business day of the month following the
month in which services are provided by the Consultant. In return for
the Consultant's services, the Company shall pay the Consultant an
hourly fee of One Hundred Dollars ($100.00), to be paid monthly or
according to the Company's standard payment practice.
(b) The Company will pay for the reasonable expenses
incurred by the Consultant for travel, lodging and other expenses
arising in connection with the services to be provided pursuant to
this Agreement. Such expenses shall be approved by the Chief
Executive Officer of the Company in advance. All travel arrangements
for Consultant shall be made by the appropriate Company personnel.
The compensation set forth in this Paragraph 3 shall be considered as full
payment to the Consultant for all such services.
4. Termination.
(a) Either party may terminate this Agreement without cause
by giving the other party at least sixty (60) calendar days' prior
written notice.
(b) The Company may terminate this Agreement without cause
immediately upon written notice to the Consultant upon the beach by
Consultant of any of the terms or conditions of this Agreement,
including but not limited to the confidentially and nondisclosure
provisions set forth in Paragraph 5.
(c) As of the date of termination of this Agreement, neither
party shall have any further rights or obligations hereunder except
for the rights and obligations accruing prior to the date of
termination or arising as a result of any breach of this Agreement.
Notwithstanding the foregoing, the following provisions shall survive
the termination or expiration of this Agreement, regardless of the
cause of such termination: Paragraph 5 and Paragraph 6(b).
5. Confidentiality; Nondisclosure.
(a) The Consultant recognizes and acknowledges that during
the term of this Agreement, the Consultant will have access to, be
provided with and, in some cases, will prepare and create, certain
confidential and proprietary information and trade secrets of the
Company arising in connection with the plans, operations, employees
and customers of the Company (collectively, the "Information"), all of
which is of substantial value to the Company and its business.
(b) The Consultant agrees to keep the Information
confidential and that the Information shall not, without the prior
written consent of the Company, be copied,
- 2 -
<PAGE> 3
divulged, disclosed, provided or otherwise made available by the
Consultant or any of Consultant's employees, contractors, agents or
representatives (collectively, the "Representatives"), and shall not be
used by the Consultant or any of the Representatives other than as
provided in this Agreement. Moreover, the Consultant agrees to transmit
the Information only to such of the Representatives who need to know
the Information for the sole purpose of assisting the Consultant in
providing the services pursuant to this Agreement, who are informed of
this Agreement and who agree to be bound by the terms hereof as if a
party hereto.
(c) The Consultant acknowledges and agrees that all of the
reports, memoranda or other materials prepared by the Consultant or
the Representatives and any other materials containing or otherwise
reflecting the Information (together with all copies of the foregoing)
are and shall be the sole and exclusive property of the Company.
(d) The Consultant agrees that, upon the Company's request,
all of the furnished Information, any reports, memoranda or other
materials prepared by the Consultant or the Representatives and any
other materials containing or otherwise reflecting the Information
(together with all copies of the foregoing), shall, at the Company's
option, be (1) returned to the Company or (2) destroyed at the
Company's direction.
(e) Notwithstanding anything herein to the contrary, no
obligation or liability shall accrue hereunder with respect to any of
the matters contained in the Information to the extent that such
Information (1) is or becomes publicly available other than as a
result of acts by the Consultant or the Representatives in violation
of this Agreement, (2) is in the possession of the Consultant or the
Representatives prior to disclosure by the Company or (3) is, on the
advice of counsel, required to be disclosed by law.
(f) The Consultant acknowledges and agrees that the
Information is a valuable and unique asset of the Company and that the
provisions of this Agreement are made for the benefit of the
Consultant and for the benefit of the Company, and that in the event
of any breach of this Agreement, the Company will be harmed and unable
to be made whole by monetary damages. It is accordingly agreed that
the Company, in addition to any other remedy to which it may be
entitled in law or at equity, shall be entitled to an injunction or
injunctions to remedy breaches of this Agreement and/or compel
specific performance of this Agreement.
The provisions of this Paragraph 5 shall survive termination or expiration of
this Agreement and shall remain in full force and effect until the expiration
of two (2) years following the date of termination or expiration, as the case
may be.
6. Independent Contractor. The Consultant is and shall at all
times be an independent contractor and shall not hold himself out as an
employee of the Company. Nothing in this Agreement is intended, nor shall it
be construed, to create an employer/employee relationship, a joint venture
relationship, a lease or landlord/tenant relationship, or to allow the Company
to exercise control over the manner or method by which the Consultant performs
the
- 3 -
<PAGE> 4
services which are the subject of this Agreement, except that the Company shall
have an interest in ensuring that the Consultant's services shall be performed
in a competent, efficient and satisfactory manner. Furthermore:
(a) The Consultant shall be liable for his own debts,
obligations, acts and omissions, including the payment of all required
withholding, social security, income tax, unemployment insurance and
other taxes or benefits pursuant to any law or requirement of any
governmental body.
(b) The Company shall not withhold on behalf of the
Consultant any sums for income tax, unemployment insurance, social
security or other withholding or benefit pursuant to any law or
regulation of any governmental body. The Consultant will indemnify and
hold harmless the Company from any loss or liability arising from the
Company's failure to make such payments or withholdings. The
provisions of this Paragraph 6(b) shall survive termination or
expiration of this Agreement.
(c) If the Internal Revenue Service or any other governmental
body shall, at any time, question or challenge the independent
contractor status of the Contractor, the Company and/or the
Consultant, upon receipt by either of them of notice from the Internal
Revenue Service or any other governmental body, shall promptly notify
the other party and afford the other party the opportunity to
participate in any discussions or negotiations with the party that
received notice from the Internal Revenue Service or other
governmental body as such party that received notice may reasonably
request. Each party shall bear its respective costs in the event of
such inquiry.
(d) The Consultant hereby agrees that the Company shall not
be obligated to provide the Consultant with vacation pay, health and
disability insurance or workers' compensation insurance; provided,
however, if the Consultant requests that he be provided with health
and disability insurance coverage similar to the benefits being
provided by the Company to its employees, the Company will use its
best efforts to obtain said health and disability insurance for
Consultant within seven business (7) days of the Consultant's request.
Health and disability insurance so obtained will be at Consultant's
expense.
7. Scope. The event that any provision of this Agreement is
deemed by a court of competent jurisdiction to be excessively broad as to
duration, scope, activity or subject, such provision shall be construed and
enforced to the fullest extent permitted by law.
8. Notices. All notices, requests, demands or other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been given at the time when personally delivered, or mailed in a
registered or certified prepaid envelope, return receipt requested, or sent by
overnight courier that regularly provides receipts and is addressed to the
address below:
- 4 -
<PAGE> 5
If to the Consultant to:
Kenneth F. Barber
1540 Fox Hollow Circle
Mechanicsburg, PA 17055
If to the Company to:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Attn: Brad E. Hollinger, President and CEO
or at such other address as hereafter may be notified in writing by one party
to the other.
9. Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and shall
not be modified or changed in any respect except in writing duly signed by the
parties hereto.
10. Interpretation of Provisions. Wherever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11. Captions. Captions in this Agreement are solely for purposes
of identification and shall not in any manner alter or vary the interpretation
or construction of this Agreement.
12. Assignment All the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, personal representatives, transferees, successors and
assigns. This Agreement shall be assignable by the Company to a subsidiary,
affiliate or successor corporation. The Consultant shall not have the right to
assign this Agreement without the prior written consent of the Company, which
consent may be withheld in the Company's sole discretion.
13. Counterparts. This Agreement may be executed in one (1) or
more counterparts. Each full counterpart shall be deemed an original, but all
such counterparts together shall constitute one and the same instrument
14. Governing Law. This Agreement shall be governed by,
interpreted, construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania, including its statutes of limitation but without
regard to its conflict of laws rules.
IN WITNESS WHEREOF, and intending to be legally bound, the parties
hereto have executed and delivered this Agreement on the date first above
written.
- 5 -
<PAGE> 6
WITNESS: CONSULTANT
/s/ Robin L. Barber /s/ Kenneth F. Barber
- ------------------------------- ---------------------------------
Kenneth F. Barber
ATTEST/WITNESS: BALANCED CARE CORPORATION, a
Delaware corporation
/s/ Robin L. Barber
- ------------------------------- By: /s/ Brad E. Hollinger
-----------------------------
Name, Title
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<PAGE> 1
EXHIBIT 10.40
FIRST AMENDMENT TO THE CONSULTING AGREEMENT
This First Amendment to the Consulting Agreement is made this 13th day
of March, 1997 by and between KENNETH F. BARBER, an individual (the
"Consultant") and BALANCED CARE CORPORATION, a Delaware corporation (together
with any related, affiliated or subsidiary corporation, the "Company").
WITNESSETH:
WHEREAS, the Consultant and the Company entered into that certain
Consulting Agreement (the "Agreement") dated the 3rd day of October, 1996, for
the Consultant to provide certain services to the Company; and
WHEREAS, the Consultant and the Company desire to replace Section 12
in the Agreement to reflect the understanding of the parties with respect to
Assignment.
NOW, THEREFORE, for the consideration set forth in this Agreement, and
intending to be legally bound hereby, the Consultant and the Company mutually
agree to amend the Agreement as follows:
1. Section 12 of the Agreement is hereby deleted in its entirety
and replaced with the following:
12. Assignment. All the terms and provisions of this
Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs,
personal representatives, transferees, successors and
assigns. This Agreement shall be assignable by the Company to
a subsidiary, affiliate or successor corporation. The
Consultant shall not have the right to assign this Agreement
without the prior written consent of the Company, which
consent may be withheld in the Company's sole discretion;
provided, however, that the Consultant shall have the right
to subcontract or assign work under this Agreement to the
Consultant's employees or other independent contractors so
long as any such subcontractee or assignee agrees to be bound
by the provisions of Paragraph 5 (Confidentiality;
Non-Disclosure) and Paragraph 6 (Independent Contractor) of
this Agreement, and further provided that the Consultant
shall provide written notice to the Company prior to any such
assignment.
Except as modified herein, the Agreement remains in full force and
effect.
<PAGE> 2
IN WITNESS WHEREOF, and intending to be legally bound, the parties
hereto have executed and delivered this First Amendment to the Consulting
Agreement on the date first written above.
CONSULTANT
By:/s/ Kenneth F. Barber
---------------------
Kenneth F. Barber
BALANCED CARE CORPORATION,
a Delaware corporation
By:/s/ Brad E. Hollinger
-------------------------
Name: Brad E. Hollinger
Title: Chairman and CEO
Reviewed by the BCC Legal Department
by Robin Barber on 3/13/97.
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<PAGE> 1
EXHIBIT 10.41
Balanced Care Corporation [Letterhead]
August 8, 1997
Ms. Susan E. Keefer
Gethsemane Retirement Community, Inc.
Gethsemane Assisted Living, Inc.
2820 Shaffer Road
Bloomsburg, PA 17815
RE: GETHSEMANE RETIREMENT COMMUNITY AND REHAB CENTER
GETHSEMANE ASSISTED LIVING COMMUNITY
LETTER OF INTENT
Dear Ms. Keefer:
We are pleased to present this letter of intent (the "LOI") to you.
This LOI sets forth the basic terms and conditions upon which Balanced Care
Corporation, a Delaware corporation (or a subsidiary thereof, "Buyer"), would
acquire the assets in connection with the following facilities, owned by
Gethsemane Retirement Community, Inc. and Gethsemane Assisted Living, Inc.,
respectively (individually and collectively, the "Seller"): (i) Gethsemane
Retirement Community and Rehab Center, a skilled nursing facility, located at
3298 Ridge Road, P.O. Box 440, Bloomsburg, PA 17815 and (ii) Gethsemane
Assisted Living Community, an assisted living facility, located at Box 340,
Route 1, Millville, PA 17846. Gethsemane Retirement and Rehab Center and
Gethsemane Assisted Living Community are hereinafter referred to collectively
as the "Facilities".
Except for the provisions of Paragraphs 7 through 12 (which are
intended to be legally binding and enforceable), this LOI is not intended to
constitute a contract or an offer to enter into a contract, nor to be binding
upon either party, nor to create any legal obligations or rights for either
party with respect to any of the matters set forth herein.
It is our present mutual intent to proceed with the proposed
transaction as follows:
<PAGE> 2
Ms. Susan Keefer
Gethsemane Retirement Community, Inc.
August 8, 1997
Page 2
1. ACQUISITION. The acquisition will be structured as an asset
purchase. It is the intent of the parties that Buyer shall acquire all of the
operating assets associated with the Facilities, which may include, but not be
limited to, the land, buildings, furniture, fixtures, machinery, equipment,
inventory, supplies, leases, licenses, contract rights, resident deposits and
escrow accounts, copies of resident records, aggregated work force, copies of
employee records, policies and procedures and marketing and public relation
materials in connection therewith (collectively, the "Assets"). The Assets
shall not include accounts receivable or prepaid expenses.
2. PURCHASE PRICE.
The total estimated purchase price for the Assets of the Facilities
will be approximately $6,600,000, paid as follows:
(a) GOOD FAITH DEPOSIT. Buyer shall make a good faith deposit with an
escrow agent mutually acceptable to the parties hereto in an amount equal to
$50,000, payable as follows:
(i) $25,000, upon execution of a definitive asset purchase
agreement as contemplated in Paragraph 5; and
(ii) $25,000, upon satisfaction or waiver of the conditions
precedent set forth in Paragraph 5(a) by Buyer.
The escrowed funds (less interest) shall be released in favor of Seller at
Closing; Interest shall be released in favor of Buyer.
(b) CLOSING PAYMENT. At Closing, Buyer will pay to Seller $5,350,000.
(c) POST-CLOSING PAYMENT; ADJUSTMENT TO PURCHASE PRICE. If Gethsemane
Assisted Living Community achieves an annualized net operating income of
$207,000 for the period from September 1, 1997 through June 30, 1998, Buyer
will pay to Seller the balance of the Purchase Price in the amount of
$1,200,000 (the "Post-Closing Payment"), within thirty days of Buyer's
confirmation thereof. If the annualized net operating income is less than
$207,000, then the Post-Closing Payment shall be reduced on a prorata basis by
the amount of the deficiency. As used herein, the phrase "annualized net
operating income" shall mean net operating income, calculated in accordance
with
<PAGE> 3
Ms. Susan Keefer
Gethsemane Retirement Community, Inc.
August 8, 1997
Page 3
GAAP, before amortization, depreciation, interest, rent expense, income taxes,
management fees and other extraordinary expenses (including extraordinary
marketing or advertising expenses), on an annualized basis. Operating expenses
will be generally determined in accordance with the staffing assumptions
(including maintenance, dietary, etc.) and the employee benefit costs set forth
on the financial pro forma prepared by Seller attached hereto and incorporated
herein as Exhibit A. Any additional staffing and cost items not associated with
the normal conduct of Seller's business or the operation of the Facilities as
licensed facilities in accordance with all regulatory requirements, including
any corporate overhead, will be excluded from the calculation of net operating
income.
(d) ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets and the covenant not to compete contemplated in
Paragraph 5(c) in a manner that is mutually acceptable to the parties hereto
and Buyer and Seller shall report the federal, state and local income and other
tax consequences of the purchase and sale contemplated hereby in a manner
consistent with such allocation.
3. FINANCIAL STATEMENTS; OTHER INFORMATION.
(a) FINANCIAL STATEMENTS. Seller will deliver to Buyer audited
financial statements for Seller's most recent fiscal year prepared on an
accrual basis in accordance with GAAP. In the event audited financial
statements have not been prepared financial statements compiled in accordance
with Statements on Standards for Accounting and Review Services shall be
delivered to Buyer. In addition, Seller will provide to Buyer, as soon as the
same become available through the closing date, but no later than 15 days after
the last day of any given month, monthly statements of profit and loss of
Seller for the Facilities. The results of Seller's operations for the periods
covered thereby shall fairly and accurately represent the operating results and
financial position of Seller for the periods covered thereby. Seller authorizes
representatives of Buyer to review and make copies or extracts from all
relevant books, records and work papers in connection with the foregoing.
(b) OCCUPANCY REPORTS. Seller will deliver to Buyer occupancy reports
for the Facilities for the last year and the current occupancy reports, as soon
as the last day of any given week.
<PAGE> 4
Ms. Susan Keefer
Gethsemane Retirement Community, Inc.
August 8, 1997
Page 4
(c) RENT ROLLS. Seller will deliver to buyer existing rent rolls for
the Facilities and, as soon as the same become available through the closing
date, but no later than 5 days after the last day of any given month, the
current rent rolls.
(d) SURVEYS/INSPECTIONS. Seller will deliver to Buyer federal and/or
state surveys or inspections for the current year and the two immediately
preceding years for the Facilities and the most recent surveys or inspections
as soon as the same become available through the closing date, but no later
than 15 days after the last day of any given month.
4. REVIEW.
Upon approval of the terms as defined herein by Seller, Buyer shall
conduct, to the extent deemed necessary in its sole discretion, a review of the
business, Assets (including physical condition), liabilities, financial
condition and results of operations of Seller. Seller will permit Buyer to have
access to, and make copies and extracts from, the Facilities' books, records,
work papers and inspection reports of Seller relating thereto. Buyer will
conduct its review during normal business hours and in such a manner that will
not interfere or disrupt Seller's normal business operations.
5. DEFINITIVE AGREEMENT; TERMS AND CONDITIONS.
Immediately following execution of this LOI by the parties hereto,
Buyer will commence with the preparation and negotiation of a definitive asset
purchase agreement governing the transaction contemplated hereby (the
"Agreement"). The Agreement shall be in a form and substance, and contain such
customary terms, conditions, representations, warranties, indemnities and
remedies, as are mutually satisfactory to the parties hereto, including, but
not limited to, the following:
(a) BUYER'S CONDITIONS PRECEDENT. The obligation of Buyer to
consummate the transaction contemplated under the Agreement shall be subject to
and contingent upon the following express conditions precedent:
(i) Buyer shall have received a written binding commitment from
real estate investment trust or other financing source(s) to provide the
necessary financing for Buyer's acquisition of the Assets under the
Agreement, upon terms and conditions satisfactory to Buyer in its sole
and absolute discretion (the "Financing Commitment").
<PAGE> 5
Ms. Susan Keefer
Gethsemane Retirement Community, Inc.
August 8, 1997
Page 5
(ii) Buyer shall have completed its review of Seller's operations
as contemplated in Paragraphs 3 and 4 of this LOI, the results of which
shall be satisfactory to Buyer in its sole and absolute discretion.
(iii) Buyer shall have obtained approval by its board of directors
for the execution and delivery of the Agreement by Buyer, the
performance by Buyer of its obligations thereunder and the sale and
purchase of the Assets.
(b) SELLER'S CONDITION PRECEDENT. The obligation of Seller to
consummate the transaction contemplated under the Agreement shall be subject to
and contingent upon Buyer's obtaining the Financing Commitment or otherwise
demonstrating, to the reasonable satisfaction of Seller, that Buyer has the
ability to pay the Purchase Price in full as evidenced at Closing by (i)
Buyer's balance sheet, (ii) other firm lending commitments or (iii) a
combination of items (i) and (ii).
(c) COVENANT NOT TO COMPETE. For a period of three years following
closing on the sale of the Facilities to Buyer, Seller, and each of Seller's
shareholders, officers and directors, individually and as a shareholder,
officer, director, partner, joint venturer or affiliate of any corporation,
partnership, joint venture or other entity, will agree not to own, manage,
operate, join, control or participate in the ownership, management, operation
or control of any independent living facilities, assisted living or personal
care home, skilled nursing facilities or other ancillary health care service
within a 25-mile radius of any of the facilities, directly or indirectly,
except as otherwise herein provided.
(d) EMPLOYMENT. Susan Keefer will enter a three-year employment
contract, to be executed at Closing, to act as administrator of the Facilities
and such other responsibilities as determined by Buyer, in its discretion. Said
employment contract will provide for an annual base salary of $75,000 for Year
1, $80,000 for Year 2, and $85,000 for Year 3 of said employment contract.
Additionally, the Board of Directors, in its discretion, may approve additional
compensation, on an annual basis, consisting of a cash bonus of up to twenty
(20%) percent of the annual base salary then in effect and/or stock options.
Susan Keefer shall receive the customary fringe benefits provided to Buyer's
other officers and employees, which are appropriate for an employee or officer
holding a position similar to Susan Keefer's, including participation in
Buyer's existing or future stock option plan(s).
<PAGE> 6
Ms. Susan Keefer
Gethsemane Retirement Community, Inc.
August 8, 1997
Page 6
6. CLOSING.
Time shall be of the essence with respect to the negotiation, execution
and delivery of the Agreement governing the transaction contemplated herein and
the parties hereto agree to use their best efforts to close within 90
consecutive calendar days from date of execution of the Letter of Intent by the
parties hereto.
7. EXPENSES.
Seller, on the one hand, and Buyer, on the other, shall each pay their
respective fees and expenses and those of their respective agents and advisors
whether or not the transaction is ever consummated.
8. OTHER OFFERS.
In consideration of the legal, accounting and other costs and fees
which Buyer will incur in connection with the investigation of Seller's
operations, Seller agrees that for a period of 90 consecutive days following
execution of this LOI, neither Seller nor any shareholders, partners, members
or legal, equitable or beneficial owners of the Facilities, of any nature
whatsoever, as the case may be, or any entity or individual affiliated with any
of the foregoing, directly or indirectly, will solicit the interest of any
other person or entity or take part in any discussion concerning a possible
acquisition of Seller or its Assets, nor will Seller or any related entity or
individual, directly or indirectly, conduct any negotiations for any such
acquisition with any person or entity other than Buyer or accept any offer from
any such person or entity to purchase Seller or its Assets.
9. CONFIDENTIALITY.
In order to facilitate the transaction contemplated herein, each party
may deem it necessary or desirable to disclose certain of its proprietary
and/or confidential information to the other party. As used herein, the term
"proprietary and/or confidential information" shall mean all information of, or
relating to, such party that is not generally available or disclosed to the
public, including but not limited to, financial information of such other party
and agrees it shall (i) keep such information confidential in accordance with
the terms of this LOI and to the extent permitted by law, (ii) use and disclose
such information solely for the purpose of performing its obligations hereunder
and (iii) not otherwise disclose or make use of such information except in
accordance with the terms of this LOI and to the extent required by law. If
this LOI is terminated by either party, all
<PAGE> 7
Ms. Susan Keefer
Gethsemane Retirement Community, Inc.
August 8, 1997
Page 7
proprietary and/or confidential information received by Buyer from Seller shall
be returned to Seller.
10. PUBLICITY.
Except as may otherwise be provided herein, Buyer and Seller agree that
no disclosure or other publicity concerning the transaction contemplated herein
shall be made prior to consummation without the mutual written consent of the
parties hereto.
11. CHOICE OF LAW.
The validity and interpretation of this LOI and the Agreement shall be
construed in accordance with, and governed by, the internal laws of the
Commonwealth of Pennsylvania.
12. TERMINATION.
If the Agreement has not been executed and delivered by the parties
hereto within ninety days of Seller's acceptance of this LOI, this LOI may be
terminated without cause by either party upon written notice to the
non-terminating party.
[THIS PORTION OF THE PAGE INTENTIONALLY LEFT BLANK]
[THE NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
<PAGE> 8
Ms. Susan Keefer
Gethsemane Retirement Community, Inc.
August 8, 1997
Page 8
If the foregoing accurately sets forth your intentions with respect to
the transaction outlined above, please obtain the appropriate authorized
signature of Seller on the enclosed copy of this LOI in the space provided
below and return it to me.
Very truly yours,
BALANCED CARE CORPORATION, a
Delaware corporation
By: /s/ WILLIAM T. McCARTHY
----------------------------
William T. McCarthy
Chief Financial Officer
Accepted and agreed to this 8th day of August by:
GETHSEMANE RETIREMENT COMMUNITY, INC.,
a Pennsylvania corporation
By: /s/ SUSAN E. KEEFER
--------------------------
Susan E. Keefer
Title: President
GETHSEMANE ASSISTED LIVING, INC.,
a Pennsylvania corporation
By: /s/ SUSAN E. KEEFER
--------------------------
Susan E. Keefer
Title: President
<PAGE> 1
EXHIBIT 10.42
Balanced Care Corporation [Logo]
September 2, 1997
Mr. Hal K. Waldman
Senior Living Centers, Inc.
223 Pittsburgh Street
Saxonburg, PA 16056
LETTER OF INTENT
Dear Mr. Waldman:
We are pleased to present this letter of intent (the "LOI"), which sets
forth the basic terms and conditions upon which Balanced Care Corporation, a
Delaware corporation (or a subsidiary thereof, "Buyer"), would acquire the
assets in connection with that certain facility licensed in Pennsylvania as a
personal care and skilled nursing care facility and known as Saxony Health
Center (the "Facility"), located at 223 Pittsburgh Street, Saxonburg, PA 16056,
owned by Senior Living Centers, Inc., a Pennsylvania corporation ("Seller").
Except for the provisions of Paragraphs 6 through 11 (which are
intended to be legally binding and enforceable), this LOI is not intended to
constitute a contract or an offer to enter into a contract, not to be binding
upon either party, nor to create any legal obligations or rights for either
party with respect to any of the matters set forth herein.
It is our present mutual intent to proceed with the proposed
transaction as follows:
1. ACQUISITION.
Buyer's acquisition of the Facility will be structured as an
asset purchase. It is the intent of the parties that Buyer shall acquire
all of the operating assets associated with the Facility, which may
include, but not be limited to, the land, buildings, furniture,
fixtures, machinery, equipment, inventory, some prepaid expenses and
rents, supplies, leases, licenses, contract rights, resident deposits
and escrow accounts, copies of resident records, aggregated work force,
copies of employee records, policies and procedures and marketing and
public relation materials in connection therewith (collectively, the
"Assets").
<PAGE> 2
Mr. Hal K. Waldman
September 2, 1997
Page 2
2. PURCHASE PRICE.
The purchase price for the Assets shall be $8,800,000 (the
"Purchase Price"). The Purchase Price shall be due and payable by Buyer
in cash at closing. Buyer and Seller agree that the purchase price will
be allocated between the Facility and the covenant not to compete
contained in Paragraph 5(b) hereof in the manner that is mutually
acceptable to the parties. Buyer will pay a nonrefundable deposit of
$100,000 ("Deposit") to Seller, which Deposit shall be applied to the
Purchase Price at closing of the transaction contemplated herein.
The Deposit is payable on the earlier of (a) the date by which Buyer has
obtained both a commitment for financing and board approval of the
transaction contemplated herein and of the Asset Purchase Agreement; or
(b) the fortieth day after the execution of this LOI. There will
reasonable and customary allocations such as real estate taxes, employee
wages, prepaid expenses and resident payments. There will be no credit
allocated by Seller to Buyer at Closing for any employee vacation
benefits accrued pre-Closing but not taken as of the date of Closing.
3. FINANCIAL STATEMENTS; OTHER INFORMATION.
(a) FINANCIAL STATEMENTS. Upon execution of this LOI, Seller
will deliver to Buyer reviewed financial statements for Seller's last
three years. In addition, Seller will provide to Buyer, as soon as the
same become available through the closing date, but no later than 20
days after the last day of any given month, a monthly statement of
profit and loss of Seller for the Facility. Said financial statements
shall fairly and accurately represent the operating results and
financial position of Seller for the periods covered thereby. Seller
authorizes representatives of Buyer to review and make copies or
extracts from all relevant books, records and work papers in connection
with the foregoing.
(b) OCCUPANCY REPORTS. It is acknowledged that Seller has
delivered to Buyer occupancy reports for the Facility for the last two
years. Seller shall deliver current occupancy reports, as soon as the
same become available through the closing date, but no later than 5 days
after the last day of any given week.
(c) RENT ROLLS. Seller will deliver to Buyer existing rent
rolls for the Facility and, as soon as the same become available through
the closing date, but no later than 5 days after the last day of any
given month, the current rent rolls.
(d) SURVEYS/INSPECTIONS. Seller will deliver to Buyer federal
and/or state surveys or inspections for the current year and the two
immediately preceding years for the Facility and the most recent surveys
and inspections as soon as the same become available through the closing
date, but no later than 15 days after the last day of any given month.
<PAGE> 3
Mr. Hal K. Waldman
September 2, 1997
Page 3
(e) COST REPORTS; RATE SCHEDULE. Seller will deliver to Buyer
cost reports for 1995 and 1996 and the current rate schedule for the
Facility.
4. REVIEW.
Upon approval of the terms as defined herein by Seller, Buyer
shall conduct, to the extent deemed necessary in its sole discretion, a
review of the businesses, Assets (including physical condition),
liabilities, financial condition and results of operations of Seller.
Seller will permit Buyer to have access to, and make copies and extracts
from, the Facility's books, records, work papers and inspection reports
of Seller relating thereto. Seller will also permit Buyer's construction
and operational representatives, surveyors, environmental consultants
and appraisers to conduct an on-site review of the Facility, but each
only with the prior authorization and knowledge of Hal K. Waldman. Said
construction and operational representatives, surveyors, environmental
consultants and appraisers will not discuss with any employee of Seller
in the course of said review any aspect of the businesses. Assets,
liabilities, financial condition or results of operations of Seller,
without the prior authorization and knowledge of Hal K. Waldman. Buyer
will conduct its review during normal business hours and in such a
manner that will not interfere or disrupt Seller's normal business
operations.
5. DEFINITIVE AGREEMENT; TERMS AND CONDITIONS.
Immediately following execution of this LOI by the parties
hereto, Buyer will commence with the preparation and negotiation of a
definitive asset purchase agreement governing the transaction
contemplated hereby (the "Agreement"). The Agreement shall be in a form
and substance, and contain such customary terms, conditions,
representations, warranties, indemnities and remedies, as are mutually
satisfactory to the parties hereto, including, but not limited to, the
following:
(a) CONDITIONS PRECEDENT. The obligation of Buyer to
consummate the transaction contemplated under the Agreement shall be
subject to and contingent upon the satisfaction, on or before the
specified date (but in any event no later than closing), of the
following express conditions precedent:
<PAGE> 4
Mr. Hal K. Waldman
September 2, 1997
Page 4
(i) On or before the fortieth day after the execution
of this LOI, Buyer shall have received a written binding
commitment binding from a real estate investment trust or other
financing source(s) to provide the necessary financing for
Buyer's acquisition of the Assets under the Agreement, upon
terms and conditions satisfactory to Buyer in its sole and
absolute discretion.
(ii) On or before the fortieth day after the execution
of this LOI, Buyer shall have completed its review of Seller's
operations as contemplated in Paragraphs 3 and 4 of this LOI,
the results of which shall be satisfactory to Buyer in its sole
and absolute discretion.
(iii) On or before the fortieth day after the execution
of this LOI, Buyer shall have obtained approval by its board of
directors for the execution and delivery of the Agreement by
Buyer, the performance by Buyer of its obligations thereunder
and the sale and purchase of the Assets.
(b) Seller shall be provided written communication as to the
release of all three conditions precedent.
(c) COVENANT NOT TO COMPETE. For a period of years (to be
determined) following closing on the sale of the Facility to Buyer,
Seller and officer, directors and shareholders will agree not to
directly or indirectly own, manage, operate, join, control or
participate in the ownership, management, operation or control of any
independent living facility, assisted living or personal care home,
skilled nursing facility within an area of the Facility which is
mutually agreed upon by the parties. Ownership in all publicly traded
companies is excluded from the covenant.
6. CLOSING.
Time shall be of the essence with respect to the negotiation, execution
and delivery of the Agreement governing the transaction contemplated herein and
the parties hereto agree to use their best efforts to close within 90
consecutive calendar days from date of execution of this Letter of Intent by
the parties hereto.
<PAGE> 5
Mr. Hal K. Waldman
September 2, 1997
Page 5
7. EXPENSES.
Seller, on the one hand, and Buyer, on the other, shall each pay their
respective fees and expenses and those of their respective agents and advisors
whether or not the transaction is ever consummated.
8. OTHER OFFERS.
In consideration of the legal, accounting and other costs and fees
which Buyer will incur in connection with the investigation of Seller's
operations, unless Buyer fails to provide Seller with written notice, as
provided in Section 5(b) hereof, Seller agrees that for a period of 40
consecutive calendar days following execution of this LOI, neither Seller nor
any of its shareholders, partners, members or beneficial owners, of any nature
whatsoever, as the case may be, or any entity or individual affiliated with any
of the foregoing, directly or indirectly, will solicit the interest of any
other person or entity or take part in any discussion concerning a possible
acquisition of Seller or its Assets, nor will Seller or any related entity or
individual, directly or indirectly, conduct any negotiations for any such
acquisition with any person or entity other than Buyer or accept any offer from
any such person or entity to purchase Seller or its Assets.
9. CONFIDENTIALITY.
In order to facilitate the transaction contemplated herein, each party
may deem it necessary or desirable to disclose certain of its proprietary and/or
confidential information to the other party. As used herein, the term
"proprietary and/or confidential information" shall mean all information of, or
relating to, such party that is not generally available or disclosed to the
public, including but not limited to, financial information, proprietary systems
and methods for delivery of services. Each party acknowledges that all such
information constitutes confidential and/or proprietary information of such
other party and agrees it shall (i) keep such information confidential in
accordance with the terms of this LOI and to the extent permitted by law,
(ii) use and disclose such information solely for the purpose of performing its
obligations hereunder and (iii) not otherwise disclose or make use of such
information except in accordance with the terms of this LOI and to the extent
required by law.
<PAGE> 6
Mr. Hal K. Waldman
September 2, 1997
Page 6
10. PUBLICITY.
Except as may otherwise be provided herein, Buyer and Seller agree that
no disclosure or other publicity concerning the transaction contemplated herein
shall be made prior to consummation without the mutual written consent of the
parties hereto.
11. CHOICE OF LAW.
The validity and interpretation of this LOI and the Agreement shall be
construed in accordance with, and governed by, the internal laws of the
Commonwealth of Pennsylvania.
If the foregoing accurately sets forth your intentions with respect to
the transaction outlined above, please so indicate by signing the enclosed copy
of this LOI in the space provided and return it to me.
Very truly yours,
BALANCED CARE CORPORATION
By: /s/ BRIAN L. BARTH
------------------------------
Brian L. Barth, Vice President
Accepted and agreed to this 2nd day of September by:
SENIOR LIVING CENTERS, INC.
By: /s/ HAL K. WALDMAN
------------------------------
Hal K. Waldman
Title: President
<PAGE> 1
EXHIBIT 10.43
September 22, 1997
[Confidential Treatment Requested]
Re: [Confidential Treatment Requested]
----------------------------------
LETTER OF INTENT
Dear Mr. Godbold:
We are pleased to present this letter of intent (the "LOI") to you on
behalf of [Confidential Treatment Requested]. This LOI sets forth the basic
terms and conditions upon which Balanced Care Corporation, a Delaware
corporation (or a subsidiary thereof, "Buyer"), would acquire the assets in
connection with [Confidential Treatment Requested] an 87-room, 117-bed assisted
living facility with an Alzheimer's Care Unit, licensed for 161 residents, which
is located at [Confidential Treatment Requested].
Except for the provisions of Paragraphs 7 through 12 (which are intended
to be legally binding and enforceable, this LOI is not intended to constitute a
contract or an offer to enter into a contract, nor to be binding upon either
party, nor to create any legal obligations or rights for either party with
respect to any of the matters set forth herein.
It is our present mutual intent to proceed with the proposed
transaction as follows:
1. ACQUISITION.
The acquisition will be structured as an asset purchase. It is
the intent of the parties that Buyer shall acquire all of the operating assets
associated with the Facility, which may include, but not be limited to, the
land, buildings, furniture, fixtures, machinery, equipment, inventory, prepaid
expenses and rents, supplies, leases, licenses, contract rights,
<PAGE> 2
[Confidential Treatment Requested]
September 22, 1997
Page 2
resident deposits and escrow accounts, copies of resident records, aggregated
work force, copies of employee records, policies and procedures and marketing
and public relation materials in connection therewith (collectively, the
"Assets").
2. PURCHASE PRICE.
The total purchase price for the Assets of the Facility will be
$8,300,000 (the "Purchase Price"). Upon conclusion of its due diligence, as
provided in Paragraphs 3 and 4 hereof (with the exception of the environmental
report as provided in Paragraph 5(a)(iv), to be completed by Closing), Buyer
will pay a deposit of $150,000 to Seller (the "Deposit") on the twentieth day
after execution of this LOI, which Deposit shall be applied to the Purchase
Price at Closing of the transaction contemplated herein or otherwise as
provided in the Agreement (as hereafter defined). The remainder of the Purchase
Price will be due and payable by Buyer in cash at Closing. Buyer and Seller
agree that the purchase price will be allocated between the Facility and the
covenant not to compete contained in paragraph 5(b) hereof in a manner that is
mutually acceptable to the parties. There will be reasonable and customary
allocations such as real estate taxes, employee wages, prepaid expenses and
resident payments.
3. FINANCIAL STATEMENTS: OTHER INFORMATION.
a. FINANCIAL STATEMENTS. Seller will deliver to Buyer
audited financial statements for Seller's most recent fiscal year
prepared on an accrual basis in accordance with GAAP. In the event
audited financial statements have not been prepared financial statements
compiled in accordance with Statements on Standards for Accounting and
Review Services shall be delivered to Buyer. In addition, Seller will
provide to Buyer, as soon as the same become available through the
Closing date, but no later than 15 days after the last day of any given
month, monthly statements of profit and loss of Seller for the Facility.
The results of Seller's operations for the periods covered thereby shall
fairly and accurately represent the operating results and financial
position of Seller for the periods covered thereby. Seller authorizes
representatives of Buyer to review and make copies or extracts from all
relevant books, records and work papers in connection with the
foregoing.
b. OCCUPANCY REPORTS. Seller will deliver to Buyer
occupancy reports for the Facility for the last year and the current
occupancy reports, as soon as the last day of any given week.
c. RENT ROLLS. Seller will deliver to Buyer existing rent
rolls for the Facility and, as soon as the same becomes available
through the Closing date, but no later than 5 days after the last day of
any given month, the current rent rolls.
2
<PAGE> 3
[Confidential Treatment Requested]
September 22, 1997
Page 3
d. SURVEYS/INSPECTIONS. Seller will deliver to Buyer
federal and/or state surveys or inspections for the current year and the
two immediately preceding years for the Facility and the most recent
surveys or inspections as soon as the same become available through the
Closing date, but no later than 15 days after the last day of any given
month.
4. REVIEW.
Upon approval of the terms as defined herein by Seller, and
during the period of twenty consecutive days thereafter, Buyer shall conduct,
to the extent deemed necessary in its sole discretion, a review of the
business, assets (including physical condition), liabilities, financial
condition and results of operations of Seller. Seller will permit Buyer to have
access to, and make copies and extracts from, the Facility's books, records,
work papers and inspection reports of Seller relating thereto. Buyer will
conduct its review during normal business hours and in such a manner that will
not interfere or disrupt Seller's normal business operations.
5. DEFINITIVE AGREEMENT: TERMS AND CONDITIONS:
Immediately following execution of this LOI by the parties
hereto, Buyer will commence with the preparation and negotiation of a
definitive asset purchase agreement governing the transaction contemplated
hereby (the "Agreement"). It is contemplated that the Agreement will be
executed upon expiration of the twenty-day period referenced in the foregoing
Paragraph 4. The Agreement shall be in a form and substance, and contain such
customary terms, conditions, representations, warranties, indemnities and
remedies, as are mutually satisfactory to the parties hereto, including, but
not limited to, the following:
a. CONDITIONS PRECEDENT. The obligation of Buyer to
consummate the transaction contemplated under the Agreement shall be
subject to and contingent upon, among other things, the satisfaction, on
or before the specified date (but in any event no later than Closing),
of the following express conditions precedent:
(i) Buyer shall have completed within twenty days
from the date hereof its review of Seller's operations as
contemplated in Paragraphs 3 and 4 of this LOI, the results of
which shall be satisfactory to Buyer in its sole and absolute
discretion.
(ii) Buyer shall have obtained within twenty days
from the date hereof approval by its board of directors for the
execution and delivery of the Agreement by Buyer, the
performance by Buyer of its obligations thereunder and the sale
and purchase of the Assets.
3
<PAGE> 4
[Confidential Treatment Requested]
September 22, 1997
Page 4
(iii) Buyer shall have received on or before Closing
an unconditional, irrevocable commitment for title insurance
issued by a title insurer acceptable to Buyer, with appropriate
endorsements, showing good and indefeasible title to the Assets
in Buyer or Buyer's designee as of Closing, subject only to
liens for taxes, assessments and governmental charges not yet
past due and payable and such other title exceptions as Buyer
may approve in its reasonable discretion.
(iv) Buyer shall have received at its sole expense on
or before Closing a written report from a qualified geotechnical
or engineering firm acceptable to Buyer in its reasonable
discretion, concerning the presence, handling, treatment and
disposal of Hazardous Substances in, on or under the real
property.
b. COVENANT NOT TO COMPETE. For a period of three years
following Closing on the sale of the Facility to Buyer, Seller, and each
of Seller's shareholders, officers and directors, individually and as a
shareholder, officer, director, partner, joint venturer or affiliate of
any corporation, partnership, joint venture or other entity, will agree
not to directly or indirectly own, manage, operate, join, control or
participate in the ownership, management, operation or control of any
independent living Facility, assisted living or skilled nursing Facility
or other ancillary health care service within a 25-mile radius of the
Facility, except as otherwise herein provided.
6. CLOSING.
Time shall be of the essence with respect to the negotiation,
execution and delivery of the Agreement governing the transaction contemplated
herein and the parties hereto agree to close the transaction contemplated
hereunder on or before November 30, 1997.
7. EXPENSES.
Seller, on the one hand, and Buyer, on the other, shall each
pay its respective fees and expenses and those of its respective agents and
advisors whether or not the transaction is ever consummated.
8. OTHER OFFERS.
In consideration of the legal, accounting and other costs and
fees which Buyer will incur in connection with the investigation of Seller's
operations, Seller agrees that for a period of twenty consecutive days
following execution of this LOI (and, if the Agreement is executed, thereafter
until Closing or termination of the Agreement), neither Seller nor any
shareholders, partners, members of legal, equitable or beneficial owners of the
Facility, of any nature
4
<PAGE> 5
[Confidential Treatment Requested]
September 22, 1997
Page 5
whatsoever, as the case may be, or any entity or individual affiliated with any
of the foregoing, directly or indirectly, will solicit the interest of any
other person or entity or take part in any discussion concerning a possible
acquisition of Seller or its Assets, nor will Seller or any related entity or
individual, directly or indirectly, conduct any negotiations for any such
acquisition with any person or entity other than Buyer or accept any offer
from any such person or entity to purchase Seller or its Assets.
9. CONFIDENTIALITY.
In order to facilitate the transaction contemplated herein,
each party may deem it necessary or desirable to disclose certain of its
proprietary and/or confidential information to the other party. As used herein,
the term "proprietary and/or confidential information" shall mean all
information of, or relating to, such party that is not generally available or
disclosed to the public, including but not limited to, financial information of
such other party. Each party agrees it shall (i) keep such information
confidential in accordance with the terms of this LOI and to the extent
permitted by law, (ii) use and disclose such information solely for the purpose
of performing its obligations hereunder and (iii) not otherwise disclose or
make use of such information except in accordance with the terms of this LOI
and to the extent required by law. In the event that the Agreement is not
executed within thirty days of the execution of this LOI, or upon termination
of the Agreement prior to Closing, each party shall return to the other all
documents and copies in its possession, or in the possession of its advisors or
agents, comprising or reflecting proprietary and/or confidential information.
10. PUBLICITY.
Except as may otherwise be provided herein, Buyer and Seller
agree that no disclosure or other publicity concerning the transaction
contemplated herein shall be made prior to consummation without the mutual
written consent of the parties hereto.
11. EXCLUSIVITY.
Buyer represents and warrants to Seller that it is not
currently involved in negotiations to acquire, nor has it contracted to
acquire, nor does it currently own, operate, or lease, any business or property
providing residential and/or health care services within 25 miles of the
Facility.
12. CHOICE OF LAW.
The validity and interpretation of this LOI and the Agreement
shall be construed in accordance with, and governed by, the internal laws of
[Confidential Treatment Requested].
5
<PAGE> 6
[Confidential Treatment Requested]
September 22, 1997
Page 6
If the foregoing accurately sets forth your intentions with respect to
the transaction outlined above, please obtain the appropriate authorized
signature of Seller on the enclosed copy of this LOI in the space provided
below and return it to me.
Very truly yours,
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ Brian L. Barth
------------------------
BRIAN L. BARTH
Vice President
Accepted and agreed to this
22nd day of September by:
[Confidential Treatment Requested]
<PAGE> 1
EXHIBIT 11.1
BALANCED CARE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Loss $ (4,492) $ (909) $ (10)
============= ============ =============
Weighted average common shares
outstanding 3,583 2,474 2,325
Additional shares assuming exercise of (1):
Convertible preferred stock 3,757 -- --
Common Stock 242 242 242
Stock options 478 478 478
Warrants 240 240 240
Shares assumed repurchased (346) (346) (346)
Weighted average common and common
equivalent shares outstanding 7,954 3,088 2,939
============= ============ =============
Net loss per share $ (.61) $ (.31) $ --
============= ============ =============
</TABLE>
(1) Pursuant to Securities and Exchange Commission policies, Common
Stock, stock options and warrants issued within the one year period prior
to the filing of this registration statement have been treated as
outstanding for all periods presented. Additionally, mandatorily
redeemable convertible preferred stock will convert into common
shares upon completion of the Offering.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Balanced Care Corporation
We consent to the use of our reports included herein and to the reference to
our Firm under the headings "Selected Consolidated Financial Data" and
"Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
- --------------------------
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
October 13, 1997
<PAGE> 1
EXHIBIT 23.3
Page 1 of 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated September 12, 1997 on our audits of the financial statements of
Butler Senior Care, Inc., our report dated September 29, 1997 on our audits of
the financial statements of Feltrop's Personal Care Home, and our report dated
September 26, 1997 on our audits of the financial statements of Senior Living
Centers, Inc. We also consent to the references to our firm under the caption
"Experts".
/s/ Coopers & Lybrand LLP
- ------------------------------
COOPERS & LYBRAND LLP
Pittsburgh, Pennsylvania
October 13, 1997
<PAGE> 2
Page 2 of 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated September 23, 1997, on our audits of the financial statements of
Gethsemane Affiliates. We also consent to the references to our firm under the
caption "Experts".
/s/ Coopers & Lybrand LLP
- --------------------------------
COOPERS & LYBRAND LLP
Harrisburg, Pennsylvania
October 13, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement on Form S-1 of our
report dated July 17, 1997, on our audits of the financial statements of Foster
Health Care Affiliates and our report dated September 12, 1997 on our audit of
the financial statements of Heavenly Health Care, Inc., d/b/a Joe Clark
Residential Care Homes. We also consent to the references to our firm under the
caption "Experts."
/s/ Baird, Kurtz & Dobson
- ---------------------------
Springfield, MO
October 13, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement on Form S-1 of our
report dated May 13, 1997 on our audits of the financial statements of Keystone
Affiliates. We also consent to the reference to our firm under the caption
"Experts."
/s/ Snyder & Clemente
SNYDER & CLEMENTE
Kingston, Pennsylvania
October 13, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement on Form S-1 of our
report dated September 23, 1997 on our audits of the financial statements of
[Confidential Treatment Requested]. We also consent to the reference to our
firm under the caption "Experts."
/s/ Hodge, Steward & Company, P.A.
- ----------------------------------
3120 Highwoods Blvd., Suite 207
Raleigh, North Carolina
October 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED JUNE
30, 1997 CONSOLIDATED FINANCIAL STATEMENTS OF BALANCED CARE CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 7,908
<SECURITIES> 0
<RECEIVABLES> 6,679
<ALLOWANCES> (330)
<INVENTORY> 0
<CURRENT-ASSETS> 24,770
<PP&E> 3,046<F3>
<DEPRECIATION> (481)<F3>
<TOTAL-ASSETS> 33,842
<CURRENT-LIABILITIES> 9,095
<BONDS> 8,177<F4>
13,249
1
<COMMON> 5
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,842
<SALES> 49,480
<TOTAL-REVENUES> 49,480
<CGS> 0
<TOTAL-COSTS> 53,267
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 917
<INCOME-PRETAX> (4,439)
<INCOME-TAX> (53)<F7>
<INCOME-CONTINUING> (4,492)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,492)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> 0
<FN>
<F3>PROPERTY AND EQUIPMENT
<F4>LONG TERM DEBT
<F7>INCOME TAXES
</FN>
</TABLE>
